CONSOL (CNX) Beats Q1 Earnings & Revenue Estimates, Guidance Up

Diversified fuel producer CONSOL Energy Inc. (NYSE:CNX) reported earnings of 17 cents per share in first-quarter 2017, beating the Zacks Consensus Estimate of 11 cents by 54.5%.

Revenue

CONSOL Energy’s total revenue of $698.7 million in the first quarter of 2017 surpassed the Zacks Consensus Estimate of $644 million by 8.5%.

Total revenue was also 31.3% higher than $532.8 million recorded in the year-ago period. The year-over-year increase was due to higher contribution from mining operations and its Exploration and Production (E&P) Division.

Segment Performance

Pennsylvania (PA) Mining Operations Division

Pennsylvania Operations sold 6.8 million tons of coal in the reported quarter compared with 5.3 million tons in the year-ago period.

Total cost of the coal sold was $34.52 per ton, higher than $33.16 in the year-ago quarter. The increase in cost was due to mobilization of additional resources for the development of longwall panels, demanding geological conditions at Enlow Fork mine and increased equipment maintenance.

Total sales price per ton was $46.80 compared with $42.99 in the prior-year quarter. Thanks to the improvement in sales price, average margin per ton sold in the reported quarter was $12.28 compared with $9.83 per ton in the year-ago quarter.

Exploration & Production (E&P) Division

CONSOL Energy registered a 3% year-over-year reduction in gas production volumes to 95 billion cubic feet equivalent (Bcfe) in first-quarter 2017.

The average sales price of $2.85 per thousand cubic feet gas equivalent (Mcfe), when combined with unit costs of $2.32 per Mcfe, resulted in a margin of 53 cents per Mcfe. This indicated an increase from the year-ago average sales price of $2.73 per Mcfe and unit costs of $2.41 per Mcfe, which led to a margin of 32 cents per Mcfe.

Financial Update

As of Mar 31, 2017, the company’s cash and cash equivalents were $61.3 million, up from $60.5 million as of Dec 31, 2016.

Total long-term debts as of Mar 31, 2017 were $2.65 billion, down from $2.76 billion as of Dec 31, 2016.

Cash from operating activities in first-quarter 2017 was $205.1 million compared with $123.7 million in first-quarter 2016.

Capital expenditure in the first quarter of 2017 was $112.9 million, up from the year-ago level of $77.7 million.

Guidance

CONSOL Energy has raised its 2017 E&P Division production to the range of 420–440 Bcfe, up from the previous expectation of 415 Bcfe.

CONSOL also raised its 2018 E&P Division production to a range of 490–520 Bcfe from the earlier guidance of 485 Bcfe.

However, despite a projected increase in production volumes, the E&P capital expenditures for 2017 and 2018 are expected to remain same at $555 million and $600 million respectively.The company expects total consolidated PA Mining Operations annual sales to be nearly 25.6–27.6 million tons for 2017, compared with the previous guidance of 26.0 million tons.

CONSOL Energy now expects total consolidated capital expenditures for PA Mining Operations to be $120–$136 million for 2017 compared with the previous guidance of $135 million.

Our View

CONSOL Energy was able to surpass both earnings and revenue estimates this quarter, thanks to strong contribution from coal and natural gas business. Its focus on E&P business is yielding positive results.

The company sold non-core E&P assets worth $108 million in the reported quarter and aims to sell more in the coming quarter to achieve a divestiture target of $400–$600 million.

Thanks to its solid asset base, the company is well poised to achieve the new E&P production targets.

CONSOL Energy currently has a Zacks Rank #3 (Hold).

Peer Releases

SunCoke Energy (NYSE:SXC) reported first-quarter 2017 adjusted earnings of 2 cents per share against the Zacks Consensus Estimate of a loss of 10 cents. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alliance Resource Partners LP (NASDAQ:ARLP) reported first-quarter 2017 adjusted earnings of $1.10 per unit, outpacing the Zacks Consensus Estimate of 77 cents by 42.9%. The stock currently has a Zacks Rank #3.

CNX Coal Resources LP (NYSE:CNX) reported earnings of 50 cents per unit in the first quarter, missing the Zacks Consensus Estimate of 55 cents by 9.1%. The stock currently has a Zacks Rank #3.

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