PITTSBURGH, Sept. 5, 2017 /PRNewswire/ — CONSOL Energy Inc. (NYSE: CNX) announced today several updates in connection with its participation in the Barclays CEO Energy-Power Conference in New York.
First, in order to provide better clarity and visibility to the market with respect to the company achieving its strategic goal of separating its coal and E&P businesses, the company intends to execute the spin-off transaction at the earliest possible time, which is expected to be in the fourth quarter of 2017.
Second, CONSOL Energy is decreasing its 2017 E&P Division production guidance to approximately 405-415 Bcfe, compared to the previously stated guidance of 420-440 Bcfe. For the third quarter of 2017, the company expects production of approximately 100 Bcfe, which implies higher growth in the fourth quarter, driven in part by the well turn-in-line (TIL) schedule peaking in November. The company maintains previously announced 2017 total E&P capital expenditures guidance of approximately $620-$645 million. Also, the company maintains the previously announced 2018 E&P Division production guidance of approximately 520-550 Bcfe, or approximately 30% growth compared to 2017 based on the midpoint of the guidance ranges.
The decrease in 2017 production volumes is due to larger ceramic completion designs increasing cycle times, operational issues, and a tightening in the availability of field services. These issues have added complexity and delayed several TILs in 2017. However, the issues are transitory, and 2018 volumes will not be impacted. In accordance with its NAV-driven philosophy, the company determined not to sacrifice value solely to achieve 2017 production within its previously announced guidance.
Third, for the Pennsylvania Mining Complex, the company is decreasing guidance for 2017 adjusted EBITDA attributable to CONSOL Energy to $345 million, which is a decrease of $25 million from previously stated guidance. The decrease is due to a reduction in coal price realizations resulting from cooler than normal summer, modest delivery impacts related to the railroads, and a one week longwall permit delay. However, through optimization initiatives, the company expects total consolidated coal capital expenditures to decrease to $112-$120 million, which is a reduction from the previously stated guidance of $120-$136 million.
As of midnight last night, the Pennsylvania Department of Environmental Protection (DEP) has sought more time to review the technical merits of the permit submittal for continued longwall mining in the 4L panel at the company’s Bailey Mine, in light of a recent Environmental Hearing Board decision. As a result, the longwall has been idled and workforce adjustments are being made. This is the first time in the 35-year history of the Bailey Mine that the company has failed to timely receive a needed mining permit. The company maintains that this permit meets the necessary criteria for approval, and the company is in ongoing communication with Pennsylvania Governor Wolf’s office and the Secretary of the DEP asking that the permit be issued in order to enable the company to get its miners back to work and resume production. CONSOL will lose approximately 25,000 tons of production per day as a result of this permit delay. While the company can make up some lost production in the fourth quarter, if the permit is not issued in the near future, additional layoffs will be likely and the impact on the company could be material. The EBITDA guidance provided above assumes that the permit is issued in the near future. The company hopes that the DEP resolves this matter quickly, and the company will provide updates as new information becomes available.
The company now expects full year 2017 adjusted EBITDA guidance to be approximately $815 million, which is a decrease of $55 million from the previously stated guidance. Also, the company now expects 2017 leverage to be approximately 2.8x net debt to EBITDA, which is an increase of 0.2x from previously stated guidance.
Finally, as stated in the previous quarter’s earnings call, CONSOL has continued to sell non-core assets, and since August 1, 2017, the company has closed on an additional $40 million, which includes the sale of non-core Marcellus Shale acres in Allegheny and Westmoreland counties, Pennsylvania, for approximately $30 million, discussed on the previous quarter’s earnings call. Therefore, year-to-date, the company has closed on $385 million of asset sales. In addition, the company has entered into a contract to sell a large block of surface acreage for approximately $25 million, which the company expects to close early in the fourth quarter. Once closed, asset sales will total approximately $410 million.
Share Repurchase Program
CONSOL Energy’s Board of Directors has approved a one-year share repurchase program of up to $200 million. The repurchases will be effected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, block trades, derivative contracts or otherwise in compliance with Rule 10b-18. The timing of any repurchases will be based on a number of factors, including available liquidity, the company’s stock price, the company’s financial outlook, and alternative investment options. The share repurchase program does not obligate the company to repurchase any dollar amount or number of shares and the Board’s authorization of the program may be modified, suspended or discontinued at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CONSOL’s free cash flow position, leverage ratio, and capital plans.
Barclays CEO Energy-Power Conference Participation and Presentation
CONSOL Energy’s President and Chief Executive Officer, Nicholas J. DeIuliis will meet with investors and present today, September 5, 2017, at 2:25 pm ET at the Barclay’s 2017 CEO Energy-Power Conference. The presentation materials will be available on the company’s website at 6:45am ET. Also, the live webcast will be available on CONSOL Energy’s website at www.consolenergy.com, and the replay will be archived there as well.
Note: CONSOL Energy is unable to provide a reconciliation of projected Adjusted EBITDA to projected operating income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing and potential significance of certain income statement items. EBITDA guidance based on the midpoint of production guidance.
About CONSOL Energy
CONSOL Energy Inc. (NYSE: CNX) is a Pittsburgh-based energy producer, and one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. The company deploys an organic growth strategy focused on developing its substantial resource base. As of December 31, 2016, CONSOL Energy had 6.3 trillion cubic feet equivalent of proved natural gas reserves. CONSOL Energy is a member of the Standard & Poor’s Midcap 400 Index. Additional information may be found at www.consolenergy.com.