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More losses at Consol; company hints at job cuts

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By Timothy Puko and John D. Oravecz
Thursday, July 25, 2013, 2:54 p.m.

Job cuts and major changes could be coming to Consol Energy Inc., which unleashed a storm of gloomy buzzwords when announcing mounting losses on Thursday.

The company is “evaluating our overall corporate structure,” looking to get “creative” and, maybe gloomiest of all, reviewing “staffing levels and project expenditures,” Consol said.

Company officials would not directly address whether they intend to cut jobs but said they are willing to go far to boost the company's sinking share price. Consol's waterway shipping and pipeline businesses are for sale, and CEO J. Brett Harvey wouldn't rule out splitting up its coal and gas businesses again.

“What I'm trying to signal to our shareholders is, everything is on the table. ... We're serious about it,” Harvey told analysts in a quarterly earnings call. “And the process of looking at all of our asset base is like any process — creativity comes out of that, and we're in the middle of that right now.”

The Cecil-based coal and gas company has lost nearly $14.6 million in the first six months of the year on $2.5 billion in sales. It lost money for the third time in the past four quarters, 5 cents per share from April through June, compared to profits of 67 cents a share during the same three months in 2012.

Despite a growing gas drilling business, Consol remains largely a coal producer, and that has sunk the company's stock price, analysts have said. It closed Thursday at $30.49 a share, down from nearly $55 a share two years ago.

The coal industry has been hit hard by dropping demand, which cost Consol $74 million in revenue compared to this time last year, Chief Financial Officer David M. Khani said. Investors are skittish about the demand ever coming back, both because of the low price of natural gas and the Obama administration's push to use more cleaner-burning natural gas and renewable power sources.

“I think it's likely the company's structure will change in the next six months,” said analyst Michael S. Dudas at Sterne, Agee & Leach. “They were purposefully vague on the conference call, but they believe they have two strong asset bases, and they are looking at ways to get to their value.”

Regarding possible layoffs, Dudas said Consol's coal business is strong, and once it completes its Bailey Mine Extension in Greene County, the coal business likely will enter a steady state.

The company must determine the right size of its coal business, and that could bring layoffs or could mean hiring workers, Dudas said.

Consol employs around 8,900 people. It laid off 465 workers at a West Virginia mine over the past year and laid off 231 at mines in Washington County and Utah in December 2010. The company has been hiring in recent years, adding 1,455 people in 2012, mostly in its coal operations.

Consol isolated its thermal coal business from the small coal-fired power plants most vulnerable to government regulation, some of which are closing, officials said.

“We pushed away from those, and we pushed toward the big scrubber plants” that installed environmental controls, Khani said. “The big scrub plants are actually going to run harder in this nation ... and we're going to take advantage of that.”

Consol executives deserve credit for structuring the coal business to concentrate on large power plants that will continue operating, Dudas said. Despite long-term losses, Consol stock did climb $2.19 Thursday, up 7.7 percent.

“It will be a good, positive-value coal company going forward,” Dudas said.

Some smaller coal companies in the Central Appalachian region are struggling with higher costs and lower quality coal and competition from natural gas. “Some of these small companies will be going out of business, and some mines will be closed,” he said. Consol, on the other hand, is “well positioned.”

Analysts for months have called the company undervalued. They've supported Consol's attempt to sell its transportation businesses in order to invest more money in its gas drilling business. Two of its asset sales have gone to a second round of bids, company officials said, declining to say which ones.

Timothy Puko and John D. Oravecz are Trib Total Media staff writers. Reach Puko at 412-320-7991 or Reach Oravecz at 412-320-7882 or

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