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Consol selling Buchanan Mine in Va. for $420M

| Monday, Feb. 29, 2016, 8:18 a.m.
Nick DeIuliis, president and chief executive officer of Consol Energy, speaks during a ceremony to mark the commencement of natural gas development at Pittsburgh International Airport on Pad 2 in Findlay Township on Monday, Aug. 25, 2014.
Jasmine Goldband | Tribune-Review
Nick DeIuliis, president and chief executive officer of Consol Energy, speaks during a ceremony to mark the commencement of natural gas development at Pittsburgh International Airport on Pad 2 in Findlay Township on Monday, Aug. 25, 2014.

Consol Energy Inc. is taking another step in its transition to a purely natural gas producer with the pending sale of its Virginia metallurgical coal mine and other reserves to a Connecticut company for $420 million.

The sale of the Buchanan Mine to Coronado Coal will help bolster the balance sheet at Cecil-based Consol, which is struggling with persistent low prices in its coal and natural gas operations. The company has reduced operations at its mines, laid off workers, stopped drilling gas wells and said it would halt dividend payments to investors.

The purchase agreement it announced early Monday “pushes out the runway” on any further moves to maintain liquidity until markets improve, said Evan Mann, an analyst with New York-based research firm Gimme Credit.

“It puts them in a better position to weather this storm,” Mann said. “This gives them more time without doing that much damage to the balance sheet.”

It also moves the company one step further from its traditional business of mining and selling coal.

The ninth-biggest producer of shale gas in Pennsylvania, Consol in 2013 sold five West Virginia mines that held the company's original name of Consolidation Coal Co. Last year, it spun off operation of its sprawling coal mine complex beneath Greene and Washington counties into the master limited partnership CNX Coal Resources.

“This is another significant event in the execution of Consol Energy's strategy, as well as a meaningful step in continuing to strengthen our balance sheet,” CEO Nicholas J. DeIuliis said in announcing the Buchanan sale. “The Buchanan Mine fits into Coronado's portfolio as a pure ... metallurgical coal producer, and, in the end, this transaction bolsters the strategic position of both companies.”

Investors reacted well to the news. Consol's shares closed up 10 percent to $8.63.

“I think it's a very good move for Consol to monetize an asset for a considerable amount of cash as they pursue their (gas exploration and production) strategy,” said analyst Ted O'Brien, CEO of Doyle Trading Consultants in New York.

Metallurgical coal is used to make steel. Demand and prices have fallen with a global supply glut. The price of coal sold from Buchanan during the fourth quarter of 2015 fell to $48.41 per ton from $68.58 per ton the year before, the company said last month.

Consol last year planned to spin off the met coal operations into its own limited partnership. The soft market prompted the company instead to consider moving Buchanan under CNX Coal Resources' control or partnering with another company, DeIuliis told analysts last year.

Consol had reduced operations at Buchanan for more than a year because of the price slide after laying off 188 workers in 2014, though in its most recent quarterly earnings report the company called the mine “competitive and profitable.”

“Our Buchanan Mine posted strong cost reduction sequentially and is likely the only met mine generating a profit in the United States at these low met price levels,” Chief Financial Officer Dave Khani told analysts in January.

Consol said then it had increased its contracts with domestic customers for the coal coming from Buchanan. Coronado is glad to benefit from those contracts and hopes to add to them, said Garry Groves, its vice president for human resources and administration.

“We'll be looking everywhere we can for customers,” Groves said, adding that Coronado had no plans to further reduce production at the mine.

The sale to Coronado includes Consol's idled Amonate Mine in southern West Virginia and southwest Virginia, and some untapped reserves in Virginia and Pennsylvania.

Coronado, which has offices in Wilton, Conn., and Rupert, W.Va., formed in 2011 and operates met coal mines in southern West Virginia. It is backed by Texas-based private equity firm Energy and Minerals Group.

The sale of Buchanan does not necessarily signal any changes coming to the Pennsylvania mines, which produce thermal coal for power plants, analysts said.

“There's some strategic value for Consol to hold that thermal coal asset,” O'Brien said, noting power plants have the option of buying coal or gas from Consol.

David Conti is the assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or

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