Consol Energy files for IPO of coal spin-off
A new Consol Energy Inc. spin-off that will run its Pennsylvania coal mines represents the latest pivot in the company's shift from a focus on coal production to expansion of its gas drilling business.
The Cecil-based company on Wednesday said it will offer stock this year in the investor-owned subsidiary, called a master limited partnership or MLP, that will operate three large mines in Greene and Washington counties. Later in the day, officials outlined new hydraulic fracturing engines designed to cut carbon emissions into the air, which will be used on the company's wells at Pittsburgh International Airport.
“It shows progress as we continue to grow,” said Tim Dugan, chief operating officer for gas, who spoke about the fracking engines at the Imperial Volunteer Fire Department in Findlay. “The announcement of this (master limited partnership), it shows progress and growth on the coal side, as well as this announcement here today shows how we are continuing to progress and use new technologies and innovations on the oil and gas exploration side.”
Consol did not disclose a price range for stock in the spin-off, CNX Coal Resources, or say how many units will be sold during the initial price offering. A registration form filed with the Securities and Exchange Commission estimated its maximum offering at $250 million.
Consol stock fell 16 cents to $27.73.
The CNX Coal Resources MLP will allow separate investment in energy assets while providing tax benefits and allowing the parent company to maintain control. It will have a 20 percent financial stake in and operate the Bailey, Enlow Fork and Harvey mines, Consol reported. Workers at the mines will remain Consol employees, the SEC filing states.
Last year, the company spun out an MLP created with partner Noble Energy to operate a gas-gathering pipeline system connected to their shale wells in the region. Officials also said they were considering an MLP to operate a mine in Virginia that produces metallurgical coal for the steel industry.
Analysts have said forming the MLPs, which Consol first discussed last year, makes sense for the company as it separates the two volatile businesses of mining for coal and extracting gas from shale.
Consol is Pennsylvania's 11th-largest gas producer with its drilling operations centered in the Appalachian basin.
The company rolled out the engines to power its fracking operations at the airport. Consol is partnering with Houston-based Halliburton, which does its fracking and directional drilling work, to use the lower-emitting engines on diesel-run fracking trucks. The $50 million project is the first of its kind in the country and aims to reduce emissions to levels lower than what is required by the federal Environmental Protection Agency, Dugan said.
“This is not something that's required today, but we're really doing it to minimize the impact we have on air quality in these operations,” he said.
The company has reduced carbon emissions by 38 percent from 2013 to 2014, said Katharine Fredriksen, senior vice president of environmental strategy at Consol.
“We issued the challenge, and Halliburton was the first to step up and commit to delivering it for us,” she said.
The engines began running on the first well pad at the airport Wednesday and will be used on all six well pads, the company said.
Katelyn Ferral and David Conti are staff writers for Trib Total Media. Ferral can be reached at 412-380-5627 or email@example.com.