Consol Energy's $11 million loss tied to mine idlings
Energy companies with significant Western Pennsylvania operations lost money or reported smaller profits during the third quarter, earnings reports on Thursday show.
Consol Energy Inc. said it lost $11.4 million from July through September, when it idled operations at four coal mines. The company's natural gas division raised production from Marcellus shale regions by 16 percent, but low prices caused overall gas revenue to fall about 6 percent.
Natural gas producer Range Resources Corp., with a regional headquarters in Cecil, said it lost $53.8 million in the quarter, and EQT Corp. said its net income fell 53 percent when excluding a gas pipeline sale last year. Both companies cited lower prices they are paid for gas.
Sustained lower prices for dry gases — fuels that lack liquids used to produce chemicals — can lead to disappointing financial results from energy companies, said Rick Gordon, president of consulting firm Gordon Energy Solutions LLC of Overland Park, Kan.
“Natural gas liquids prices have been depressed as well,” Gordon said. “Everybody in the business has been saying, ‘We are going to change our focus to areas with more liquids in the play,' ” including parts of Western Pennsylvania, and that shrinks prices.
“It's sort of like a cascade effect,” he said. “You can end up actually producing yourself into a hole.”
Consol said the July collapse of two new conveyor belts that move coal from Consol's high-producing Enlow Fork and Bailey mines in Greene County to Bailey's preparation plant idled four longwall machinery operations for three weeks, before crews restarted one belt.
The third quarter typically yields soft earnings, CEO J. Brett Harvey said during a conference call, and the Cecil-based company learned that when a problem occurs at one of its large, well-capitalized mines, “it hits the bottom line pretty hard.”
The two mines produced at about 60 percent of normal levels the rest of the quarter, but the problem cost Consol $53 million in income, a figure that doesn't include insurance and other expenses from the incident.
The company's loss amounts to 5 cents a share, compared to a profit of $167 million — or 73 cents — for the same period last year. Consol reported total revenue of $1.16 billion, down from $1.52 billion a year ago.
Consol said its Buchanan Mine in Virginia — idled in September because of weak demand for metallurgical coal — will restart the week of Nov. 5 with a reduced schedule of five days a week. The company halted part of production at its Amonate Mining Complex in West Virginia and does not expect to change this year.
“By idling Buchanan and Amonate, we are communicating to steel producers that we will not sell into a market that is experiencing an inventory destocking,” said William Lyons, chief financial officer. “It is financially difficult for us in the short term but our actions will contribute to a fast rebound in demand for met coal.”
Coal used in steelmaking dropped in price by about 35 percent, and natural gas fell 15 percent on average recently, Lyons said. Despite record-high production from its wells and higher revenue, Range Resources reported a per-share loss of 34 cents. That compares to a $34.8 million profit, or a 21 cents a share, a year ago. Total revenue of $294.9 million was down about 20 percent.
Range said it brought 68 more horizontal wells online in Western Pennsylvania during the quarter, and production rose by 47 percent, but prices fell 24 percent.
Downtown-based EQT reported a $31.9 million profit, down from $178.9 million in the same period in 2011 although the sale of EQT's Big Sandy Pipeline to Spectra Energy Partners LP accounted for much of the prior-year number. EQT's latest profit amounts to 21 cents a share, down from $1.19 a year ago.
Excluding the deal for the pipeline, which transports gas from Kentucky to Mid-Atlantic and Northeast markets, the company's third quarter 2011 profit was $67.6 million, or 45 cents. EQT's revenue totaled $364 million for the quarter, up from $362.6 million.
EQT said a $44.3 million increase in depreciation and other expenses, plus a 23 percent drop in average sales prices, more than offset gas production and other growth.
Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or email@example.com.