From New York analysts Michael Dudas and Satyadeep Jain of SterneAgee:
CONSOL ENERGY (NYSE: CNX) Flash Note
Price Target: $48.00
4Q Beat on Strong Cost Performance; Maintains 2015-16 Gas Production Growth Targets - Reaffirm Buy
During 4Q, Consol delivered lower operating costs in gas, de-risked coal and gas margins and cash flow through contracting, and added value through liquids and Utica output. Management maintained 30% annual gas production growth targets through 2016, and continues to expect thermal coal MLP in mid-2015 and met coal IPO in 4Q15. CNX remains on track to deliver asset value while continuing to selectively monetize non-core assets.
• 4Q'14 Results – Consol reported 4Q'14 adjusted earnings of $0.25/share vs. our $0.11 and Street's $0.20 estimate. Adjusted EBITDA of $262M beat our $250M estimate. Average gas realization of $3.90/mcfe came right in line with our $3.90/mcfe estimate. However, total gas came in at $3.19/mcfe, below our $3.56/mcfe estimate. Buchanan all-in costs costs dropped even further to an impressive $54/ton. Earnings beat our expectations on better-than-expected gas division cost performance, lower income taxes and other below the line items.
• 2015-16 Guidance – Consol maintained 2015-16 annual gas production growth targets of 30%. Management is targeting 1Q15 gas production of 70-74 Bcfe. During the past three months, we estimate Consol hedged 38.6 Bcfe of additional gas volumes for 2015 at $4.05 and 19.4 bcfe for 2016 at $3.88. We estimate the company priced nearly 3.1 of additional coal for 2015 during 4Q at $55/ton. Consol expects to spend $1.0B on capital in 2015 on its gas division vs $1.1B budget for 2014, and $220M on coal division.
• Gas Business - 4Q Marcellus gas production increased 88% y/y to 36.5 Bcfe. All in, Marcellus costs dropped to $2.83/mcfe and all-in cash costs to $1.71/mcfe. 4Q Utica production volumes were 7.1 Bcfe vs 6.8 Bcfe in 3Q14. Utica Shale costs were an impressive $2.24/mcfe. Consol remains long firm transportation and has structured its capacity contracts to allow for 30% growth targets through 2016. Marcellus and Utica together would constitute almost 80% of total 2016E gas output for CNX.
• Balance Sheet and Liquidity – Consol ended 4Q14 with total liquidity of $2.0B. We believe Consol controls many liquidity levers to fund its gas growth that others in the basin do not profile. During 4Q, Consol received $252M in cash proceeds from sale of non-core assets. For 2014, Consol received $459M in cash proceeds from asset sales, with current pace ahead of its $1.0B asset sale target by 2019. Consol continues to expect thermal coal MLP in mid-2015 and met coal IPO in 4Q15. During 2014, Consol received $285 in carry proceeds from JV partners; we are not modeling any JV contribution in 2015-16 given sub $4 gas price expectation. With our 2015 price deck, we would expect Consol to generate $800M in operating cash flow, which together with thermal coal MLP, met coal spinoff and other asset sales, should position Consol to meet capital targets.
Royal Dutch Shell Plc will cut $15 billion of investment over the next three years as the crash in oil prices saw fourth-quarter profit miss forecasts, the company said earlier this week.
Shell, the first of the world’s largest oil companies to report earnings following the slump in crude to a five-year low, will defer or cancel about 40 projects worldwide, Chief Executive Officer Ben van Beurden said today. Exploration will also be curtailed.
Some are speculating if the proposed ethane cracker plant in Beaver County, Pa., could be on the company's unannounced hit list.
Click here to read the latest Bloomberg story.To read more or comment...
The rupture of the Appalachia-to-Texas Express Pipeline on Monday in northern West Virginia burned 24,000 barrels of ethane and burned five acres of woodland before burning itself out, federal officials said.
The pipeline rupture in Brooke County appears to have occurred near where the 20-inch pipeline was welded together, officials said.
Click here to read Wheeling reporter Casey Junkins report.To read more or comment...
Blue Racer Midstream LLC has shelved the proposed Petersburg gas-processing plant in Mahoning County, according to the Youngstown-based Business Journal.
A top company official said as much on Thursday at a shale conference in Pittsburgh, the Business Journal reported.
The plant had been planned for Springfield Township southeast of Youngstown near the Ohio-Pennsylvania border.
The $70 million facility would have been capable of processing 200 million cubic feet per day of natural gas/. It was projected to open in mid-2016.To read more or comment...
Scotland has imposed a moratorium on hydraulic fracturing or fracking, pending a public consultation.
It is the latest blow to drilling plans in the United Kingdom.\
Click here to read the latest Bloomberg story.To read more or comment...
From the American Petroleum Institute on Thursday:
WASHINGTON, January 29, 2015 ─ API President and CEO Jack Gerard said the Senate’s strong bipartisan passage of legislation to build the Keystone XL pipeline shows Congress can find common ground and follow the will of the American people. Now, it’s the president’s turn to show he’s ready to lead on energy issues.
“Republicans and Democrats alike on Capitol Hill are speaking in one clear voice saying it’s time to build KXL,” said Gerard. “This is one of the most bipartisan bills we have seen in recent history. We hope the president will seize this opportunity to work collaboratively with Congress to advance sound energy policy while creating thousands of jobs.
“We cannot afford to veto 42,000 good paying American jobs because of politics as usual. We urge the president to make the right decision and approve KXL because it is in this nation’s best interest.
“We agree with the president that our sights should be higher than a single pipeline. But if we can’t make a decision on a single pipeline, how can we expect to ever convince the market we can accomplish comprehensive infrastructure improvement? Indecision has consequences. The fact is that if all other infrastructure projects are delayed like Keystone XL, we are years away from approving anything that could create jobs and enhance our energy security.”
API thanked leaders from both sides of the aisle in both chambers of Congress. Since the delays began more than six years ago, lawmakers who relentlessly put jobs and energy security first have continued to recognize Keystone XL and its benefits to the U.S.
API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 625 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 25 million Americans.
From Environment America on Thursday:
WASHINGTON, D.C. -- After three weeks of debate, the U.S. Senate passed a bill this afternoon to force approval of the controversial Keystone XL pipeline. The measure passed 62 to 36, failing to garner enough votes to override a promised veto from President Obama. According to the State Department, building Keystone XL would add 26 million metric tons of carbon pollution to our atmosphere each year, the equivalent of putting another 5.7 million cars on the road. Environment America’s Anna Aurilio issued the following statement:
“We owe it to the next generation to put the brakes on global warming, but Keystone XL would hit the accelerator. By pushing forward this dangerous pipeline, the Senate is listening to the project’s oil industry backers, not the scientists who say there’s a limit to how much carbon we can dump into the air before climate change spirals out of control.
“We’re delighted that President Obama has pledged to veto this pro-polluter, pro-global warming bill. The president is continuing to lead on climate, and we're thankful to all the senators who voted with him today to reject this dirty, dangerous pipeline legislation.”
To read more or comment...
From the American Sustainable Business Council on Thursday:
WASHINGTON, DC – Today, in response to the U.S. Senate’s vote to approve the Keystone XL pipeline, the American Sustainable Business Council (ASBC), which represents more than 200,000 businesses, released a statement saying that instead, Congress should focus on the jobs and other economic benefits of renewable energy.
"Congress should stop wasting time on this giveaway to the fossil fuel industry. Many more permanent jobs – and much better jobs – come from investments in renewable energy,” said Richard Eidlin, Vice President of Public Policy for the American Sustainable Business Council, which with its member organizations represents more than 200,000 businesses across the nation. "Those are proven job creators. The Keystone XL pipeline simply isn't. All it would do is put more local businesses and communities at risk from more devastating oil spills.”
To read more or comment...
From the Laborers International Union of North America on Thursday:
Quote from LIUNA General President Terry O’Sullivan on Senate Approval of Keystone XL Pipeline:
“We applaud the Senate vote – it’s a vote they should not have been forced to take. We hope the President stops the politics when a bill reaches his desk and unlocks the good jobs and energy the pipeline will support.”
#To read more or comment...
From the Center for Liquified Natural Gas on Thursday:
Washington, D.C.: In response to today’s Senate Energy and Natural Resources Committee hearing on S. 33, the “LNG Permitting Certainty and Transparency Act,” Center for Liquefied Natural Gas (CLNG) President Bill Cooper issued the following statement:
“Today’s hearing emphasizes the wide consensus among energy experts, economists and policymakers: Liquefied natural gas exports will be an economic boon to the U.S., creating jobs and investment while enhancing our trading partnerships. Thanks to our abundance of natural gas supplies, the U.S. is uniquely positioned to both meet domestic demand and still bring real wealth back into this country by selling a small percentage of our surplus natural gas to our friends and allies abroad. CLNG applauds today’s hearing participants for urging strong bipartisan legislative action to move these projects forward so that all Americans can experience the clear benefits provided by LNG exports.”To read more or comment...
Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.
Rig Count Interactive Map by Baker Hughes, an energy services company.
Shale Sheet Fracking, a Youngstown Vindicator blog.
The Ohio Environmental Council, a statewide eco-group based in Columbus.
Earthjustice, a national eco-group.
People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.
Concerned Citizens of Medina County, a grass-roots group.
No Frack Ohio, a Columbus-based grass-roots group.
Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.
Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.
Allegheny Front, environmental public radio for Western Pennsylvania.