PITTSBURGH, Jan. 6, 2016 /PRNewswire/ -- CONSOL Energy
Inc. (NYSE: CNX) announced today an updated 2016 capital
expenditure and operational forecast for the E&P and Coal
Divisions.
In 2016, the E&P Division expects capital expenditures of
$205-$325 million, which is
$185 million lower than the previous
guidance of $400-$500 million, based
on the midpoint of the guidance. E&P Division capital
expenditures are comprised of the following: $110-$210 million for drilling and completion
activity, which includes $10-$15
million for coalbed methane (CBM) activity; $40-$50 million for midstream, including
approximately $22 million associated
with expected CONE Midstream capital contributions; and
$55-$65 million for other activities
related to land, permitting, and business development.
The further reduction to 2016 E&P capital reflects continued
benefits from drilling and completion efficiencies and the deferral
of mainly wet gas completions into 2017. CONSOL believes that it
has a meaningful lever to pull to partially offset this deferral of
activity through potential production benefits related to
additional gathering system debottlenecking projects in the second
half of 2016. These additional debottlenecking projects could
provide upside benefits to 2017 gas production volumes.
The lower end of the E&P capital expenditure range mainly
reflects capital associated with completing approximately 37% of
the company's inventory of drilled but uncompleted wells (DUCs).
The higher end of the range encompasses adding back a modest level
of drilling activity, which could commence around mid-year. The
extent of drilling activity in 2016, if any, will primarily be a
function of rates of return and commodity prices, and the
assessment of the dry Utica wells
drilled in 2015. The company expects to make a decision regarding
drilling capital allocation before mid-year 2016.
Details of CONSOL Energy's base-case E&P development plan,
which excludes drilling activity in 2016, are detailed in the table
below:
(gross
wells)*
|
Drilled/
Uncompleted Inventory
|
Drilled/ Completed
Inventory
|
2016
Completions
|
2016
TIL
|
Marcellus
|
|
|
|
|
SW PA
Operated
|
29
|
23
|
18
|
41
|
SW PA
Non-Op
|
5
|
10
|
--
|
10
|
WV
Operated
|
7
|
--
|
7
|
7
|
WV Non-Op
|
42
|
--
|
--
|
--
|
Total
Marcellus
|
83
|
33
|
25
|
58
|
|
|
|
|
|
Utica
|
|
|
|
|
SW PA
Operated
|
--
|
1
|
--
|
1
|
OH
Operated
|
1
|
4
|
--
|
4
|
OH Non-Op
|
10
|
--
|
10
|
10
|
Total
Utica
|
11
|
5
|
10
|
15
|
|
|
|
|
|
Total Gross
Marcellus and
Utica Wells
|
94
|
38
|
35
|
73
|
* Average net revenue interest is 43.7%. Table includes two 100%
CONSOL-owned wells: one dry Utica Shale well in Monroe County, Ohio; one dry Utica Shale well
(GH9) in Greene County,
Pennsylvania. In addition to the table above: CONSOL expects
to drill and turn-in-line (TIL) 43 and 47 CBM wells in 2016,
respectively.
CONSOL expects the 2016 TIL schedule to be more front-end
weighted, resulting in E&P production volumes growing
approximately 15%, compared to 2015. Production growth will come
from three areas: new wells TIL, non-operated production (outside
of the joint ventures with Hess Corporation and Noble Energy Inc.),
and additional midstream debottlenecking projects, which are
back-end weighted in 2016.
CONSOL continues to drive E&P capital efficiencies through
improvements in well performance, completion cost reductions, and
the utilization of in-place infrastructure to lower construction
and facilities expenses. As a result, CONSOL has made tremendous
strides on operational improvements, lowering drilling and
completion costs in the Marcellus Shale to below $1 million per 1,000 lateral feet, including
capital associated with production equipment, water, and pad
construction, which is approximately 30% lower, compared to 2013
levels. CONSOL expects the average TIL lateral length to be
approximately 7,700 feet. As a result, total E&P capital,
including midstream, has declined significantly from 2014, compared
to 2016 expected guidance. Over that time period, E&P capital
and CONE capital contributions are expected to decline from
$1.2 billion to the projected
$205-$325 million, with corresponding
production projected to grow from 235.7 Bcfe to approximately 377
Bcfe, respectively.
"CONSOL's updated 2016 plan reflects the company's operational
flexibility to respond effectively to the continued weakness in
commodity prices, as well as the company's commitment to de-lever
the balance sheet through the execution of the organic free cash
flow plan," commented Nicholas J.
DeIuliis, president and CEO. "Despite the low commodity
price environment, CONSOL's held by production land position,
strong hedge book, and inventory of drilled and uncompleted wells
provides the company with opportunities for strong rates of return
based on incremental capital to complete and turn-in-line those
wells. The expected weighted average rate of return on 2016
incremental capital is above 30%. We anticipate that continued cost
improvements and strong well performance will further improve
development economics when drilling activity is resumed."
CONSOL Energy's 2016 Coal Division budget continues to reflect
maintenance of production capital. Total Coal Division capital
expenditures of $170-$190 million
include the following: $140-$155
million allocated to production and $30-$35 million for other activities related to
land, water, safety, and the Baltimore Terminal. CONSOL Energy's
2016 Coal Division capital and production guidance reflects 100% of
the Pennsylvania Complex ("PA Operations"), consistent with the
consolidation accounting methodology applied for the 20% of the PA
Operations owned by CNX Coal Resources LP ("CNXC").
In response to ongoing coal market uncertainty, CONSOL's total
Coal Division is reducing 2016 expected sales to 27.0-32.0 million
tons, compared to previous guidance of 30.6-33.4 million
tons. The reduction reflects further coal market weakness due to
unusually warm winter weather and low natural gas prices impacting
customer's coal burn. CONSOL is working with customers to help with
their inventory levels by adjusting delivery schedules in order to
improve operational consistency. These adjustments to delivery
schedules intensified towards the end of December 2015 and negatively impacted the timing
of coal shipments. As a result, and due to the current visibility
for the first quarter of 2016, the company believes that it is
prudent to lower the total coal sales guidance for 2016.
Consistent with CONSOL's press release dated December 11, 2015, Pennsylvania Operations has a
2016 sold position of 24.1 million tons. However, the average
realizations may change from the previously provided estimates
depending on the customer mix, timing of shipments, and other
factors. Although the timing of shipments creates quarter to
quarter volatility, CONSOL expects that the committed tons will get
shipped. In conjunction, CONSOL continues to seek opportunities for
additional incremental sales to offset any potential delays from
contracted customers.
Earnings call information:
CONSOL Energy will report financial results for the quarter
ended December 31, 2015 at
6:45 a.m. ET on Friday, January 29, followed by a conference call
at 10:00 a.m. ET. The call can be
accessed at the investor relations section of the company's
website, at www.consolenergy.com.
CONSOL Energy Inc. (NYSE: CNX) is a Pittsburgh-based producer of natural gas and
coal. The company is one of the largest independent natural gas
exploration, development and production companies, with operations
centered in the major shale formations of the Appalachian basin.
CONSOL Energy deploys an organic growth strategy focused on rapidly
developing its resource base. As of December
31, 2014, CONSOL Energy had 6.8 trillion cubic feet
equivalent of proved natural gas reserves. The company's premium
coals are sold to electricity generators and steel makers, both
domestically and internationally. CONSOL Energy is a member
of the Standard & Poor's 500 Equity Index. Additional
information may be found at www.consolenergy.com.
Cautionary Statements
Various statements in this release, including those that express
a belief, expectation or intention, may be considered
forward-looking statements under federal securities laws including
Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act") that involve risks and uncertainties that could cause actual
results to differ materially from projected results. Accordingly,
investors should not place undue reliance on forward-looking
statements as a prediction of actual results. The forward-looking
statements may include projections and estimates concerning the
timing and success of specific projects and our future production,
revenues, income and capital spending. When we use the words
"believe," "intend," "expect," "may," "should," "anticipate,"
"could," "estimate," "plan," "predict," "project," or their
negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe strategy that involves risks or uncertainties, we are
making forward-looking statements. The forward-looking statements
in this press release, if any, speak only as of the date of this
press release; we disclaim any obligation to update these
statements. We have based these forward-looking statements on our
current expectations and assumptions about future events. While our
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the following:
deterioration in economic conditions in any of the industries in
which our customers operate; an extended decline in prices we
receive for our gas, natural gas liquids and coal including the
impact on gas prices of our gas operations being concentrated in
Appalachia which has experienced a dramatic increase in gas
production and decline in gas pricing relative to the benchmark
Henry Hub prices; foreign currency fluctuations affecting the
competitiveness of our coal abroad; our customers extending
existing contracts or entering into new long-term contracts for
coal; our reliance on major customers; our inability to collect
payments from customers if their creditworthiness declines; the
disruption of rail, barge, gathering, processing and transportation
facilities and other systems that deliver our gas and coal to
market; a loss of our competitive position because of the
competitive nature of the gas and coal industries, or a loss of our
competitive position because of overcapacity in these industries
impairing our profitability; coal users switching to other fuels in
order to comply with various environmental standards related to
coal combustion emissions; the impact of potential, as well as any
adopted regulations relating to greenhouse gas emissions on the
demand for natural gas and coal ; the risks inherent in gas and
coal operations, including our reliance upon third party
contractors, being subject to unexpected disruptions, including
geological conditions, equipment failure, timing of completion of
significant construction or repair of equipment, fires, explosions,
accidents and weather conditions which could impact financial
results; decreases in the availability of, or increases in, the
price of commodities or capital equipment used in our mining
operations; obtaining and renewing governmental permits and
approvals for our natural gas and coal gas operations; the effects
of government regulation on the discharge into the water or air,
and the disposal and clean-up of, hazardous substances and wastes
generated during our natural gas and coal operations; our ability
to find adequate water sources for our use in gas drilling, or our
ability to dispose of water used or removed from strata in
connection with our gas operations at a reasonable cost and within
applicable environmental rules; the effects of stringent federal
and state employee health and safety regulations, including the
ability of regulators to shut down a mine; the potential for
liabilities arising from environmental contamination or alleged
environmental contamination in connection with our past or current
gas and coal operations; the effects of mine closing, reclamation,
gas well closing and certain other liabilities; uncertainties in
estimating our economically recoverable gas, oil and coal reserves;
defects may exist in our chain of title and we may incur additional
costs associated with perfecting title for gas rights on some of
our properties or failing to acquire these additional rights we may
have to reduce our estimated reserves; the outcomes of various
legal proceedings, which are more fully described in our reports
filed under the Exchange Act; increased exposure to
employee-related long-term liabilities; lump sum payments made to
retiring salaried employees pursuant to our defined benefit pension
plan exceeding total service and interest cost in a plan year;
replacing our natural gas and oil reserves, which if not replaced,
will cause our gas and oil reserves and production to decline;
acquisitions that we recently completed or may make in the future
including the accuracy of our assessment of the acquired businesses
and their risks, achieving any anticipated synergies, integrating
the acquisitions and unanticipated changes that could affect
assumptions we may have made and asset monetization
transactions, including sales of additional interests in our
thermal coal or other assets to CNX Coal Resources LP and
divestitures to third parties we anticipate may not occur or
produce anticipated proceeds; the terms of our existing joint
ventures restrict flexibility, actions taken by the other party in
our gas joint ventures may impact our financial position and
various circumstances could cause us not to realize the benefits we
anticipate receiving from these joint ventures; risks
associated with our debt; our hedging activities may prevent us
from benefiting from price increases and may expose us to other
risks; changes in federal or state income tax laws, particularly in
the area of percentage depletion and intangible drilling costs,
could cause our financial position and profitability to
deteriorate; failure to appropriately allocate capital and other
resources among our strategic opportunities may adversely affect
our financial condition; failure by Murray Energy to satisfy
liabilities it acquired from us, or failure to perform its
obligations under various arrangements, which we guaranteed, could
materially or adversely affect our results of operations, financial
position, and cash flows; information theft, data corruption
and/or financial loss resulting from a terrorist attack or cyber
incident; operating in a single geographic area; and
other factors discussed in the 2014 Form 10-K under "Risk Factors,"
as updated by any subsequent Form 10-Qs, which are on file at the
Securities and Exchange Commission.
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SOURCE CONSOL Energy Inc.