CONSOL Energy has amassed significant acreage at Marcellus and Utica plays and now boasts of $4 trillion cubic feet of natural gas reserves. In fact, the company's reserves are similar to that of Antero Resources (AR), a rising mid-cap energy firm which went public two months ago. Antero Resources is loved by analysts who have showered it bullish notes and buy ratings. Like Antero, CONSOL Energy's gas assets could also be hiding significant value that has been overshadowed by its struggling coal business.
Over the last several years, the business has considerably increased its gas output. In 2012, Consol Energy reported an 11% drop in revenues, and a 39% drop in net income ($5.43 billion and $388.1 million, respectively). During this period, it reduced its coal production from 62 million tons in 2011 to 56 million tons in 2012 while its gas production rose from 153.5 Bcf to 156.3 Bcf.
Although the transition towards natural gas appears slow, a longer term analysis over a period of five years reveals that CONSOL Energy has reduced its coal production by 14% while its gas production has more than doubled in the same period.
As mentioned in the beginning, CONSOL Energy is now one step closer towards selling all five of its longwall coal mines in West Virginia for $3.5 billion. Meanwhile, the company will also cut its coal capital expenditure by half, from a little less than $1 billion in 2012 to between $410 million and $520 million in the current year. The company generates significant cash flows from its coal business.
In the previous quarter, the CONSOL Energy generated cash flows from operations of $41 million from high and low volatility metallurgical coal and $207 million from thermal coal.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV