NEW YORK (TheStreet) -- Consol Energy (CNX) - Get CNX Resources Corporation Report  impressed investors with its quarterly earnings report on Tuesday that included higher-than-expected revenue from its exploration-and-production division and a higher production forecast for the year.

Even better was the continued evidence of the energy company's progress in shifting to natural gas from coal, which should help it mitigate the risk of a decline in the coal industry. Natural gas accounted for 29% of revenue in Consol's E&P division  in the third quarter, up from 24% a year earlier. Coal accounts for about 55% Consol's revenue.

During the third quarter, Consol Energy produced 64.9 billion cubic feet equivalent of natural gas, natural-gas liquids and oil, topping its estimates of 59 billion to 61 Bcfe, allowing it raise its production outlook for the year. During the next couple of years, its natural-gas output is expected to increase by 30% per year.

The higher output in the E&P division, which came thanks to higher production in the Marcellus and Utica shale fields in the Northeast, boosted Consol's revenue, as shown in the table below.

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Source of data: CONSOL Energy's Web site

Natural-gas prices tend to pick up in the last quarter of the year, and so Consol Energy may reap higher profit margins during the fourth quarter.

The company's coal operations also exceeded estimates during the third quarter, but lower coal prices mainly in thermal coals partly offset the growth in volume. The company expects its coal sales will pick up in the fourth quarter, which could help boost earnings.

Consol's decision to expand its liquids operations, including liquid natural gas and oil, may result in higher profit margins. The company increased its liquids volume to 6.3 Bcfe in the third quarter from 2.6 Bcfe in the second quarter. Its average sales price for liquids increased by 37 cents per thousand cubic feet equivalent.

At the time of publication, the author held no positions in the stock mentioned.

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