Today, we will be discussing our second quarter results. Any forward-looking statements we make or comments about future expectations are subject to the business risks we have laid out for you in our press release today as well as in our previous SEC filings. We also have slides that I should make you aware of. We will be referring off and on to our slides, which you can find on our website.We will begin our call with prepared remarks today by Bill Lyons, followed by Brett Harvey. Nick and Bob will then participate in the Q&A portion of the call. With that, let me start the call with you, Bill. William J. Lyons Thank you, Dan, and good morning, everyone. As you've seen in our press release, CONSOL Energy once again posted solid operational and financial results. In a quarter where the coal and domestic natural gas industries struggled with weak spot pricing, CONSOL Energy has been successfully managing through this tough macroeconomic environment. We have continued to benefit from items that we discussed on the last call, namely, being effectively sold out in thermal coal for the year and our significantly above-market hedge position on approximately 1/2 of our gas production. One area that I believe separates us from others is our improving cost structure. In the Coal segment, our all-in cost per ton fell by $2.17 in the second quarter when compared with the first quarter. These costs fell in the quarter when we had less production. Reducing unit cost in a period of lower volumes is noteworthy due to the substantial fixed cost structure of our underground mining complexes. We have been actively managing our costs in 2 ways: first, we have eliminated activities that do not directly impact safety, compliance or efficiency. For example, in the quarter, we lowered our G&A expense by $6 million through the completion of projects relating to corporate initiatives and by amending corporate salary benefit plans. We expect these savings to continue in future quarters; and second, we have been working with our suppliers and service providers to deliver their commodities and services to us at a lower cost.
Understanding the costs of our operations is not enough. To compete successfully in the increasingly competitive global markets, we must know the costs of the entire economic chain and actively participate in the management of that entire chain. These supply chain initiatives have resulted in meaningful savings on items such as roof bolts and power. For example, with one major part supplier, we have been able to gain a 3.3% discount per part off of an annual spend of about $25 million.The key takeaway is that we are expanding our focus from costing only what goes on within the company to focusing on costing the entire economic process. We are not simply waiting for higher sales prices to drive returns. In the Gas segment, costs for the 2012 second quarter were $3.34 per Mcf. This was down $0.23 from the year earlier quarter. The improvement was led by our growing Marcellus Shale program where unit costs in the just ended quarter were $2.61. This is an improvement of $0.65 from the year earlier quarter. There were numerous contributors to the unit cost improvement, which will detail in the 10-Q. But the basic driver is that CONSOL is drilling longer laterals, which increased production rates per well. This, when coupled with the more wells per pad, is helping us to achieve what could be industry-leading results. CONSOL is basically in full development mode at a time when many of our competitors are still drilling sub-optimally in order to hold acreage. Our held-by-production position in adherence to our core values of safety, compliance and continuous improvement have driven these results. We have also been successful in the first half of 2012 in having substantial asset sales that have contributed to our liquidity and cash flow. We've had multiple asset sales this year that have generated cash of $224 million. We've been able to sell assets at a fair price because of the quality of our assets and the fact that our strong financial position allows us to transact these deals without the pressure of the need for immediate liquidity. Read the rest of this transcript for free on seekingalpha.com