The Deal: Consol Energy Sells Coal Mines for $3.5B to Focus on Gas

NEW YORK ( TheStreet) -- Pittsburgh coal and natural gas producer Consol Energy ( CNX) said Monday it agreed to sell its Consolidation Coal unit, including five coal mines in West Virginia, to privately held Murray Energy for $3.5 billion in an effort to focus on its gas business in the Marcellus Shale, among other locations. 

The price includes $850 million in cash, $184 million in future payments - from royalties, water treatment plants and tolling fees at its Baltimore coal export terminal - and $2.4 billion in assumed liabilities, the biggest being $2.1 billion in postretirement benefit plans. Consol expects to book a $1.3 billion pre-tax gain in its fourth quarter from the sale if it closes by year-end.

While the company also is cutting its dividend in half, it expects to use the cash toward its natural gas development projects, with a 30% production growth goal for 2015 and 2016 from the 23% to 32% orginally targeted for next year. Consol expects its gas production to reach 210 billion to 225 billion cubic feet equivalent, 7% to 8% of which will be higher-value liquids or condensates.

"While this transaction furthers Consol's E&P growth strategy, the sale of these five mines - assets that have long contributed to America's economic strength and our company's legacy - was a very difficult decision for our team," Consol chairman and CEO J. Brett Harvey said in a statement. "In the end, we concluded that the time had come to sell these mature assets to ownership whose strategic direction is more aligned with those mines."

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