Gas production in April, May and June increased 34 percent over the same period last year "and the Marcellus shale remains the growth driver," the
The company increased its annual gas production forecast by nearly 10 percent and predicts 30 percent growth through 2016. But it lowered projections for metallurgical coal and warned that it will post a loss for the second quarter primarily because of one-time expenses.
Consol's shares sank
Consol has been putting more emphasis on gas after decades as a coal company. But increased shale production creates a conundrum for gas drillers: While companies may have more gas to sell, a glut could pressure prices and impact their bottom lines.
A glut of gas put this month's prices on pipelines into
"This supply growth, coupled with known transportation constraints, is responsible for increasing price weakness in the Appalachian region this summer,"
Consol's update did not address prices, but said the company would post a second-quarter loss because of bond refinancing, a new revolving credit arrangement, and a pension settlement charge, offset by income from a coal contract buyout. A spokeswoman said officials could not elaborate on the "one-time items" before the earnings statement release.
The company in May laid off 188 workers from its
Its overall coal forecast remained unchanged from spring estimates because production of thermal coal from the
Consol said it is reworking some wells, getting more gas out of new wells and cutting the time between drilling and production.
"These improvements will not only help compress cycle times but will also result in growing our gas production even more efficiently," DeIuliis said in the production update.
"With rising U.S. production and falling costs per unit of production, U.S. E&P companies are now poised to actually grow cash flows even in a flat or modestly lower energy price environment," Adkins wrote in a note to clients. "This dramatic shift (driven by the increased horizontal well efficiencies) should lead to a more sustainable (5-10 year) improvement in U.S. E&P profitability and capital efficiency."
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