PITTSBURGH, July 15, 2014 /PRNewswire/ -- CONSOL Energy
Inc. (NYSE: CNX) is providing an operations update for the quarter
ended June 30, 2014.
CONSOL's much anticipated 3-well NBL19 pad in northern
Noble County, OH, had initial
production rates exceeding 23 MMcfe per day, per lateral, with
controlled pressure drawdown. The three wells were turned into
production last week and are located adjacent to CONSOL's NBL16
pad, which contains two wells: the NBL16A and NBL16B. The NBL16A
had a lateral length of approximately 4,900 feet and tested at 12.0
MMcf per day plus 768 barrels oil per day. The NBL 16B had a
lateral length of approximately 3,400 feet and is currently
undergoing completion activity. Both NBL16 wells are expected to be
turned into production in August, 2014. Adjacent to the NBL16 pad
is the 5-well NBL18 pad with average lateral lengths of
approximately 5,400 feet. The five wells at NBL18 are currently
undergoing fracture stimulation and are expected to be turned into
production in October, 2014. Also, in the immediate vicinity is the
3-well NBL30 pad with average lateral lengths of approximately
4,800 feet. The NBL30 pad is currently undergoing completion
activity and is expected to be turned into production in September,
2014.
CONSOL's E&P division produced 51.9 Bcfe for the 2014 second
quarter, or 34% more than the 38.6 Bcfe produced in the 2013 second
quarter. Gas production was in-line with previous second quarter
guidance of 50.0 – 52.0 Bcfe, net to CONSOL. The 2014 second
quarter net production included 542 MMcf per day of natural gas,
1,209 barrels per day of oil/condensates, and 3,514 barrels per day
of NGLs.
"The E&P division continues to achieve production targets
while focusing on improving operational efficiencies," commented
Nicholas J. DeIuliis, President and
Chief Executive Officer. "CONSOL is improving cycle times from SPUD
to turning a well in-line with improvements in both drilling and
completion efficiencies. Specifically, we are reducing the number
of days to drill wells and time to move a horizontal rig, as well
as increasing stages completed per day. These improvements will not
only help compress cycle times but will also result in growing our
gas production even more efficiently."
CONSOL's coal division produced 8.3 million tons for the 2014
second quarter, including 1.0 million tons of low-vol coking coal
from the company's Buchanan Mine. These results are in-line with
previous second quarter guidance of 8.1 – 8.5 million tons, which
included low-vol tons of 0.85 – 0.95 million tons. Geological
issues at Enlow Fork Mine and equipment issues at Harvey Mine,
partially offset by outperformance at Bailey Mine, impacted costs.
Of the 7.0 million tons of thermal coal produced in the quarter,
6.5 million tons were from Northern
Appalachia and 0.5 million tons were from Central Appalachia.
As of June 30, 2014, CONSOL's
total coal inventory decreased by 234,000 tons to 407,000 tons.
Thermal coal inventory decreased by 242,000 tons to 209,000 tons,
while low-vol coal inventory increase by 8,000 tons, to 198,000
tons.
The company's second quarter financial results will include the
expenses related to the 2017 bond refinancing, the completion of a
new revolving credit facility and a pension settlement charge,
offset, in part, by income from a coal contract buyout. The result
of these four items will cause the company to show a net GAAP loss
for the quarter.
Forecasts:
E&P: CONSOL Energy expects third quarter 2014 gas
production, net to CONSOL, to be between 59.0 – 61.0 Bcfe, which,
using the midpoint of the range, would be a 30% increase as
compared with the 46.1 Bcfe produced in the third quarter of 2013.
CONSOL expects the Marcellus and Utica Shale programs to be
back-end weighted with approximately 70% of the combined wells
turned in line during the second half of the year. Annual 2014
total gas production is now estimated to be 225 – 235 Bcfe, where
the low end of the range has been increased by 10 Bcfe over the
earlier guidance. The 2014 production guidance assumes liquids
content between 5% – 8% of the total. Production guidance for 2015
and 2016 remains unchanged at annual growth rates of 30%, with
liquids content increasing to 10% – 15% of total production in
2016.
Coal: CONSOL Energy expects third quarter 2014 coal
production to be between 7.3 – 7.7 million tons. The decline from
the second quarter production is due to normal miner vacation
schedules. Annual 2014 total coal production guidance remains 31.0
– 33.0 million tons. Buchanan Mine's third quarter production is
expected to be between 0.75 – 0.85 million tons, while annual
low-vol production is now estimated at 3.4 – 3.8 million tons,
which is a decrease from previous 2014 guidance of 3.6 – 4.2
million tons. The decrease in Buchanan's annual guidance is a result of
continued market weakness.
E&P Division Results:
CONSOL's E&P division continues to execute the company's
production growth plan while capturing operational efficiencies in
drilling and completion activities, and the Marcellus Shale remains
the growth driver of the E&P division, as illustrated by
volumes increasing 129% from the year-earlier quarter.
In drilling, CONSOL set a new company record in the Marcellus
Shale for longest drilled lateral on the NV34G well in Washington County, PA at a measured depth and
drilled lateral length of 18,770 feet and 10,970 feet,
respectively. Drilling efficiencies were also illustrated on the
NV58 where one horizontal rig drilled four laterals in May. During
the quarter, in Southwest PA, CONSOL averaged drilling a well in
1.4 days per 1,000 feet of lateral compared to 1.6 days per 1,000
feet of lateral in 2013. In addition, CONSOL also remains focused
on reducing non-productive time and completed three horizontal rig
moves in the second quarter in less than seven days compared to an
average of 14 days in 2013.
CONSOL also continued to realize efficiency improvements in
completion activities in the quarter: the Gaut pad, in Westmoreland County, PA completing 6 stages
per day compared to the 2013 average of 3.5 stages per day.
The table below summarizes the Marcellus Shale drilling and
completion results during the second quarter:
|
#
Horizontal
|
|
|
Turned
|
Avg.
TIL
|
|
Sub-Regions
|
Rigs
|
Drilled
|
Completed
|
In Line
(TIL)
|
Lateral Length
(ft)
|
Counties
|
Southwest
PA
|
2
|
15
|
12(1)
|
9
|
9,253
|
Washington,
PA
|
Central PA
|
1
|
3
|
10
|
11
|
7,071
|
Westmoreland, PA;
Indiana, PA
|
Northern WV
Dry
|
2
|
6
|
6
|
3
|
8,827
|
Barbour,
WV
|
North Wet
Gas
|
4
|
20
|
13
|
12
|
6,623
|
Marshall, WV;
Washington, PA
|
South Wet
Gas
|
1
|
4
|
10
|
--
|
--
|
Ritchie,
WV
|
Total
|
10
|
48
|
51
|
35
|
7,629
|
|
(1)
Includes 6 wells recompleted in Greene County, PA using
RCS/SSL.
|
In the Marcellus Shale, in Westmoreland County, PA, the 3-well Shaw pad
was completed using RCS/SSL with an average of 27 stages per well
and had an average lateral length of 3,965 feet. The initial
24-hour production averaged over 7.8 MMcf per day, which are
particularly strong results given the shorter lateral lengths. In
the North Wet Gas area, in Washington
County, PA, the 8-well WFN6 pad was recently brought on-line
with an average lateral length of 6,100 feet. The 24-hour initial
production rate averaged approximately 8 MMcf per day and 10
barrels of condensate per million cubic feet of gas. The best well
on the pad had a 24-hour initial production rate of 10.4 MMcf per
day and 100 barrels of condensate per day, with several other
laterals producing over 9 MMcf per day and approximately 200
barrels of condensate per day. Estimated NGL yields for the WFN6
pad are between 40 – 50 barrels per million cubic feet of gas,
assuming ethane rejection.
CONSOL recompleted six Marcellus Shale wells in Greene County, PA including the GH10BCV and
GH10CV, which were originally turned in line during the first half
of 2009 and had lateral lengths of 1,860 feet and 1,529 feet,
respectively. These wells are on sales with 24-hour flowrates of
4.6 MMcf per day and 4.2 MMcf per day, respectively, which is a
substantial production increase from the 0.375 MMcf per day and
0.215 MMcf per day that the wells were previously flowing before
the recompletion. The remaining four wells are completed,
drilled-out, and currently under flowback operations; CONSOL
expects these wells to be on sales in July. The three GH10 laterals
were recompleted with an average of 9 stages and 46 perforation
clusters per well, compared to the original completion of 5 stages
and 9 clusters. Similarly, the GH11 laterals were recompleted with
an average of 9 stages and 49 perforation clusters per well,
compared to the original completion of 4 stages and 8 clusters. The
company has over 200 additional recompletion opportunities to
capture more resource.
The table below summarizes the Utica Shale drilling and
completion results during the second quarter:
|
#
Horizontal
|
|
|
Turned
|
Avg.
TIL
|
|
Sub-Regions
|
Rigs
|
Drilled
|
Completed
|
In Line
(TIL)
|
Lateral Length
(ft)
|
Counties
|
Noble
County
|
1
|
8
|
4
|
3
|
9,510
|
Noble, OH
|
Surrounding
Core
|
3
|
3
|
8
|
--
|
--
|
Harrison,
OH
|
Total Ohio Wet
Gas
|
4
|
11
|
12
|
3
|
9,510
|
|
In the Utica Shale, CONSOL's 3-well NBL19 pad in Noble County, OH, was completed using RCS/SSL
with an average of 64 stages per well and had an average lateral
length of 9,510 feet. The pad, which had a controlled drawdown in
pressure, yielded 24-hour average rates over 23 MMcfe per day,
which included condensate yields of 70 barrels per million cubic
feet of gas and an estimated NGL yield of 55 barrels per million
cubic feet of gas. CONSOL is optimizing production facilities,
midstream liquids handling and managing the reservoir pressure, and
the company believes that the pad has the potential to produce at
much higher rates. Each of the three wells achieved peak flow rates
of approximately 18 MMcf per day, which would equate to 33.4 MMcfe
per day. In the Ohio Dry Gas area, CONSOL has started drilling the
top-hole on one dry Utica and one
Marcellus in Monroe County, OH and
expects to drill the horizontal for each well early in the fourth
quarter in 2014.
In the Utica core, surrounding
Noble County, OH, CONSOL expects
to turn in line 2 – 3 pads, or 8 – 13 laterals, during the coming
quarter.
CONSOL continues to expect the Utica Shale to become a larger
portion of the production mix with estimates over 6% of the total
production in 2014.
Coal Division Results:
Within CONSOL's coal division, the Bailey Complex had record
production of 2.6 million tons in April. The Enlow Fork Mine
sealing project, which involved sealing 11 airshafts and
eliminating 6.8 miles of underground belt and track haulage, was
completed, on schedule, on June 30.
The sealing project was possible due to the overland belts and new
slope that were commissioned in the first quarter of 2014. As a
result of sealing this area, CONSOL expects over $3 million in annual power savings. In addition,
maintenance costs, and more importantly, potential risks to
employees working in these older areas of the mine, will be
eliminated. The mine is now approximately 70% sealed.
The low-vol Buchanan Mine in Virginia continues to manage operations to
match the current weak market environment. The mine is prepared to
return to higher production levels, when market demand and pricing
rebounds.
Earnings Release Information:
CONSOL Energy will report additional operational and financial
results for the quarter ended June 30,
2014 at 6:45 a.m. ET on
Tuesday, July 29, followed by a
conference call at 10:00 a.m. ET. The
call can be accessed at the investor relations section of the
company's web site, at www.consolenergy.com.
Cautionary Statements
Various statements in this release, including those that express
a belief, expectation or intention, may be considered
forward-looking statements (as defined in Section 21E of the
Exchange Act) that involve risks and uncertainties that could cause
actual results to differ materially from projected results.
Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. The
forward-looking statements may include projections and estimates
concerning the timing and success of specific projects and our
future production, revenues, income and capital spending. When we
use the words "believe," "intend," "expect," "may," "should,"
"anticipate," "could," "estimate," "plan," "predict," "project," or
their negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe strategy that involves risks or uncertainties, we are
making forward-looking statements. The forward-looking statements
in this press release, if any, speak only as of the date of this
press release; we disclaim any obligation to update these
statements. We have based these forward-looking statements on our
current expectations and assumptions about future events. While our
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the following:
deterioration in economic conditions in any of the industries in
which our customers operate or a worldwide financial downturn; an
extended decline in prices we receive for our gas, natural gas
liquids and coal including the impact on gas prices of our gas
operations being concentrated in Appalachia which has experienced a dramatic
increase in gas production and decline in gas pricing relative to
the benchmark Henry Hub prices; our customers extending existing
contracts or entering into new long-term contracts for coal; the
expiration or failure to extend existing long-term contracts; our
reliance on major customers; our inability to collect payments from
customers if their creditworthiness declines; the disruption of
rail, barge, gathering, processing and transportation facilities
and other systems that deliver our gas and coal to market; a loss
of our competitive position because of the competitive nature of
the gas and coal industries, or a loss of our competitive position
because of overcapacity in these industries impairing our
profitability; coal users switching to other fuels in order
to comply with various environmental standards related to coal
combustion emissions; the impact of potential, as well as any
adopted regulations relating to greenhouse gas emissions on the
demand for natural gas and coal, as well as the impact of any
adopted regulations on our coal mining operations due to the
venting of coalbed methane which occurs during mining; the risks
inherent in gas and coal operations being subject to unexpected
disruptions, including geological conditions, equipment failure,
timing of completion of significant construction or repair of
equipment, fires, explosions, accidents and weather conditions
which could impact financial results; decreases in the availability
of, or increases in, the price of commodities and services used in
our mining and gas operations, as well as our exposure under "take
or pay" contracts we entered into with well service providers to
obtain services of which if not used could impact our cost of
production; obtaining and renewing governmental permits and
approvals for our gas and coal gas operations; the effects of
government regulation on the discharge into the water or air, and
the disposal and clean-up of, hazardous substances and wastes
generated during our coal and gas operations; the effects of
stringent federal and state employee health and safety regulations,
including the ability of regulators to shut down a well or mine;
the potential for liabilities arising from environmental
contamination or alleged environmental contamination in connection
with our past or current gas and coal operations; the effects of
mine closing, reclamation, gas well closing and certain other
liabilities; uncertainties in estimating our economically
recoverable gas and coal reserves; defects may exist in our chain
of title and we may incur additional costs associated with
perfecting title for gas or coal rights on some of our properties
or failing to acquire these additional rights we may have to reduce
our estimated reserves; the outcomes of various legal proceedings,
which are more fully described in our reports filed under the
Securities Exchange Act of 1934; the impacts of various asbestos
litigation claims; increased exposure to employee related long-term
liabilities; lump sum payments made to retiring salaried employees
pursuant to our defined benefit pension plan exceeding total
service and interest cost in a plan year; replacing our natural gas
reserves, which if not replaced, will cause our gas reserves and
gas production to decline; acquisitions that we may make in the
future involve risks including the accuracy of our assessment of
the acquired businesses and their risks, achieving any anticipated
synergies, integrating the acquisitions and divestitures we may
make may not occur or produce anticipated proceeds; existing and
future gas joint ventures may restrict our operational and
corporate flexibility, we may be materially impacted by actions
taken by our joint venture partners and we may not realize
anticipated benefits such as carried costs; our ability to acquire
water supplies needed for gas drilling, or our ability to dispose
of water used or removed from strata in connection with our gas
operations at a reasonable cost and within applicable environmental
rules; provisions of our debt agreements may restrict our
flexibility and the risks associated with the degree to which we
are leveraged; our hedging activities may prevent us from
benefiting from price increases and may expose us to other risks;
changes in federal or state income tax laws, particularly in the
area of percentage depletion and intangible drilling costs, could
cause our financial position and profitability to deteriorate; the
risks in making strategic determinations, including the allocation
of capital and other resources among our strategic opportunities
may adversely affect our financial condition; failure by Murray
Energy Corporation to satisfy the liabilities it assumed from us as
well as to perform its obligations under various agreements; we may
not be able to consummate a sale or MLP transaction of our gas
midstream assets; and other factors discussed in the 2013 Form 10-K
under "Risk Factors," as updated by any subsequent Form 10-Qs,
which are on file at the Securities and Exchange Commission.
A registration statement relating to the securities of the MLP
that would be sold in the offering has not been filed with the
Securities and Exchange Commission or become effective. This
announcement does not constitute an offer to sell, or the
solicitation of an offer to buy, any securities. This announcement
is being issued pursuant to, and in accordance with, Rule 135 under
the Securities Act of 1933.
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SOURCE CONSOL Energy Inc.