UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 15, 2014
CONSOL Energy Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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001-14901 |
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51-0337383 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
CNX Center
1000 CONSOL Energy Drive
Canonsburg, Pennsylvania 15317
(Address of principal executive offices)
(Zip code)
Registrants telephone number, including area code:
(724) 485-4000
Not
applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 |
Results of Operations and Financial Condition. |
CONSOL Energy Inc. (the
Company) issued a press release on July 15, 2014 announcing its 2014 second quarter operational results. A copy of the operations release is attached to this Form 8-K as Exhibit 99.1.
The information in this Current Report and the exhibit hereto are being furnished and shall not be deemed to be filed for the
purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Current Report and exhibit hereto shall not be incorporated by reference into any
registration statement or other document pursuant to the Securities Act of 1933, as amended.
The response to Item 2.02 is incorporated herein by reference to
this Item 7.01.
Item 9.01 |
Financial Statements and Exhibits. |
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Exhibit Number |
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Description of Exhibit |
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Exhibit 99.1 |
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Operational Results Press Release dated July 15, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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CONSOL ENERGY INC. |
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By: |
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/s/ Stephen W. Johnson |
Stephen W. Johnson Executive Vice
President and Chief Legal and Corporate Affairs Officer |
Dated: July 16, 2014
Exhibit Index
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Exhibit Number |
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Description of Exhibit |
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Exhibit 99.1 |
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Operational Results Press Release dated July 15, 2014. |
Exhibit 99.1
CONSOL Energy Announces Operations Update;
Utica Shale 3-Well Pad in Noble County, OH, 24-Hour IP Rate Averages over 23 MMcfe Per Day, Per Lateral;
2014 Gas Production Guidance Range Increased to 225 235 Bcfe;
Coal Division Produces 8.3 Million Tons in Quarter
PITTSBURGH (July 15, 2014) CONSOL Energy Inc. (NYSE: CNX) is providing an operations update for the quarter ended June 30, 2014.
CONSOLs 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 CONSOLs 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.
CONSOLs 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.
CONSOLs coal division produced 8.3 million tons for the 2014 second quarter, including 1.0 million tons of low-vol coking coal from the
companys 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, CONSOLs 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 companys 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.
1
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 Mines 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 Buchanans annual guidance is a result of continued
market weakness.
E&P Division Results:
CONSOLs E&P division continues to execute the companys 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:
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Sub-Regions |
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# Horizontal Rigs |
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Drilled |
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Completed |
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Turned In Line (TIL) |
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Avg. TIL Lateral Length (ft) |
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Counties |
Southwest PA |
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2 |
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15 |
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12 |
(1) |
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9 |
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9,253 |
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Washington, PA |
Central PA |
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1 |
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3 |
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10 |
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11 |
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7,071 |
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Westmoreland, PA; Indiana, PA |
Northern WV Dry |
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2 |
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6 |
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6 |
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3 |
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8,827 |
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Barbour, WV |
North Wet Gas |
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4 |
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20 |
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13 |
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12 |
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6,623 |
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Marshall, WV; Washington, PA |
South Wet Gas |
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1 |
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4 |
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10 |
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Ritchie, WV |
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Total |
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10 |
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48 |
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51 |
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35 |
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7,629 |
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(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.
2
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:
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Sub-Regions |
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# Horizontal Rigs |
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Drilled |
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Completed |
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Turned In Line (TIL) |
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Avg. TIL Lateral Length (ft) |
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Counties |
Noble County |
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1 |
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8 |
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4 |
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3 |
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9,510 |
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Noble, OH |
Surrounding Core |
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3 |
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3 |
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8 |
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Harrison, OH |
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Total Ohio Wet Gas |
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4 |
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11 |
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12 |
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3 |
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9,510 |
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In the Utica Shale, CONSOLs 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 CONSOLs 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 companys web site, at www.consolenergy.com.
3
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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Contacts: |
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Investor: |
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Dan Zajdel, at (724) 485-4169 |
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Tyler Lewis, at (724) 485-3157 |
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Media: |
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Kate ODonovan, at (724) 485-3097 |
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Brian Aiello, at (724) 485-3078 |
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