Investor Relations

News Release

Printer Friendly Version View printer-friendly version
<< Back
CONSOL Energy Announces 2012 Capital Budget of $1.7 Billion; CONSOL Energy is Growing Coal, Gas, and Liquids Production; 2012 Gas Production Expected to Grow 12% to 160 Bcfe; 2013 Gas Production Target Introduced at 200-220 Bcfe

PITTSBURGH, Jan. 10, 2012 /PRNewswire/ -- CONSOL Energy Inc.'s (NYSE: CNX) Board of Directors has approved a 2012 Capital Budget of $1.7 billion, an increase from $1.4 billion invested in 2011. The budget includes $720 million for coal, $755 million for gas, $135 million for water, and $110 million for other.

"This budget reflects our desire to create shareholder value by investing in our highest rate of return projects: our organic opportunities in coal, gas, and liquids" commented J. Brett Harvey, chairman and CEO. "We are, however, entering a year with an unusual amount of uncertainty. We have the ability to adjust our investment, should circumstances warrant."

Within the coal category, CONSOL anticipates investing $310 million for maintenance-of-production projects. Another $205 million has been allocated to projects such as the BMX Mine which will result in increased production. This project is on track to add 5 million tons a year of high-quality Pittsburgh seam coal, which will be sold in either the high-vol or thermal markets. A further $155 million will go towards efficiency improvements such as the overland belt at Enlow Fork Mine, while health and safety items will require $50 million.

Within the gas category, CONSOL plans to spend $575 million on developing its extensive Marcellus Shale assets. Included in this is drilling capital of $395 million. The budget anticipates that the CONSOL/Noble Energy joint venture will drill 122 (gross) horizontal Marcellus Shale wells, including 39 (gross) wells in the liquids-rich area of the play. CONSOL expects to invest $90 million in related gathering and compression.

In the CONSOL/Hess Corporation joint venture in the Utica Shale, CONSOL expects to invest $50 million. Most of that will be drilling capital for CONSOL's share of up to 22 (gross) wells. All of the Utica drilling is expected to occur in either the liquids-rich area or the oil window of the play.

As a result, the total drilling in the liquids-rich/oil window is expected to be the 39 (gross) wells in the Marcellus Shale, and 22 (gross) wells in the Utica Shale, for a total of 61 (gross) wells out of the 144 (gross) wells, or 42%, expected to be drilled in the two plays.

The coalbed methane program will be scaled back in 2012 with the expected drilling of only 86 wells. Total capital for the 2012 CBM program is estimated to be $65 million.

Across all of the gas plays, the $755 million includes $519 of drilling capital, $124 million of gathering and compression capital, $30 million for production equipment, $26 million for water, and $23 million for land.

As a result of the expected gas investment, CONSOL Energy projects its 2012 gas production to be 160 Bcfe. This will be an increase of nearly 12%, compared to pro forma 2011 production of 142.9 Bcf, adjusted for the partial year impact of Marcellus production sold to Noble Energy and Antero Resources.

The company is introducing a 2013 gas/liquids production target of between 200 – 220 Bcfe, which will be achieved largely from the ramp-up in drilling in 2012. 

CONSOL Energy also re-affirms its 2015 gas production target of 350 Bcfe. The company expects to achieve this target by drilling the following number of wells per year:

 

 

 

 

 

 

 

 

Net wells by play type:

2012

2013

2014

2015

Marcellus Shale (net to CONSOL)

61

114

158

179

Utica Shale (net to CONSOL)

 

11

27

33

33

CBM

 

 

 

86

206

206

206

Other

 

 

 

55

110

115

113

   Total

 

 

 

213

457

512

531

Within the water category, the previously announced water treatment plant in northern West Virginia will require $115 million in capital in 2012.

The table below categorizes the 2012 Capital Budget and provides a comparison to the actual 2011 investments.

 

2011

Actual

Capital

2012
Capital
Budget

Coal

 

 

   Maintenance of Production

$243

$310

   Efficiency Projects (e.g., overland belts)

$183

$155

   Increases in Production (e.g., BMX)

$114

$205

   Safety

$  18

$  50

Total Coal

$558

$720

Gas

 

 

   Marcellus

$427

$575

   Utica

$    3

$  50

   CBM

$130

$  65

   Other

$102

$  65

Total Gas

$662

$755

Other

 

 

   Water

$49

$135

   Transportation (e.g., Baltimore Terminal;  barges)

$28

$  30

   Coal land

$73

$  55

   Other

$12

$  25

Total Other

$162

$245

Total Capital

$1,382

$1,720

 

CONSOL Energy Inc., the leading diversified fuel producer headquartered in the Eastern U.S., is a member of the Standard & Poor's 500 Equity Index and the Fortune 500. It has 12 bituminous coal mining complexes in four states and reports proven and probable coal reserves of 4.4 billion tons. It is also a leading Eastern U.S. gas producer, with proved reserves as of December 31, 2010 of 3.7 trillion cubic feet. Additional information about CONSOL Energy can be found at its web site: www.consolenergy.com.

Forward-Looking 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 sustained uncertainty in financial markets cause conditions we cannot predict; an extended decline in prices we receive for our coal and gas affecting our operating results and cash flows; our customers extending existing contracts or entering into new long-term contracts for coal; 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 coal and gas to market; a loss of our competitive position because of the competitive nature of the coal and gas 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 coal and natural gas, 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; foreign currency fluctuations could adversely affect the competitiveness of our coal abroad; the risks inherent in coal and gas 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; our focus on new gas development projects and exploration for gas in areas where we have little or no proven gas reserves; 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 coal and 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 mine or well; the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal and gas operations; the effects of mine closing, reclamation, gas well closing and certain other liabilities; uncertainties in estimating our economically recoverable coal and gas reserves; costs associated with perfecting title for coal or gas rights on some of our properties; 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; increased exposure to multi-employer pension plan liabilities; minimum funding requirements by the Pension Protection Act of 2006 (the Pension Act) coupled with the significant investment and plan asset losses suffered during the recent economic decline has exposed us to making additional required cash contributions to fund the pension benefit plans which we sponsor and the multi-employer pension benefit plans in which we participate; 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; acquisitions and joint ventures that we recently have completed or entered into or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and divestitures we anticipate may not occur or produce anticipated proceeds including joint venture partners paying anticipated carry obligations; the anti-takeover effects of our rights plan could prevent a change of control; increased exposure on our financial performance due to the degree we are leveraged; replacing our natural gas reserves, which if not replaced, will cause our gas reserves and gas production to decline; 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; our hedging activities may prevent us from benefiting from price increases and may expose us to other risks; and other factors discussed in the 2010 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.

 

SOURCE CONSOL Energy Inc.

CONTACT: Brandon Elliott, Investor Relations, +1-724-485-4526, Dan Zajdel, Investor Relations, +1-724-485-4169, or Lynn Seay, Media Relations, +1-724-485-4065

Become a fan of Consol on Facebook