CONSOL Energy (CNX) Sees Net Investments Up to $865M in FY13
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CONSOL Energy Inc. (NYSE: CNX) expects to invest $835 - $865 million in its coal, gas, and water businesses in 2013, after adjusting for certain expected proceeds.
CONSOL Energy expects to be able to fund this 2013 net investment through cash flow from operations.
In 2013, CONSOL will receive the final annual installment of $328 million from Noble Energy. This is reflected in the asset sales category. The remainder of this category in the two cases represents a range of assumed asset sales, of between $127 million and $312 million. We believe that this range is achievable, given that the company sold assets of $350 million in 2012.
Within the coal operations category for 2013, CONSOL anticipates investing $318 million for maintenance-of-production projects. Other major items include $166 million for the BMX Mine, as well as $80 million for the Enlow Fork overland belt project. The BMX Mine is scheduled for completion during the first quarter of 2014, when 5 million annual tons of high-quality Pittsburgh seam coal will be available to be sold in either the high-vol or thermal markets. In 2012, CONSOL contracted and paid significant deposits to secure replacement longwall mining shields at three of its mining complexes and new longwall mining shields at the BMX mining complex. The company is nearing the end of a process to fund this capital commitment in a $205 million operating lease in 2013. This amount has been netted from the expected coal operations capital expenditures.
Within the gas operations category, CONSOL expects to invest about $835 - $935 million. An estimated $160 million of this is to maintain production. This figure is net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale and independent of commodity price levels. CONSOL assumes no carry from Noble Energy for drilling in the Marcellus Shale, which is dependent on natural gas being priced at or above $4.00 per MMBtu for three consecutive months. We remain focused and disciplined to drill our higher rate of return projects and benefit from the flexibility of our held-by-production (HBP) acreage position.
CONSOL plans to spend $600 million on continuing to develop its extensive Marcellus Shale assets, which includes drilling capital of $415 million. The budget anticipates that the CONSOL/Noble Energy joint venture will drill 126 (gross) horizontal Marcellus Shale wells, including 90 (gross) wells in the liquids-rich area of the play. We will continue to evaluate the number of dry gas wells that we drill in light of the commodity price curve and exercise appropriate capital discipline. CONSOL expects to invest $74 million in related gathering and compression.
In the CONSOL/Hess Corporation joint venture in the Utica Shale, CONSOL expects to invest $122 million, with $90 million of that allocated towards drilling capital for CONSOL's share of 27 (gross) wells. Because of the drilling carry, Hess Corporation pays 75% of Utica Shale well costs, while production is split 50/50.
The coalbed methane program will again be kept at minimal drilling levels, with the expected drilling of only 63 wells. Total capital for the 2013 CBM program is estimated to be $65 million.
Across all of the gas plays, the high case includes $660 of drilling capital, $128 million of gathering and compression capital and $76 million for land.
As a result of the expected gas investment, CONSOL Energy projects its 2013 gas production to be between 170-180 Bcfe, of which 95% is expected to be dry gas. Within this range are included approximately 250 Mbbls of oil and 1,200 Mbbls of condensate/NGLs. The total production, if achieved, will be an increase of between 8 - 15%, as compared to actual 2012 production of 156.3 Bcfe.
CONSOL Energy expects to be able to fund this 2013 net investment through cash flow from operations.
In 2013, CONSOL will receive the final annual installment of $328 million from Noble Energy. This is reflected in the asset sales category. The remainder of this category in the two cases represents a range of assumed asset sales, of between $127 million and $312 million. We believe that this range is achievable, given that the company sold assets of $350 million in 2012.
Within the coal operations category for 2013, CONSOL anticipates investing $318 million for maintenance-of-production projects. Other major items include $166 million for the BMX Mine, as well as $80 million for the Enlow Fork overland belt project. The BMX Mine is scheduled for completion during the first quarter of 2014, when 5 million annual tons of high-quality Pittsburgh seam coal will be available to be sold in either the high-vol or thermal markets. In 2012, CONSOL contracted and paid significant deposits to secure replacement longwall mining shields at three of its mining complexes and new longwall mining shields at the BMX mining complex. The company is nearing the end of a process to fund this capital commitment in a $205 million operating lease in 2013. This amount has been netted from the expected coal operations capital expenditures.
Within the gas operations category, CONSOL expects to invest about $835 - $935 million. An estimated $160 million of this is to maintain production. This figure is net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale and independent of commodity price levels. CONSOL assumes no carry from Noble Energy for drilling in the Marcellus Shale, which is dependent on natural gas being priced at or above $4.00 per MMBtu for three consecutive months. We remain focused and disciplined to drill our higher rate of return projects and benefit from the flexibility of our held-by-production (HBP) acreage position.
CONSOL plans to spend $600 million on continuing to develop its extensive Marcellus Shale assets, which includes drilling capital of $415 million. The budget anticipates that the CONSOL/Noble Energy joint venture will drill 126 (gross) horizontal Marcellus Shale wells, including 90 (gross) wells in the liquids-rich area of the play. We will continue to evaluate the number of dry gas wells that we drill in light of the commodity price curve and exercise appropriate capital discipline. CONSOL expects to invest $74 million in related gathering and compression.
In the CONSOL/Hess Corporation joint venture in the Utica Shale, CONSOL expects to invest $122 million, with $90 million of that allocated towards drilling capital for CONSOL's share of 27 (gross) wells. Because of the drilling carry, Hess Corporation pays 75% of Utica Shale well costs, while production is split 50/50.
The coalbed methane program will again be kept at minimal drilling levels, with the expected drilling of only 63 wells. Total capital for the 2013 CBM program is estimated to be $65 million.
Across all of the gas plays, the high case includes $660 of drilling capital, $128 million of gathering and compression capital and $76 million for land.
As a result of the expected gas investment, CONSOL Energy projects its 2013 gas production to be between 170-180 Bcfe, of which 95% is expected to be dry gas. Within this range are included approximately 250 Mbbls of oil and 1,200 Mbbls of condensate/NGLs. The total production, if achieved, will be an increase of between 8 - 15%, as compared to actual 2012 production of 156.3 Bcfe.
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