| CONSOL Energy Trims 2016 Guidance, Shares Plunge 11.1% | |
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Multi-fuel energy producer CONSOL Energy CNX issued a revised guidance for 2016. The current guidance is lower than the prior expectation in reflection of weak market fundamentals. CONSOL’s shares plunged nearly 11.1% to close at $7.58 yesterday in response to the news.
CONSOL’s current expectation from its Coal and E&P divisions is lower than prior goals. The objective of the company to increase its focus on E&P has been dealt a hard blow by the persistent weakness in commodity prices.
Coal Division
Given the slump in coal demand, the company lowered its 2016 sales expectation from this division to 27.0–32.0 million tons, from its previous guidance of 30.6–33.4 million tons. The cut in the guidance reflects further coal market weakness due to an unusually mild winter and rock bottom natural gas prices.
The stringent regulation on emission set out by the U.S. Environmental Protection Agency’s Clean Power Plan and the recent deal signed in Paris to keep a check on global warming will ensure lower coal usage going forward.
CONSOL Energy's 2016 Coal Division budget reflects maintenance of production capital. Total Coal Division capital expenditure of $170–$190 million includes $140–$155 million allocated to production and $30–$35 million to other activities related to land, water, safety, and the Baltimore Terminal.
E&P Division
CONSOL Energy now expects E&P production volumes to grow nearly 15% this year from 2015 levels, a moderation from its prior growth projection of 20% in 2016 taking 2014 as the base year.
In 2016, the E&P Division expects capital expenditure of $205–$325 million, which is $185 million lower than the previous guidance of $400–$500 million.
Why the Downward Revision?
The downward revision in the guidance at both its Coal and E&P divisions was not surprising given the carnage in the commodities market.
In this situation, CONSOL Energy implemented zero-base budgeting last year. The company is streamlining its organizational structure and right-sizing headcount. This will definitely boost its margins.
Bigger Picture
CONSOL Energy currently has a Zacks Rank #3 (Hold). The company’s strategic decision to lower its focus on coal assets and increase emphasis on natural gas turned out to be a double whammy. But if we consider the dismal conditions of the primarily coal focused miners like Peabody Energy BTU and Arch Coal ACI, CONSOL’s diversification strategy seems to be not so much a failure.
Both Peabody Energy and Arch Coal are premier coal companies but the softness in demand of coal and a continuous drop in market prices had forced them to go for a reverse stock split to remain listed on the exchange.
CONSOL Energy has also paid the price having lost 75.8% of its market value over the last one year to close at $7.58 yesterday.
A better-ranked stock in the coal space is Cloud Peak Energy CLD, currently carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CONSOL ENERGY (CNX): Free Stock Analysis Report ARCH COAL INC (ACI): Free Stock Analysis Report PEABODY ENERGY (BTU): Free Stock Analysis Report CLOUD PEAK EGY (CLD): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
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Consol Energy Inc.
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PRODUCER |
CODE : CNX |
ISIN : US20854P1093 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Consol Energy is a producing company based in United states of america. Consol Energy produces coal in USA, and holds various exploration projects in USA. Its main asset in production is BUCHANAN in USA. Consol Energy is listed in Germany and in United States of America. Its market capitalisation is US$ 5.4 billions as of today (€ 5.0 billions). Its stock quote reached its highest recent level on June 06, 2008 at US$ 99.79, and its lowest recent point on April 26, 2019 at US$ 10.00. Consol Energy has 223 758 284 shares outstanding. |