Yesterday CONSOL Energy announced that it will sell its subsidiary Consolidated Coal Company (CCC) that contains five coal mines in West Virginia to a subsidiary of Murray Energy Corporation (Murray Energy) for growth in their E&P (energy and production) business sector. The CCC mines (McElroy Mine, Shoemaker Mine, Robinson Run Mine, Loveridge Mine, and Blacksville No. 2 Mine) and CONSOL’s river and dock operations (21 boats and 600 barges) are the assets included in the transaction.
CONSOL expects growth in its gas production though this sale. The company is projecting gas production growth of 30 percent for 2015-2016. "In advancing our E&P growth strategy, we expect that West Virginia will continue to play an important role," continued Mr. Harvey. "We have a sizeable Marcellus Shale footprint in West Virginia, which will take a significant amount of labor and capital to develop."
The Pennsylvania operations are not involved in the sale to Murray Energy. CONSOL retains ownership of the Bailey, Enlow Fork, and soon-to-be-completed BMX mines. CONSOL expects this to reduce their 2014 EBITDA by $213, adjusted EBITDA by $377 million and balance sheet liabilities by $2.5 billion. The company plans to pay a regular quarterly dividend in 2014. From the transaction, CONSOL Energy’s administrative expenses will decrease as pension and disability fees are included in the agreement.
CONSOL expects to pay a regular quarterly dividend of $0.0625 per share resulting in an annual dividend of $0.25. The total value of the agreement with Murray Energy is expected to be valued at $3.5 billion. Balance sheet liabilities of $2.5 billion are part of the agreement. The administrative items included but not limited to in the agreement are pension trust obligations, long term disability, workers compensation, future royalties on some assets such as reserves and coal workers pneumoconiosis. CONSOL Energy expects this to increase fourth quarter pretax gain by $1.3 billion should this transaction close by the end of the year.
Yesterday CONSOL (NYSE:CNX) opened with a trading price of 36.96 and closed at 37.95 with a negative .19 price change. The stock is traded in the energy sector of the coal industry, and it competes with companies Alliance Holdings, Alliance Resource and Peabody Energy Corporation.
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