PITTSBURGH, Pa.--Consol Energy Inc. (CNX), one of the world's oldest coal companies, is exploring ways to significantly reduce its coal holdings and focus more on natural gas.
Company executives have felt its stock was undervalued in part because of its historic dependence on coal, and have been exploring ways for the 150-year-old firm, whose stock has fallen about 33% from its 2011 high, to optimize its value
Under consideration, according to people familiar with the matter, is splitting up its coal and gas assets, and having them traded separately. Consol has invested heavily in the natural gas market in recent years, including a $3.5 billion purchase of Dominion Resources' Appalachian gas business to take advantage of the shale gas boom.
Another scenario is selling about half of its coal capacity, mainly that tied to the utility markets, and retaining those linked to the export market and steel, such as the Buchanan mine in Mavisdale, Va., which last year produced 3.5 million tons of metallurgical coal. It could later sell its remaining coal holdings if it found buyers at the right price and if the market seemed to favor its retrenchment. A third scenario is selling all of the coal assets outright, which are valued at $6.5 billion, but those close to the company said Consol would like to be able to retain some of its more profitable coal operations.
In a statement, the company confirmed "that the evaluation process regarding our corporate structure continues and all options are being considered. There can be no assurance that any particular option will be pursued." In July, CEO J. Brett Harvey said that the case for investors had become "confusing" because of the multiplicity of assets. The company, he went on, needs to "let our shareholders bask in the value of all these assets, whether it is by sale or structure, and we're working on that right now."
Most likely buyers would be those domestic coal companies that are familiar with the U.S market and have mines and infrastructure close to Consol's 12 Appalachian mining complexes. Coal analysts say likely buyers for Consol's coal mines include Chris Cline's Foresight Energy LLC, Alliance Resource Partners LP, and Murray Energy as possible buyers. A representative for Mr. Cline said he couldn't be reached. Alliance and Murray did not return requests for comment.
Getting out of the coal business would mark a historic pivot for the company, which started mining during the Civil War, mainly in Appalachia. The move would also follow a larger national trend toward greater reliance on cheaper, cleaner-burning natural gas.