Consol Energy to sell five coal mines to Murray Energy in a $3.5 bn deal
29 October 2013
Consol Energy, one of the largest US coal producers, yesterday said that it will sell its Consolidation Coal Company (CCC) subsidiary containing five longwall coal mines to Murray Energy Corp in a $3.5-billion deal, in order to focus on natural gas and on mines that produce coal for export.
The CCC mines being sold are McElroy Mine, Shoemaker Mine, Robinson Run Mine, Loveridge Mine, and Blacksville No. 2 Mine, which collectively produced 28.5 million tons of thermal coal in 2012.
Also included in the deal are approximately 1.1 billion tons of Pittsburgh No. 8 seam reserves and Consol's river and dock operations, comprising a fleet of 21 towboats and 600 barges, which transported 19.3 million tons of coal in 2012.
Post closing, Consol will continue to have 3.1 billion tons of coal reserves, including enough to support new mines in Northern Appalachia and the Illinois Basin.
The transaction value of $3.5 billion comprises $850 million in cash to be paid at the closing, future payments of nearly $184 million and Murray would take on $2.4 billion in liabilities, including worker pensions.
Pittsburgh-based Consol is retaining coal assets that clearly align with its long-term strategic objectives. The company is keeping the Pennsylvania Operations with estimated production of nearly 24 million tons of high-Btu Pittsburgh-seam coal in 2014, its flagship Buchanan Mine in southwestern Virginia producings 4-5 million tons of coking coal per year.
It will also retain the Miller Creek Mining Complex in southern West Virginia, which is expected to produce about 2 million tons in 2014.
"While this transaction furthers Consol's E&P growth strategy," said Brett Harvey, Consol's chairman and CEO, "the sale of these five mines – assets that have long contributed to America's economic strength and our company's legacy – was a very difficult decision for our team.''
Consol said that the disinvestment enhances the company's ability to grow its gas production, and to extend its gas growth production targets beyond 2014.
For 2015 and 2016, the company expects 30 per cent annual gas production growth.
Founded in 1860, Consol is a producer of coal and natural gas. Its Appalachian coals are sold worldwide to electricity generators and steelmakers, while its Natural Gas Division has grown from a pure-play coalbed methane producer to a full-fledged exploration and production operation.
It is a leading producer in the Marcellus Shale and is currently conducting exploration in the Utica Shale.