"First quarter results reflect a substantial improvement in our coal segment performance," said Consol CEO Brett Harvey. "Production volumes from our Northern Appalachia mines improved in nearly every case, average realized prices were up, and costs, although higher than the same period a year earlier, declined from the trailing quarter - a good sign."
Harvey said based on the strength of the coal market, it had improved the company’s financial outlook, predicting cash generation of $328 million in 2004.
Harvey noted in January the company said it was evaluating a capital markets transaction to help fund anticipated spending. "As a result of the improved outlook for cash generation, I do not foresee a circumstance this year where we would need to access the equity or public debt markets to fund our ongoing capital expansion activities."
Total revenue and other income increased $91.0 million, or 16.3% in the quarter-to-quarter comparison. The increase was primarily due to approximately $80 million in higher revenue from sales of coal and gas as well as from other income derived from the sale of the company's Australian subsidiary.
Coal segment performance improved in the quarter-to-quarter comparison due to 1.2 million tons of higher total coal sales and because of 1.3 million tons more production of coal.
Higher coal production reflected substantial improvement in production from the company's core Northern Appalachia mines. Notably, the Bailey and Enlow Fork mines in Pennsylvania each produced more that three million clean tons in the quarter.
Average realized prices for company-produced coal increased, period-to-period, by $1.79 per ton, reflecting improved contract prices, as well as growing demand for coal and lower industry production of coal in the eastern United States, both of which have resulted in higher spot prices for domestic power generation consumption.
“We anticipate that higher contract prices for metallurgical grades of coal, that also reflect reduced industry production, primarily will be reflected in results later in the year. Of the 16.9 million tons produced in the quarter, 1.6 million tons were metallurgical grade,” Consol said.
Harvey said international factors also have positively affected coal industry fundamentals. "Tight supplies of metallurgical grades of coal world-wide have resulted in much higher prices for that product. At the moment, even steam coals for international markets appear to be in short supply. As a result, there is little of the discount that we see typically in U.S. steam coals sold in the international market."