January 28, 2010 / 2:13 PM / 8 years ago

UPDATE 3-Coal miner Consol beats estimates, upbeat on China

* Q4 earnings 78 cents/share vs Street view 74 cents

* Sees more China exports, to double natgas production

* Shares drop over 3 pct (Recasts first paragraph with outlook, adds CEO comments, stock movement)

By Steve James

NEW YORK, Jan 28 (Reuters) - Coal miner Consol Energy Inc (CNX.N) reported a better-than-expected fourth-quarter profit and forecast increased exports of steel-making coal to Asia and a doubling of natural gas production in five years.

Despite the upbeat outlook, the company’s shares fell 3.2 percent to $48.42 in afternoon trade on the New York Stock Exchange as stocks slumped broadly on concerns about the global economy.

President and Chief Executive Officer Brett Harvey said 2010 looked more promising than he thought possible only three months ago.

“The market’s changing and the demand for energy is coming out of Asia, especially China,” he told analysts on a conference call

“Two quarters ago, I never would have said that we would be shipping coal to China,” he said. “I’m pleasantly surprised... so it could end up being a long-term relationship.”

Harvey said Consol sold a shipload of coking, or metallurgical, coal to merchant coke plants in China this month. And on Thursday, Consol sold another five cargoes of northern Appalachian coking coal into Asian markets.

“Penetration of northern Appalachia coal into the high-vol coking coal market has meaningful implications for Consol’s earnings in 2010 and beyond,” Harvey said.

Last October, Consol cut steam, or thermal coal production to match demand, while power plant customers were sitting on near record high stockpiles of coal.

But with the recession easing and power demand increasing, utilities are looking to buy more coal. Harvey said Consol would likely produce about 62 million total tons this year. Eight million of that would be metallurgical for domestic and Asian steelmakers.

“On the steam side, the difference will be we’ll match the market,” Harvey said. “Where the market is. We’re not going to build inventory so whatever the market will bear, we’ll match that side.”

Asked about natural gas production, Harvey said Consol’s subsidiary, CNX Gas Corp CXG.N was installing a new rig in the Marcellus Shale geological region covering several Northeast states. “Since we became public in the gas company in 2005, we have doubled our annual production.

“We plan to do that again in the next five years.”

Pittsburgh-based Consol said fourth-quarter net earnings were $143.2 million, or 78 cents per share, compared with $176.3 million, or 97 cents per share, in the 2008 quarter. Revenue fell to $1.238 billion from $1.242 billion.

Analysts on average were expecting earnings of 74 cents per share and revenue of $1.166 billion, according to Thomson Reuters I/B/E/S.

“Although revenue from our thermal coal business was higher, met (metallurgical) coal revenue and gas revenue were lower,” the company said in its earnings release.

Consol produced 57.2 million tons of thermal coal in the year, at an average price of $56.57 per ton, up from $45.01 in 2008. Fourth-quarter production fell to 14.6 million tons from 16.2 million in the 2008 quarter.

Metallurgical coal production slipped to 2.1 million tons in 2009 from 3.4 million in 2008. The average price for metallurgical coal fell to $104.15 from $116.94 in the previous year. For the fourth quarter, production fell to 900,000 tons from 1.2 million a year earlier. (Reporting by Steve James, editing by Dave Zimmerman and Tim Dobbyn)

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