Consol Energy has announced it has completed the sale of its subsidiary, Consolidation Coal Co., to Murray Energy.
The sale includes five longwall mines in West Virginia: the McElroy, Shoemaker, Robinson Run, Loveridge and Blacksvill No. 2 mines.
The company said it had closed the US$ 3.5 billion deal, in which Consol received US$ 825,000 in cash plus US$ 184 million in other fees in the future, as well as the offloading of US$ 2.4 billion in balance sheet liabilities. The company said it would have a pre-tax gain of roughly US$ 1.3 billion on its Q4 results, while saving around US$ 65 million in annual administrative costs.
Consol CEO J. Brett Harvey said in a prepared statement: “The completion of this complex transaction this year enables us to enter 2014 with our focus on achieving our gas growth production targets of 210-225 Bcfe for 2014 and 30% annual gas production growth in 2015 and 2015.”
Consol Energy is the fifth-largest US coal producer, and the deal is estimated to be one of the biggest transactions in recent years in the coal patch.
Analyst John W. Miller said that “The deal shows how rough the coal business has become, weighed by tepid demand, tighter regulations and the rise of cheap natural gas.”
“This is what makes Murray’s purchase all the more intriguing: it sees a long-term future for coal while most rivals in the industry don’t,” Miller said.
The West Virginian coal mines produced a combined total of 28.5 million t of thermal coal in 2012.
In a statement, Murray Energy CEO, Robert E. Murray, referred to the deal as “momentous”.
“The combined companies will allow Murray Energy to better serve our electric utility customers with reliable and low cost coal supplies, at accurate qualities,” Murray said.
The company is hoping to double production at the coal mines to 58.6 million tpa, while tripling reserves to 2.4 billion t. The company is targeting fifth spot in the list of US largest coal miners, up from a current position of eighth. This will involve doubling the company’s workforce from 3300 to over 7000.
Pennsylvania-based Consol said that Muarray would also take on Consol’s pension obligations with the United Mine Workers of America (UMWA).
Edited from various sources by Sam Dodson
Read the article online at: https://www.worldcoal.com/mining/06122013/consol_energy_sells_five_us_coal_mines_327/