Thursday, 31 July 2008

:::: CONSOL Energy Inc.


CNX Gas Corporation, incorporated on June 30, 2005, is engaged in the exploration, development, production and gathering of natural gas primarily in the Appalachian and Illinois Basins. The Company is a developer of coalbed methane (CBM). CONSOL Energy Inc. (CONSOL Energy) owns 81.5% of the Company’s outstanding common stock. In August 2005, the Company acquired all of CONSOL Energy’s rights associated with CBM from 4.5 billion tons of proved coal reserves owned or controlled by CONSOL Energy in Northern Appalachia, Central Appalachia, the Illinois Basin and other western basins. As of December 31, 2007, the Company has 1.343 trillion cubic feet equivalents of net proved reserves, including its portion of equity affiliates. The Company’s proved reserves are approximately 99% CBM and 50% proved developed. The Company is a gas producer in the Appalachian Basin with net sales of 58.2 billion cubic feet for the year ended December 31, 2007.

Prior to August 2005, the Company conducted business through various companies that were subsidiaries or joint ventures of CONSOL Energy. Those companies include CNX Gas Company, LLC, Cardinal States Gathering Company (CSGC), Coalfield Pipeline Company, Knox Energy LLC, Buchanan Generation, LLC and various other joint ventures. These companies are responsible for the exploration, production, gathering and sale of the Company’s gas. Buchanan Generation, LLC uses the Company’s gas to generate electricity from a generating facility located near its Virginia gas field. Approximately 27% of the Company’s gas production is produced in connection with coal extraction by CONSOL Energy. In the eastern United States, conventional natural gas fields typically are located in various types of sedimentary formations at depths ranging from 2,000 to 15,000 feet.

Central Appalachia

The Company has the right to extract CBM in Virginia Operations region from approximately 368,000 net CBM acres, which cover a portion of the coal reserves owned or controlled by CONSOL Energy in Central Appalachia. The Company produces gas primarily from the Pocahontas #3 seam, which is the main coal seam mined by CONSOL Energy in this region. This seam is generally found at depths of 2,000 feet and generally ranges from 3 to 6 feet thick. The gas content of this seam is between 400 and 600 cubic feet of gas per ton of coal in place. In addition, there are as many as 50 thinner seams present in the several 100 feet above the main Pocahontas #3 seam. Collectively, this series of coal seams represents a total thickness ranging from 15 to 40 feet. The Company coordinates some of its CBM extraction with the subsurface coal mining of CONSOL Energy. Frac well accounts for approximately 73.0% of the Company’s daily production. The Company drills vertical wells called gob wells into the gob to extract the additional gas that is released. Approximately 26% of the Company’s gas production comes in the form of gob gas. As of December 31, 2007, the Company has drilled 15 of in-mine horizontal wells, some of which have been extended to lengths of 5,000 feet.

Through a joint venture known as Knox Energy, LLC, the Company controls oil and gas rights (including the Chattanooga shale) and CBM rights on approximately 102,000 net leasehold acres in Anderson, Campbell, Morgan, Scott, and Roane Counties, Tennessee. The Company’s overall Chattanooga shale acreage position is 132,000 net acres. It also controls other property in east Kentucky and Tennessee that represents approximately 225,000 net CBM acres.

Northern Appalachia

The Company has the right to extract CBM in this region from approximately 684,000 net CBM acres, which contain most of the recoverable coal reserves owned or controlled by CONSOL Energy in Northern Appalachia. CNX Gas Corporation has acquired all of CONSOL Energy’s rights associated with CBM in this region. It produces gas primarily from the Pittsburgh #8 coal seam. This seam is generally found at depths of less than 1,000 feet and generally ranges from 4 to 7 feet thick. The gas content of this seam is typically between 100 and 250 cubic feet of gas per ton of coal in place. There are additional coal seams above and below the Pittsburgh #8 seam. Collectively, this series of coal seams represents a total thickness ranging from 10 to 30 feet. The Company has access to over 7,000 core samples that allows it to determine the amount of coal present, the geologic structure of the coal seam and the gas content of the coal.

In 2007, the Company drilled 62 vertical-to-horizontal CBM wells in Mountaineer. The Company has the right to extract CBM in Nittany region of Pennsylvania from approximately 248,000 net CBM acres. In 2007, the Company drilled 14 wells and connected 10 wells, which are producing CBM. The Company has 161,000 net acres of Marcellus shale potential in Ohio, Pennsylvania, West Virginia, and New York. As of December 31, 2007, it controlled approximately 300,000 net acres of rights to gas in the New Albany shale in Kentucky, Illinois, and Indiana.

Illinois Basin

As of December 31, 2007, the Company controlled approximately 573,000 net CBM acres, including 92,000 net CBM acres, which contain most of the recoverable coal reserves owned or controlled by CONSOL Energy in Illinois.

The Company has the right to extract CBM on 139,000 net acres in the San Juan Basin, 38,000 net acres in the Powder River Basin, 41,000 net acres in eastern Ohio, and 51,000 net acres in central West Virginia. It also has the rights to extract Oil and Gas on 43,000 net acres in the San Juan Basin, 9,000 net acres in the Powder River Basin and 53,000 net acres in various other areas.

Coal miner Consol 2nd-quarter profit slips

Thu Jul 31, 2008 8:43am EDT

NEW YORK, July 31 (Reuters) - Consol Energy Inc (CNX.N: Quote, Profile, Research, Stock Buzz) on Thursday posted a drop in second-quarter profit versus a year ago, when it recorded a gain from the sale of an asset.

Net earnings fell to $101 million, or 54 cents per share, from $153 million, or 83 cents per share, in the year-earlier quarter.

Revenue for the Pittsburgh-based mining company rose 14 percent to $1.21 billion.

In 2007, Consol recorded a $59 million gain in net earnings from an asset sale and swap, the company said.

Total coal sales climbed to 17.5 million tons from 17.1 million tons, while the average price rose to $48.50 from $41.64.

However, rising costs to produce that coal limited Consol's operating margin growth to $16.47 per ton from $16.18. (Reporting by Matt Daily; Editing by Maureen Bavdek)



Coal-to-Liquids — West Virginia ready to become a global leader

Bluefield Daily Telegraph
An $800 million investment by mining giant CONSOL could position the Mountain State as a global leader in modern coal technology. CONSOL announced this week that it plans to build a coal gasification plant capable of producing 720,000 metric tons of methanol that can be used as feedstock for the chemical industry. Officials also expect the project will be capable of converting methanol to about 100 million gallons per year of 87 octane gasoline.

CONSOL, and Synthesis Energy Systems are planning to develop the plant in northern West Virginia in the Benwood community in Marshall County by 2012.

Gov. Joe Manchin said the construction of the nation’s first modern coal-to-liquid plant will help to propel the state of West Virginia to the forefront of national energy leadership.

U.S. Sen. Jay Rockefeller, D-W.Va., said the project will give West Virginia an opportunity to show the world that the state is a global leader in energy issues and modern coal technology.

With the nation in the midst of a serious energy crisis, Rockefeller said the development of the $800 million coal gasification plant tells the world that West Virginia is no longer waiting around for someone else to solve the growing energy woes of the nation and the world.

Rockefeller said the CTL plant will create jobs, meet modern environmental standards and develop the state’s most abundant domestic resource — coal.

U.S. Sen. Robert Byrd said West Virginia has the coal, the brains and the determination to meet the energy challenges of the nation. Byrd said the Mountain State is demonstrating to the world that it intends to be a part of the solution.

While we regret that the historic and resource-rich coalfields of southern West Virginia were not selected as the site of this all-important project, we still join in the enthusiasm of our state and federal officials.

The creation of the nations’ first modern coal-to-liquids plant right here in the Mountain State does in fact send a message to the nation and the world.

The historic announcement puts the nation on a path to using clean coal technologies as a way to address our national energy needs. We are taking an important first step toward meeting this goal — and sending a unified message to the nation and the world — by developing our most abundant domestic resource.

Clean coal technology is a major part of the future of our nation. That future begins now in the Northern Panhandle on West Virginia.

The $800 million project is a historic first step in solving our nation’s energy crisis.




CONSOL Energy Inc. (CONSOL Energy) is a multi-fuel energy producer and energy services provider that primarily serves the electric power generation industry in the United States. CONSOL Energy has two principal business units: Coal and Gas. The principal activities of the Coal unit are mining, preparation and marketing of steam coal, sold primarily to power generators and metallurgical coal, sold to metal and coke producers. The Coal unit includes four segments: Northern Appalachian, Central Appalachian, Metallurgical and Other Coal. The principal activity of the Gas unit is to produce pipeline quality methane gas for sale primarily to gas wholesalers. On July 31, 2007, CONSOL Energy acquired AMVEST Corporation and certain subsidiaries and affiliates (AMVEST). The coal reserves acquired consist of approximately 160 million tons of low sulfur steam and high-volatile metallurgical coal. In October 2007, CONSOL Energy acquired Tri-River Fleeting Harbor Services, Inc. and Tri-River Marine, Inc.

Coal Operations

During the year ended December 31, 2007, the Northern Appalachian aggregated segment included Blacksville #2, Robinson Run, McElroy, Loveridge, Bailey, Enlow Fork, Mine 84 and Mahoning Valley. In 2007, the Central Appalachian aggregated segment included Jones Fork, Mill Creek and Wiley-Mill Creek. It also includes the mines acquired with the AMVEST acquisition: Fola Complex and the Terry Eagle Complex. In 2007, the Metallurgical aggregated segment included Buchanan and Amonate. The Other Coal segment includes its purchased coal activities, idled mine cost, coal segment business units not meeting aggregation criteria, as well as various other activities assigned to the coal segment but not allocated to each individual mine.

During 2007, CONSOL Energy had 17 active mining complexes, including a fully consolidated, 49% owned, variable interest entity, and a 49% equity affiliate, all located in the United States. At December 31, 2007, CONSOL Energy had an estimated 4.5 billion tons of proven and probable reserves. CONSOL Energy’s proven and probable coal reserves fall within the range of commercially marketed coals in the United States. CONSOL Energy’s reserves are located in northern Appalachia (63%), central Appalachia (13%), the mid-western United States (18%), the western United States (4%) and in western Canada (2%) at December 31, 2007. In 2007, 96% of CONSOL Energy’s production came from underground mines and 4% from surface mines. During 2007, 88% of its production came from mines equipped with longwall mining systems.

Gas Operations

The Company's gas operations are primarily conducted by CNX Gas Corporation (CNX Gas). CNX Gas primarily produces coalbed methane. In the Appalachian Basin it operates principally in Central Appalachia and Northern Appalachia. The Company also operates in the Illinois Basin. During 2007, the Company drilled in the aggregate, 370 net development wells, all of which were productive. During 2007, the Company drilled in the aggregate nine net exploratory wells. Most of its development wells and acreage are located in Central Appalachia.

Other Activities

CONSOL Energy provides other services both to its own operations and to others. These include land services, industrial supply services, terminal services (including break bulk, general cargo and warehouse services), river and dock services, and coal waste disposal services. The Company is developing property assets previously used primarily to support its coal operations or property assets not being utilized.

Fairmont Supply Company, a CONSOL Energy subsidiary, is a general-line distributor of mining and industrial supplies in the United States. Fairmont Supply has 15 customer service centers nationwide. Fairmont Supply also provides integrated supply procurement and management services. Fairmont Supply offers value-added services, including onsite stores management and procurement strategies. Fairmont Supply provides mine supplies to CONSOL Energy’s mining operations. Approximately 52% of Fairmont Supply’s sales in 2007, were made to CONSOL Energy’s mines.

In 2007, approximately 6.9 million tons of coal were shipped through CONSOL Energy’s subsidiary, CNX Marine Terminal Inc.’s exporting terminal in the Port of Baltimore. Approximately 55% of the tonnage shipped was produced by CONSOL Energy coal mines. The terminal can either store coal or load coal directly into vessels from rail cars. It is also one of the few terminals in the United States served by two railroads, Norfolk Southern and CSX Transportation, Inc.

CONSOL Energy’s river operations, located in Monessen, Pennsylvania, transport coal from the Company’s mines, coal from other mines and non-coal commodities from river loadout facilities primarily along the Monongahela and Ohio Rivers in northern West Virginia and southwestern Pennsylvania. Products are delivered to customers along the Monongahela, Ohio and Allegheny rivers. At December 31, 2007, the Company operated 25 towboats, five harbor boats and more than 750 barges. In 2007, its river vessels transported a total of 21.7 million tons of coal and other commodities, including 7.3 million tons of coal produced by CONSOL Energy mines. CONSOL Energy provides dock services for its mines at Alicia Dock, located on the Monongahela River in Fayette County, Pennsylvania. CONSOL Energy transfers coal from rail cars to barges for customers that receive coal on the river system.

The Company operates an ash disposal facility on a 61-acre site in northern West Virginia to handle ash residues for coal customers that are unable to dispose of ash onsite at their generating facilities. The ash disposal facility can process 200 tons of material per hour. CONSOL Energy has a long-term contract with a co-generation facility to supply coal and take the residual fly ash and bottom ash. Bottom ash is disposed locally at the co-generation facility for road construction and other purposes.