In its latest swing at transforming into a pure play E&P, Consol Energy (NYSE: CNX) said Feb. 29 that it will sell its Buchanan mine and other assets in southwestern Virginia but hang on to its coalbed methane rights.
In a $420 million deal, private-equity backed Coronado IV LLC agreed to purchase 400 million tons of metallurgical coal and reserves, including $398 million cash payable at closing.
Consol will likely pay down part of its $952 million debt with the sale’s proceeds, but it parts with “the premiere U.S. met coal asset,” Jefferies LLC analyst Jonathan D. Wolff said.
Metallurgical or met coal is less-abundant coal chiefly used in the production of coke, and is primarily sold to steel mills, according to Grande Cache Coal’s website.
Wolff said that the Buchanan mine, with 88 million tons of proved coal reserves, was likely to drag on free cash flow in 2016.
The transaction continues Consol on its strategic path while further aligning the balance sheet, said Nicholas J. DeIuliis, president and CEO. Consol also said it was suspending its penny dividend.
Consol made its first substantial foray into the Appalachian Basin in March 2010 when it spent $3.5 billion to acquire 1.46 million Marcellus acres from Dominion Resources Inc.
"The Buchanan mine fits into Coronado’s portfolio as a pure play metallurgical coal producer, and, in the end, this transaction bolsters the strategic position of both companies,” he said.
The Buchanan deal includes Consol’s closed Amonate mine in West Virginia, the Russell County, Va., coal reserves and the Pangburn-Shaner-Fallowfield coal reserves in southwest Pennsylvania.
The transaction does not include any gas rights, and Consol retained rights to extract and sell gas at the mines and other properties. Wolff said the future gas development plan at Buchanan involves areas where the coal has already been mined out.
Consol will also receive a 20% royalty on coal sold outside the U.S. and Canada during the five years following closing. Consol will get 20% of any excess on the gross sale sales price.
Deutsche Bank was Consol’s financial adviser to Consol Energy. Buchanan Ingersoll & Rooney PC and Steptoe & Johnson PLLC were legal counsel.
Darren Barbee can be reached at dbarbee@hartenergy.com.
Recommended Reading
Not Sweating DeepSeek: Exxon, Chevron Plow Ahead on Data Center Power
2025-02-02 - The launch of the energy-efficient DeepSeek chatbot roiled tech and power markets in late January. But supermajors Exxon Mobil and Chevron continue to field intense demand for data-center power supply, driven by AI technology customers.
Lion Equity Partners Buys Global Compression from Warren Equipment
2025-01-09 - Private equity firm Lion Equity Partners has acquired Warren Equipment Co.’s Global Compression Services business.
Phillips 66’s NGL Focus, Midstream Acquisitions Pay Off in 2024
2025-02-04 - Phillips 66 reported record volumes for 2024 as it advances a wellhead-to-market strategy within its midstream business.
Plains All American Prices First M&A Bond of Year
2025-01-13 - U.S. integrated midstream infrastructure company Plains All American Pipeline on Jan. 13 priced a $1 billion investment-grade bond offering, the year's first to finance an acquisition.
Energy Transfer Announces $3B Senior Notes Offering
2025-02-19 - Midstream company Energy Transfer plans to use the proceeds from its $3 billion offering of senior notes to refinance existing debts and for general partnership purposes.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.