Gas sales and prices were the strong performers compared to coal production volumes which fell short of forecasts, impacting the company’s bottom line.
Production income for coal, including equity affiliates, declined 4.9 percent in the period-to-period comparison, due to a 2.5 percent decline in sales of company-produced coal.
Production from ongoing operations was improved 2.4 million tons, but total production in the period-to period comparison declined 1.2 million tons. This was because some mines producing in the June 2002 quarter later depleted, were sold, or were idled on a long-term basis and were no longer producing in the June 2003 period.
Operating costs per ton of coal produced (including equity affiliates) increased 1.3 percent, and total costs per ton of coal produced (including equity affiliates) increased 2.2 percent. Operating costs on a unit basis increased due to decreases in production volumes.
Total costs on a unit basis increased due to a decrease in production volumes, higher active and retired employee medical benefits and increased salaried employee pension costs.
Average realized prices for company-produced coal improved 2.2 percent period-to-period, reflecting higher domestic steam coal prices received on contracts previously negotiated.
CONSOL CEO Brett Harvey said US energy markets during the quarter were somewhat erratic.
"Coal demand during the quarter showed no consistent trend. Cool weather in the spring and earlier summer dampened demand, but customer inventories are still lower than a year ago and prices remain higher than a year ago," Harvey said.
He said the relative strength of coal prices was due to continued tightness in coal supplies, particularly in the eastern United States.
Harvey gave a conservative outlook for the second half of the year, predicting demand to be within the normal range, barring unusual weather patterns or further weakening of the United States economy.
"We expect the third quarter to be weak because of higher coal segment costs related to major maintenance activity scheduled during the traditional miners vacation period and any remaining costs for repairing fire damage at Loveridge," he said.
CONSOL Energy was largely unaffected by changes in energy markets during the quarter because most of the company's coal and gas production had already been sold at prices higher than a year earlier.
In event news, CONSOL announced the sale of its Emery mine in Utah during July. In the same month, the company also announced an agreement with Triana Energy to explore and produce gas in southwestern Virginia.
