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Consol Energy’s Production Guidance and Strategies for 3Q15

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Consol Energy’s production guidance

Although Consol Energy (CNX) did not give any specific production guidance for 3Q16, in July 2016, Consol Energy increased its E&P (exploration and production) division’s fiscal 2016 production guidance to 380–385 Bcfe (billion cubic feet equivalent), a midpoint increase of ~4.5 Bcfe (or ~1%) from its old production guidance of ~378 Bcfe.

The midpoint of Consol Energy’s 2016 production guidance is 382.5 Bcfe, which is ~16% higher than Consol’s production of 229 Bcfe in 2Q15.

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As shown in the above chart, for 2016, Consol Energy expects a 50-Bcfe production decline (due to a base decline) to offset a 103-Bcfe production increase due to improved well productivity, pipeline infrastructure debottlenecking projects, and the completion of inventory of drilled but uncompleted wells.

In 1H16, Consol Energy’s E&P division reported total production of ~197 Bcfe (billion cubic feet equivalent), which is ~34% higher than its 1H15 production of ~147 Bcfe. Therefore, it looks like Consol Energy is on track to meet or beat its fiscal 2016 E&P production guidance.

Consol Energy’s production mix guidance

For 2016, CNX expects natural gas production in the range of 338–342 Bcf (billion cubic feet), natural gas liquids production in the range of 6,150–6,300 Mbbls (thousand barrels), crude oil production in the range of 62–68 Mbbls and condensate production in the range of 850–950 Mbbls.

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Consol Energy’s updated E&P capital budget

Despite increasing its E&P division’s fiscal 2016 production guidance, Consol Energy reduced its E&P division’s capital budget to $190 million–$205 million, a midpoint reduction of $67.5 million, or ~25%, from its previous guidance range of $205 million–$325 million.

For 2016, Consol Energy plans to spend $140 million–$145 million on drilling and completion activities. Consol Energy plans to add two rigs in 2H16, which will result in drilling ten wells throughout rest of the year.

Other upstream players

In 2Q16, Consol Energy’s E&P division reported production of ~99.3 Bcfe. The majority of Consol Energy’s production came from the Marcellus Shale. Range Resources (RRC), Southwestern Energy (SWN), Exco Resources (XCO), and Chesapeake Energy (CHK) also operate in the Marcellus Shale.

Range Resources (RRC) has reported production of ~129 Bcfe (a sequential increase of ~5%), whereas Southwestern Energy (SWN) has reported production of ~225 Bcfe (a sequential decrease of ~5%) in 2Q16. Whereas the ISE-Revere Nat Gas Index ETF (FCG) invests in natural gas producers, the Vanguard Energy ETF (VDE) invests in the broader energy market.

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