High-Btu thermal coal and metallurgical coal producer Consol Energy, Inc. (CNX) announced Monday that its board has approved a capital budget of $1 billion for 2010. The budget includes $400 million for its majority owned company CNX Gas Corp. (CXG), which was approved separately by the board. CNX Gas also re-affirmed its production target of 100 Bcf for 2010.
In a statement, chief executive officer, Brett Harvey said, "CONSOL Energy's 2010 Capital Budget of $1.0 billion achieves the goals of improving the efficiency and productivity of CONSOL's world-class fleet of mines, while simultaneously funding meaningful production growth in the gas business."
Canonsburg, Pennsylvania-based Consol Energy's capital budget of $1.0 billion includes $500 million for coal and $100 million for other non-gas activities. The coal budget of $500 million includes $130 million in efficiency projects for longwall face extensions and overland conveyor systems.
The $400 million budget for CNX Gas, which is a leading gas producer in the Appalachian Basin, is almost evenly split between shale programs and coalbed methane programs, including a largest single program of $160 million for the Marcellus Shale. The contract for a second horizontal flex rig to drill in the Marcellus Shale will be signed soon, which will be effective from March 1, 2010.
Looking ahead, CNX Gas reaffirmed its 2009 production guidance of 100 Bcf. Earlier, the company had said that it expects 2011 production to be 115 Bcf.
"We are beginning to see the end of a once-in-a-generation recapitalization of our fleet of longwall mines. Many of these mines have decades of remaining reserves, so it makes sense for us to maintain them to the best of our ability. In looking beyond 2010, I believe that spending on coal will migrate to maintenance of production levels, while gas will likely be the growth vehicle. While a lot can happen between now and 2011, I currently envision that coal capital will be lower in 2011, while gas spending will be higher," Harvey added.
CNX closed Thursday's regular trading session at $49.80, down $0.68 on a volume of 1.22 million shares, lower than the three-month average volume of 2.92 million shares.
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