Morningstar Rating

Stock Research and Analysis

by Stephen Simko, CFA

Bulls Say

Consol’s decision to bet big on natural gas still looks sound, given that its major asset is the high-returns Marcellus shale. Production in much of this play can generate strong returns even if gas prices are $4/mmBtu.
Consol’s coal mines in Northern Appalachia are efficient, long-wall operations, which tend to exhibit lower costs than most other competing Appalachian coal mines.
Consol’s BMX coal mine came on line in 2014 and produces thermal and metallurgical coal at operating costs lower than the firm’s current average. Read more 

Bears Say

U.S. coal demand has been stagnant, as low natural gas prices and much stricter emission regulations and general regulatory uncertainty deter coal-based power generation capacity investment.
Growing gas production will require billions of dollars of capex during the next few years; Consol is likely to remain free cash flow negative for at least the next couple of years.
A glut of domestic natural gas production has depressed natural gas prices, hurting profitability and reducing the value of its more marginal natural gas acreage. Read more 

Management

J. Brett Harvey, who had been CEO since 1998, retired in early 2014 but remains chairman. His successor is 46-year-old Nick Deluliis, who has been with the company for 23 years. He was CEO of CNX Gas during 2005-09 and president of Consol during 2011-13.  Read more 

Profile

Consol Energy is a coal producer that is transforming itself into a natural gas E&P. The company produces natural gas across a wide swath of Appalachia, although growth   Read more 

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