CONSOL Energy Announces Operations Update; Enlow Fork and Buchanan Mines Operate Accident-Free During Entire Quarter

CONSOL Energy Inc. CNX, the leading diversified fuel producer in the Eastern U.S., is providing an operations update for the quarter ended June 30, 2012. CONSOL Energy's core values are safety, compliance, and continuous improvement. During the second quarter, CONSOL made meaningful progress in safety across the company. The safety accomplishments were highlighted by Enlow Fork Mine, which ran accident-free while producing 2.6 million tons and Buchanan Mine, which ran accident-free while producing 1.1 million tons. Several other mines and operations also had accident-free quarters. Regarding compliance across the coal division, violations were down 18% from the first quarter. In continuous improvement, a CONSOL-operated Marcellus Shale well in Westmoreland County, Pa. achieved a peak 24-hour production rate of 17.9 MMcf, the highest of any well in company history. CONSOL's Coal Division produced 14.6 million tons during the quarter, including 1.1 million tons of low-vol metallurgical coal from the company's Buchanan Mine. CONSOL's Gas Division produced 37.3 Bcf for the 2012 second quarter, or 10% more than the 34.0 Bcf produced in the 2011 second quarter, adjusting for the subsequent sale of 3.5 Bcf of that quarter's production to Noble Energy Inc. and Antero Resources Appalachian Corp. During the quarter, CONSOL Energy drilled 17 Marcellus Shale wells, while placing 18 online. Additionally, Noble Energy drilled six Marcellus Shale wells in the liquids-rich area of the play. Third Quarter 2012 Forecasts Coal: CONSOL Energy expects to produce 14.0 – 14.5 million tons during the quarter, including 1.1 million at the Buchanan Mine. As previously announced, the Blacksville No. 2 and Robinson Run (NAPP) mines will see normal vacation schedules increased by a combined three weeks during the quarter. As noted previously, we have idled the surface operations at the Fola (CAPP) Mine and expect to idle the underground mining at the end of August. Gas: CONSOL's 2012 gas production guidance remains at 157 - 159 Bcf (net to CONSOL). Third quarter 2012 gas production is expected to be 40 - 42 Bcf. Coal Division Operations During the second quarter, both the McElroy and Blacksville No. 2 mines successfully completed 120-psi sealing projects, which decreased their active footprints by approximately 25%, improving their safety, efficiency, and maintenance requirements. At the Buchanan Mine, the mainline belt terminal groups were replaced; the change out will improve our availability and compliance around the terminal groups. Demonstrating how its coal and gas divisions can work together to create value for shareholders, for the first time, CONSOL Energy's Coal Division supplied the Gas Division (and its joint venture partner, Noble Energy) with 40 million gallons of treated mine-sourced water to support their drilling activity. CONSOL's total coal inventory increased during the quarter by 0.2 million tons to 2.4 million tons as of June 30, 2012. Thermal coal inventory increased by 0.1 million tons during the quarter, as production outpaced sales. Low-vol Buchanan coal inventory also increased by 0.1 million tons during the quarter, to 0.3 million tons. Gas Division Operations In addition to the record daily flow rate cited above, the Gas Division has been extending its completed laterals. In 2011, the average completed lateral was 3,300'. For wells turned on line in the first half of 2012, completed laterals have averaged 4,600'. Longer laterals, when combined with other efficiencies such as pad drilling, help to make CONSOL's Marcellus Shale program economic at current projected (NYMEX) prices. CONSOL's economics are also being improved by cost reductions in items such as costs per frack stage. In 2011, CONSOL was spending $205,000 per stage. In 2012 to date, frack costs have fallen to $181,000 per stage. Another first for the Gas Division in the quarter was the use of water from coal mines for hydraulic fracturing. This is another in a long line of synergies between CONSOL's coal and gas divisions. The three-well Morris 14 pad in Southwest Pennsylvania was fracked with a 10% blend of mine-sourced water. The pad came on line in early July and was producing at an initial rate of 18 MMcf per day. Marcellus Shale Dry Gas (CONSOL Energy-operated): Central PA: During the second quarter, CONSOL Energy drilled five Marcellus Shale wells, finishing the six-well DeArmitt pad in Westmoreland County with drilled lateral lengths exceeding 8,000'. Completion operations at the DeArmitt pad are scheduled to begin during the third quarter. Completion operations were concluded during the second quarter at the eight-well Aikens pad in Westmoreland County. A total of 152 stages were completed with lateral lengths of up to 7,249' (25 stages). This pad commenced production in early May with a peak rate of 34.4 MMcfd. As of June 30, the Aikens pad was still producing 32.2 MMcfd. The four-well Gaut 4 pad in Westmoreland County, which the company finished drilling in the first quarter of 2012, was completed late in the second quarter. This pad has 109 stages and lateral lengths ranging from 7,243' (24 stages) to 8,460' (29 stages). Stimulation flow back is ongoing with the initial well, the Gaut 4A, producing at a peak rate of 17.9 MMcfd. This is a record daily production rate for any well in the company's history. The four-well Bowers 1 pad, where drilling was completed in the first quarter, is the first horizontal exploration drilling by CONSOL in Jefferson County. Receipt of a centralized impoundment permit is anticipated, which should enable the company to hydraulically fracture the wells during the fourth quarter of 2012. CONSOL Energy has completed its planned operated rig drilling in Central Pennsylvania for 2012. Southwest PA: CONSOL Energy continues its full-scale development drilling at several pads in Greene County. During the first quarter, CONSOL drilled ten wells and brought eight wells online at several pads with completed lateral lengths averaging 4,201'. Two additional wells were brought on line at the five-well Morris 9 pad, two wells were brought on line at the two-well NV-13 pad, and four wells were brought on at the four-well NV-30 pad. Results continue to be strong in this area. In Southwest Pennsylvania, CONSOL Energy currently has two rigs drilling. Northern WV: CONSOL Energy drilled two wells during the quarter, both on the Philippi 4 pad in Barbour County. The three-well Philippi 4 pad will be completed in a total of 69 stages during the third quarter. The pad will have completed lateral lengths ranging between 6,333' to 6,719'. Production from Philippi 4 is also scheduled to begin during the third quarter. The six-well Alton 2 pad in Upshur County, with drilling having been finished in the first quarter of 2012, was completed late in the second quarter in 135 stages, with completed lateral lengths ranging from 3,545' (12 stages) to 5,941' (25 stages). Stimulation flow back is ongoing at Alton 2 and early flow back and production results appear to be improved over the initial Alton 1 pad, which was drilled and completed in 2011. The Alton 2F, the shortest of the Alton 2 pad wells (3,545') reached a peak production rate of 3.5 MMcfd. CONSOL Energy has completed its planned operated rig drilling in Northern West Virginia for 2012. Marcellus Shale Wet Gas (Noble Energy-operated): Noble Energy drilled six wells on the SHL-6 pad, planned for 7 wells total, in Marshall County, W.Va. First sales are expected later this month, with the completion of the Majorsville compressor station. During the second quarter, Noble completed the 5-well SHL-1 pad, which had been previously drilled by CONSOL Energy, in 69 stages and completed lateral lengths up to 6,234' (20 stages). Stimulation flow back is underway on the pad, with production also feeding into Majorsville. Completion operations are ongoing on the eight-well SHL-3 pad. At the end of the second quarter, 75 of 130 total planned stages had been stimulated. Production from the SHL-3 is expected to commence by the middle of the third quarter. Noble Energy has one rig drilling in the liquids-rich area of the Marcellus Shale. Two additional rigs are expected to arrive in the third quarter. Noble Energy now expects to drill 31 wells in 2012 on its operated acreage, down from earlier expectations of 39 wells. Ohio Utica Shale (CONSOL Energy-operated): In the Utica Shale joint venture with Hess Corporation, CONSOL Energy has completed its first horizontal well, the TUSC 3A, in the western portion of Tuscarawas County, Ohio. The well was completed in 17 stages with a completed lateral length of 4,915'. During initial flow back, commercial amounts of light crude oil with a 38° API gravity, and 1,440 Btu gas, were encountered. The well is currently shut-in for further dissipation of hydraulic fracturing fluids, calculation of a bottom hole pressure, and the installation of permanent production facilities. CONSOL Energy is operating two horizontal rigs in the Utica Shale, one in Noble County drilling the NBL 1A and another in Portage County drilling the PRT 2A. Additionally, CONSOL Energy has finished drilling the top hole for a horizontal well in Mahoning County. In total for 2012, CONSOL Energy expects to drill about 12 wells on its acreage in the Ohio Utica Shale, down from earlier expectations of 16. Ohio Utica Shale (Hess-operated): Also, our joint venture partner, Hess Corporation, is operating one joint rig in Belmont County, drilling the Capstone 2H-9.
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