CONSOL officials said that the thermal MLP’s purpose will be to own interests in its mines and facilities in Pennsylvania including the Bailey, Enlow Fork and Harvey mines, along with its related preparation plant.
The company, which sold several Appalachian properties from the Consolidation Coal division in late 2013 to Murray Energy Corp., is anticipating a mid-2015 initial public offering (IPO) for the MLP; post-IPO, it plans to own the partnership’s general partner along with any incentive distribution rights and a majority of limited partner interests.
Additionally, CONSOL’s board, citing a wish to create a more profitable financial structure, has approved the separate establishment of a subsidiary entity to encompass its metallurgical coal properties and related property, with the aim of conducting an IPO of up to 20% of the subsidiary’s equity in the second half of next year.
The subsidiary’s assets would include the Buchanan mine in Virginia and its related preparation plant, as well as CONSOL’s interest in the Western Allegheny Energy joint venture.
Each business would have its own separate management teams.
Once complete, CONSOL will be mainly made up of its core oil and gas exploration and production business; its interest in CONE Midstream Partners LP; a controlling interest in its cash flow generating thermal coal MLP; and a controlling interest in its metallurgical coal subsidiary.
“In addition to focusing on the steady execution of our core businesses, we have been hard at work on creating structural transparency, bringing value forward, and taking advantage of opportunities for share count reduction,” said CONSOL Energy President and Chief Executive Officer Nick DeIuliis. “The culmination of the structural moves completed in 2014 and anticipated for 2015 are intended to improve CONSOL’s valuation by providing straightforward, sum-of-the-parts analytics and reducing the risk to the E&P growth plan, which we continue to target at 30% year-over-year growth in 2015 and 2016.”
He also commented on a related announcement that CONSOL will have a two-year share repurchase program of up to $250 million.
“The stock repurchase program reaffirms our belief in the value inherent in CONSOL Energy, and our commitment to returning value to our shareholders,” he said.
The executive also said that the restructuring transactions will reaffirm its commitment to its coal businesses.
“We will retain control so that we can continue to offer our customers the same reliability that they have come to expect from CONSOL Energy as well as the continued unique ability to supply those customers with both coal and gas as their needs demand and the market dictates.”
Whether and when the producer proceeds with IPOs for the thermal coal MLP and metallurgical coal subsidiary hinge upon a number of factors, including prevailing market conditions and the approval of its board.