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CONSOL Energy's Initiatives to Boost Liquidity Amid Crisis

CONSOL Energy CEIX and CONSOL Coal Resources LP CCR have collectively taken some steps to boost finances and liquidity amid the ongoing pandemic.

Since the second half of 2020, these firms have tried to create value through multiple transactions that included land and mineral asset sales, gas wells and coal reserves outside of its active operations. Courtesy of the initiatives, CONSOL Energy and CONSOL Coal are expected to generate $60-$70 million and $9-$10 million, respectively. These companies are also looking forward to other ways for strengthening their respective balance sheets.

CONSOL Energy, a producer and exporter of high-Btu bituminous thermal and crossover metallurgical coal, is expected to utilize the funds generated from these initiatives to strengthen the balance sheet through open market repurchases and will work to position it well to take advantage of a potential coal market recovery.

Near-Term Coal Outlook Dull, 2021 Holds Some Promise

Coal is gradually losing ground to natural gas and renewable energy. The novel coronavirus outbreak and the resultant decline in commercial and industrial activities further affected coal demand. The latest report from U.S. Energy Information Administration (“EIA”) forecasts 2020 coal consumption in the United States to fall to 475.1 million short tons (MMst), indicating a 19.1% decline from 2019 levels of 587.3 MMst. Demand for electricity from industrial customers is expected to drop 11% in 2020 due to the coronavirus pandemic, while coal demand from the electric power sector is expected to drop nearly 20% in 2020.

However, in 2021, the scenario might change if the prediction made by EIA in their latest release comes true. EIA predicts coal production to increase 17% from the expected 2020 levels to 600 MMst in 2021. This projection takes into consideration the rising demand for coal because of higher natural gas prices than 2020. Moreover, the 2020 Steam Electric Reconsideration Rule from the U.S. Environmental Protection Agency will aid the coal industry.

Coal stocks like SunCoke Energy, Inc. SXC and Contura Energy CTRA, among others, are well poised to gain from the expected recovery in coal demand.

Zacks Rank

CONSOL Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

In the past three months, its shares have underperformed the industry.

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SunCoke Energy, Inc. (SXC): Free Stock Analysis Report
 
Consol Energy Inc. (CEIX): Free Stock Analysis Report
 
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