Consol Energy Inc. (CNX), an Appalachian coal and natural gas producer from shale deposits, reported second-quarter net income below analyst estimates as gas prices declined. Net income climbed 16 percent to $77.4 million, or 34 cents a share, from $66.7 million, or 29 cents, a year earlier, Pittsburgh-based Consol said today in a statement. The company was forecast to earn 72 cents, according to the mean of 10 analyst estimates compiled by Bloomberg. Sales rose 23 percent to $1.59 billion from $1.29 billion. Consol, led by J. Brett Harvey, saw profit in the gas division sink 49 percent even as it boosted output to 411.6 million cubic feet a day from 350.2 million a year earlier. The company drills in the Marcellus and Utica shale deposits. “Despite significantly higher gas volumes, the company saw reduced profitability within the gas division when compared with the June quarter ended 2010,” the company said in the statement. “Unit gas margins fell, primarily due to much lower realized gas prices.” Consol fell 53 cents, or 1 percent, to $52.91 in New York Stock Exchange composite trading yesterday. The shares have gained 38 percent in the past year. The earnings statement was released before the start of regular U.S. trading. Gas Business The company bought Dominion Resources Inc.’s gas exploration and production business last year for $3.48 billion and spent an additional $963 million to buy the 16.7 percent of CNX Gas Corp. that it didn’t already own. The gas division produced 37.5 billion cubic feet of the fuel, up 18 percent from a year earlier, it said in the July 14 statement. It plans to produce between 150 billion cubic feet and 160 billion cubic feet this year. The company lifted coal production guidance this month after it sold 15.4 million tons of the steelmaking component and power-plant fuel, surpassing the previous estimate of as little as 14.75 million. Benchmark prices for coking coal, used to make steel, surged 65 percent to a record $330 a ton from a year earlier amid global supply disruptions. Consol fetched $207.05 a ton for its low-volatility metallurgical coal, used by steelmakers, up 37 percent from a year earlier, it said. “Low-vol supply remains very tight, as some U.S. producers have experienced lost production due to weather and underground mining conditions,” it said. (Consol will hold a conference call with analysts and investors at 10 a.m. in New York. To listen, go to the company’s Web site at http://www.consolenergy.com.) To contact the reporters on this story: Mario Parker in Chicago at mparker22@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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