With Warm Weather; Coal Mines Hardly Gold Mines
By: If Santa needs extra coal this Christmas he won't have trouble finding it. A warm Winter has sparked a major surplus - and that surplus has pushed down share price of companies such as Consol Energy. The company's CFO, William Lyons, spoke with CNBC’s Maria Bartiromo today on "Closing Bell" about the glut and why he's not concerned about it.
Lyons said he might not characterize it as a glut. "Inventories are 20-25% higher than last year, that's true, but Consol energy does not sell a lot of coal on the spot market. 90% of the inventory is already sold for next year so the weather should not have a big impact on business."
He explained that it's electricity production that affects demand. In the United States about 50% of the nation's generators are powered by coal.
In addition, Consol Energy is the second largest producer of natural gas in the Appalachia area. "We do about 64 billion cubic feet of production - we do very well in the gas business."
Despite the upbeat outlook, Consol Energy saw its shares drop 7% this week. Lyons added, "I think the market just gets it wrong. They sell off (our stock) too quickly - coal should be a long term play - there's going to be long term demand."
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