CONSOL Energy Inc. (NYSE:CNX) mines coal and drills for oil and gas. But it also owns the infrastructure used to move coal, including barges and a port. These are boring but vital assets that shouldn’t be overlooked, and CONSOL Energy Inc. (NYSE:CNX) isn’t the only coal company that owns them.
Making changes
In its second quarter earnings release, CONSOL Energy Inc. (NYSE:CNX) states that it “stepped up its asset sale process to include coal and gas transportation infrastructure.” Moreover, the company is “evaluating” its corporate structure, looking for ways to unlock value for shareholders.
Essentially, CONSOL Energy Inc. (NYSE:CNX) doesn’t believe its assets are being properly valued by the market. That’s not unreasonable, since the stock is currently trading for around 1.5 times book value when it has historically traded for more than three times book value. Part of the problem is clearly the overhang of a tough coal market, so corporate actions of some sort, either asset sales or spinoffs, would likely help to highlight the value, and perhaps speed up the growth, of the company’s oil and gas business.
What it owns
In addition to its core coal and drilling businesses, CONSOL Energy Inc. (NYSE:CNX) also owns Fairmont Supply Company, CNX Marine Terminals, 21 towboats, five harbor boats, and approximately 600 barges, among other assets. Less than 40% of Fairmont’s $244 million in sales were to CONSOL Energy Inc. (NYSE:CNX) in 2012. About 40% of the material that passed through the CNX Terminal was mined by other companies. And of the almost 20 million tons of commodities handled by CONSOL’s boats, only about 8 million came from CONSOL. The transportation assets had revenues of $126 million in 2012.
These assets only made up a small portion of CONSOL’s over $5.4 billion in revenues last year, but they have financial and strategic value that is being overlooked by Wall Street. And their revenue streams are less affected by volatile commodity price swings. Selling these assets shouldn’t be too difficult and could be an important catalyst for a higher share price as the company reinvests proceeds in its core businesses. Investors should keep an eye on this process.
Not looking to sell
However, CONSOL isn’t the only company that owns such assets. For example, coal infrastructure assets account for about 15% of Natural Resource Partners LP (NYSE:NRP)’ top line, and about half of the revenue it derives from businesses other than coal royalties. This limited partnership, however, isn’t looking to monetize these assets; it wants to expand its non-coal businesses to further diversify its revenues.
