Consol Energy to Sell 5 Coal Mines

Consol Energy, the largest coal producer in the eastern United States, said on Monday that it was selling five highly automated mines â€" about half of its production capacity â€" to focus instead on natural gas and on mines that produce coal for export.

Domestic coal producers are facing stiff challenges. Low natural gas prices have made gas-fired electricity cheaper than electricity from coal plants, and ever-stricter air pollution regulations have led to a wave of coal plant retirements. In addition, the Environmental Protection Agency recently proposed limits on carbon emissions for new plants, which could doom conventional coal-fired power.

Nicholas J. DeIuliis, president of the Pittsburgh-based company, said in a conference call with reporters that the five mines being sold to the privately held Murray Energy in the transaction, worth $3.5 billion to $4.4 billion, were “a very profitable business, a very stable business.”

But although they historically represent the center of the 150-year-old company’s business, they have limited growth potential, he said.

“I would not view it as capitulation,” he said.

Coal exports continue to grow, he said, and the company will hold onto mines that feed that market, which includes Europe, Brazil and the Pacific Rim.

Consol said it would receive $850 million in cash and $184 million in value from future payments, and Murray would take on $2.4 billion in liabilities, including worker pensions.

Reflecting the loss of cash flow from the five mines, Consol said it would halve its dividend, to 25 cents a share. Its stock rose more than 1 percent in afternoon trading.

Consol is planning to increase its natural gas production by 30 percent a year for the next three years, Mr. DeIuliis said, and in the next 10 years will invest $14 billion in developing the Marcellus Shale field in West Virginia and nearly $8 billion in the Marcellus Shale field in Pennsylvania, along with $2.5 billion in Pennsylvania coal mines that it is retaining. A major objective of the sale, he said, was to free up the balance sheet to allow for new investment.

The mines being sold are “longwall” mines, where underground machines spin spike-studded wheels through coal seams, dumping the coal onto conveyor belts that take to the surface while a handful of human minders monitor the process.

This article has been revised to reflect the following correction:

Correction: October 28, 2013

An earlier version of this article incorrectly reported where Consol would invest $14 billion in developing the Marcellus Shale field. It is West Virginia, not Virginia.