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Consol Energy Inc. executives said there are reasons to be optimistic about 2020 following a rough year in coal markets, but the company is also pulling back on capital spending and production to address lower coal demand.

Despite weakening seaborne coal demand, the company reported relatively high coal sales volumes from its thermal coal mining complex in 2019. However, the company projected a decline in 2020 production. Executives with the Pennsylvania-based coal producer said on a Feb. 11 earnings call that they will slow capital expenditures on a new mining project to focus on opportunities to reduce Consol’s debt.

Consol reported making payments of nearly $184 million in 2019 toward outstanding debts and extended its maturities into at least 2023.

“This remains our top priority heading into 2020, and to achieve that goal, we have taken significant steps to reduce our capital spend and take advantage of the cost of capital arbitrage,” Miteshkumar Thakkar, director of finance and investor relations at Consol, said on the earnings call. “This was very timely as access to capital in the energy industry in general, and coal, in particular, has steadily declined since then due to [environmental, social and governance] concerns.”

While seaborne coal prices remain under pressure from liquefied natural gas exports, Consol is expecting increased demand from countries such as India. The company also said it is now able to sell lower-sulfur coal than in the past, which allows the company to deliver higher quality coal and capture more of the domestic utility market.

“Coal markets and producers had a tough 2019,” Consol President and CEO Jimmy Brock said on the call. “However, there are some indications that provide hope for an improvement in the second half of 2020.”

The company reported coal sales volumes of 27.3 million tons in 2019 from its Pennsylvania Mining Complex, the second-highest production year for those mines. The Harvey mine, one of three that make up the complex, produced 5.0 million tons during the year, an annual record for the site.

“Our core operations once again defined the broader market trend, which we believe is a result of our well-capitalized asset base and the superior quality of our products,” Brock said.

Consol reported net income attributable to shareholders of $13.9 million in the fourth quarter of 2019, down from $39.7 million year on year. The company projected 2020 coal sales in the range of 24.5 million tons to 26.5 million tons and noted it had secured coal sales contracts accounting for 95% and 43% of the midpoint of expected coal sales in 2020 and 2021, respectively.

The company also raised ultimate annual output expectations for its Itmann coking coal mining project in West Virginia to more than 900,000 tons of coal from initial guidance of 600,000 tons of coal. However, it slowed the timing of capital expenditures on the development to account for weak conditions in the metallurgical coal market. While Consol still expects initial coal production at Itmann to occur in the first quarter, the ramp-up of production will be slower than anticipated.

“We are always prepared to pull the necessary levers in a market downturn,” Brock said. “We have reduced our capital spending requirements in 2020 due to our willingness to keep our mines well-capitalized in strong markets. This gives us the ability to successfully weather market downturns.”

Consol also touted its work to diversify into alternative uses of coal and coal byproducts beyond power generation applications. That includes an investment in a 25% ownership stake in CFOAM Corp., a company involved in manufacturing carbon foam products from coal used in the industrial, aerospace, military and commercial product markets. Consol estimated that the total addressable market for such products is over $15 billion annually.

“The investments we make in our technology bucket are small but have the potential to contribute significantly to our bottom line over time,” Brock said.