Mason Hawkins (Trades, Portfolio)’ Longleaf Partners on Monday made another purchase of shares of its third largest holding Consol Energy (CNX, Financial) as the stock fell to a 52-week low, according to Real Time Picks data.
Longleaf boosted the position by 7.26% to 48,212,215 shares from 44,949,771 held at the end of the first quarter. The day of the reported purchase, shares closed at their lowest price in 52 weeks – $15.47 per share. The company’s share price has declined 57.9% in the past year.
Hawkins’ firm started its Consol position in the first quarter of 2012, when the price averaged around $35 per share. The Monday purchase gave Longleaf 21.07% ownership.
Consol is a natural gas and coal producer with a $3.81 billion market cap. Hawkins commented on the holding in his second quarter Longleaf Partners Fund commentary:
“CONSOL Energy (CNX) fell 22% in the quarter despite reporting OCF above Wall Street expectations and buying in shares at a 4% annualized pace. Positive gas basis differentials versus NYMEX and good cost control at the Buchanan metallurgical coal mine contributed to the solid results but could not overcome the continued pressure on coal prices. In adjusting to the current commodity price environment, the company announced several cost-cutting measures, including a move to zero-based budgeting. As expected, CONSOL monetized non-core thermal coal assets in the Bailey Mine Complex by offering shares in the master limited partnership (MLP) CNX Coal, which generated $200 million in proceeds. The price was below earlier expectations because of lower coal prices. Management is pursuing additional monetization opportunities where proceeds can be reinvested in higher return alternatives, including CONSOL’s deeply discounted shares.”
On Longleaf’s recent purchase date, the company also announced that it expects a second quarter loss from operations due to lower commodity prices and flat production guidance for its E&P and coal divisions, along with several other items.
On the positive side, Consol said it would also unveil a plan produce free cash flow while maintaining its existing annual gas production growth expectations of 30% in 2015 and 20% in 2016. Its target date to start the plan was the second half of 2015.
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