CONSOL Energy Announces Acquisition of AMVEST Corporation


PITTSBURGH, June 18 -- CONSOL Energy Inc. (NYSE:CNX), a high-Btu bituminous coal and coalbed methane company, has agreed to acquire AMVEST Corporation and certain of its subsidiaries and affiliates, including AMVEST West Virginia Coal (AMVEST Coal) and Vaughan Railroad Company, for approximately $335 million, subject to adjustments. The acquisition will be financed using cash and debt. Closing of the acquisition is expected early in the third quarter.

"This acquisition allows us to create a solid Central Appalachian platform for future growth and profitability," said J. Brett Harvey, CONSOL Energy president and CEO. "By combining the reserves and the other assets of the two companies in the central West Virginia area, we expect to create operations that not only will be at the lower end of the Central Appalachian cost curve but will have access to numerous markets because of the excellent transportation infrastructure available to these operations."

Harvey said the acquisition creates one of the last large, contiguous blocks of coal remaining in Central Appalachia. "When combined with our adjacent reserves to the north, we will have created a reserve block of nearly 300 million tons of surface and underground mineable coal consisting of thick seams more typical of an earlier generation of mining in Central Appalachia," he said.

In addition to approximately 200 million tons of low-sulfur coal reserves being acquired, CONSOL Energy will acquire four coal preparation plants, several fleets of modern mining equipment, and a common carrier rail line. "Infrastructure is a key part of this acquisition because it substantially reduces the cost to develop our existing reserves in the area," Harvey explained. "The existing preparation plants will be able to process coal from our Birch and Canfield reserves as they are developed."

Harvey noted that the Fola plant was expanded in 2005. "AMVEST has an excellent track record of regular investment in their facilities. We are acquiring top-of-the-line assets."

AMVEST West Virginia Coal is comprised of Fola Coal Company, Little Eagle Coal Company, Powellton Coal Company, and Terry Eagle Coal Company and utilizes surface, underground, and highwall mining methods. AMVEST's coal reserves consist of approximately 200 million tons of high quality, low sulfur steam and high-vol metallurgical coal. During 2006, AMVEST shipped approximately 4.9 million tons of coal to customers, 84 percent of which were domestic and international utilities, with the remaining sales going to metallurgical and industrial customers.

Harvey said he also expected substantial value to be created with the addition of the AMVEST workforce. "In addition to high-quality reserves, we are acquiring a highly-skilled workforce proficient in Central Appalachian surface mining," Harvey said. "This complements our underground mining expertise and will allow us to build and transfer knowledge among operations to focus the best skill sets against the development requirements of the various parts of this reserve block."

In addition, CONSOL has acquired the Vaughan Railroad Company as part of this transaction. The Vaughan Railroad Company is a common carrier short line railroad that connects the Fola and Little Eagle coal operations and other potential shippers to the CSX and Norfolk Southern rail interchanges. The 18 miles of track that comprises the Vaughan Railroad is capable of accommodating 130 car trains. "This infrastructure will give us the ability to transport coal from the future Birch and Canfield operations to mainline rail service of either the NS or CSX without an extensive investment into new rail haulage."

Harvey said AMVEST is a well-run, private company that has produced strong cash flows and steady growth in net income since 1970. The company has minimal legacy liabilities and no debt. "The acquisition of AMVEST increases our production capacity in Central Appalachia to 18 million to 20 million tons annually," Harvey explained. "We have acquired quality reserves and equipment that fit well with our extensive reserve base in the area. But most importantly, like our Buchanan Mine in Virginia, we now have a strong production platform in the Central Appalachian Basin with a cost structure that will allow us to be profitable and very competitive in nearly any pricing environment."

Harvey said that CONSOL Energy will retain a disciplined approach to developing new production. "But given the likely cost structure and transportation advantage that we expect this reserve area to have," he concluded, "I am optimistic that we have substantially strengthened our hand in Central Appalachian production."

CONSOL Energy Inc., a member of the Standard & Poor's 500 equity index, has annual revenues of $3.7 billion. The company was named one of America's most admired companies in 2005 by Fortune magazine. It received the U.S. Department of the Interior's Office of Surface Mining National Award for Excellence in Surface Mining for the company's innovative reclamation practices in 2002 and 2003. Also in 2003, the company was listed in Information Week magazine's "Information Week 500" list for its information technology operations. In 2002, the company received a U.S. Environmental Protection Agency Climate Protection Award. Additional information about the company can be found at its web site: www.consolenergy.com.

Source: CONSOL Energy Inc.

Web site: www.consolenergy.com/

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