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UPDATE 2-Coal miner Consol's profit misses Street view
* Q2 adj profit 31c/shr vs Steet view 33c/shr
* Sees global over-supply of steelmaking coal
* Stock up slightly
July 26 (Reuters) - Coal and natural gas producer Consol Energy Inc's second-quarter profit missed Wall Street expectations despite a drop in mining costs that partially offset plunging coal prices.
Consol shares were slightly higher at $28.04 in early trading on the New York Stock Exchange as the broader market rose.
"We continue to manage our way through this challenging environment," said Chairman and Chief Executive Officer Brett Harvey. "In fact, we are fortunate to have generated more net income in this year's second quarter than in last year's second quarter, despite the much weaker industry and macro environment."
Consol said low-quality steelmaking metallurgical coal is oversupplied globally, leading to a recent sharp price drop. "Steel utilization rates are weak in Europe and Brazil, which are Consol's natural export markets," it said in a statement.
The company said it idled operations at its Buchanan mine in Virginia for a week this month to better balance supply and demand. The idling will lower third-quarter Buchanan production by 100,000 tons to 1.0 million tons.
Thermal coal prices have also plummeted this year as demand from electricity producers slumped, with some utilities turning to cheaper natural gas. That has forced coal companies to cut production and one company, Patriot Coal, has filed for bankruptcy protection.
Net income rose to $153 million, or 67 cents per share, from $77 million, or 34 cents per share, a year earlier, the Pittsburgh-based company said.
Excluding gains from sales of some non-core properties, a reclamation charge and a charge for the expiration of certain shallow gas leases, the adjusted profit was 31 cents per share.
On that basis, it missed the analysts' average estimate of 33 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 8 percent to $1.45 billion as the average realized price for its coal dropped 12 percent to $66.00 per ton in the quarter.
Coal costs per ton were $52.23, up 1 percent from a year ago, the company said. But excluding costs to idle operations at two mines, costs fell $1.12 to $50.58 from the year-ago quarter.
Consol said the improvement in costs was notable since production dropped to 14.6 million tons in the second quarter, from 15.7 million in the first quarter.
Consol's net income from its natural gas business tumbled to $800,000, from $17.1 million a year ago, as prices fell. It said profitability was also impacted by $11 million from the expiration of certain shallow gas leases, which the company chose not to renew. The company also maintained its total production targets for this year of 59.4 million tons of coal and 157-159 billion cubic feet of gas.
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