Businessmodel of CONSOL Energy

Customer Segments

CONSOL has a niche market business model, with a specialized customer segment. The company targets its offerings at electric generators and steelmakers.

Value Proposition

CONSOL offers two primary value propositions: innovation and brand/status.

The company embraces innovation in its everyday processes. Its energy coal operations utilize longwall mining systems in underground mines. These systems enable increased production by providing continuous mining machines that enhance access for miners and equipment.

The company has established a strong brand due to its success. It is one of the largest independent natural gas exploration, development, and production companies in the world. As of December 2015, it had 5.6 trillion cubic feet equivalent of proved natural gas reserves and almost 13,000 net producing wells. In 2015 alone, it presided over an average production of 900,430 Mcfe per day, an increase of 39% over 2014. It is a member of the Standard & Poor’s Midcap 400 Index.

Lastly, it has won a number of honors, including recognition as Operator of the Year by the Virginia Department of Mines and Minerals and the Energy-Virginia Oil and Gas Association in 2016.

Channels

CONSOL’s main channel is its direct sales team. The company promotes its offering through its website and social media pages.

Customer Relationships

CONSOL’s customer relationship is primarily of a self-service nature. Customers utilize its products while having limited interaction with employees.

Key Activities

CONSOL’s business model entails exploring, developing, and producing its energy products for customers.

Key Partners

CONSOL’s key partners are the suppliers that provide it with the equipment and materials it needs to conduct its operations. The company is also a member of two strategic joint ventures:

• CONSOL has a joint venture in the Marcellus Shale that requires Noble Energy to pay a part of its qualifying drilling and completion costs in certain situations
• CONSOL has a joint venture in the Utica Shale with a subsidiary of Hess Corporation ### Key Resources

CONSOL’s main resources are its physical resources, the most important being its 5.6 trillion cubic feet equivalent of proved natural gas reserves (3.7 trillion developed, 1.9 trillion undeveloped). It also operates the largest private research and development facility in the U.S. dedicated to coal and energy utilization and production.

Moreover, it has important human resources in the form of miners and transportation specialists who negotiate freight and equipment agreements with transportation suppliers, including railroads, barge lines, terminal operators, and trucking companies.

Cost Structure

CONSOL has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is cost of coal sold, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed expenses.

Revenue Streams

CONSOL has two revenue streams: revenues generated from sales of its products (energy and equipment) to its customers and from sales of various services (e.g., land services, water services, and coal terminal services). Sales typically occur through the signing of contracts.