Although 2015 was marked largely by cost-cutting, workforce reductions and steep losses for Consol Energy Inc., the company finished the year with a more durable balance sheet, improving liquidity and cash flow, while also surpassing 1 Bcfe/d of production in the fourth quarter.

As it continued to grapple with the commodities downturn throughout 2015, the company had more to deal with as its general and administrative expenses remain closely tied to the coal side of its business. But gains on its retiree medical plan, pension settlement expenses and the sale of more coal assets as its continues to transition to a pure-play Appalachian natural gas producer helped it record a profit to finish the year.

Improving results in the deep, dry Utica shale of Ohio, Pennsylvania and West Virginia also has the company reexamining its asset base, and a backlog of drilled but uncompleted wells (DUCs) has it thinking about a rebound in commodities and a better position whenever that happens.

“We don’t believe that we need to sell assets to support the liquidity of our balance sheet,” CEO Nicholas Deluliis said during a fourth quarter earnings call on Friday with financial analysts. “We’re going to remain patient and selective on what assets we will sell in this environment, if any.”

While the company has been promoting wide-ranging divestment plans since mid-year 2014, and has sold more than $5 billion in mostly coal assets since 2012, it’s narrowed its focus. In October, Consol said it would aim to sell up to $2.3 billion in coal, gas, surface and midstream assets over time (see Shale Daily, Oct. 27, 2015).

The company produced 95.5 Bcfe in the fourth quarter, a record that surpassed the 70.5 Bcfe it produced in the year-ago period. Volumes were also up from 3Q2015, when the company produced 86.1 Bcfe. While the Marcellus Shale continued to drive production gains, accounting for 48.5 Bcfe during the quarter, the emerging story for Consol — and other operators in the Appalachian Basin — continues to be the deep Utica (see Shale Daily, Aug. 25, 2015).

“While still early, trends are beginning to emerge and the new results and data coming in are exceeding our expectations, giving us greater confidence of the dry Utica’s potential and the opportunity it represents to drive dynamic growth for the company in the relatively near future,” said COO Timothy Dugan.

In 2Q2015, the company tested its first deep Utica well, the Gaut 4I, in Westmoreland County, PA, at 61.4 MMcf/d (see Shale Daily, July 29, 2015). After that, management said the company would likely turn to the Utica to help grow production in the coming years. During the fourth quarter, Consol brought online its second deep Utica well, the GH-9 in Greene County, PA. That well tested at 61.9 MMcf/d at an average flowing casing pressure of 8,312 psi.

The company now has production results from seven operated wells across its 622,000 net Utica acres and data from another 12-13 non-operated deep dry utica wells in Ohio, West Virginia and Pennsylvania. Based on those results, Dugan said the company believes its Ohio wells can produce at sustained rates of 15-20 MMcf/d for 9-12 months and its Pennsylvania Utica wells can produce at 20-30 MMcf/d or higher during that time before they begin to decline.

More data led Consol to increase its estimated ultimate recoveries in Ohio to 2.8 Bcf per 1,000 feet of lateral and 3 Bcf per 1,000 feet of lateral in Pennsylvania. Dugan said as more data comes in, the EURs could climb higher. Consol’s Utica program produced 20.7 Bcfe in the fourth quarter, up from 7.1 Bcfe in the year-ago period.

The company has idled its drilling program until further notice and it cut capital spending from a little more than $805 million last year to a projected $325 million at the high end this year (see Shale Daily, Jan. 6, 2015). Part of the cut was based on discipline in the current commodity price environment, management said, but they added that unit costs came down 25% year-over-year in 2015 and are likely to continue declining even with higher Utica costs built into the program. Deep Utica wells in Pennsylvania, for example, are expected to cost about $15 million, but management expects those costs to come down to less than $12.5 million.

While Consol still plans to turn-in-line 67 wells this year, it has a backlog of 102 gross DUCs and another 42 wells that have been completed but are not online. CFO David Khani said the company would look to put those wells into sales in the coming years. The backlog, he said, represents about 725 MMcf/d of net production that could help drive production growth as early as 2017.

But the DUCs and increasingly better wells in the Utica, he added, also means the company can now sell some of its premium assets in the Marcellus and Utica shales. Consol has about 86,000 net Marcellus acres outside of its 345,541 acre joint venture with Noble Energy Inc. in the play.

“We are actively marketing, in some cases, a bunch of packages that will impact some [exploration and production] acreage,” Khani told analysts Friday. “So, it could impact Marcellus or Utica and maybe some of the other areas…We’re not shy in selling assets. The markets right now are difficult and we’re going to be very patient and selective of when we do something.”

Consol reported net income of $30 million (13 cents/share) in the fourth quarter, compared to a profit of $74 million (32 cents/share) in the year-ago period and net income of $119 million (52 cents/share) in 3Q2015. Its revenue for the quarter slid to $762 million from $935.7 million in the prior year period. Its average sales price also dropped to $2.78/Mcfe in the quarter, compared to $3.90/Mcfe in 4Q2014.

But even with the fourth quarter gain, the full year was a challenging one for Consol. It reported a net loss of $374.9 million ($1.64/share) for 2015, compared to net income of $163.1 million (70 cents/share) in 2014. Revenue also declined over the period from $3.7 billion in 2014 to $3.1 billion last year. While it didn’t write down any assets in the fourth quarter, Consol reported an exploration and production property impairment of $828.9 million for 2015.

Deluliis said Consol has about two-thirds of its 2016 gas production hedged at $3.28/Mcf “that’s protected revenue that’s going to help derisk our business and internal free cash flow plan.” At the end of the year, the company had $855.9 million of liquidity, comprised of $66.1 million in cash and $789.8 million available under its $2 billion credit facility, which was reaffirmed by its lending group during the fourth quarter.