The coal industry remains moribund. CONSOL Energy has taken dramatic steps to remake itself and its East Coast coal. Cloud Peak Energy, meanwhile, is well positioned on the West Coast but won't find growth from the domestic market.

Big changes
Last year, CONSOL Energy sold about half of its coal mines, leaving it with a collection of low-cost and well-situated properties. The only mines it owns are on the East Coast in Pennsylvania, West Virginia, and Virginia. Roughly 90% of the seven million tons of thermal coal the company produced in the second quarter came from Central Appalachia (CAPP), while the rest from Northern Appalachia (NAPP).

Being on the East Coast puts CONSOL Energy's mining operations at something of a disadvantage. That's because it generally costs more to mine for coal in the East Coast located CAPP and NAPP versus the West Coast-located Powder River Basin (PRB), the cheapest coal basin in the country. For example, PRB coal can compete with natural gas priced as low as $2.50, but CAPP coal needs gas priced at $4.50 or above to be price competitive.

Henry Hub Natural Gas Spot Price Chart

Henry Hub Natural Gas Spot Price data by YCharts

Luckily for CONSOL Energy, natural gas was in the mid-$4 range through most of the first half, so its CAPP coal could still compete. A recent drop in gas prices doesn't bode well for the future, however. That's true on both sides of the company's business, too. When CONSOL Energy sold its coal mines, it was shifting from a coal company expanding into natural gas to a gas driller with well positioned coal assets.

Note also that the rest of the company's coal is metallurgical coal. That market is still struggling with oversupply, which is why CONSOL Energy has announced plans to reduce its production of met coal. With that said, the headline story at CONSOL Energy will be how successful it is at expanding its gas production, which so far appears to be going well. Look for an update on a master limited partnership spinoff as well, which the company is looking to as a way to raise additional cash for growth.

The West is the best
Cloud Peak Energy is pretty much the exact opposite of CONSOL Energy when it comes to location, Cloud Peak is operating exclusively out of the PRB. Despite the recent drop in natural gas prices, PRB coal remains price competitive. Still, the overall downturn in the thermal coal market has left the miner's production well off its recent high-water mark of 95.6 million tons in 2011.

Source: Jack Delano, via Wikimedia Commons

In fact, Cloud Peak Energy is looking for 2014 production to be roughly flat year over year at around 86 million tons. With gas prices still near historic lows, it's probably a stretch to expect the company to hit the 90 million ton high end of its range. Still, Cloud Peak's results should benefit from a recovering domestic thermal coal market. The miner lost money for the first time in the first quarter, though; the second quarter could be touch and go despite what looks like a nascent upturn.

However, all of this is surface news. Yes, the domestic market is important. Cloud Peak Energy's long-term growth is going to come from exports, though. On that front, you need to listen for an update on the Gateway Pacific Terminal. Cloud Peak Energy hopes to send over 17 million tons of coal a year through that port, but only if it gets built.

This port is especially important because Cloud Peak is getting ready for those exports now. It is exploring for coal on land recently leased from the Crow Tribe. It only makes sense to develop that if there's an overseas market for the coal. Keep a close eye on the export story here.

Still a tough market
Cloud Peak Energy and CONSOL Energy are still working through a tough coal market. Both are positioning for an upturn. However, having done the heavy lifting, both are largely left waiting for that turn. For Cloud Peak the future is in exports, while gas is the main story at CONSOL since coal is now a secondary (though still important) input to the top line.