WHEELING - A little more than a year after purchasing $3.4 billion in Marcellus Shale natural gas assets, Consol Energy Inc. is entering a $3.4 billion partnership to develop the acreage.
Texas-based Noble Energy Inc. is the partner Consol selected, as this company will gain a 50 percent interest in Consol's 663,350 Marcellus acres in West Virginia and Pennsylvania, as well a 50 percent stake in Consol's existing gas wells, all for the $3.4 billion to be paid to Consol.
"This transaction affirms the value we saw in the Marcellus Shale when we acquired Dominion's Appalachian exploration and production business just 15 months ago," said Consol Chairman and Chief Executive Officer J. Brett Harvey. "We are extremely pleased to have Noble Energy as our partner in the Marcellus."
Best known locally for its Shoemaker and McElroy coal mining operations in Marshall County, Consol's gas drilling business is overseen by its subsidiary, CNX Gas Corp. CNX has active gas drilling operations in Marshall and Wetzel counties, according to West Virginia Department of Environmental Protection records.
"This agreement will benefit the regional economy, the communities in which we operate, our employees and our respective companies," said Harvey. "Together we will be able to accelerate the development of this significant resource safely, efficiently and economically."
The joint development plan calls for the rig count to increase from four rigs now drilling in the Marcellus to eight rigs in 2012 and 12 rigs in 2013, eventually reaching a plateau of 16 horizontal rigs in 2015.
Consol will operate in the dry gas areas of the acreage, while Noble will operate the wet gas acreage. Wet gas is loaded with ethane, propane and butane, in addition to the methane natural gas, making it generally more valuable to drillers.
Noble is expected to operate a portion of the dry gas area after the wet gas area has been fully developed.
Charles D. Davidson, Noble's chairman and chief executive officer, said Consol's operational area in West Virginia and Pennsylvania is "one of the most economically attractive developments in North America due to its enormous resource potential, its proximity and access to premium markets, and its competitive cost structure."
"We have spent considerable time looking for the right entry point into the Marcellus and I believe, with Consol, we have found the perfect partner that we have been searching for," he added. "Consol is a highly established and respected operator in the region with a strong reputation for working cooperatively with all stakeholders."
David L. Stover, Noble's president and chief operating officer, also applauded the deal.
"Both companies are committed to operating in a safe, environmentally responsible manner while maintaining a good working relationship with the local communities," he said.
According to Noble, key operational aspects of the joint venture include:
Consol's total daily gas production from Marcellus gas jumped from 14 million cubic feet per day in 2009 to 40 million cubic feet per day in 2010. The proved reserves increased from 1.9 trillion cubic feet in 2009 to 3.7 trillion cubic feet in 2010.
Consol has also reached the Utica Shale rock formation in Ohio by drilling to a depth of 8,450 feet at a well near Barnesville. The Utica Shale lies deep under the ground, with the Marcellus layer overlapping it at some points. It extends throughout a large region including portions of Ohio, West Virginia, Pennsylvania, New York and Canada.