BENWOOD - Consol Energy plans to spend $1.7 billion this year to develop coal and natural gas assets across the local region - and more than 40 percent of that money will focus on growing the company's increasing stake in the Marcellus and Utica shale plays.
Consol, which operates the Shoemaker and McElroy coal mining operations in Marshall County, plans to drill 61 Marcellus wells and 11 Utica wells this year. The energy giant has plans to eventually increase its drilling numbers to 158 new wells in the Marcellus field in 2014, along with 33 new wells in the Utica formation that year.
"This ... reflects our desire to create shareholder value by investing in our highest rate of return projects: our organic opportunities in coal, gas, and liquids," said J. Brett Harvey, chairman and chief executive officer of Consol.
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"We are, however, entering a year with an unusual amount of uncertainty. We have the ability to adjust our investment, should circumstances warrant."
Consol's natural gas producing subsidiary, CNX Gas Corp., now has active gas drilling operations in Marshall and Wetzel counties, according to West Virginia Department of Environmental Protection records. The company also has reached the Utica formation in Ohio by drilling to a depth of 8,450 feet at a well near Barnesville. Consol's earnings report shows the Belmont County Utica Shale well produced 1.5 million cubic feet of gas during a 24-hour period from its 200-foot bed, all with no fracking to stimulate it.
Consol spokeswoman Lynn Seay said this well has since been restructured as a wastewater injection well, though the company has not yet accepted water at the site.
Consol plans to use $575 million in 2012 to drill wells and develop assets in its Marcellus acreage across West Virginia and Pennsylvania. Company officials have estimated Consol holds about 663,350 acres of natural gas reserves across the two states.
Randy Albert, Consol's chief operating officer for its gas division, said much of the Marcellus acreage is located near Caiman Energy's Fort Beeler cryogenic plant southeast of Moundsville, and also near the MarkWest Liberty cryogenic plant near Majorsville in the eastern portion of Marshall County.
Seay said Marshall County is not the only county in which Consol will focus its $575 million investment, as action will also take place in Barbour and Upshur counties in West Virginia - as well as Greene, Washington, Westmoreland, and Indiana counties in Pennsylvania.
"There will be a big effort in the liquids-rich area near Majorsville in Marshall County," Seay added.
Consol also plans to spend $90 million to construct compression stations and gathering pipelines to transport gas from the Marcellus wells it drills this year. Consol's focus will not just be on West Virginia's side of the Ohio River, as the company plans to grow its Utica Shale production in Ohio.
Last year, Consol entered a $593 million deal for a 50-50 partnership with New York City-based Hess Corp. to develop Consol's Utica Shale acreage across eastern Ohio. Hess will operate in Belmont, Jefferson, Harrison and Guernsey counties while Consol will drill in Portage, Tuscarawas, Mahoning and Noble counties.
Consol expects to invest $50 million in Utica Shale drilling this year, all of which will happen in either the oil window of the formation, or the natural gas liquids portion. Natural gas liquids include propane, butane, ethane and pentane.
Hess spokeswoman Maripat Sexton said she would have no comment on the planned Consol/Hess operations because Consol was the company releasing the information.
Because of its gas investments, Consol projects its natural gas production to be 160 billion cubic feet in 2012. The driller hopes to reach a production level of 350 billion cubic feet by 2015.
In 2010, the United States as a whole used 24 trillion cubic feet of natural gas, according to the U.S. Energy Information Administration.
Also, with all of the planned Marcellus and Utica drilling, Consol will scale back on shallow coal bed methane drilling this year. The company plans to spend $65 million for these wells compared to $130 million in 2011.
In terms of coal operations, company information does not indicate any specific spending for Shoemaker or McElroy. However, Consol does plan to spend $50 million for safety at coal mines this year, up from just $18 million last year.
The firm also plans to spend $205 million for several upgrades, such as the Bailey Mine Expansion at the southwestern Pennsylvania facility. This project is on track to add 5 million tons a year of Pittsburgh seam coal to the market for Consol.
Another $155 million will go towards efficiency improvements, such as the overland belt at Enlow Fork Mine, also in the southwestern corner of the Keystone State.