CONSOL Completes Joint Venture with Hess for Ohio Utica Shale
A second joint venture that CONSOL has announced in recent months has just been completed. Yesterday, CONSOL received an initial $60 million of a total $594 million from Hess to develop 200,000 Utica Shale acres in Ohio. Previously, CONSOL entered another joint venture with Noble Energy for $3.4 billion to develop 663,350 acres in western Pennsylvania and West Virginia (see this MDN story). Why all the joint ventures? Money! CONSOL needs cash to develop its Marcellus and Utica Shale acreage, and in order to get the cash, they have cut (so far) two deals, granting their partners a 50 percent interest in each case.
CONSOL Energy Inc. announced today [Oct. 24] that it has closed on its previously announced agreement with Hess Corporation to jointly explore and develop CONSOL’s nearly 200,000 Utica Shale acres in Ohio for aggregate consideration to CONSOL of approximately $594 million.
In the transaction, Hess Corporation acquired a 50% interest in nearly 200,000 Ohio Utica Shale acres owned by CONSOL in consideration for $594 million, of which $60 million was paid at closing. CONSOL and Hess Corporation have entered into a joint development agreement pursuant to which Hess Corporation will pay approximately $534 million in the form of a 1/2 drilling carry of certain CONSOL working interest obligations as the acreage is developed. Both the acreage and the consideration are subject to customary adjustment for revenues, expenses, and title matters. The effective date of the transaction is August 1, 2011.
"We are very pleased to have closed this, our second, joint venture agreement on schedule," commented J. Brett Harvey, CONSOL’s chairman and chief executive officer. "Hess brings global integrated energy expertise to the Ohio Utica acreage. They share our dedication to safety and compliance and will help explore and develop this acreage on behalf of the stakeholders of both companies."*
*CONSOL Press Release (Oct 24, 2011) – CONSOL Energy and Hess Corporation Close on Ohio Utica Shale Acreage Joint Venture Agreement