CONSOL Reports Marcellus Shale Gas Production Up 18 Percent, Drilling 85 Wells by End of 2011, One Rig Dedicated to Utica Shale

CONSOL Energy has just released an operational update which includes an update on its shale gas drilling operations in Pennsylvania and West Virginia:

CONSOL’s Gas Division produced a record 37.5 Bcf for the quarter, or nearly 18% more than the 31.9 Bcf produced in the year-earlier quarter. The company re-affirms its 2011 production guidance of 150-160 Bcf.

For drilling in the Marcellus and Utica shales, CONSOL Energy has contracted for two additional flex rigs, which will arrive by October 1. As of that date, the company expects to have a total of six rigs, with one rig drilling in Central Pennsylvania, three in Southwestern Pennsylvania, one in Northern West Virginia, and one full-time in the Utica Shale. The company believes that with its continued successes in the Marcellus Shale, coupled with its low cost structure, it can generate attractive returns from an expanded drilling program, even at current prices.

In the first half of 2011, CONSOL Energy drilled 40 wells in the Marcellus Shale, including 24 in Southwest Pennsylvania, ten in Central Pennsylvania, and six in Northern West Virginia. Assuming the new rigs arrive as scheduled, the company now expects to drill about 85 wells in 2011.

In Central Pennsylvania, CONSOL has moved to full-scale development, after the initial successes at the DeArmitt pad. All ten horizontal wells drilled in Central Pennsylvania in the second quarter were drilled on the Hutchinson pad in northwestern Westmoreland County. On this single pad, CONSOL drilled laterals totaling 41,647 feet, with the longest lateral being 5,517 feet. This pad highlights the competitive advantage that CONSOL has in the Marcellus Shale. Because the company has relatively little acreage expiring, it can efficiently drill wells on large pads, instead of drilling to hold acreage. Larger pads, the company believes, should result in lower unit operating costs, while minimizing the number of permits needed for stream crossings. The Hutchinson pad has now received all necessary stream crossing permits for the associated gathering lines. The wells will be hydraulically fractured in August. First production from this pad is expected to occur around Labor Day.

In Southwestern Pennsylvania, CONSOL continues its full-scale development drilling at several Nineveh pads in Greene County.

In Northern West Virginia, CONSOL drilled its first pad, the Alton pad, in Upshur County. CONSOL’s objective was to test the southeastern extremity of its Marcellus holdings, under the theory that if these wells were commercial, much of the acreage between Upshur County and Greene County (Pa.) was also likely to be commercial. The three wells on this pad had combined laterals of 12,000 feet, and a total of 34 frac stages. The three wells produced at a peak 24-hour rate of 5.3 MMcf, and had a 30-day production rate of 4.7 MMcf. The results were in line with company expectations, given that the production is flowing into an 840-pound gathering line. As compression is added next week, the company expects to see higher production rates.

The rig operating in Northern West Virginia has now moved to Barbour County, West Virginia, where drilling has begun at the Phillipi pad.*

*CONSOL Energy News Release (Jul 14, 2011) – CONSOL Energy Announces Operations Update