In March 2010, CONSOL Energy (Cecil, PA) paid Dominion Resources $3.5 billion for 500,000 acres of Marcellus Shale gas leases, instantly tripling their lease holdings. Since that time, CONSOL has continued to invest in Marcellus acreage and they now have 750,000 acres under lease. But CONSOL had a problem: Not enough money to develop their vast Marcellus acreage. So they did what is now a common practice—they found a partner to invest. Yesterday, CONSOL and Noble Energy (Houston, TX) announced that Noble will buy a 50 percent interest in 663,350 net undeveloped acres and fund drilling and completion costs in a deal worth $3.4 billion over an eight-year period.
The joint venture will concentrate on ramping up development of Marcellus Shale gas wells in three areas of Pennsylvania and West Virginia (see a map of CONSOL’s acreage below):
- Westmoreland and Indiana counties (PA)
- Greene and Washington counties (PA)
- Marshall and Barbour counties (WV)
The effects of the joint venture will be almost immediate in both drilling activity and new jobs. CONSOL plans to increase the number of drilling rigs its operating in the Marcellus region from four to eight this year, with further plans to increase that number to 12 rigs by 2013 and 16 rigs by 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.
The obligatory made-up-by-the-marketing-department statements from each partner:
“We are extremely pleased to have Noble Energy as our partner in the Marcellus,” commented J. Brett Harvey, CONSOL’s chairman and chief executive officer. “Noble Energy is a world-class operator that shares CONSOL’s dedication to safety and compliance and they bring strong technical and operational expertise to this partnership. This agreement will benefit the regional economy, the communities in which we operate, our employees, and our respective companies. Together we will be able to accelerate the development of this significant resource safely, efficiently and economically.
“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,” continued Mr. Harvey.
Charles D. Davidson, Noble Energy’s Chairman and CEO, commented, “Noble Energy is excited to be joining CONSOL Energy in the development of their outstanding acreage position in the Marcellus. 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. CONSOL is a highly established and respected operator in the region with a strong reputation for working cooperatively with all stakeholders. This reputation and their focus on safe and efficient operations closely aligns with Noble’s values. Both partners will be contributing their considerable technical and operational expertise to accelerate the development of this important national resource thus creating considerable value for both of our companies as well as the communities we touch.”
Useful sources for more information:
- CONSOL Energy Press Release (Aug 18, 2011) – CONSOL Energy and Noble Energy Enter into a Joint Venture for CONSOL’s Marcellus Shale Acreage
- Noble Energy Press Release (Aug 18, 2011) – Noble Energy Announces Strategic Partnership With Consol Energy in Marcellus Shale
- Pittsburgh Tribune-Review (Aug 19, 2011) – Deal with Consol gives Texas company stake in Marcellus shale
- The Intelligencer/Wheeling News-Register (Aug 19, 2011) – Consol Signs $3.4B Deal
A map of the Marcellus Shale acreage involved in a $3.4 billion deal
between CONSOL Energy Inc. and Noble Energy Inc.