CONSOL Sells Marcellus Leases to Antero for $193M

CONSOL is on a roll, continuing to sell some of its Marcellus Shale assets to other energy companies and in the process, raising more than $4 billion in cash in just the past few weeks. The latest sale has been to Antero Resources.

From the CONSOL press release:

CONSOL Energy Inc. announced today that it has entered into an agreement with Antero Resources Appalachian Corp., pursuant to which CONSOL will assign to Antero overriding royalty interests (ORRI) of approximately 7% in 115,647 net acres of Marcellus Shale located in nine counties in southwestern Pennsylvania and north central West Virginia, in exchange for $193 million. The all-cash transaction closed on September 21, 2011, with an effective date of July 1, 2011.

These overriding royalty interests were acquired in connection with the acquisition of the Appalachian oil and gas exploration and production business of Dominion Resources, Inc. in April 2010, and were previously reserved by Dominion when the working interests and operating rights in the Marcellus Shale were conveyed from Dominion to Antero in 2008. This asset was excluded from the CONSOL Energy / Noble Energy joint venture announced in August 2011, so the cash proceeds accrue entirely to CONSOL Energy and its shareholders.

CONSOL will retain the existing shallow wells and formations and all other leasehold interests on the acreage, including geological formations generally above and below the Marcellus Shale.(1)

This was the press release from Antero about the deal:

Antero Resources today announced that it has acquired a 7%  overriding  royalty interest  (ORI) from  CONSOL Energy in  approximately  115,000 net acres located in the southwestern core of the Marcellus Shale  play on a large portion of Antero’s existing West Virginia and Pennsylvania acreage  position for $193 million.  The  cash  transaction closed on September 21, 2011 with an effective date of July 1, 2011, and was funded with undrawn capacity on Antero’s credit facility.

The  acquisition of the CONSOL ORI increases Antero’s average net revenue interest to 87% in the 115,000 net Marcellus acres that the company acquired from Dominion Resources in September 2008 and  adds 12 MMcfd of  current  net daily production in existing Antero operated wells, free of incremental lease operating costs. Antero estimates that the ORI acquisition adds over 500 Bcfe of net risked resource to Antero’s resource base, including over 60 Bcfe of proved reserves, free of incremental capital and lease operating costs.  As part of the transaction, Antero and CONSOL cleared a lease ownership  discrepancy adding an additional 5,000 net acres contiguous to Antero’s leasehold position in West Virginia. Under the terms of the  acquisition  agreement, the parties have also eliminated all future  Antero Marcellus Shale drilling  requirements  and most of the data sharing obligations associated with Antero’s 2008  Dominion leasehold  purchase.  These drilling  and data sharing  obligations to Dominion Resources  were conveyed to CONSOL Energy when  CONSOL acquired Dominion’s Appalachian Basin oil and gas exploration and production business in April 2010.

Following the closing of the  acquisition and the clearing of ownership discrepancy on the  5,000 net acres mentioned previously, Antero  now  owns over 200,000 net acres of leasehold in the Marcellus Shale play. Antero currently has 227 MMcfd of gross operated production from the Marcellus Shale, 99% of which is coming from 53 horizontal wells, resulting in 181 MMcfd of net production following the ORI acquisition.  The production associated with the ORI acquisition increases current estimated company-wide net production to approximately 300 MMcfed, a new record for Antero.(2)

As for CONSOL’s other recent sales:

This $193 million transaction takes place only a few weeks after Consol sold a 50 percent interest of 200,000 eastern Ohio Utica Shale acres to New York City-based Hess Corp. for $593 million. It also follows a $3.4 billion deal with Texas-based Noble Energy Inc. to help develop 663,350 Marcellus acres in West Virginia and Pennsylvania.

The deals with Noble, Hess and Antero have yielded Consol nearly $4.2 billion over the past several weeks.(3)

(1) CONSOL Press Release (Sep 26, 2011) – CONSOL Energy Sells its Royalty Interest in Antero for $193 million

(2) Antero Press Release (Sep 26, 2011) – Antero Resources Announces Marcellus Shale Acquisition and Record Production Rate

(3) The Intelligencer/Wheeling News-Register (Sep 27, 2011) – Consol Gets $193M for Shale Land