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MarkWest to Expand/Build NGL Plants on New Agreements

MarkWest Energy Partners, a major midstream player in the Marcellus and Utica Shales, just announced major expansion plans that will add an additional 600 million cubic feet per day (mmcf/d) of natural gas processing capacity which includes natural gas liquids (NGLs). Most of the new capacity will come from expansion of its Majorsville, WV plant. The expansion is made possible by new long-term agreements MarkWest signed with CONSOL Energy, Noble Energy and Range Resources to process NGLs.

MarkWest also announced they will build two new processing plants in Ohio’s Utica Shale—in Harrison and Monroe counties.

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CONSOL Will Spend $130M Less on Marcellus Drilling in 2012

CONSOL Energy, the coal and natural gas giant with drilling operations in the Marcellus and Utica Shales, released it’s fourth quarter results along with a year-in-review yesterday. Even though the price of natural gas steadily declined during 2011, CONSOL was able to pay off all of its short term debt and ended the year with a cash balance of $376 million. CONSOL spent $1.4 billion on capital projects in 2011 and paid out dividends to shareholders totaling $96 million. The company has increased its regular quarterly dividend by 25 percent. The annual dividend is now $0.50 per share.

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CONSOL Increases 2012 Capital Spending in Marcellus/Utica

CONSOL Energy is increasing its capital projects budget by 21 percent in 2012, including a ramp-up in their commitment to both the Marcellus and Utica Shale plays. CONSOL says they will spend $395 million to drill 122 new Marcellus Shale wells in 2012 (their portion of a joint venture with Noble Energy), 39 of those wells will be in the liquids-rich portion of the Marcellus. They will invest $50 million in Utica Shale drilling for the year.

From the CONSOL press release:

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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.

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CONSOL Sells Ohio Utica Shale Rights to Hess for $593M

Consol Energy Inc. has sold exploration and development rights for natural gas in the Ohio Utica Shale to Hess Corp. The $593 million deal was announced yesterday. The agreement gives Hess 50 percent of Consol’s mineral rights to some 200,000 acres. Hess will pay Consol $59 million when the deal closes in October and invest an additional $534 million in the operation over the next five years.

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Noble Energy and CONSOL to Partner on Marcellus in $3.4B Deal

handshakeIn 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):

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Recent Marcellus Shale Joint Venture Deals

Joint ventures are a common way for oil and gas companies to share risk, expertise and resources. Here is a list of recent deals in the Marcellus shale:

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Westmoreland County, PA Municipal Authority Initiates New Water Testing for Reservoir Located Near Marcellus Drilling

The Municipal Authority of Westmoreland County, PA will start a new water testing and monitoring program for the Beaver Run Reservoir which supplies water to about 150,000 residents. CONSOL Energy has 100 shallow gas wells on municipal property near the Reservoir, and is starting to drill Marcellus Shale wells. The new water testing program is precautionary to ensure water is not being affected by nearby drilling activity.

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Dunkard Creek Fish Kill Mystery Solved – And it Had Nothing to Do with Marcellus Drilling

There was a lot of speculation in 2009 about a fish kill over a 30-mile stretch of Dunkard Creek in West Virginia. We now know that the cause was leakage from coal mines. But early on, wild theories were being spun. Our favorite was that the algae killing the fish, which grows only in salty water and is not native to any place in West Virginia, somehow hitchhiked to the area on Marcellus Shale drilling rigs coming from Texas and Oklahoma. Science has finally won out over fairytale, and now CONSOL Energy will pay:

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Pro-Drilling PA Senator Joe Scarnati Accepts Free Super Bowl Trip from CONSOL Energy

Joe ScarnatiA bone-headed move by Pennsylvania’s top Senate Republican:

The state Senate president, a key player in the debate over natural-gas drilling in Pennsylvania, accepted a free trip from one of the state’s largest energy companies to see the Pittsburgh Steelers play in the Super Bowl.

Senate President Pro Tem Joe Scarnati, R-Brockway, had his ticket, plane ride, and hotel bill paid for by Consol Energy Inc., a major coal producer and one of the companies drilling for natural gas in the Marcellus Shale, according to Mr. Scarnati’s top aide.*

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Dominion Signs Deal to Transport CONSOL Marcellus Shale Gas for Next 15 Years

From a Dominion press release issued today:

Dominion today announced that its natural gas transmission and storage subsidiary, Dominion Transmission, has reached a 15-year agreement with the gas subsidiary of CONSOL Energy Inc. for firm transportation of CONSOL’s Marcellus shale natural gas production.

The project, capable of transporting 200,000 dekatherms per day, will move supplies from various receipt points in central and southwestern Pennsylvania to a nexus of market pipelines and storage facilities in Leidy, Clinton County, Pa.

“Dominion is pleased to provide CONSOL with year-round access to growing Northeast markets and to provide another supply alternative for market area customers,” said Gary Sypolt, chief executive officer of Dominion Energy. 

Earlier this year Dominion sold its natural gas exploration and production business to CONSOL so that the company could concentrate on its regulated businesses, including increased transportation and storage infrastructure opportunities resulting from Marcellus shale discoveries.

Dominion plans to file for a FERC certificate in December. If the project is approved, construction is planned to begin in March 2012, and it would enter service in November 2012. Construction plans include new compression facilities at three existing compressor stations in central Pennsylvania.

Dominion Transmission provides gathering, processing, transportation and storage services, operating in the heart of the Marcellus shale production area.

Dominion is one of the nation’s largest producers and transporters of energy, with a portfolio of more than 27,500 megawatts of generation, 12,000 miles of natural gas transmission, gathering and storage pipeline and 6,000 miles of electric transmission lines. Dominion operates the nation’s largest natural gas storage system with 942 billion cubic feet of storage capacity and serves retail energy customers in 12 states.

*Dominion Press Release (June 14) – Dominion Announces 15-Year Contract for Marcellus Northeast Natural Gas Project

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CONSOL Energy Building Coal Mine Acid Water Treatment Plants to Produce Water for Marcellus Shale Drilling

CONSOL Energy is a long-time coal producing company and now the third largest player (by acreage) in the Marcellus Shale after buying Dominion Resource’s gas exploration and production division (for $3.5 billion). So what’s next for CONSOL? Water!

CONSOL already traps and treats millions of gallons of water from the coal mining operations they have. They now plan to reuse that water for their Marcellus Shale drilling operations, and perhaps even sell it to their drilling competitors.

“We already have access to all this water that we already own and already treat,” running from underground mines such as the Bailey-Emerald complex in Greene and Washington counties, [Consol CEO J. Brett] Harvey said.

“We are actually going into the water business, I would say,” he said. Natural gas “was a byproduct of coal, and we built a gas company. Now it looks like water is a byproduct of all this (coal production), and we’ll probably develop great water resources for the state.”

Each [coal] mine treats and discharges millions of gallons each year. Consol will spend $200 million to $300 million over the next five years to build four or five new water treatment plants in Marcellus areas, he said, adding, “I’d love to be in the position where I am selling water to all our competitors” who now buy water from municipalities and other sources.

The idea is gaining momentum elsewhere.

“The reusing of acid mine drainage for fracking is a viable alternative to using surface and ground water,” Radisav Vidic, chairman of the civil and environmental engineering department at the University of Pittsburgh, told an audience at a Marcellus Shale conference yesterday at Duquesne University.*

*Pittsburgh Tribune-Review (May 5) – Consol pegs water as next business move

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CONSOL/CNX Gas Will Drill Two Dozen Horizontal Marcellus Gas Wells in 2010, Now Holds Leases on 760,000 Acres

Highlights from the CONSOL Energy quarterly earnings report as it touches on their operations in the Marcellus Shale:

On March 15, CONSOL Energy announced a $3.475 billion acquisition of the Appalachian gas exploration and production business of Dominion Resources. We expect to close the transaction tomorrow. The assets include approximately 1 trillion cubic feet of proved reserves and approximately 500,000 acres of Marcellus Shale. Additional assets include an overriding royalty interest from farm-outs, 300,000 acres of Huron Shale, and extensive Utica Shale acreage.

On March 22, CONSOL Energy announced its intention to acquire the approximately 25 million shares of CNX Gas that it does not already own for $38.25 per share. We commenced the tender offer on April 28. As previously announced, T.Rowe Price has already agreed to tender the 9.47 million shares held for its investment advisory clients into the offer at the offer price of $38.25 per share.

During the quarter, CNX Gas achieved record initial production from one of its latest Marcellus Shale wells. Well GH 2B CV, has averaged 5.0 MMcf per day for the first 47 days of production. It peaked at 5.7 MMcf per day. This well has a lateral of 2,300 feet.*

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