Noble Energy Inc. (NBL) and Consol Energy Inc. (CNX) agreed to jointly
develop Consol's interest in the Marcellus Shale under a deal that will see
Noble pay about $3.4 billion for a 50% stake in Consol's interest.
Energy companies have made a big bet in recent years on developing shale-gas
assets in the
U.S.
,
particularly within the massive Marcellus Shale in
Pennsylvania
and
West
Virginia
. Consol acquired its 663,350 acreage in the area
15 months ago as part of its deal for Dominion Resources Inc.'s (D) Appalachian
exploration and production business.
Consol shares surged 6.7% to $45.25 premarket, while Noble was inactive and
closed Wednesday at $87.94.
Consol has increasingly been focusing on natural gas production, announcing in
June it would close one of its idled
Western Pennsylvania
coal
mines to focus on more profitable coal and Marcellus shale gas operations. Meanwhile,
oil-and-gas producer Noble has said it will ramp up spending in the second half
of the year in basins from
Colorado
to
West
Africa
and the
Mediterranean Sea
.
"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," Noble Chief Executive Charles D.
Davidson said.
Under the terms of the deal, Noble Energy will acquire the 50% interest for
$1.07 billion, payable in three equal installments. Consol and Noble will also
enter into a joint development agreement under which Noble will pay $2.13
billion in the form of a 1/3 drilling carry of certain Consol working interest
obligations as the acreage is developed. Also, Noble will pay $160 million at
closing for Consol's existing Marcellus Shale wells and $59 million for 50%
interest in the gathering assets.
The joint development plan calls for the rig count to increase from four rigs
currently drilling in the Marcellus to eight rigs in 2012 and 12 rigs in 2013,
eventually reaching 16 in 2015. Consol will operate in the dry gas areas of the
acreage, and after a transition period, Noble will operate the wet gas acreage,
making up about 20% of the acreage.
Consol also reaffirmed its 2015 production target of 350 billion cubic feet.
The deal
is expected to close Sept. 30.