Consol to Spend $1.1B on Shale Drilling Operations
PITTSBURGH -- Consol Energy Inc. plans to invest approximately $1.5 billion this year to accelerate natural gas production, mostly in the Marcellus and Utica shale plays in Pennsylvania and eastern Ohio, the company reported today.
"Our 2014 capital budget advances our E&P growth strategy we executed in 2013 by selling low-growth, non-core coal assets," said J. Brett Harvey, CEO and chairman. "Our primary sale, which closed last month, yielded approximately $1 billion in cash when taking into account after-tax proceeds and related administrative cost reductions. We will apply these funds toward our aggressive 2014 natural gas drilling program."
Late last year, Consol sold five of its West Virginia coal operations to Murray Energy, based in St. Clairsville, Ohio.
Consol said it expects to invest $1.1 billion into its natural gas operations this year, the bulk of which will be devoted to drilling programs in the Utica shale in Ohio and the Marcellus shale in Pennsylvania. About 50% of the company's total drilling capital would be focused on the liquids-rich windows of these two plays.
Consol said it would continue to drill in dry-gas areas of the Marcellus that has yielded high net revenue interest, economies of scale, and reservoir performance.
In the Marcellus, Consol and its joint venture partner, Noble Energy, plan to operate an average of four- to five horizontal rigs each to drill a combines 162 wells. Eighty-eight of these wells will be drilled in the liquids-rich areas of the play, including two within acreage that lies beneath the Pittsburgh International Airport. At least 74 wells are targeted for the dry-gas areas.
These dry gas locations include six Upper Devonian laterals -- four in Washington County, Pa., and two in Doddridge County, W.Va. Current plans of both partners include increased usage of shorter stage laterals and reduced cluster spacing. The wells completed in this manner have shown initial production rates being improved by as much as 40%, which the company believes will translate into potential increases of 15%-20% in terms of estimated ultimate recovery.
In the Utica Shale joint venture, a total of 32 gross wells are planned within the liquids-rich corridor that runs across Harrison, Belmont, Guernsey, and Noble counties in Ohio. Consol and its partner, Hess Energy Corp., will also test enhanced completion techniques in the Utica as efforts this year will focus on ramping up production.
Separate from the joint venture activity, Consol expects to invest $24 million in Monroe County, Ohio. In addition to continuing to build-out its land position, the company will drill two 100%-owned laterals. One well will target the liquids-rich Marcellus formation, while the other will be designed to penetrate the dry-gas Utica zone. Both will be drilled from the same pad.
The coalbed methane program will again be kept at minimal drilling levels, the company reported, with just 71 wells planned. Total capital for the 2014 drilling program is estimated to be $34 million.
As a result of the growth-oriented/liquids-oriented gas investment, Consol Energy projects its 2014 natural gas production to be between 215 billion and 235 billion cubic feet equivalent, of which between 5% and 8% is expected to be NGLs, condensate, or oil. With the continued focus on the liquids-rich areas of its plays, the company expects that mix to increase to 10% to 15% by the end of 2016, while overall volumes are expected to increase 30% per year over the same time period.
Consol also reports it anticipates investing $200 million to complete the BMX Mine in mid-March. This underground mine is adjacent to Consol's Bailey and Enlow Fork mines in Southwestern Pennsylvania. On a full-year basis, the single-longwall BMX Mine is expected to produce approximately 5 million annual tons of high-quality Pittsburgh seam coal to be sold in either the high-vol or thermal markets.
SOURCE: Consol Energy
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