DOW JONES NEWSWIRES
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.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356; firstname.lastname@example.org