Consol to stress gas output growth, sell five coal mines

Consol Energy Inc., Pittsburgh, will emphasize Appalachian natural gas production growth and has arranged the $3.5 billion sale to a unit of Murray Energy Corp. of its Consolidation Coal Co. subsidiary that operates five longwall steam coal mines in West Virginia.

Consol termed the five mines, which produced a combined 28.5 million tons of thermal coal in 2012 and have 1.1 billion tons of Pittsburgh No. 8 seam reserves, as a nongrowth industry due to tightening US environmental regulations. Nevertheless, it retains low-cost coal mines in Pennsylvania, Virginia, and West Virginia. The sale, to close by yearend, includes 21 towboats and 600 barges.

Consol has set a 2014 gas production guidance range of 210-225 bcf of gas equivalent, 7-8% liquids or condensates, a 22-30% hike from expected 2013 output. The company said the sale enabled it to extend its gas production targets beyond 2014. For 2015 and 2016, the company expects gas production growth of 30%/year.

Consol said its gas division produced 46.1 bcfe in the quarter ended Sept. 30, 17% more than in the 2012 third quarter. Third-quarter 2013 output was 491 MMcfd of gas, 397 b/d of oil and condensate, and 1,340 b/d of natural gas liquids.

Consol and partner Noble Energy Inc. are running a record eight rigs in the Marcellus shale and expected to operate at least that many in 2014. Consol drilled 12 horizontal Marcellus shale wells and three Utica shale wells in the most recent quarter. Laterals averaged 8,817 ft in the Marcellus and 9,893 ft in the Utica.

In Washington County, Pa., the most notable Marcellus well, NV 38C, had an initial production rate of 19 MMcfd. Four wells on the NV 38 pad, including NV 38C, were completed using shorter stage length completion techniques.

Consol’s first Upper Devonian well, NV 39F, which was drilled in the Burkett shale and turned in line in June at 3 MMcfd, has exhibited a nearly flat decline rate and was still producing 2.9 MMcfd as of Sept. 30. The two Marcellus shale wells underlying NV 39F are producing at or above projections.

The company plans to drill more Burkett shale wells and to further test Upper Devonian wells in the Rhinestreet shale formation from Marcellus pads in 2014.

The company noted that it has a sizable Marcellus shale footprint in West Virginia, where its partner Noble Energy expects to have drilled 75 wells in 2013.

Consol operated three wells in the quarter on the NBL 19 pad in Noble County, Ohio, with laterals of 9,396-10,360 ft in its Utica shale joint venture with Hess Corp., completing a nine-well 2013 program. Hess operated two wells in Guernsey County in the quarter and is running two horizontal rigs on JV acreage.