Marcellus Shale

Noble Energy and CONSOL Energy Sign Marcellus Shale Joint Venture Deal

Noble Energy (NBL) and CONSOL Energy (CNX) have entered into an agreement to jointly develop leasehold held by CONSOL Energy in Pennsylvania and West Virginia that is prospective for Marcellus Shale.

Noble Energy is acquiring a 50% interest in 663,350 net acres held by CONSOL Energy for $3.2 billion payable in cash and a future drilling carry.  The company will pay $1.07 billion in three equal annual installments with the first due at closing.

Noble Energy has also agreed to fund $2.13 billion of CONSOL Energy’s future drilling and completion costs in the Marcellus Shale acreage.  The drilling carry is subject to an annual cap of $400 million and will be subject to a suspension if natural gas prices fall below $4.00 per MMBtu as follows:

• If natural gas prices fall below $4.00 per MMBtu for three consecutive months the drilling carry is suspended.
• If natural gas prices move above $4.00 per MMBtu for three consecutive months the drilling carry is resumed.

Noble Energy estimates that the discounted present value of the acreage acquired is $7,100 per net acre.  

Noble Energy is also purchasing a 50% interest in CONSOL Energy’s existing Marcellus Shale production and midstream infrastructure for $219 million.  The current production is 70 million cubic feet of natural gas equivalents per day.

Summary of CONSOL Energy Marcellus Shale Position

• Risked resources of 7.4 Tcfe and proved reserves of 400 Bcfe net to each company.
• 4,400 gross well locations in Marcellus Shale.
• Gross production growth estimated to reach 1.2 billion cubic feet of natural gas equivalents per day by 2015.
• Acreage is 85% held by production.
• Existing development plan will increase rig count from four to sixteen rigs by 2015.

Magnum Hunter Resources Adds To Marcellus Shale Position

Magnum Hunter Resources (MHR) reported that the company has closed on the acquisition of properties in West Virginia that are prospective for the Marcellus Shale.

Magnum Hunter Resources paid $20 million for a 2,225 net acre position in Wetzel County, with twenty identified horizontal drilling locations on the property.

Magnum Hunter Resources conducts its oil and gas operations in Appalachia through Triad Hunter, LLC, a wholly owned subsidiary of the company.

Williams Companies - Marcellus Shale Conference Call Comments

Williams Companies (WMB) held a conference call on July 29, 2010, to discuss the company’s earnings report for the second quarter of 2010. The company made comments on its activities in the Marcellus Shale.

“We completed a major E&P acquisition at the Williams level that establishes a significant and growing position in the Marcellus, we now have just under 100,000 acres there…Our all-in costs for the now-97,000 acres we hold is just under $7,000 an acre…We would note that the 70,000 of our 97,000 acres are not part of the JV.”

“We expect to drill 100 wells in the Marcellus in 2011, running about eight rigs, close to 200 wells in 2012 as we run 14 rigs. So, clearly, Marcellus is becoming a bigger part of our mix. By 2013, it will be our second largest producing basin, by 2015, we would expect that Marcellus would be producing in excess of 500 million a day.”

“With respect to the Rex JV, 12 wells have been drilled under that JV, seven wells are now producing, we have one rig operating. Since we took over operation earlier this year, we've drilled one well. That's the Westmoreland County Slavic Trust Well and it appears to be our best well, flowing approximately 4.9 million a day on a 30-day test."

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