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.

Newfield Exploration Purchases Marcellus Shale Acreage

Newfield Exploration Company (NFX) reported the acquisition of leasehold acreage in the Appalachian Basin that is prospective for the Marcellus Shale. 

Newfield Exploration Company is purchasing 50,000 net acres of leasehold from EOG Resources (EOG) for $405 million.  The acreage is located mostly in the Bradford County, Pennsylvania.

Newfield Exploration Company said that the acreage being purchased has production of 7 million cubic feet per day of natural gas from five producing wells.  The company said that there are eleven wells waiting on completion, and Newfield Exploration Company plans to drill two additional wells in 2010.

Newfield Exploration Company estimates that there are 400 gross well locations on the acreage and a net unrisked reserve potential from 1.5 to 2 trillion cubic feet equivalent.  The company will spend $100 million in 2011 to convert its newly acquired acreage to held by production.

Atlas Energy Comments On Marcellus Shale - Part Two

Atlas Energy (ATLS) held a conference call to discuss the company’s earnings report for the first quarter of 2010, and made comments on its operations in the Marcellus Shale.

The company recently signed a joint venture with Reliance Industries to develop acreage in the Marcellus Shale.

“As a result of the Reliance joint venture, however, for each future Marcellus horizontal well we will pay only 15% of the total costs but we will receive 60% of the revenues. Now that is a real enhancement and what downside protection as some analysts have pointed out.”

“Through our JV with Reliance we control over 345,000 locked up net acres in part of the proven Marcellus Shale play having over 3,600 horizontal locations using conservative spacing assumptions. With Reliance’s commitment to fund up to $2.8 billion of drilling costs in the Marcellus Shale over the next 5.5 years including 75% of our 60% well costs up to $1.4 billion and their own proportion share of well costs for their 40% of the joint venture we are embarking on a massive but deliberate ramp up in our operations.”

“On behalf of the joint venture we are on track to drill 45 horizontal Marcellus Shale wells in 2010, 108 wells in 2011, 171 wells in 2012 and 300 wells per year thereafter. This development plan will have a dramatic effect on our net production which we expect will top 500 Mmcf per day net to our interests in five years and approach 1 Bcf per day in 10 years.”

“We have already purchased a further 42,000 acres of strategic in-fill acreage on behalf of the Marcellus joint venture and we did that at an average price per acre only about 1/3 of the acreage value that we ourselves received in last month’s $3 billion Reliance joint venture.”

Source: Seeking Alpha