Consol Energy Inc.'s (NYSE: CNX) board of directors has approved a 2012 capital budget of $1.7 billion, an increase from $1.4 billion invested in 2011. The budget includes $720 million for coal, $755 million for gas, $135 million for water, and $110 million for other.
Within the coal category, Consol anticipates investing $310 million for maintenance-of-production projects. Another $205 million has been allocated to projects such as the BMX Mine which will result in increased production. This project is on track to add 5 million tons a year of Pittsburgh seam coal, which will be sold in either the high-vol or thermal markets. A further $155 million will go towards efficiency improvements such as the overland belt at Enlow Fork Mine, while health and safety items will require $50 million.
Within the gas category, Consol plans to spend $575 million on developing its Marcellus Shale assets. Included in this is drilling capital of $395 million. The budget anticipates that the Consol/Noble Energy joint venture will drill 122 (gross) horizontal Marcellus Shale wells, including 39 (gross) wells in the liquids-rich area of the play. Consol expects to invest $90 million in related gathering and compression.
In the Consol/Hess Corp. joint venture in the Utica Shale, Consol expects to invest $50 million. Most of that will be drilling capital for Consol’s share of up to 22 (gross) wells. All of the Utica drilling is expected to occur in either the liquids-rich area or the oil window of the play.
As a result, the total drilling in the liquids-rich/oil window is expected to be the 39 (gross) wells in the Marcellus Shale, and 22 (gross) wells in the Utica Shale, for a total of 61 (gross) wells out of the 144 (gross) wells, or 42 percent, expected to be drilled in the two plays.
The coalbed methane program will be scaled back in 2012 with the expected drilling of only 86 wells. Total capital for the 2012 CBM program is estimated to be $65 million. Across all of the gas plays, the $755 million includes $519 of drilling capital, $124 million of gathering and compression capital, $30 million for production equipment, $26 million for water, and $23 million for land.
As a result of the expected gas investment, Consol Energy projects its 2012 gas production to be 160 Bcfe. This will be an increase of nearly 12 percent, compared to pro forma 2011 production of 142.9 Bcf, adjusted for the partial year impact of Marcellus production sold to Noble Energy and Antero Resources.
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