Noble Energy inks $3.4B Marcellus Shale JV with Consol Energy

By Phaedra Friend Troy

US independent Noble Energy (NYSE:NBL) signed definitive agreements to create a joint venture partnership with Consol Energy (NYSE:CNX) for the development of Consol’s Marcellus Shale acreage in southwest Pennsylvania and northwest West Virginia.

Under the agreement, Noble Energy will pay $1.07 billion for a 50-percent stake in Consol’s 663,350 undeveloped Marcellus Shale leasehold acres, as well as fund $2.13 billion of Consol’s future drilling and completions costs on the assets.

The acreage acquisition is payable in three equal annual payments after the acquisition is closed. Additionally, the drilling carry is expected to extend over an eight-year period, with a cap of $400 million a year and a suspension of funding should natural gas prices dip below $4 MMBtu.

The acreage value of $3.2 billion equates to $7,100 per net acre, a discounted value according to Noble.

Additionally, Noble Energy is acquiring a 50 percent interest in 70 million cubic feet equivalent a day of existing Marcellus Shale production and infrastructure for $219 million.

The acquired Marcellus Shale acreage is estimated to contain up to 7.4 trillion cubic feet equivalent of risked resources net to Noble Energy, of which 400 billion cubic feet equivalent has been proven.

Noble Energy and Consol plan more than 10 years of development activity, including the drilling of about 4,400 wells. The long-term development plan will ramp up drilling activity in the Marcellus Shale, increasing drilling rigs from four to 16 units by 2015.

Noble Energy’s initial focus will be on the wet gas portion of the acreage.

Additionally, Noble Energy sees net production to potentially reach 600 million cubic feet equivalent a day by 2015, and growing more over the next 10 years.

"Noble Energy is excited about the opportunity to establish a position in the Marcellus Shale, which is considered to be one of the most economically attractive developments in North America due to its enormous resource potential, its proximity and access to premium markets, and its competitive cost structure,” said Charles D. Davidson, Noble Energy’s chairman and CEO. “This transaction will complement and further strengthen our U.S. portfolio by adding a high-quality asset with a substantial growth profile. The Marcellus, combined with our ongoing developments in the DJ basin and deepwater Gulf of Mexico, will provide important balance to our rapidly expanding international programs.” 

In addition to domestic oil and gas developments, Noble Energy is at the forefront of major natural gas drilling and developments offshore Israel.

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