Noble Buys into Marcellus Shale

Written By Brianna Panzica

Posted August 19, 2011

The Marcellus shale is one of the largest shale deposits in the United States.

Stretching across parts of New York, Ohio, Pennsylvania, West Virginia, and Maryland, the formation is estimated to hold trillions of cubic feet of natural gas.

Companies involved in the extraction of gas from this formation are sitting on huge potential as the extraction process of hydraulic fracturing, or fracking, develops.

One of these companies is CONSOL Energy Inc (NYSE: CNX), a Pennsylvania-based company that currently owns four well rigs in the Marcellus development.

On Thursday, Market Watch reported, CONSOL announced plans to sell 50% of its Marcellus stake to Noble Energy (NYSE: NBL).

According to the $3.4 billion deal, Noble will acquire half of CONSOL’s 663,500-acre stake in the deposit.

The Toronto Star reports the details of the deal.

For the acreage, Noble will pay $1.07 billion in three installments.  $2.13 billion will go to future drilling costs in the area.  An additional $219 million will be paid for the existing CONSOL wells as well as access to the pipelines attached to those wells.

The total cost of the deal winds down to $7,100 per acre.

Noble CEO Charles Davidson told Market Watch that his company will sell “non-core” assets to help pay for the venture, though as of now the company has not specified what is considered “non-core”.

Davidson detailed the reasons behind the acquisition of shale assets:

“We needed greater confidence and where the commodity markets were headed and, more importantly, we needed further progress on our own portfolio of major projects.”

According to the Toronto Star, within the next year the joint venture will increase the number of drilling rigs from four to eight.

Future plans include 12 rigs by 2013 and 16 rigs by 2015.

Though CONSOL is selling assets, the company told the Star, it will still maintain its goal of drilling 350 billion cubic feet of natural gas by 2015.

On Friday shares of CONSOL were down 1.9% to $41.77, and shares of Noble dipped 1.83% to $81.51 in afternoon trading.

That’s all for now,


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