Consol, Hess form joint venture for Ohio Utica Shale

Posted September 10, 2011

CANONSBURG - Consol Energy Inc. said Wednesday that it has entered into an agreement with Hess Corp. for the joint exploration and development of Consol's 200,000 Utica Shale acres in Ohio.The total aggregate consideration to be paid by Hess for an undivided 50 percent of Consol's fee and leased mineral interests in the Utica shale acres in Ohio is $593 million, or $6,000 per net acre. Hess will pay approximately $59 million at closing.

J. Brett Harvey, Consol's chairman and chief executive officer, said Hess brings strong technical shale expertise to the venture.

"Hess Corp. is a global integrated energy company that shares Consol's dedication to safety and compliance, and they bring strong technical and operational shale expertise to this joint venture," he said.

 

Harvey said Hess's skill sets "coupled with Consol's deep footprint and history in northern Appalachia result in a powerful combination that will benefit the eastern Ohio economy, strengthen the communities in which we operate and provide more opportunity for our employees, and our respective companies.

"Of the nearly 200,000 Utica Shale acres in Ohio, approximately 80,000 acres were acquired decades ago by Consol, while the remaining 120,000 acres were acquired last year as part of the Dominion E&P acquisition."

"We are delighted with our entry into the Utica Shale, which enables us to build a strategic acreage position in an emerging unconventional play in the United States," said John Hess, Chairman and CEO of Hess Corp.

The companies' plan of jointly developing the Utica Shale assets calls for Hess to operate in the liquids-rich window, which contains approximately 80,000 acres in Belmont, Harrison, Guernsey and Jefferson counties, and Consol to operate elsewhere in eastern Ohio, including Portage, Tuscarawas, Mahoning counties, in the oil window, as well as in Noble County.

The companies anticipate commencing initial drilling operations in a few weeks and will average two rigs in 2012, three and one-half rigs in 2013 and eventually plateau at an average of five rigs in 2015.

Consol Energy reconfirmed its 2015 production target of 350 billion cubic feet, net to the company. It said any success in the Utica Shale will be additive.

The transaction is expected to close by Oct. 21 and excludes Consol's shallow rights in Ohio and its remaining Utica Shale acreage in Pennsylvania and West Virginia.