CONSOL, Noble Energy to separate Marcellus shale joint venture

10/31/2016

PITTSBURGH and HOUSTON -- CONSOL Energy and Noble Energy have entered into a definitive agreement to separate their 50-50 Marcellus shale joint venture.

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Image: Noble Energy.

The two companies have negotiated a separation of the JV that was formed in 2011 for the exploration, development and operation of primarily Marcellus shale properties in Pennsylvania and West Virginia. Highlights of the agreement include:

  • Each party will own and operate a 100% interest in its properties and wells in two separate operating areas.
  • Each party will have independent control and flexibility with respect to the scope and timing of future development over its operating area.
  • All acreage operated by CONSOL Energy and Noble Energy in their respective operating areas will remain fully dedicated to CONE Midstream Partners.

"This agreement with Noble Energy to separate our JV is bitter sweet for CONSOL Energy," commented Nicholas J. DeIuliis, president and CEO. "Noble has been a top-notch partner, and we have enjoyed the collaborative relationship that we have shared over the past five years. Even though we have seen much success together, we have agreed that we must both have the ability to adapt to a changing energy landscape. The separation of the JV is consistent with CONSOL's transitional journey to a pure-play exploration and development company, and the company's commitment to future growth, in what is now a more robust and actionable stacked pay opportunity set."

David L. Stover, chairman, president and CEO of Noble Energy, added, "The accomplishments of our JV over the last five years are outstanding, including significant increases in combined production and recoverable resources. These outcomes are a direct result of the high-quality nature of the acreage, but even more so a result of the combined technical leadership and coordination between our two companies. Today's agreement between CONSOL Energy and Noble sets a clear path for both companies into the future. It provides us with greater control and flexibility over the future pace of development in the Marcellus."

Prior to the agreement, the JV collectively operated approximately 669,000 Marcellus acres. CONSOL Energy and Noble Energy each held a 50% working interest. As of the effective date of the agreement on Oct. 1, 2016, total flowing production to the JV was 1.07 Bcfd of natural gas equivalents.

Subsequent to closing of the agreement, the acreage and production of the prior JV will be as follows:

  • CONSOL Energy will operate a 100% working interest in approximately 306,000 Marcellus acres with associated production of approximately 620 MMcfd of natural gas equivalents. The majority of the acreage operated by CONSOL Energy resides in Pennsylvania.
  • Noble Energy will operate a 100% working interest in approximately 363,000 Marcellus acres with associated production of approximately 450 MMcfd of natural gas equivalents. The majority of the acreage operated by Noble Energy resides in West Virginia.

In addition to the acreage and production realignment between the two companies, Noble Energy will also remit a cash payment of approximately $205 million to CONSOL Energy at closing. The exchange of properties and cash result in the elimination of the remaining outstanding carry cost obligation due from Noble Energy to CONSOL Energy.

While the exchange agreement creates independent ownership interests in the acreage and production currently gathered by CONE, it does not change the total acreage dedicated to CONE, the gathering rates, or other fundamental terms for the services provided by CONE. CONSOL Energy and Noble Energy remain as co-sponsors of CONE and shippers on CONE's gathering systems, while retaining their respective general partnership and limited partner ownership interests in CONE.

The agreement is expected to close in the fourth quarter.

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