It is reported that Eighteen months ago, Consol Energy Inc bought Dominion Resources Inc Appalachian natural gas properties for USD 3.5 billion giving the coal producer a big position in the Marcellus Shale natural gas field.
At the time, Wall Street disapproved. Consol shares fell more than 9%. Consol looks clever now.
The Canonsburg, Pa Company announced it would receive USD 593 million from Hess Corp for a joint venture to explore and develop Consol 200,000 acres of Utica Shale in Ohio much of it acquired from Dominion.
The Hess deal comes a month after Consol signed a USD 3.4 billion joint venture with Noble Energy Inc. of Houston to develop about 663,500 acres of Marcellus Shale leases in West Virginia and Pennsylvania, much of it former Dominion property.
Mr J Brett Harvey Consol chairman and chief executive officer said "We got basically our money back on the Dominion thing, and we own all our resources still. So we're in a really good position. And we're bringing in specialists."
Mr Harvey in an interview on the sidelines of the Shale Gas Insight conference in Philadelphia this week said the joint ventures would combine the specialized operational skills of big international oil producers such as Hess and Noble with Consol knowledge of the geographic and political terrain in Appalachia.
He said the new joint ventures illustrated the rapidly expanding assessment of the Marcellus which has attracted billions in investment from major oil producers. He added that "When we did the Dominion acquisition 15 months ago, we valued the Utica at zero. The deal with Hess this week for a half interest in part of its Utica acreage is worth USD 600 million.”
Mr Harvey said "This is all happening very rapidly. He said that you'd never see us go to the gulf and do something. But if it's in your own backyard, in Pennsylvania, West Virginia and Ohio that's who we are."
Consol valued the 2010 Dominion acquisition largely for how its Marcellus properties fit with Consol existing coal fields. The Utica Shale which underlies some of the Marcellus and is now attracting attention for its oil and natural gas potential did not enter the equation.
(Sourced from www.philly.com)
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