Consol Energy Inc. has reduced a planned build-up of its horizontal rig fleet in the Marcellus Shale due to low natural gas prices, the Appalachian Basin player said Thursday.
Consol's gas division achieved every goal set for it during 2010, including producing a company-record 127.9 Bcf and integrating employees and assets acquired in last year's $3.475 billion deal for Dominion's natural gas and oil exploration and production business (see Daily GPI, March 16, 2010). The deal included rights to about 491,000 acres in the Marcellus.
"The only disappointment in gas has been prices," said CEO J. Brett Harvey. "The continued weakness in the industrial sector of the economy, combined with increased production from shale plays around the country, continues to oversupply the market and suppress gas prices. Fortunately for Consol, we don't have to drill to hold leases and can demonstrate the discipline our investors have come to expect from us on the coal side of the business. With most of our 752,000 Marcellus acres either held by shallow production or owned in fee, we can scale back our drilling plans while retaining our valuable Marcellus Shale acreage."
Consol has trimmed the build-up of its horizontal rig fleet in the Marcellus from an average of five rigs to just under four rigs for 2011, Harvey said. The Canonsburg, PA-based company, which had three horizontal rigs running in the Marcellus at the end of 2010, has delayed the acceptance of its fourth rig until April.
"Our major objective in 2011 continues to be the delineation of our Marcellus acreage in Central Pennsylvania and Northern West Virginia. We also plan to drill a modest number of exploration wells in the Utica Shale, where we announced our first exploratory success in the third quarter."
Consol's 2011 gas production goal is 150-160 Bcf, a 17-25% increase compared with 2010 results, Harvey said. The company had previously announced production guidance of 170 Bcf for 2011 (see Shale Daily, Nov. 1, 2010).
The gas division drilled and completed 12 Marcellus wells during 4Q2010, nine of which were in Greene County, PA. Six wells were turned on line and are producing at an average of 2.9 MMcf/d. Three Marcellus wells were drilled on the acquired Dominion acreage in Westmoreland County, PA, and are waiting to be hydraulically fractured. Consol's total daily production in the Marcellus in 2010 grew to 40 MMcf/d from 14 MMcf/d at the beginning of the year.
Consol reported 4Q2010 earnings before interest, taxes, depreciation and amortization of $388 million, a 24% increase compared with $313 million in 4Q2009.
On the coal side of its business, Consol reported production of 16.8 million tons for the most recent quarter.