Consol Energy Inc. said Tuesday that its 2014 capital budget would remain flat compared to last year, announcing plans to once again invest $1.3-1.5 billion on its operations.
As expected, though, the company will continue to focus heavily on shale gas, with about $1.1 billion expected to be dedicated to its assets in the Marcellus and Utica Shales. That estimate is up from 2013 when the company said it would spend up to $935 million in the plays (see Shale Daily, Jan. 15, 2013).
Pittsburgh-based Consol, one of the nation's oldest coal producers, has been working to divest some of those assets in order to better focus on shale gas in the Appalachian Basin.
In October, the company said it had reached a deal valued at $3.5 billion with Ohio-based Murray Energy Corp. to sell all five of its longwall coal mines in West Virginia (see Shale Daily, Oct. 28, 2013). The sale closed last month on the heels of millions generated from additional asset sales last year and those from Canadian coal sales in 2012.
"Our 2014 capital budget advances our E&P growth strategy," said CEO J. Brett Harvey, in a statement. "We executed in 2013 by selling low-growth, non-core coal assets. Our primary sale, which closed last month, yielded approximately $1 billion in cash when taking into account after-tax proceeds and related administrative cost reductions. We will apply these funds toward our aggressive 2014 natural gas drilling program...we expect our coal business to also generate meaningful cash to support the capital program for the E&P segment of our company."
The bulk of Consol's 2014 budget will go toward wet and dry gas drilling completions and gathering in the Marcellus Shale, where the company expects to spend up to $885 million. With its joint venture (JV) partner, Noble Energy Inc., Consol plans to operate four to five horizontal rigs and drill a combined 162 gross wells in the play. The company said at least 88 of the JV wells will be drilled in the liquids-rich area of the Marcellus, including two within the recently acquired acreage that lies beneath the Pittsburgh International Airport (see Shale Daily, Feb. 21, 2013).
In the Utica Shale, Consol expects to receive $115 million in drilling carry from its JV partner Hess Corp., which pays for 75% of well costs on a 50/50 production split. Under that JV, 32 wells are planned in a liquids-rich patch in Harrison, Belmont, Guernsey and Noble counties. Separate from the JV activity, Consol will invest another $24 million in Monroe County, OH, to drill two 100% owned wells on the same pad, and the company will also continue to build its leasehold in Ohio.
Consol's production guidance is up from 2013. This year, it expects to produce 215-235 Bcfe, with up to 8% consisting of natural gas liquids, condensates and oil. The company expects that mix to increase to up to 15% of total production by the end of 2016, while overall wet gas volumes are expected to reach 30% per year of total production over the same time period.