Consol Energy Inc.’s balance sheet continued its transformation during the third quarter, when it divested two more coal mining complexes to exit central Appalachia coal and surface mining with an eye toward a future that looks increasingly full of Utica Shale development.

Even as the company shifted its focus to gas production in recent years, many of its general and administrative expenses remained closely tied to the coal-side of its business. Since 2012, the company has sold $5 billion in coal assets and corporate expenses, management said Tuesday, have been reduced by $300 million.

For the third consecutive quarter, Consol generated organic free cash flow of $103 million, actually paying $30 million of that total during the period to divest its Fola and Miller Creek Mining Complexes. The rest was used to pay down debt and boost liquidity from $1.3 billion at the end of the second quarter to $1.4 billion.

Consol has just one non-operated coal complex remaining in its portfolio and related assets. As it continues to de-lever, CEO Nicholas Deluliis said, the company becomes better positioned to finally split the coal and exploration and production (E&P) segments through drops to CNX Coal Resources LP. The company said Tuesday that the dry Utica in Monroe County, OH, is now its highest rate of return project. Consol expects its well costs there to drop to $9.3 million for estimated ultimate recoveries of 2.8 Bcfe per 1,000 feet of lateral.

“When we look at our costs and opportunities, Monroe County does provide us the highest rate of return,” said COO Tim Dugan during a call to discuss the company’s third quarter results. “We have moved into more of a development mode there. We have two rigs out there drilling pad development, so we’re able to quickly take advantage of our learnings to be able to get our days and costs down further. We’ll be drilling in Monroe County for the next year or two.”

The third quarter saw Consol’s rigs return to work for the first time since the company idled its program in 2015 (see Shale Daily, July 29, 2015). In July, the company said it would drill eight dry Utica wells in Monroe County and two Southwest Pennsylvania Marcellus wells (see Shale Daily, July 26). Instead, it will now remain in Ohio and drill nine dry Utica wells in Monroe by the end of the year. The company’s Utica data set now includes 112 wells and its production database has grown to 32 wells, Dugan added, allowing it to create a “heat map” for the play in which it can rank and prioritize locations for development.

“We continue to improve our visibility of Utica control, and we will continue to be the company that delineates the dry Utica through the drillbit and non-operated participation opportunities,” Dugan said.

The company has 622,000 net acres prospective for the Utica in Ohio, West Virginia and Pennsylvania. Consol produced 96.4 Bcfe during the third quarter, up from the 86.1 Bcfe it produced in the year-ago period, but down slightly from the 99.3 Bcfe it produced in 2Q2016 on fewer turn-in-lines. Marcellus volumes for the period accounted for 51.8 Bcfe, while Utica volumes accounted for 22.5 Bcfe, or 47% more than they did in 3Q2015.

The company announced a deal on Monday to end its five year-old Marcellus joint venture with Noble Energy Inc., taking a 100% interest in 306,000 Marcellus acres located mostly in Pennsylvania and a $205 million cash payment (see Shale Daily, Oct. 31) It also took 53 drilled but uncompleted (DUC) wells in the agreement. Dugan said Consol would finish the year with about 70 DUCs, adding that the company is still working on its 2017 E&P plan.

Consol’s average sales price for the quarter was up to $2.54/Mcfe from $2.35/Mcfe in the year-ago period and $2.50/Mcfe in 2Q2016. Revenue also increased to $745.6 million from $720.9 million in 3Q2015. The company reported net income of $25 million (11 cents/share), compared to net income of $119 million (52 cents/share) in the year-ago period.