CNX Resources Corp. said Thursday it would rename Cone Midstream Partners LP and dedicate more dry natural gas Utica Shale acreage to the system to enable the businesses to grow.
CNX closed the deal to assume full ownership of Cone by buying Noble Energy Inc.’s remaining interest in the system for $305 million. CNX, formerly Consol Energy Inc., recently rebranded itself after splitting from the former company’s coal business into a standalone natural gas producer. Cone was renamed CNX Midstream Partners LP and began trading Thursday on the New York Stock Exchange under the ticker symbol “CNXM.”
CNX said it would dedicate 63,000 dry gas Utica acres in Pennsylvania and West Virginia to CNXM and commit 140 wells over the next four years to the midstream master limited partnership (MLP) in an amended natural gas gathering agreement. CEO Nicholas J. Deluliis said the agreement was “immensely significant” for both companies because it lays the foundation for future growth.
CNXM has agreed to a major system expansion to support production from the newly dedicated areas, but details have not yet been released.
“The strategy here is to enable CNX to undertake integrated development of both our Marcellus and Utica positions,” Deluliis said of the new acreage dedication. He spoke with financial analysts during a conference call on Thursday. “By CNX executing stacked pay development and blending dry Utica with damp Marcellus gas, CNX is going to be able to benefit from economies of scale through developing multiple formations as well as being able to avoid processing costs. Those things are going to significantly enhance the economics of the area.”
Cone was formed by Noble and CNX in 2014 to gather production from their 50/50 joint venture (JV). Noble, whose U.S. onshore focus is now in Texas and Colorado, dissolved the JV and sold its 385,000 net acres in the Appalachian Basin. CNX said it wanted to dissolve the JV to gain more control over its development pace after splitting the coal and natural gas businesses.
Deluliis said CNX has aggressively pursued full ownership and control of what was Cone because the company “understood that a successful midstream operation” was “critical to unlocking” the value of its production. A single-sponsor MLP now gives CNX more flexibility to grow both businesses, he added.