Appalachian-focused CNX Gas Corp. plans to boost its exploration and production (E&P) budget this year 84% to $312 million to test the viability of some coalbed methane (CBM) plays. CNX expects its natural gas output to reach 64 Bcf in 2007, increasing by 15% in both 2008 and 2009.

The Pittsburgh-based independent, which spent an estimated $170 million for E&P last year, will concentrate spending on two development and two exploration plays this year. About $148 million will be directed toward drilling and processing for its Virginia Operations, a CBM play in central Appalachia. Mountaineer, a CBM play in northern Appalachia, is budgeted $84 million. Another $6 million will be set aside for Nittany, an exploration CBM play in central Pennsylvania, and $12 million will be spent on Cardinal, an exploration New Albany shale play in western Kentucky.

An additional $32 million has been set aside for a more “aggressive” land effort, CNX said. Most of the remaining $30 million, aside from $9 million for Knox Energy in Tennessee, will be devoted to initial exploration work as other plays are assessed.

“The 2007 capital budget represents a major step forward for us in exploring and developing our 2.44 million gross acres,” said CEO Nicholas J. DeIuliis. “In August 2005, we set a 2006 production growth target of 55.7 Bcf. For 2007 and beyond, we continue to expect at least 15% annual growth in organic production. Success in Nittany and Cardinal will move us closer to our strategic vision of eclipsing 100 Bcf of production in 2010. Achieving this would mean that CNX Gas would have more than doubled its 2005 production of 48.4 Bcf in five years without having made an acquisition.”

When CNX sold some of its company shares in a private placement in August 2005, DeIuliis said, “we were basically a Virginia CBM play. In 2006 we increased Virginia drilling, proved the viability of our Mountaineer play and identified two new plays — Nittany and Cardinal — that have the potential to create significant shareholder value. Our goal in 2007 is to prove the viability of Nittany and Cardinal, while continuing to test our other acreage for additional opportunities. Our ultimate goal is to continue to achieve a return on capital employed in excess of 20%. We expect to achieve that with this capital budget.”

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