Consol Energy Inc. announced Monday that it plans to spend most its capital expenditure (capex) budget in 2013 on natural gas production in the Marcellus and Utica shales, and will sell millions in other assets.
The Canonsburg, PA-based company said its capex budget would range from $1.29 billion to $1.5 billion, depending on the level of investment, achieved through cash flow and operations. Of that total, Consol said it would spend between $835 million and $935 million on shale gas, including $160 million to maintain production.
The company will receive a final annual payment of $328 million from the August 2011 leasehold sale to its joint venture (JV) partner in the Marcellus, Noble Energy Inc. (see Shale Daily, Aug. 19, 2011). Consol said it expects to make between $127 million and $312 million from additional assets sales in 2013, a range it characterized as “achievable” because it sold $350 million in assets, mostly Canadian coal, in 2012.
“Our net investment in 2013 reflects both our ability to invest in our organic growth opportunities in coal, gas, and liquids, while selling assets that have more value to others,” said CEO J. Brett Harvey. “We have some flexibility in our 2013 investment plan, in both coal and gas.”
Of the $160 million to maintain production, Consol said approximately $100 million would go toward a drilling carry with its JV partner in the Utica, Hess Corp., for drilling there (see Shale Daily, Sept. 8, 2011). Consol doesn’t have a drilling carry with Noble for drilling in the Marcellus; drilling there is contingent upon natural gas prices being at or above $4/MMBtu for three consecutive months.
“We remain focused and disciplined to drill our higher rate of return projects and benefit from the flexibility of our held-by-production acreage position,” Consol said.
The company said it plans to spend $600 million to develop its Marcellus Shale assets, including $415 million for drilling wells. Consol said it anticipates drilling 126 gross horizontal wells in the Marcellus with Noble, including 90 gross wells in the liquids-rich area of the play (see Shale Daily, April 18, 2012).
“We will continue to evaluate the number of dry gas wells that we drill in light of the commodity price curve and exercise appropriate capital discipline,” Consol said. “[We expect] to invest $74 million in related gathering and compression.”
The company added that it plans to spend $122 million to develop assets in the Utica Shale, including $90 million for drilling its share of 27 gross wells. Under the terms of the drilling carry, Hess pays 75% of the drilling costs in the Utica, while production is split 50-50.
Consol said the high end of its investment in shale plays would be $660 for drilling costs, $128 million for gathering and compression costs, and $76 million for land acquisition costs. The company said it expects 2013 natural gas production will be between 170 and 180 Bcfe, with 95% weighted to dry gas. That production estimate includes approximately 250,000 bbl of oil and 1.2 million bbl of condensate and natural gas liquids. Total production, if achieved, would be 8% to 15% higher than 2012, which saw production of 156.3 Bcfe.
Energy analysts with Tudor, Pickering, Holt & Co. said Consol’s capex plans should be “easily funded” through the company’s cash flow. The firm added that Consol’s plans “appear lackluster, but early Utica development may skew results.”
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