CONSOL Energy Inc., Pittsburgh, will take Hess Corp., New York, as a partner in its eastern Ohio Utica shale land position for $593 million.
CONSOL, which controls nearly 200,000 acres, will receive $59 million at closing, expected by mid-October. Hess also agreed to pay $534 million to defray 50% of CONSOL’s working interest drilling and completion costs as the acreage is developed. Drilling is to start within weeks.
The development plan calls for Hess to generally operate in the liquids window on 80,000 acres in Belmont, Harrison, Guernsey, and Jefferson counties and CONSOL to generally operate elsewhere in eastern Ohio, including Portage, Tuscarawas, and Mahoning counties in the oil window and in Noble County to the south.
The companies expect to average 2 rigs in 2012, 3.5 rigs in 2013, and 5 rigs in 2015. The carry is expected to be fully utilized by the end of 2016.
CONSOL reconfirmed a 2015 production target of 350 bcf net, to which any Utica volumes would be additive.
CONSOL has held 80,000 acres in Ohio for decades and acquired 120,000 acres in 2010 as part of the Dominion E&P acquisition. CONSOL said it will report a $59 million pretax gain on the Hess transaction.
Vinson & Elkins LLP, which represented CONSOL, said the deal excludes Consol’s shallow rights in Ohio and its Utica shale acreage in Pennsylvania and West Virginia.