CNX Gas to buy Peabody's CBM, gas rights

CNX Gas Corp., Pittsburgh, is buying the coalbed methane and gas interests of Peabody Energy Corp., St. Louis, for $66.5 million.

By OGJ editors
HOUSTON, June 14 -- CNX Gas Corp., Pittsburgh, is buying the coalbed methane and gas interests of Peabody Energy Corp., St. Louis, for $66.5 million.

The acquisition totals 1,037,000 acres, including 654,000 acres in the Illinois basin, 153,000 acres in Northern Appalachia, 171,000 acres in the San Juan basin, 47,000 acres in the Powder River basin, and 11,000 acres in the Rockies. The deal boosts CNX Gas's gross acreage position 44% to 3.6 million acres.

No proved gas reserves are associated with the acreage, much of which must be evaluated to obtain an unproved reserves estimate.

The transaction involves three parties. CNX Gas will first acquire certain coal assets from CONSOL Energy Inc. for $45 million cash, plus a future payment with an estimated present value of $6.5 million. CNX Gas will then convey those coal assets plus $15 million cash to Peabody Energy in exchange for Peabody's CBM and gas rights.

The Illinois basin interests being acquired include 114,500 acres of conventional gas acreage with development potential in the Devonian New Albany shale. CNX Gas believes that this acreage alone holds at least 258 bcf of net unproved reserves. This and other action since the end of 2006 will increase CNX Gas's total proved and net unproved reserves 18% to 3.668 tcf.

CNX Gas recently doubled its position in the New Albany, where it is conducting an exploratory play known as Cardinal (OGJ Online, May 29, 2007). The company controls the leading CBM positions in the Central and Northern Appalachia and the Illinois basin.

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