Noble Energy to buy part of Consol's stake in Marcellus for $3.4 billion

US oil and gas producer Noble Energy has agreed to pay $3.4 billion for a 50 per cent stake in Consol Energy's Pennsylvania and West Virginia properties in the Marcellus Shale.

The deal, announced today, is Noble's first buy into the Marcellus shale, one of the largest natural gas fields in the US.
 
Under the deal, Houston-based Noble will buy half of Consol's Marcellus development rights and existing wells in 663,350 undeveloped acres for $1.07 billion, payable in three equal annual installments and pay an additional $2.13 billion to fund Consol 's drilling and completion costs over an eight-year period.
 
The funding is limited to one third of Consol's drilling and completion costs, with an annual cap of $400 million, and drops off when gas prices go below $4.
 
Noble will also pay $160 million for existing Consol's Marcellus wells and another $59 million for 50 per cent interest in Consol's pipelines connecting the wells to interstate gas transmission pipelines.
 
The deal also stipulates that Consol double its Marcellus well rig count from four to eight this year, with plans to increase to twelve rigs by 2013 and sixteen by 2015.
 
Noble Energy will operate in the wet gas window (roughly 20 per cent of the acreage) while Consol will operate in dry gas acreage.

The acreage is estimated to contain 7.4 trillion cubic feet equivalent resources, of which 400 billion cubic feet equivalent (Bcfe) are proven reserves.
 
Noble said net production at its acreage has the potential to reach 600 MMcfe/d in 2015 and is expected to continue growing into the next decade.
 
"Noble Energy is excited about the opportunity to establish a position in the Marcellus Shale, which is considered to be one of the most economically attractive developments in North America due to its enormous resource potential, its proximity and access to premium markets, and its competitive cost structure," Charles Davidson, Noble's chairman and CEO, said.
 
Noble is a leading independent energy company engaged in worldwide oil and gas exploration and production. The company has core operations onshore in the US, primarily in the DJ Basin, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa.
 
Consol is a multi-fuel energy producer and energy services provider primarily in the electric power generation industry in the US.
 
Global oil and gas majors have made a beeline to acquire and develop shale-gas assets in the US, particularly within the massive Marcellus Shale in Pennsylvania and West Virginia.
 
Marcellus Shale has become the new Houston in the energy industry, an area that is estimated to hold between 168 trillion and 516 trillion cubic feet of natural gas, buried as deep as 9,000 feet below ground.
 
Indian oil giant Reliance Industries has also last year acquired acreages and formed joint ventures with US energy companies to drill for shale gas in the Marcellus area.