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Press release from PR Newswire

CONSOL Energy Advances E&P Growth Strategy with Rollout of 2014 Capital Budget of $1.3 - $1.5 Billion; Re-Iterates 2014 Gas Production Growth Target of 30%

Tuesday, January 21, 2014

CONSOL Energy Advances E&P Growth Strategy with Rollout of 2014 Capital Budget of $1.3 - $1.5 Billion; Re-Iterates 2014 Gas Production Growth Target of 30%

07:00 EST Tuesday, January 21, 2014

PITTSBURGH, Jan. 21, 2014 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX) expects to invest approximately $1.5 billion in 2014 to accelerate its growth in natural gas production. CONSOL re-iterates its 2014 natural gas production growth target of 30% and is guiding to a range of 215 - 235 Bcfe for the year.

(Logo: http://photos.prnewswire.com/prnh/20120416/NE87957LOGO )

 

 Capex ($MM) 

 Gross Wells 

 Net Wells 

 Natural Gas Operations: 

 Land and Permitting 

70

 Liquids-rich drilling and completions: 

 Marcellus 

410

88

44

 Utica 

105

32

16

 Dry-gas drilling and completions: 

 Marcellus/Upper Devonian 

415

74

36

 Utica 

10

1

1

 CBM/Shallow Gas 

40

76

76

 Midstream: 

 Marcellus Gathering 

60

 Total Natural Gas Operations 

1,110

271

172

 Coal Operations: 

 BMX Mine 

200

 Maintenance of Production 

130

 Land/Safety/Water/Terminal 

60

 Total Coal Operations 

390

 Total 2014 Capex - High 

1,500

 Potential Marcellus JV Carry 

(220)

 Total 2014 Capex - Low 

1,280

 

"Our 2014 Capital Budget advances our E&P growth strategy," commented J. Brett Harvey, chairman and CEO. "We executed in 2013 by selling low-growth, non-core coal assets. Our primary sale, which closed last month, yielded approximately one billion dollars in cash when taking into account after-tax proceeds and related administrative cost reductions. We will apply these funds toward our aggressive 2014 natural gas drilling program. And once the BMX longwall starts late in the first quarter, we expect our coal business to also generate meaningful cash to support the capital program for the E&P segment of our company."

Within the gas operations category, CONSOL expects to invest about $1.1 billion, much of which will be directed toward drilling and completion costs in the highly productive Marcellus and Utica shales. Approximately one-half of the company's total drilling capital will target the liquids-rich areas within these two plays. On the dry side, the drilling will primarily focus on those areas in the Marcellus that have established superior economics resulting from high net revenue interest, economies of scale, or reservoir performance.

In the Marcellus Shale joint venture, CONSOL and its partner plan to operate an average of 4-5 horizontal rigs each to drill at least a combined 162 gross wells. At least 88 of the joint venture wells will be drilled in the liquids-rich areas of the play, including 2 within the recently acquired acreage that lies beneath the Pittsburgh International Airport. At least 74 wells are planned to target the dry gas area of the joint venture. These dry locations include 6 Upper Devonian laterals (5 Burkett; 1 Rhinestreet) in Washington County, Pennsylvania (4) and Doddridge County, West Virginia (2). Current plans of both partners include increased usage of shorter stage laterals and reduced cluster spacing. The early results of these enhanced completion techniques in Southwestern Pennsylvania have been very promising. The wells completed in this manner have shown initial production rates being improved by as much as 40%, which the company believes will translate into potential increases to well EURs of 15%-20%.

In the Utica Shale joint venture, a total of 32 gross wells are planned to be drilled within the liquids-rich corridor that runs across Harrison, Belmont, Guernsey, and Noble counties of Ohio. CONSOL and its partner will also test enhanced completion techniques in the Utica as efforts this year will focus on ramping up production.

The Utica drilling and completions capital shown on the table above reflects a $115 million reduction for drilling carry we expect to be paid by our joint venture partner. The Marcellus drilling and completions capital is not reduced because of the contingent nature of the drilling carry in place with the Marcellus joint venture. The Marcellus JV drilling carry is currently suspended and will be reinstated upon Henry Hub natural gas prices being equal or greater than $4 for three consecutive months. Based on current Henry Hub futures and the corresponding reinstatement of the drilling carry, approximately $220 million of the Marcellus JV drilling carry is expected to be realized for drilling and completions capital incurred between March and December of the current year.

Separate from the joint venture activity, CONSOL expects to invest $24 million in Monroe County, Ohio.  In addition to continuing to build-out its land position, the company will drill two 100%-owned laterals.  One well will target the liquids-rich Marcellus formation, while the other will be designed to penetrate the dry-gas Utica zone.  Both will be drilled from the same pad.

The coalbed methane program will again be kept at minimal drilling levels, with the expected drilling of only 71 wells. Total capital for the 2014 CBM drilling program is estimated to be $34 million.

As a result of the growth-oriented/liquids-oriented gas investment, CONSOL Energy projects its 2014 natural gas production to be between 215 - 235 Bcfe, of which 5%-8% is expected to be NGLs/condensates/oil. With the continued focus on the liquids-rich areas of its plays, the company expects that mix to increase to 10%-15% by the end of 2016, while overall volumes are expected to increase 30% per year over the same time period.

Within the coal operations category for 2014, CONSOL anticipates investing $200 million to complete the BMX Mine in mid-March. This underground mine is adjacent to CONSOL's Bailey and Enlow Fork mines in Southwestern Pennsylvania. On a full-year basis, the single-longwall BMX Mine is expected to produce approximately 5 million annual tons of high-quality Pittsburgh seam coal to be sold in either the high-vol or thermal markets.

Due to the well capitalized nature of the company's retained coal assets following last month's divestiture, we anticipate that maintenance-of-production capital for the year will be held to under $4.25 per ton on the 31 million tons expected to be produced for the year.  

Earnings call information:

CONSOL Energy will report financial results for the quarter ended December 31, 2013 at 7:00 a.m. ET on Friday, January 31, followed by a conference call at 10:00 a.m. ET. The call can be accessed at the investor relations section of the company's website, at www.consolenergy.com.

About CONSOL Energy

CONSOL Energy Inc. (NYSE: CNX) is a Pittsburgh-based producer of natural gas and coal. The company is one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. CONSOL Energy deploys an organic growth strategy focused on rapidly developing its resource base of 4.0 trillion cubic feet of proved natural gas reserves, while the company's premium coal is sold to electricity generators and steelmakers both domestically and internationally.  CONSOL Energy is a member of the Standard & Poor's 500 Equity Index and the Fortune 500. Additional information can be found at www.consolenergy.com.

Cautionary Statements:

Various statements in this release, including those that express a belief, expectation or intention, may be considered forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release, if any, speak only as of the date of this press release; we disclaim any obligation to update these statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following with respect to our capital investment in 2014: deterioration in economic conditions in any of the industries in which our customers operate or a worldwide financial downturn; an extended decline in prices we receive for our coal, gas and natural gas liquids; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and gas to market; the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coal and natural gas, as well as the impact of any adopted regulations on our coal mining operations due to the venting of coalbed methane which occurs during mining; the risks inherent in coal and gas operations being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions; decreases in the availability of, or increases in, the price of commodities and services used in our mining and gas operations; obtaining and renewing governmental permits and approvals for our coal and gas operations; the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal and gas operations; the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down a mine or well; the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; actions taken by our joint venture partners in existing joint ventures and acquisitions or joint ventures that we may enter into in the future; our ability to acquire water supplies needed for gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules; provisions of our debt agreements; failure by Murray Energy Corporation to satisfy the liabilities it assumed from us as well as to perform its obligations under various agreements;  and other factors discussed in the 2012 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this press release, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category.

SOURCE CONSOL Energy Inc.

For further information: Investor Relations: Dan Zajdel 724-485-4169, Tyler Lewis 724-485-3157; Media Relations: Kate O'Donovan 724-485-3097, Brian Aiello 724-485-3078

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