Noble Energy, Consol Energy Marcellus Shale joint venture valued at total of $3.4 billion

By Lisa Kerner

Charlotte, N.C., Aug. 18 - Noble Energy, Inc. agreed to pay about $3.2 billion for a 50% interest in Consol Energy Inc.'s ownership of 663,350 undeveloped acres in the Marcellus Shale in southwest Pennsylvania and northwest West Virginia, the companies announced on Thursday.

The acreage value equates to a discounted present value of $7,100 per net acre, according to a Noble news release.

Noble will pay $1.07 billion in three equal annual installments beginning at closing, which is expected to occur by the end of September.

In addition, Noble will fund $2.13 billion of Consol's future drilling and completion costs over an eight-year period with an annual cap of $400 million. The funding will be suspended if natural gas prices fall below $4 per million British thermal unit.

Noble will also acquire a 50% interest in 70 million cubic feet equivalent per day of existing Marcellus production and infrastructure for $219 million.

Total value of the transaction is $3.4 billion. The effective date of the transaction is July 1.

Charles D. Davidson, Noble's chairman and chief executive officer, described the Marcellus Shale acreage as a "high-quality asset with high-growth potential."

Noble plans to fund the deal with some of the company's $1.5 billion cash on hand and its undrawn credit facility, said Davidson during a conference call on Thursday.

Currently, the Houston-based crude oil and natural gas exploration and production company has total liquidity of $3.5 billion.

Consol, a Canonsburg, Pa.-based fuel producer, acquired the Marcellus Shale acreage 15 months ago from Dominion Resources, Inc. for about $3.5 billion 15 months ago, said chairman and chief executive officer J. Brett Harvey on his company's call.

Initially, the joint venture partnership will have Consol operating in the dry gas area and Noble operating in the wet gas area, but that could change over the years, both companies said.

In connection with the joint venture, Consol announced it is soliciting consents to amend its $1.5 billion of 8% senior notes due 2017, its $1.25 billion of 8¼% senior notes due 2020 and its $250 million of 6 3/8% senior notes due 2021.

The solicitation requires consents from holders of a majority of the notes.

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