Diversified fuel producer CONSOL Energy Inc. (CNX) has reached a milestone in gas production leveraging its strong performance in the Marcellus Shale region. The gross production of the company, including royalty and joint venture volumes, surpassed the 500 million cubic feet (MMcf) per day mark.
CONSOL's strong performance in Marcellus Shale and production from its coalbed methane and conventional gas production areas helped it to reach this milestone. The higher production has prompted the company to raise its fourth-quarter estimate for gas production volumes to 38 to 40 billion cubic feet (Bcf) from the previous range of 36 to 38 Bcf.
The company is working consistently to enhance its daily gas production. In such an effort, CONSOL entered into a contract with Hess Corporation (HES) in October 2011 to jointly explore and develop its 200,000 Utica Shale acres in Ohio for an aggregate consideration of $594 million. In another contract, in August 2011, CONSOL entered into a deal with Noble Energy, Inc (NBL) to jointly explore and develop its 663,350 Marcellus Shale acres in Pennsylvania and West Virginia for aggregate payments of $3.4 billion.
We believe the strategic move of CONSOL to take partners in its two prominent shale resources will not only help the company to further increase its gas production in the forthcoming years but at the same time monetize a significant portion of its resources.
We also believe that the company is doing well in the coal production front with its year-end coal sales expected in the range of 62 to 62.6 million tons. Added to it, the strong boost in gas production has put the company in a good position to register a winning performance in the final quarter of the year.
CONSOL Energy at present retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Based in Canonsburg, Pennsylvania, CONSOL Energy is a multi-fuel energy producer as well as energy services provider, primarily catering to the U.S. power generators.
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