Oct 31, 2016 3 min read

CANONSBURG – Consol Energy Inc. and Noble Energy Inc. said Monday they have agreed to separate their five-year-old Marcellus Shale 50-50 joint venture.

The two companies said in a joint news release they have negotiated a separation of the joint venture formed in 2011 for the exploration, development and operation of primarily Marcellus Shale properties in Pennsylvania and West Virginia.

“This agreement with Noble Energy to separate our joint venture is bittersweet for Consol Energy,” said Nicholas J. DeIuliis, Consol president and CEO. “Noble has been a top-notch partner, and we have enjoyed the collaborative relationship that we have shared over the past five years. Even though we have seen much success together, we have agreed that we must both have the ability to adapt to a changing energy landscape.”

He said the separation “is consistent with Consol’s transitional journey to a pure-play exploration and development company, and the company’s commitment to future growth, in what is now a more robust and actionable stacked pay opportunity set.”

Noble CEO David L. Stover added that the new agreement “sets a clear path for both companies into the future. It provides us with greater control and flexibility over the future pace of development in the Marcellus.”

Prior to the exchange agreement, the JV collectively operated 669,000 Marcellus acres, with each company holding 50 percent working interest. As of the effective date of the agreement on Oct. 1, total flowing production to the JV was 1.07 billion cubic feet per day of natural gas equivalents.

Subsequent to closing of the exchange agreement expected in the fourth quarter, the acreage and production of the prior Joint Venture will be as follows:

• Consol will operate a 100 percent working interest in 306,000 Marcellus acres with associated production of 620 million cubic feet per day of natural gas equivalents. The majority of the acreage is in Pennsylvania.

• Noble will operate a 100 percent working interest in 363,000 Marcellus acres with associated production of approximately 450 mcf per day of natural gas equivalents. The majority of the acreage is in West Virginia.

Noble will also remit a cash payment of approximately $205 million to Consol at closing.

While the exchange agreement creates independent ownership interests in the acreage and production currently gathered by CONE Midstream, it does not change the total acreage dedicated to CONE, the gathering rates, or other fundamental terms for the services provided by CONE. Consol and Noble remain as co-sponsors of CONE and shippers on CONE’s gathering systems, while retaining their respective general partnership and limited partner ownership interests in CONE.

The agreement is subject to a number of conditions, and is expected to close in the fourth quarter.