Why natural gas will spearhead growth for CONSOL Energy

Alex Chamberlin - Author
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Aug. 18 2020, Updated 5:16 a.m. ET

CONSOL Energy has a solid strategy in place

CONSOL Energy (CNX) has adopted a selective strategy to achieve its growth target. It intends to shift towards a natural gas-oriented company from its traditional base of a coal-assets based upstream energy company. CNX is currently concentrating on increasing its natural gas based assets, selective acquisition of natural gas and liquid-gas based assets, monetizing non-core assets to improve cash flows and profitability on thermal and metallurgical coal sales by reducing costs.

CNX looks to increase gas production by 120% by 2016 from 2013

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CONSOL Energy’s natural gas division operates on the liquid-rich regions of Appalachia, including Pennsylvania, West Virginia, Virginia, Ohio, and Tennessee. It focuses on developing the Marcellus Shale and Utica Shale acreage. It expects to produce 215– 235 billion cubic feet (bcf) equivalent of gas for 2014 and achieve 30% annual gas production growth in 2015 and 2016, each.

Marcellus and Utica to lead the charge

CNX has a joint venture with Noble Energy (NBL) in the Marcellus Shale, which drilled 117 gross wells in 2013. In 2014, the company expects Marcellus Shale drilling activity to be the primary driver of gas production growth. In 2014, the joint venture is expected to drill 162 gross wells, at least 88 of which will be drilled in the liquids-rich areas of the play. Wet natural gas is is natural gas with a substantial amount of natural gas liquids (NGLs), that can be sold at a higher price.

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CNX is also using advanced technologies like enhanced completion techniques that includes increased usage of shorter stage laterals (or SSL) and reduced cluster spacing (or RCS). In southwestern Pennsylvania, the initial production rates have improved by as much as 40% as a result of implementing these techniques. CNX believes that more extensive use of these technologies would translate into 15%– 0% increases Estimates Ultimate Recovery (or EUR). EUR, a key indicator in oil and gas industry, is an approximation of the quantity of oil or gas that is potentially recoverable in wells. The enhanced production techniques has the potential to eliminate chokes and bottlenecks, increase pad production by 34%, and increase EUR by 29%.

Utica is fast growing

CNX expects to achieve 270% compounded annual growth rate in the Utica volumes through 2016, which would make Utica a sizeable portion of production mix. CNX has solid acreage in the core wet gas areas of Utica like the Noble, Harrison, Belmont, and Guernsey counties. The company expects to complete the midstream build-out in the Noble County by 2014. In the dry gas producing acreage of Utica, CNX also has a presence, like in eastern Ohio, southwest Pennsylvania, and northern part of Western Virginia. Natural gas production from its Utica Shale operation is expected to begin from 2015.

In the Utica Shale joint venture with Hess Corporation (HES), a total of 32 gross wells are planned to be drilled in 2014. CNX plans to increase production by employing enhanced completion techniques as it successfully did in the Marcellus Shale.

CONSOL Energy Inc. (CNX) is a producer of natural gas and coal. Other companies operating in the coal industry are Arch Coal Inc. (ACI), Alpha Natural Resources Inc. (ANR), and Cloud Peak Energy (CLD). Some of the major names in the natural gas sector are ExxonMobil (XOM), Chesapeake Energy (CHK), and Devon Energy (DVN). Some of these companies are part of the SPDR S&P Metals & Mining ETF (XME) and the Vanguard Energy ETF (VDE).

 

 

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