Consol Energy To Buy Dominion's E&P Assets For $3.475B; Will Gain 500,000 Marcellus Acres

Bought 1.46 million acres in Appalachia with 500,000 Marcellus shale acres in PA & WV, gaining 112 MMcf/d, 1.1 Tcf proved.

Coal-producer Consol Energy Inc., Pittsburgh, (NYSE: CNX) plans to to acquire the Appalachian E&P business of Dominion Resources Inc. Richmond, Va., (NYSE: D) for $3.475 billion in cash.

Dominon's E&P business includes 500,000 Marcellus shale acres in Pennsylvania and West Virginia.

The assets consist of 1.46 million oil and gas acres from with more than 9,000 producing wells that are expected to produce more than 41 billion cubic feet of gas equivalent in 2010. Proved reserves are 1.1 trillion cubic feet of gas and potential resources are 41 trillion cubic feet.

Pro forma, Consol Energy will have approximately 750,000 acres in the Marcellus fairway the company's gas business will account for up to 35% of its total revenue.

Consol president and chief executive J. Brett Harvey says, "Consol Energy's acquisition of Dominion's Appalachian E&P business is a strategically compelling transaction that will transform Consol Energy into a leading diversified energy company with a strong position in natural gas as well as coal. Since 2005, Consol Energy will have doubled its annual gas production to 100 billion cubic feet in 2010. This acquisition will further accelerate that trend with the addition of the extremely attractive resource-rich, low-cost Marcellus shale assets."

Dominion chairman, president and CEO Thomas Farrell II says, "The decision to sell our E&P business came as a result of our previously-announced plan to monetize our Marcellus acreage, either in multiple transactions or all at once. As we analyzed the various alternatives, and their respective impact on the value of the remaining business, we determined that combining our conventional Appalachian E&P operations with the rights to the Marcellus formation resulted in the best long-term value for our investors."

The company expects to raise approximately $4 billion and is targeting a balanced mix of equity and debt to fund the acquisition and development of the acquired acreage. BofA Merrill Lynch and PNC Bank have provided financing commitments to complete the acquisition.

BofA Merrill Lynch is lead financial advisor to Consol and Wachtell, Lipton, Rosen & Katz and Akin Gump Strauss Hauer & Feld LLP are legal counsel. Stifel, Nicolaus & Co. Inc. is also a financial advisor and provided a fairness opinion to Consol.

Barclays Capital Inc. is financial advisor to Dominion. Baker Botts LLP is Dominion's legal adviser.

The transaction is expected to close by April 30.