Hess, Consol Combine Forces For Ohio Utica Shale JV

Entered 50-50 JV targeting Utica shale in E OH covering 200,000 acres in Belmont, Harrison, Guernsey, Jefferson, Portage, Tuscarawas, Mahoning and Noble cos.

Hess Corp., New York, (NYSE: HES) has entered a 50-50 joint venture with Consol Energy Inc., New York, (NYSE: CNX) to develop Utica shale operations in eastern Ohio for $593 million.

Hess will pay $59 million at closing and will pay 50% of Consol's working interest obligations relating to certain drilling and completion costs, up to total payments of approximately $534 million, as the acreage is developed. The deal is valued at $6,000 per net acre, according to Consol.

The joint venture will have Hess generally operate in the liquids-rich window, which contains approximately 80,000 acres in Belmont, Harrison, Guernsey and Jefferson counties, and Consol will generally operate elsewhere in eastern Ohio, including Portage, Tuscarawas, Mahoning counties, in the oil window, and in Noble County.

CONSOL and Hess anticipate commencing initial drilling operations in a few weeks, and will thereafter average two rigs in 2012, 3.5 rigs in 2013, and eventually plateau at an average of five rigs in 2015. The carry is expected to be fully utilized by year-end 2016.

The transaction excludes Consol’s shallow rights in Ohio and its remaining Utica shale acreage in Pennsylvania and West Virginia.

Hess chairman and chief executive John Hess says, “We believe that this acquisition offers significant potential for future growth in reserves and production with most of the land either owned in fee or held by production with high net revenue interests. We are honored to partner with Consol, which has a long history and an excellent safety and operating record in the Appalachian basin.”

The deal is expected to close by Oct. 21.

Jefferies & Co. Inc. is financial advisor to Consol. Vinson & Elkins LLP and Wachtell, Lipton, Rosen & Katz are legal advisors to Consol.