Noble Energy, Consol JV In The Marcellus
Entered JV to develop 663,350 n et undeveloped Marcellus acres in PA & WV, gaining 70 MMcfe/d, 400 Bcfe proved.
Noble Energy Inc., Houston, (NYSE: NBL) plans to enter a joint-venture partnership with Consol Energy Inc., Pittsburgh, (NYSE: CNX) to develop Consol’s Marcellus shale properties in southwestern Pennsylvania and northwestern West Virginia for $3.4 billion.
Noble Energy will purchase a 50% interest in 663,350 nn
The acreage value of $3.2 billion equates to a discounted present value of $7,100 per net acre, according to Noble.
Net production to Noble Energy's interest has the potential to reach 600 million cubic feet of gas equivalent per day in 2015 and is expected to continue growing into the next decade. The acreage is estimated to contain 7.4 trillion cubic feet equivalent risked resources net to Noble’s interest, of which 400 billion cubic feet equivalent were proven reserves at year-end 2010.
The assets also feature more than a decade of expected development activity, which includes the drilling of approximately 4,400 gross well locations. The leasehold position is more than 85% held by production, almost entirely operated with close to 100% working interest (88% net revenue interests).
A long-term development plan forecasts drilling activity to increase from four to 16 rigs in 2015. Operations are to be shared between the partners with Noble Energy's initial focus on the wet gas portion of the acreage. Also, the companies will share midstream infrastructure and access to water-handling capabilities.
Noble chairman and chief executive Charles D. Davidson says, “This transaction will complement and further strengthen our U.S. portfolio by adding a high-quality asset with a substantial growth profile. The Marcellus, combined with our ongoing developments in the D-J Basin and deepwater Gulf of Mexico, will provide important balance to our rapidly expanding international programs. Spreading the transaction costs over an extended time horizon creates better partner alignment on investment decisions and maintains our strong balance sheet.”
Consol chairman and CEO J. Brett Harvey says, “Noble Energy is a world-class operator that shares CONSOL's dedication to safety and compliance and they bring a strong technical and operational expertise to this partnership. This agreement will benefit the regional economy, the communities in which we operate, our employees, and our respective companies.”
Noble is expected to fund the deal with cash on hand and its revolving credit facility.
Jefferies & Co. Inc. is financial advisor to Consol. Vinson & Elkins LLP and Wachtell, Lipton, Rosen & Katz are legal advisors to Consol. Porter Hedges LLP is legal advisor to Noble.
The deal is expected to close in late September.
Tudor, Pickering, Holt & Co. analyst Dave Pursell values the deal at $10,200 per acre, undiscounted.
“Balance is important at Noble and this deal balances the company’s portfolio—domestic/international; lower-risk development/higher risk exploration,” says Pursell. “Noble paid a fair price pre-acceleration at $7,100 per acre. As they accelerate we see the value accreting toward $9,000 per acre.”
Pursell adds Tudor Pickering’s discounted development values for the 15 companies with Marcellus acreage that the firm follows have an average value of $8,100 per acre with a median value of $6,900 per acre.