PITTSBURGH - Consol Energy is planning to invest more than $700 million in 2012 to develop its extensive shale assets, a significant chunk of its projected $1.7 billion capital spending plan for the year.
"This budget reflects our desire to create shareholder value by investing in our highest rate of return projects: our organic opportunities in coal, gas and liquids," said J. Brett Harvey, Consol's chairman and chief executive officer. "We are, however, entering a year with an unusual amount of uncertainty. We have the ability to adjust our investment, should circumstances warrant."
The Pittsburgh-based company's spending plan earmarks $575 million to develop its extensive Marcellus shale assets, including $395 million for drilling capital. The budget anticipates that Consol's joint venture with Noble Energy will involve drilling 122 horizontal wells in its Marcellus acreage, including 39 wells in the liquids-rich area of the play. Consol expects to invest $90 million in related gathering and compression.
Another $50 million has been earmarked for the company's joint venture with Hess Energy in the Utica shale, most of which will be drilling capital for Consol's share of up to 22 wells in either the liquids-rich or the oil window of the play.
The company's coalbed methane program will be scaled back in 2012, with the expected drilling of only 86 wells. Total capital for the 2012 coalbed methane program is projected at $65 million.
The company's investments across all of the gas plays are projected at $755 million, including $519 million in drilling capital, $124 million in gathering and compression capital, $30 million for production equipment, $26 million for water and $23 million for land.
On the coal side, Consol anticipates investing $310 million for maintenance of production projects, including $205 million on projects that will increase production at its BMX Mine in Western Pennsylvania. The BMX project will add 5 million tons a year of high-quality Pittsburgh seam coal, which will be sold in either the high-vol or thermal markets.
Another $155 million will go toward efficiency improvements like the overland belt at Enlow Fork Mine in Pennsylvania, with $50 million allocated for health and safety items.