CONSOL Energy continues its transition from coal to natural gas. Just last week the company closed a massive $3.5 billion deal that offloaded five legacy coal mines in West Virginia. Now CONSOL is acquiring natural gas drilling rights on 90,000 acres in that state.
The $190 million deal with Dominion Resources sees CONSOL picking up the drilling rights to the natural gas below Dominion’s natural gas storage fields. CONSOL is joined on this deal with its 50% joint venture partner Noble Energy which is exercising its rights to own 50% of this drilling allowance.
Dominion Resources sold off its legacy oil and gas exploration business years ago to focus on its utility segments. However, the company still owns a large natural gas storage business, as well as a sizable natural gas pipeline network. The drilling rights being sold to the CONSOL/Noble venture involve acreage it owns as part of its natural gas storage system. Dominion’s natural gas storage business is actually made up of depleted conventional natural gas well. In addition to buying these drilling rights, CONSOL agreed to be an anchor shipper on Dominion’s natural gas transmission system. That makes it a solid deal for Dominion, which cashes in on an asset that it wasn’t using to generate income while also adding natural gas volumes to its transmission business.
Read more: http://www.dailyfinance.com/2013/12/10/consol-energy-bulks-up-on-gas/