) focus on natural gas production has brought it near the fringes
of Pittsburgh Airport, where the company started to drill wells as
per its plans. CONSOL will drill 45 wells from six pads to explore
the gas-rich Marcellus Shale tapped nearly 7,000 feet underground.
The project was approved by the Federal Aviation Administration and
other local authorities.
CONSOL will use hydraulic fracking technology to extract gas. The
airport authority is expected to receive royalty revenues of $20
million per year. Incidentally, the airport authority owns
nearly 9,000 acres of land. The entire tenure of this project could
generate royalty revenues of nearly $500 million for the airport
New drilling technology and the increasingly stringent regulations
on coal usage for power generation had led CONSOL Energy to
diversify its business into natural gas exploration &
production. CONSOL Energy produced 51.9 billion cubic feet
equivalent (Bcfe) of natural gas in the second quarter. The company
expects to produce 225-235 Bcfe of natural gas in 2014.
CONSOL Energy is targeting 30% annual production growth at the
E&P segment over the next three years. We expect drilling near
the Pittsburgh airport and the gradual increase in the well count
going forward will help the company to meet its production target.
To further strengthen its existing position in the reserve-rich
Marcellus Shale, CONSOL Energy joined forces with Noble Energy Inc.
) to form a master limited partnership called Cone Gathering LLC.
The MLP would provide midstream services for their production in
the Marcellus Basin.
CONSOL Energy currently has a Zacks Rank #3 (Hold). Apart from
natural gas, CONSOL Energy has exposure in coal. Some better-ranked
stocks in the coal sector include Glencore Plc (
) and Alliance Resource Partners LP (
). While Glencore sports a Zacks Rank #1 (Strong Buy), Alliance
Resource Partners holds a Zacks Rank #2 (Buy).
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