CONSOL Energy's Quest for Gas Takes it to Pittsburgh Airport - Analyst Blog


CONSOL Energy 's ( CNX ) 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 authority.

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. ( NBL ) 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 ( GLNCY ) and Alliance Resource Partners LP ( ARLP ). While Glencore sports a Zacks Rank #1 (Strong Buy), Alliance Resource Partners holds a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CNX , GLNCY , NBL , ARLP

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