Consol Energy to pay almost $3.5B for Dominion Appalachian exploration and production business

Consol Energy to buy Dominion’s drilling business

RICHMOND, Va. — Consol Energy Inc. said Monday it agreed to buy Dominion Resources Inc.’s Appalachian exploration and production business for $3.475 billion, substantially increasing its natural gas reserves and production capacity.

The deal will give the coal and natural gas company a leading position in the strategic Marcellus Shale, a rockbed about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio that could be the country’s most productive natural gas source.

Most energy companies, both producers and utilities, believe stricter federal regulations for coal mining and emissions are coming. Utilities are swapping out coal-fired power plants for cleaner-burning natural gas turbines.

Last month, coal mine operator Alpha Natural Resources, based in Abingdon, Va., said that it was expanding its natural gas business by drilling its first well in the Marcellus shale in a joint venture with Rice Energy.

Consol, based in Canonsburg, Pa., near Pittsburgh, expects its natural gas business to account for as much as 35 percent of the company’s total revenue. It needs to raise about $4 billion to fund the Dominion acquisition, which is expected to close by April 30.

Consol has operations in West Virginia, Virginia, Kentucky, Pennsylvania and Utah. At the start of the year, CEO J. Brett Harvey told analysts and investors that he considered coal mining a cash cow that would be tapped to fund increased production from CNX Gas. Consol owns more than 83 percent of CNX, which already has a sizable stake in the Marcellus shale as well as coalbed methane wells in Virginia.

Consol will acquire a total of 1.46 million oil and gas acres from Dominion along with over 9,000 producing wells, the company said. The assets were originally part of John D. Rockefeller’s Standard Oil empire.

Dominion, based in Richmond, Va., is one of the oldest and most active exploration and production businesses in Pennsylvania and West Virginia.

Dominion produces electricity, natural gas and oil and has the nation’s largest natural gas storage system. It operates in 14 states and serves retail energy customers in a dozen states.

Consol shares fell $5.03, or 9.3 percent, to $49.30 in morning trading. Dominion added 4 cents at $39.73 after touching a 52-week high of $40.29 earlier in the session.