CONSOL Energy Inc. Is Ready to Turn on the Gas

CONSOL Energy, Inc. is investing more than $1 billion to grow its natural gas production by 30% in 2014.

Jan 22, 2014 at 10:30AM

For the past three years, CONSOL Energy (NYSE:CNX) kept its natural gas production rather flat. It couldn't decided whether to focus on growing its gas and coal business. That will change this year as it invests more than $1 billion to push its gas production up by 30%. That is a growth rate that the company plans on keeping at least through 2016.

The decision to transition from a diversified natural gas and coal producer to a natural gas growth company wasn't an easy one to make. However, with the sale of some of its legacy coal assets in West Virginia, CONSOL Energy chose to become a natural gas growth company. Now, with the release of its 2014 capital spending plans, we have greater detail on how it plans to achieve that gas-fueled growth.

The mighty Marcellus
Most of CONSOL's capital will be spent in the Marcellus Shale in 2014. About $410 million will be spent on the liquids-rich portion of the play while another $415 million will be spent in the dry gas areas. It is also important to note that the company has a joint venture with Noble Energy, (NYSE:NBL)in the Marcellus. Because of this, CONSOL might see $220 million coming back to it as part of the drilling carry it has with Noble Energy. That carry is currently suspended due to low natural gas prices. However, as prices picked up, it's possible that the company will earn that carry in 2014.

Another interesting note is that in addition to investing in the higher-value liquids-rich portion of the play, CONSOL will also be investing substantial capital to drill for dry gas. Thanks to an enhanced well completion technique, it is seeing better economics from its dry gas wells. That technique has improved initial production rates by 40%, which it believes will increase its estimated ultimate recovery of each well by 15%-20%. By pushing more gas out of a well, CONSOL will earn both a quicker payback as well as earn more over the life of the well.

One other area to watch is the development of the Upper Devonian. The company plans on drilling a handful of wells in 2014 to explore that target. Initial results so far have been promising, which suggests that CONSOL might have even more natural gas-fueled growth ahead of it.

The Utica's potential grows
The other area of focus for CONSOL Energy in 2014 will be its growing production out of the Utica Shale. The company will be investing $105 million in the liquids-rich portion of that play and another $10 million to drill a single well in the dry gas portion of the Utica.

CONSOL has partnered with Hess Corp. (NYSE:HES) to develop the liquids-rich portion of the Utica Shale. In addition to the money it is spending, it expects Hess to kick in another $115 million as part of its joint venture agreement to drill wells in the Utica. Unlike the contingent natural of the Marcellus drilling carry, CONSOL Energy fully expects Hess to pay the drilling carry in 2014.

Legacy assets still produce cash
While CONSOL Energy's growth in 2014 is fueled by the Marcellus and enhanced by the Utica, the company will still see solid cash flow from some of its legacy assets. In fact, the company is investing nearly $400 million in coal-related assets as well as another $40 million to drill coal bed methane wells.

Half of the company's 2014 coal spending will be to finish its BMX mine expansion. Once that project is complete in mid-March, it should start flowing cash into CONSOL's coffers. After that, it only expects to invest to maintain its coal production, not grow it. Meanwhile, the company also isn't giving up on its legacy coal bed methane business as it's investing $40 million to drill 76 wells. Still, these legacy assets will provide CONSOL with some of the cash it needs to fuel its natural gas growth. 

Investor takeaway
CONSOL Energy is an interesting stock to watch. It has a solid foundation of legacy coal assets that are still generating cash. On top of that, it offers compelling potential as it transitions to become a natural gas-fueled growth company.

This is the one stock to buy in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Fool contributor Matt DiLallo has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers