For the past three years, CONSOL Energy (CNX -0.63%) 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, (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. (HES 0.65%) 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.