Replies to This Discussion

Permalink Reply by Paul Butler on September 9, 2015 at 1:21am

MDN doesn’t do this (too) often, but we’re going to engage in a little Friday idle speculation. A tad bit of rumor mongering. So take this for what’s it worth. MDN has a contact in the Pittsburgh region that tells us that *all* of CONSOL Energy’s field engineers received an email at 3:30 am–this morning–requesting that they report to the center in Canonsburg, PA to discuss dismissal packages. Our contact says CONSOL’s plan is to lay down the rest of their active drilling rigs as soon as existing wells are completed and that they will not drill any new wells for the next 18 months. The really big bombshell is this: rumors are swirling that CONSOL’s CNX gas division is getting ready to sell itself to Noble Energy…

Again, the caveat is that this is rumor and speculation! But our contact is convinced it’s true that CONSOL is queuing up to sell itself to Noble. Which kind of makes sense. CONSOL and Noble cut a $3.4 billion joint drilling venture in the Marcellus Shale back in 2011 (see Noble Energy and CONSOL to Partner on Marcellus in $3.4B Deal). Then, just a year ago the two companies launched a 50/50 joint venture midstream company called CONE Midstream (see CONSOL & Noble Energy Form New Marcellus Midstream Company). The two companies have been cozy for a number of years.

Here’s three emails MDN received from our anonymous, secret source. We have redacted portions that might identify the source:

July 14:

Hello Mr Willis. I was wondering if you have heard anything about a Noble acquisition of Consol Energy. I … have been hearing rumors. I know Consol just let go of some VPs in their engineering and Geo departments. Not sure if that’s them trying to clean up before the big move or just to cut costs. Just curious, you seem to have the insider route to a lot of info.

July 15:

I’ve heard tomorrow at 5pm they are letting go of all Completions field employees and going 100% consultants. That’s on top of everyone who was let go today. A lot of people from the Jane Lew office and Waynesburg office are tomorrow.

July 17:

All of the CONSOL field engineers received an email at 3:30 this morning requesting that they report to the center in Canonsburg to discuss dismissal packages. They are planning on laying down the rest of their drilling rigs that are in operation as soon as they complete the wells they are on and finish up all completion jobs. At that time it is imagined they would be letting go of all completion consultants and I heard they were not drilling any new wells for at least 18 months.

All of this is common hearsay but it all keeps falling into place. I honestly think they are set up to sell to Noble, based on the joint venture they have with them and the midstream and coal mine spin offs with them.

Please let me know if you hear anything.

There you have it! Yep. It’s rumor. And of course we run the risk of dinging our own reputation if it turns out the rumor is wrong. But it does kind of fit together and hey, it’s Friday. So let’s do a little bit of gossiping

Permalink Reply by Paul Butler on September 9, 2015 at 1:22am

Following up on our CONSOL Energy/Noble Energy rumor from last Friday, MDN now has a second source that delivers a bit more information about the rumor–refining it for us. We told you on Friday that a persistent rumor among those working for or with CONSOL Energy is that Noble Energy is lining up to buy the gas division, CNX (see Rumors Circulate that CONSOL May Sell Itself to Noble Energy). A new source tells MDN that a complete buyout of CNX is not necessarily in the cards–but that Noble Energy is “taking over” the joint venture acreage the two currently hold in a 50/50 deal in the Marcellus/Utica…

**IF that’s true**, if Noble is doing a deal to take over ALL jv acreage from CONSOL/CNX, it means Noble is essentially buying out CNX as most of the acreage CNX holds is in a joint venture with Noble–some 663,350 of 750,000 net acres, or 88% (see Noble Energy and CONSOL to Partner on Marcellus in $3.4B Deal). If Noble controls 88% of CONSOL’s acreage, what would you call it? Corporate raiders control entire companies on far less ownership. Yes, this is merely acreage and not the whole company–but without acreage to drill on, you don’t have much left. Capisce?

Virtually all of CONSOL’s in-house completions team is now gone, with just a few people left–that’s from both of our sources. In addition, our second source tells us approximately 150 CONSOL workers are being transferred to Noble.

It seems the philosophy and ethos at CONSOL Energy “has totally changed” in the past six months, says MDN’s second source.

Our loud and clear proviso is, once again, that this is a rumor. So please take this as unconfirmed.

Our second source, like the first source, does not work for (as in employed by), but does work with (as in does contract work for) CONSOL Energy and is, in our opinion, highly placed and someone with knowledge of what’s happening.

It’s interesting to MDN that with major changes happening at CONSOL none of the Pittsburgh newspapers have (as yet) reported on it, other than to note the layoffs. So much for “investigative” journalism.

Permalink Reply by Heidlebergman on September 9, 2015 at 3:14pm

There is no JV deal between Noble and CNX for the Utica. The JV deal goes from the Burkett to the top of the Onondaga. The Utica is below the Onondaga. In my opinion it makes no sense for CNX to sellout the JV to Noble. That would leave CNX with a swath of non-diligent reviewed Utica acereage and about 7000 conventional wells that CNX has always considered a liability...they just layed off all the personnel to operate these wells and evaluate the Utica. To be honest I really don't know what to expect. This is the most knee jerk hyperbolic company you'll ever come across. Trying to predict their behavior is meaningless. Just sit back and watch them drive the van into the ditch.

Permalink Reply by farmgas on September 9, 2015 at 3:49pm

How will Consol operate their conventional wells if they laid off the personnel to maintain them?   If they close down these wells then they will lose these leases for non-production.   Does the JV with Noble include the Marcellus Shale layer for all their acreage including the Dominion acreage in central PA?

Permalink Reply by Heidlebergman on September 9, 2015 at 4:11pm

I'm sure they plan on shutting in a lot of them and paying the shut in royalties...but there are contracts with transmission companies going back to the Hope Gas days that they need to comply with. Yes the Noble deal included central PA acreage.

Permalink Reply by Mike Murphy on September 9, 2015 at 6:14am

sent this info to channel7 news so we shall see if they investigate it and report on it on the news

Permalink Reply by Matt Stroud on September 9, 2015 at 6:36am

I'm Matt Stroud with the Pittsburgh Business Times. A Consol rep told me this is "complete foolishness." If anyone wants to offer further information -- something that's verifiable and goes beyond the interesting speculation here -- please let me know: mstroud AT bizjournals DOT com

Permalink Reply by Paul Butler on September 9, 2015 at 7:01am

The dismissal with the juvenile generality "complete foolishness" is pretty much confirmation of the rumors to me.

I smell a rat.

What was the number of people who were working for CNX and what was the payroll  for the 30 days prior to September 1, 2014 and September 1, 2015?

Is CNX trying to get a sweetheart deal done with Noble before a third party can bid?

CNX has extremely valuable Oil & Gas interests (both severed and including surface.) 

The CNX deal with Noble raised plenty of eyebrows at the time the deal was struck.  Did CNX need Noble?  What was Noble bringing to the party? 

Whatever Noble brought to the party, arguably, it amounted to financial rat poison.  Without Consol's backing, CNX would most likely be in bankruptcy today.

Have the employees of CNX gotten too close to Noble and forgotten the Consol stockholders? 

Permalink Reply by farmgas on September 9, 2015 at 9:57am

Check out Consol`s webpage under Investor`s Reports for the Barclay`s CEO Energy & Power Conference Report.   From the tone of this report, Consol sounds prepared to weather the storm.   What do you think?

Permalink Reply by Heidlebergman on September 9, 2015 at 2:46pm

The relationship between Noble and CNX always appeared to be strained. Just my opinion.

Permalink Reply by rmc on September 9, 2015 at 11:01pm

Rumor has it that Consol is going to start drilling the Utica in 2017 without Noble energy. That leaves one wondering what are they going to do with the joint acreage?

Permalink Reply by farmgas on September 9, 2015 at 11:26pm

Here in central PA where the JV acreage with Noble is widespread what will Consol`s future look like for Marcellus Shale Gas development?  Will they sell this acreage and to whom?  Other gas companies like EQT seem to be expanding in this area.   What about the transmission contracts with  Dominion?  How will they satisfy these contracts without developing for Marcellus Shale Gas?