Noble Energy has closed the previously announced agreements which create a joint venture partnership with CONSOL for the development of Marcellus Shale properties in southwest Pennsylvania and northwest West Virginia. 

The deal, announced in mid-August, is the largest for Noble since its $3.4 billion acquisition of Patina Oil & Gas in 2005, said Evaluate Energy analyst Eoin Coyne in his Weekly Update of oil and gas transactions for OGFJ. For CONSOL, "the cash payment will strengthen a balance sheet that carried significant debt following large recent acquisitions from Dominion Petroleum and CNX Gas," Coyne continued. 

The average price for an undeveloped Marcellus shale play acre in the past two years has been roughly $5,500, noted Coyne. "The cost for the undeveloped portion of acreage equates to $9,650 per acre, although after taking into account the present value (assuming a 10% discount rate) Noble Energy reports this figure as $7,100 per acre. Noble Energy has also managed to mitigate a portion of the risk posed by the currently supressed US gas prices by suspending the disproportionate funding when the price falls below $4 per btu," he continued.  

Under the agreements, Noble Energy acquired a 50% interest in 628,000 net undeveloped acres for approximately $1 billion, payable in three installments of which the first is $327 million. The company also purchased a 50% interest in existing Marcellus production and infrastructure for approximately $232 million. In addition, Noble Energy agreed to fund approximately $2.1 billion of CONSOL's future drilling and completions costs, which are expected to extend over an eight-year period. 

The total amount Noble Energy paid at closing was $593 million, which included the first installment payment, the full amount for production and infrastructure, and customary adjustments for net cash between the effective date and closing. The second and final installments will be paid on the first and second anniversaries of the closing, respectively.