March 22, 2010 / 12:24 PM / 10 years ago

UPDATE 2-CNX Gas shares rise on proposed take out

* Consol to start CNX Gas shares’ tender offer by May 5

* CNX Gas says current production from Marcellus 21 mmcfd

* Says peak production rate of 5.7 mmcfd at latest well

* Shares up 24 pct (Recasts; adds tender offer news, updates share movement)

March 22 (Reuters) - CNX Gas Corp CXG.N reported strong results from its latest well at the Marcellus shale, a day after its parent Consol Energy Inc (CNX.N) reached a deal with T. Rowe Price Associates to tender CNX Gas shares.

Shares of CNX Gas surged as much as 24 percent to a new year-high of $38.18 Monday morning, making them one of the top percentage gainers on the New York Stock Exchange.

Consol Energy in 2005 formed the unit, CNX Gas, to explore for and produce gas, and currently owns about 83.3 percent of the 151 million shares of CNX Gas common stock outstanding.

Consol has said it would start the tender offer by May 5 to acquire all of the shares of CNX Gas common stock that it does not currently own at a price of $38.25 a share in cash. [ID:nN21154011]

Consol Energy, one of the nation’s top four coal producers, last week agreed to buy Dominion Resources Inc’s (D.N) Appalachian natural gas properties for $3.48 billion in cash, giving Consol a leading position in the growing Marcellus Shale field.

The Marcellus in Pennsylvania is one the “big four” U.S. shale plays.[ID:nN18204577]

CNX Gas said it has budgeted $110 million in 2010 for Marcellus shale drilling out of a total capital budget of $400 million.

The company said the latest well at Greene County is seeing a current daily production rate of 5.5 million cubic feet (mmcf).

The average daily production from the well is almost one-fourth of the company’s current production of 21 mmcf from the Marcellus shale’s 16 wells. CNX’s 2009 average daily production was 273 mmcf.

The well which has been producing for 16 days at an average production rate of 4.9 mmcf per day, has a peak daily production rate of 5.7 mmcf. (Reporting by Arundhati Ramanathan and Arup Roychoudhury in Bangalore; Editing by Maju Samuel)

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