CHARLESTON, W.Va. -- Coal mine operator Alpha Natural Resources has begun expanding its natural gas business by drilling its first well in the Marcellus shale.
The company announced a joint venture Tuesday with driller Rice Energy. The companies are investing a combined $20 million in four wells this year southwestern Pennsylvania and could drill as many as 100 in the Marcellus, a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio.
Two things are driving intense interest in onshore natural gas.
Most energy companies, both producers and utilities, believe strict federal regulation of coal is coming. Utilities are swapping out coal-fired power plants for natural gas turbines because gas burns cleaner than coal.
Second, natural gas deposits have been freed up by new technology and the nation's estimated gas reserves have jumped by 30 percent in the past two years.
It is expected that huge supplies of gas will mute at least one of the reasons natural gas wasn't used more: price volatility.
Alpha's investment reflects growing interest by a variety of energy companies in onshore natural gas. Exxon Mobil recently bid $30 billion on big natural gas producer XTO Energy.
Alpha's competitor, Consol Energy, has increasingly focused on natural gas production in the face of stricter environmental regulation of Appalachian coal mines.
CHARLESTON, W.Va. -- Coal mine operator Alpha Natural Resources has begun expanding its natural gas business by drilling its first well in the Marcellus shale.
The company announced a joint venture Tuesday with driller Rice Energy. The companies are investing a combined $20 million in four wells this year southwestern Pennsylvania and could drill as many as 100 in the Marcellus, a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio.
Two things are driving intense interest in onshore natural gas.
Most energy companies, both producers and utilities, believe strict federal regulation of coal is coming. Utilities are swapping out coal-fired power plants for natural gas turbines because gas burns cleaner than coal.
Second, natural gas deposits have been freed up by new technology and the nation's estimated gas reserves have jumped by 30 percent in the past two years.
It is expected that huge supplies of gas will mute at least one of the reasons natural gas wasn't used more: price volatility.
Alpha's investment reflects growing interest by a variety of energy companies in onshore natural gas. Exxon Mobil recently bid $30 billion on big natural gas producer XTO Energy.
Alpha's competitor, Consol Energy, has increasingly focused on natural gas production in the face of stricter environmental regulation of Appalachian coal mines.
Alpha Chief Executive Kevin Crutchfield told analysts he's not ready to commit to transforming the company into a gas producer just yet.
"It's kind of a wait and see attitude, but it's a valuable resource and we want to begin to realize some value out of it," he said. "And with the passage of time, I think we'll make the strategic decision whether that's something we really want to grow in earnest or we're happy with sort of the foothold that we have."
Alpha, based in Abingdon, Va., acquired approximately 20,000 acres in the Marcellus shale when it bought Foundation Coal last July. Besides the new wells, Alpha also is doubling the capacity of a gas processing plant it owns to 10 million cubic feet a day, Crutchfield said.
Alpha's news came in conjunction with the fourth-quarter earnings.
Abingdon, Va.-based Alpha said net profits increased to $18 million, or 15 cents per share, in the period. Alpha earned $5.6 million, or 8 cents per share, in fourth-quarter 2008 after adjusting for a new accounting rule. Originally, Alpha reported a loss for that period.
Analysts surveyed by Thomson Reuters predicted 45 cents per share, excluding charges. Alpha says it earned $62.1 million, or 51 cents per share, from continuing operations.
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