PITTSBURGH—The Marcellus and Utica shales are changing the fortunes for producers, operators and landowners throughout Pennsylvania, West Virginia and Ohio. Indeed, the Appalachian Basin is one of the few bright spots in a low commodity price market, as production continues increasing from the Utica and midstream development grows in the Marcellus.

In a single decade, the plays have helped the region become one of the most important to the global energy economy. One of the most telling transformations during this time has been that of Consol Energy, the 152-year-old company that is transitioning from coal into a pure play E&P.

The company has seen many changes over those years – it was incorporated when Abraham Lincoln was president—and this current transformation is one of its biggest.

Central to this transition is the development of the Utica Shale, which Tim Dugan, Consol’s COO classified as a “game-changer” that will help the company become a dominant player in the field.

“We are navigating through a very challenging environment, but it’s also an exciting time for our industry…Our heritage stems from the coal industry, but we’ve been involved with the gas industry for more than three decades,” Dugan said at Hart Energy’s recent 8th annual DUG East conference in Pittsburgh.

The transformation from prominent coal company to top-tier E&P began in 2013 with the sale of five West Virginia coal mines to Murray Energy Corp. This was followed by the IPO of CONE Midstream Partners LP, which included its Marcellus gathering system in 2014 and its Pennsylvania mining complex as CNX Coal Resources in 2015. Most recently, Consol announced the sale of its flagship Buchanan coal mine in March for $460 million.

“These transactions were watershed events in our transformation. … Consol is now a pure-play E&P company with a sole focus on growing value of our Appalachian E&P assets and becoming the premier operator in the basin,” he said.

This has resulted in a nearly 40% growth rate for its gas production in 2014 and 2015, with production expected to grow by another 15% in 2016. The company now produces more than 1 billion cubic feet per day (Bcf/d) of natural gas and is the 15th-largest producer of gas in the nation. Dugan said this growth was important, as it allowed the company to reach critical mass and show it could stand alone as an E&P company.

Perhaps more impressive than the production growth have been the cost reduction efforts through efficiency gains with new technologies, through which Consol achieved a 35% reduction in operating expense and capital over the last three years. Therefore, Consol produced two-thirds of the volumes of its peers in the basin at much lower costs, according to Dugan.

The Marcellus will continue to be a crucial part of Consol’s growth strategy, but the Utica is the play that Consol feels could really drive growth over the years, as one Utica well is equivalent to three Marcellus wells, which will require less drilling with higher returns.

“Across the industry, the wells drilled in the Utica to date have been some of the largest ever drilled, with initial flows well in excess of 50 million cubic feet per day,” he said, while adding that the company has 622,000 acres in the play. So far, the company has half of the top 10 wells in the Utica based on a normalized average.

That’s not to say that challenges don’t remain in the Utica. Not only are producers facing drastically lower commodity prices than in years past, but fewer wells drilled in the play mean that efficiencies must be found faster.

Midstream buildout will be an important factor in companies’ abilities to improve efficiencies in the region, Dugan said. “Access to dry Marcellus gathering systems helps both E&P and midstream service providers lower costs and maximize the value of existing assets,” he said.

Midstream investments Consol previously made in the Marcellus will help it reduce costs in the Utica. The dry gas portion of the Utica offers additional blending capacity for “damp” Marcellus production, further optimizing the stacked play and allowing the company to compete in any pricing environment.

Frank Nieto can be reached at fnieto@hartenergy.com.