Consol Energy Inc., a coal and natural gas producer, agreed to buy Dominion Resources Inc.'s natural gas and oil exploration and production business for $3.48 billion to expand its Marcellus Shale holdings.

The sale includes rights to 491,000 acres in West Virginia and Pennsylvania, which will increase Consol's natural gas reserves by 50 percent to 3 trillion cubic feet from 1.9 trillion, the Pittsburgh-based company said today in a statement.

Consol, the fifth-largest U.S. coal producer, is expanding natural gas production after years of developing coal-bed methane from its mining properties. With the Dominion purchase, Consol gets more than 9,000 wells that are expected to produce
41 billion cubic feet of natural-gas equivalent this year.

"Consol has wanted to expand gas production and the market is much weaker than coal right now," said Jim Rollyson, an analyst at Raymond James Financial in Houston who has an "outperform" rating on the stock. "This may be dilutive in the short term but makes sense for them in the long run."

Consol plans to combine the assets with CNX Gas Corp., a unit in which it holds an 83 percent stake, and it may purchase the remaining shares, Chief Executive Officer J. Brett Harvey said on a conference call with analysts and investors.

Eoin Treacy's view This article illustrates the continued interest among energy companies of all hues in gaining access to shale gas reserves while the industry remains in comparative infancy.