After four years as the majority owner of CNX Gas Corp., Consol Energy Inc. has taken the first steps toward becoming the natural gas producer's sole owner.

Consol, which owns 83 percent of CNX Gas, struck a deal over the weekend with T. Rowe Price Associates Inc. to buy 9.5 million shares of the natural gas company owned by the investment advisory firm's clients. That accounts for 37 percent of the total shares that Consol does not already own.

The Cecil coal company also announced plans to make an all-cash offer by May 5 to buy the remaining shares at $38.25, the same price being offered to T. Rowe Price's clients.

That represents a 24 percent premium to Friday's closing price of $30.80 for CNX Gas.

Consol's shares, which closed Friday at $45.55, closed Monday at $44.69. CNX Gas shares stood at $37.84.

Consol has held a majority stake in CNX Gas since spinning the company out in a public offering in 2006. It attempted to acquire CNX two years ago with an all-stock deal offering a .4425 share of Consol -- then worth about $35 -- for each share of CNX. That offer was rejected.

The two companies consolidated their management in January 2009, and have had their headquarters in the same building in the Southpointe office park since February 2009.

News of the CNX Gas buyback comes one week after Consol's announcement of a deal with Richmond, Va.-based Dominion Resources Inc. to buy that company's Appalachian natural gas exploration and production business for $3.5 billion. That transaction, slated to close by April 30, will add 1.64 million acres to Consol's footprint, including 500,000 acres in the Marcellus shale fairway.

The gas assets will be placed under the management of CNX Gas. In remarks last week, J. Brett Harvey, CEO of both Consol and CNX Gas, hinted Consol might seek to bring the smaller company entirely in-house.

To finance the Dominion deal, Consol has begun an offering of $2.75 billion in notes, with an undetermined amount to come due in 2017 and the remainder in 2020. In addition, it is issuing approximately $1.75 billion worth of common stock.

Consol's moves to become, in Mr. Harvey's words, "a leading diversified energy company" with a strong presence in natural gas, come in the face of a downward trend in natural gas prices since the beginning of the year. The contract for April delivery of natural gas from an industry hub, which began the year ranging between $5.70 and $5.80 per million British thermal units, is now trading at close to $4.10.

Coal remains Consol's primary asset. On that front, the company announced Monday that it has locked in sales for its 2010-11 fiscal year of nearly 3 million tons of coking coal from its Buchanan Mine at prices between $165 and $175 per ton, or $20 to $30 above expectations.

Analyst response to the deal to acquire CNX Gas was mixed.

Jeffries & Company Inc. maintained the buy rating that it has held on Consol since September 2008, raising its target price to $65 from $60. But Credit Suisse, even while giving the company an "outperform" rating, lowered its target to $50 from $55, "to reflect the net dilution from this morning's announcements."

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