Published: June 11, 2020 |

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CNX continues to optimize its long-term intrinsic value per share by safely and compliantly generating free cash flow (FCF) per share on a regular basis. The following is an update of key drivers in that effort.

Production Profile Optimization

CNX began sculpting its production profile since May 1, and the company has shut in as much as 375 MMcf per day of production to take advantage of the large positive spread between summer and winter natural gas prices. The company expects the shut-in amount to decline to approximately 300 MMcf per day of production by July and will adjust as conditions warrant.

This production profile optimization would result in over $30 million in incremental FCF over the next few years, assuming the wells are turned back online November 1 and using current forward strip pricing. In a series of related transactions, the company monetized hedges in the summer months of 2020 and added new hedges in the winter months, which locked in a significant portion of this FCF improvement.

SWPA Marcellus Efficiencies

CNX continues to achieve capital efficiency improvements in its core Southwest Pennsylvania (SWPA) Marcellus Shale wells. The company’s most recent eight-well Marcellus Shale pad, RHL 99, was stimulated by Evolution Well Services’ electric frac fleet and averaged 1,570 lateral feet per day and a peak of 2,600 lateral feet in a 24-hour period.

During stimulation of the RHL 99 pad, the company used approximately 140,000 Mcf of CNX’s clean burning natural gas to power the fleet in lieu of diesel, which equates to a fuel savings of approximately $2.4 million. 

“The company is cruising at high efficiency. Operational results validate our commitment to move to an electric frac fleet over a year ago, which a number of other operators have since adopted. Our operations team continues to be thought leaders in the basin, which will continue to improve capital efficiency. And it is important to note that RHL 99’s cost per foot is already lower than the cost per foot assumed in our seven-year FCF plan laid out in our first quarter conference call,” said Chief Operating Officer Chad Griffith.

PA Utica Efficiencies

During the quarter, the company also drilled two SWPA Utica Shale wells at a record high pace and a record low cost. When compared to prior Pennsylvania Utica Shale wells drilled, the average drilling costs decreased from $957 per foot to $447 per foot, or a decline of 53 percent, with drilling times decreased by 22 percent. When completed, the company expects the total well costs for these two SWPA Utica wells to be approximately $1,375 per lateral foot, far below the $1,800 per lateral foot assumed in the seven-year FCF plan. 

Also, the company increased its estimated ultimate recovery (EUR) expectations for its most recent Central Pennsylvania (CPA) Utica well, the Bell Point 6, to a range of 4.5–5.0 Bcfe per thousand feet, which makes it the company’s most productive Utica well to date.

Core Inventory

“Bell Point 6’s strong production profile illustrates the potential of our over 100,000 acres of CPA Utica. Coupled with the recent cost performance of the SWPA Utica wells, our Pennsylvania Utica offers compelling economic returns on future capital investment opportunities,” said Chief Operating Officer Chad Griffith.

“With our SWPA Marcellus inventory already providing over a decade of inventory at a maintenance of production activity-set, the CPA Utica delivers multiple decades of core inventory and optionality to grow when conditions allow for good rates of return,” added Griffith.

Capital Efficiency and Base Decline

During the quarter, the substantial midstream buildout supporting the company’s SWPA Marcellus Shale development plan was completed with only incremental compression and well connects needed going forward. This best-in-basin high pressure / low pressure gathering network allows the company’s wells to flow at pressures that improve economics, increase ultimate recoveries, and maintain reservoir and completion integrity over the productive lives of the wells.  Under the company’s maintenance plan, the PDP volume will continue to grow resulting in an average base decline of approximately 20% through the 2022-2026 FCF plan.

“These metrics combine to allow the company to be highly efficient and meet or exceed our seven-year, $3 billion consolidated FCF plan,” said Chief Financial Officer Don Rush.

About CNX Resources Corporation
CNX Resources Corporation is one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. The company deploys an organic growth strategy focused on responsibly developing its resource base. As of December 31, 2019, CNX had 8.4 trillion cubic feet equivalent of proved natural gas reserves. The company is a member of the Standard & Poor’s Midcap 400 Index.

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