CNX Resources Corporation (CNX): Navigating the Appalachian Basin with Precision and Purpose

Published on September 24, 2024 | Ticker: CNX

CNX Resources Corporation (CNX) is a premier, ultra-low carbon intensive natural gas development, production, midstream, and technology company centered in Appalachia, one of the most energy-abundant regions in the world. With a 160-year regional legacy, substantial asset base, leading core operational competencies, technology development and innovation, and astute capital allocation methodologies, CNX has established itself as a responsible steward of its resources, delivering long-term value for its shareholders, employees, and the communities where it operates.

Financials

For the fiscal year ended December 31, 2023, CNX reported annual net income of $1,720,716,000, annual revenue of $1,503,296,000, annual operating cash flow of $814,588,000, and annual free cash flow of $135,184,000. These impressive financial results underscore the company's ability to navigate the dynamic natural gas market and capitalize on its strategic positioning within the Appalachian Basin.

In the second quarter of 2024, CNX reported operating earnings of $0.36 per share, beating the Zacks Consensus Estimate of $0.27 per share by 33.3%. However, the company's revenues of $346 million missed the Zacks Consensus Estimate of $387 million by 10.6%, despite a 2.7% increase from the prior-year quarter's $337 million. The average selling price in the quarter was $2.58 per thousand cubic feet equivalent (Mcfe), up 2.8% from the year-ago figure of $2.51, while total production cost was $1.71 per Mcfe, up 11% year over year. Total production volumes were 134 billion cubic feet equivalent (Bcfe), down 0.1% year over year, compared to the Zacks Consensus Estimate of 135.4 Bcfe.

Segment Performance

The company's Shale segment, which accounts for the majority of its operations, had natural gas, NGLs, and oil revenue of $216 million for the second quarter of 2024, compared to $234 million for the same period in 2023. The $18 million decrease was primarily due to an 11.9% decrease in the average sales price for natural gas, offset in part by a 3.1% increase in the average sales price of NGLs and a 0.2% increase in total Shale sales volumes. The Coalbed Methane (CBM) segment had natural gas revenue of $20 million for the second quarter of 2024, compared to $23 million for the same period in 2023, due to a 5.4% decrease in the average sales price for natural gas and a 4.0% decrease in CBM sales volumes.

The company's Other Segment, which includes nominal shallow oil and gas production, purchased gas activities, unrealized gain or loss on commodity derivative instruments, New Technologies, exploration and production related other costs, as well as various other expenses, had a loss before income tax of $149 million for the second quarter of 2024, compared to earnings before income tax of $489 million for the same period in 2023. This decrease was primarily due to an unrealized loss on commodity derivative instruments of $96 million in the current quarter, compared to an unrealized gain of $463 million in the prior-year quarter.

New Technologies

CNX's New Technologies group continues to be a focus area for the company, with the division generating $33 million and $46 million in sales of environmental attributes, such as carbon credits, air quality credits, and renewable energy credits, during the three and six months ended June 30, 2024, respectively. These sales are included as part of Other Revenue and Operating Income in the Other Segment. The company also incurred $5 million and $7 million in environmental attribute fees during the three and six months ended June 30, 2024, respectively, which represent costs related to the sale of environmental attributes and are included in Other Operating Expense in the Other Segment.

Share Repurchases

In the second quarter of 2024, CNX repurchased 1.8 million shares at an average price of $24.45 per share for a total cost of $44 million. Over the past 15 quarters, the company has repurchased approximately 35% of its outstanding shares, demonstrating its commitment to enhancing shareholder value.

Liquidity

As of June 30, 2024, CNX had cash and cash equivalents of $3.9 million, compared to $0.4 million as of December 31, 2023. Long-term debt as of June 30, 2024, was $1.96 billion, compared to $1.89 billion recorded as of December 31, 2023. Cash from operating activities for the second quarter of 2024 totaled $191.8 million, compared to $198.7 million in the year-ago period, while free cash flow amounted to $47 million.

Outlook

Looking ahead, CNX reaffirmed its 2024 total capital expenditure guidance between $525 million and $575 million. The company lowered its expectation for 2024 production volume to the band of 545-555 Bcfe from the previously guided range of 540-560 Bcfe. CNX also lowered its expectation for 2024 adjusted EBITDAX to the range of $0.95-$1.05 billion from the previous guidance of $0.925-$1.075 billion. However, the company continues to expect free cash flow of $300 million in 2024.

Conclusion

CNX Resources Corporation has demonstrated its ability to navigate the challenges of the natural gas industry, leveraging its strategic positioning, operational expertise, and innovative technologies to deliver strong financial results. With a focus on responsible resource development, environmental stewardship, and shareholder value creation, CNX is well-positioned to continue its success in the Appalachian Basin and beyond.

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