Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CNX Resources Corp (CNX, Financial) has significant flexibility in its production profile due to retaining 11 deferred DUCs, allowing it to adjust based on market conditions.
- The company has seen a 31% reduction in well costs from 2023, with drilling costs reduced by 38%, indicating improved operational efficiency.
- CNX Resources Corp (CNX) is experiencing strong interest in its new technologies, particularly in the auto set fleet, which is fully deployed and attracting customer interest.
- The Deep Bua Play is showing promising results with high rates of return and prolific wells, competing favorably with the Marcellus in capital allocation.
- The company maintains a strong balance sheet and hedge book, providing significant flexibility in capital allocation and potential M&A opportunities.
Negative Points
- CNX Resources Corp (CNX) has removed its full-year 2025 capital disclosure, creating uncertainty about future capital expenditures and production targets.
- Regulatory clarity on 45 V and 45 Q tax credits is still pending, which affects the company's ability to plan for coal mine methane capture and associated capex.
- The company has deferred some turn-in-line schedules, indicating potential delays in production ramp-up due to market conditions.
- There is uncertainty regarding the potential growth of coal mine methane volumes, as it depends on future regulatory guidance and incentives.
- The stock buyback strategy is under review due to recent stock price increases, raising questions about future cash return strategies, including potential dividends.
Q & A Highlights
Q: Is the 2025 capital disclosure of $550 million still accurate, and how is inflation impacting your plans?
A: Alan Shepard, CFO: The 2025 capital disclosure will be detailed next quarter, depending on pricing developments. We retain flexibility with 11 deferred DUCs, and efficiency remains similar or better. The removal of the disclosure is due to the proximity of the next quarter's detailed guidance.
Q: Can you provide more details on the new tech business and the impact of regulatory clarity on 45 V and 45 Q?
A: Ravi Srivastava, President - New Technologies: We are exploring multiple pathways, including APS programs and private sector transactions. However, it's too early to quantify the impact of regulatory clarity on coal mine methane capture and associated CapEx until markets crystallize.
Q: With the stock price higher, how are you approaching buybacks and potential dividends?
A: Alan Shepard, CFO: We see long-term value in CNX and maintain a disciplined capital allocation process. The share price is an input, but we have flexibility with our balance sheet and hedge book, keeping all capital allocation options open.
Q: Have you reduced activity with the removal of five turn-in-lines from the 2024 schedule?
A: Alan Shepard, CFO: The change is due to scheduling across the year-end line, not a reduction in activity. There is no change from the spring's deferred 11 DUCs plan.
Q: What are the cost improvements in the Deep Utica play, and how does it compare to Marcellus?
A: Navneet Behl, COO: We've reduced drilling costs by 38% from 2023, down to $750 per foot. The Deep Utica wells are highly prolific and compete well in our capital allocation process, offering high returns and rapid production compared to Marcellus.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
