earnings results - marcellus drilling news · earnings results fourth quarter 2018 january 31,...
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Earnings ResultsFourth Quarter 2018
January 31, 2019
Cautionary Language
2
Risk Factors. This presentation, including the oral statements made in connection herewith, contains forward-looking statements, estimates and projections within the meaning of the federal
securities laws. Statements that are not historical are forward-looking and may include our operational and strategic plans; estimates of gas reserves and resources; projected timing and rates of
return of future investments; and projections and estimates of future production, revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those statements, estimates and projections. Investors should not place undue reliance on forward-looking statements as a prediction of future
actual results. The forward-looking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation to update the statements, and we caution you not to rely
on them unduly.
Specific factors that could cause future actual results to differ materially from the forward-looking statements are described in detail under the captions "Forward Looking Statements" and "Risk
Factors" in our annual report on Form 10-K for the year ended December 31, 2017 filed with the SEC, as supplemented by our quarterly reports on Form 10-Q. Those risk factors discuss, among
other matters, pricing volatility or pricing decline for natural gas and NGLs; operational risks relating to midstream facilities, pipeline systems, drilling natural gas wells, access to key services and
equipment, access to adequate water sources and customer interactions; the impact of laws and regulations on our business and industry; competitive and economic concerns; risks associated
with our debt and hedging strategy; our ability to acquire economically recoverable natural gas reserves; challenges associated with strategic determinations, including the allocation of capital to
strategic opportunities; our development and exploration projects and potential acquisitions or divestitures, as well as CNXM's midstream system development.
Reserves. Currently, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a
given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this presentation, such as EUR
(estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. We caution you that the SEC views such
estimates as inherently unreliable and these estimates may be misleading to investors unless the investor is an expert in the natural gas industry. These measures are by their nature more
speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from
aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category.
Title. Except for proved reserve data, the information included in this presentation is based on a summary review of the title to the gas rights we hold. As is customary in the gas industry, prior to
the commencement of natural gas drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects. We are typically
responsible for curing any title defects at our expense. As a result of our title review or otherwise, we may be required to acquire property rights from third parties at our expense in order to
effectively drill and produce the gas rights we control and third parties may participate in the wells we drill, thereby reducing our working interest in those wells.
Reconciliation. As it relates to the disclosures within this presentation of projected Adjusted EBITDA and EBITDAX for fiscal or quarterly periods in 2019-2022, for CNX or CNXM, CNX
Resources is unable to provide a reconciliation of such metrics to projected operating income, the most directly comparable financial measure calculated in accordance with GAAP, due to the
unknown effect, timing, and potential significance of certain income statement items for each of CNX and CNXM, respectively.
Data. This presentation has been prepared by CNX and includes market data and other statistical information from sources believed by CNX to be reliable, including independent industry
publications, government publications and other published independent sources. Some data are also based on CNX’s good faith estimates, which are derived from its review of internal sources as
well as the independent sources described above. Although CNX believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy or
completeness.
Not an Offer. This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CNX Resources Corporation or CNX Midstream Partners LP.
Executive Summary
3
Q4 2018 EXPECTATION
STRATEGIC INITIATIVE
2018 Production &
EBITDAX per Share Growth(1)
▪ Q4 2018 Consolidated Adjusted EBITDAX Per Share(2)
increased 90% year-over-year
▪ Adjusted EBITDAX per share growth remains an output of
prudent capital allocation
Balance Sheet &
Leverage Ratio(1)
▪ Ended year at 2.25x attributable net debt / TTM
attributable adjusted EBITDAX or below the stated 2.5x
target
▪ Leverage will continue to be evaluated on a number of
bases in order to fully evaluate the health of the balance
sheet and capacity to buy back shares as well as invest in
incremental activity and M&A opportunities
Share Repurchases
▪ Repurchased an additional 6.8 million shares from the
beginning of the quarter through January 18, 2019
bringing the total number of retired shares to 32.6 million
since the program began in Q4 2017
▪ Share repurchases remain a major part of the strategy and
will be executed opportunistically through 2019 and into
2020
Operational Execution
▪ Production of 136 Bcfe in Q4 2018 resulted in 507 Bcfe
produced for the full year
▪ Many operational successes in 2018 headlined by
outperformance in SWPA Marcellus and CPA Utica
▪ Majority of development plan for 2019 remains in SWPA
Marcellus while SWPA and CPA Utica wells continue to be
studied
2019 Guidance Update▪ Updated 2019 guidance includes minimum production of
495-515 Bcfe and D&C capital of $575-$625 million
▪ Pro forma minimum production growth of 3-7%
▪ 2019 capital guidance supports base development activity;
incremental activity will depend on factors such as CNX
share price, forward strip pricing, Utica data set, and
supply/demand indicators
▪ Guidance updates will be made accordingly through the year
Commitment to the Strategy
▪ The CNX philosophy and strategy drove the 14%
reduction in shares since October 2017 while drastically
reducing leverage and growing operational scale
▪ Grew EBITDAX year-over-year despite divestitures
▪ Capital allocation through a rate of returns focus continues
to be the strategy; share repurchases remain a priority along
with growing balance sheet capacity through disciplined
production and EBITDAX growth
CNX Resources is unable to provide a reconciliation of projected Adjusted EBITDAX to projected net income, the most comparable financial measure calculated in
accordance with GAAP, due to the unknown effect, timing, and potential significance of certain income statement items.
(1) See non-GAAP reconciliation table below.
(2) When using shares outstanding as of January 18, 2019.
Steadfast in Philosophy
4
PHILOSOPHYMaximize
the
long-term
per share
value
of the firm
through
prudent
capital
allocation
and
continuous
cost
management
Risk-adjusted returns set basis for all capital allocation decisions
RETURNS
Flexibility in development plans and capital deployment drive optionality
FLEXIBILITY
Hedging and minimal commitments reduce risk
HEDGING
Substantial share repurchases compound per share value
REPURCHASES
Confident in Strategy
5
MINIMUM BASE OF ACTIVITY
INCREMENTAL ACTIVITY
EBITDAX GROWTH
BALANCE SHEET CAPACITY
SHARE COUNT REDUCTION
HEDGE BOOK
LOW COST
STRUCTURE
PLAN RISK
MITIGATION
NAV/SHARE GROWTH
Strategy
designed to
work
through the
cycle and
does so at
strip pricing
in all
periods
STRONG
MARGINS
MINIMAL
COMMITMENTS
HIGH RATES OF
RETURN
PLAN
FLEXIBILITY
BASED ON
REAL-TIME
DECISIONS
This process, which grew
EBITDAX and reduced
shares through 2018, is
primed to be deployed in
2019 and beyond
The Strategy Drives Significant EBTIDAX per Share Growth
Note: Calculated as Adjusted EBITDAX divided by period end shares outstanding as disclosed in SEC filings.
6
$0.54
$0.45 $0.48
$0.83
$1.08
$0.96
$1.03
$1.41
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Per Share Adjusted EBITDAX Attributable to CNX Resources Shareholders
Q1 2017 – Q4 2018
Q4 2018 Summary
($ in millions, except per share data) 4Q 2018 4Q 2017 Y/Y Units Y/Y - % 4Q 2018 3Q 2018 Q/Q Units Q/Q - %
Revenue and Other Income from Continuing Operations $435 $477 ($42) -9% $435 $397 $38 10%
Consolidated Adjusted Net Income / (Loss)(1)
$160 $217 ($57) -26% $160 $57 $103 181%
Consolidated Adjusted EBITDAX(1)
$314 $187 $127 68% $314 $239 $75 31%
Consolidated Adjusted EBITDAX(1)
Per Share $1.58 $0.83 $0.75 90% $1.58 $1.12 $0.46 41%
Shares Outstanding at Period End (millions) 198.3 223.8 (25.5) -11% 198.3 203.6 (5.3) -3%
Q4 2018 Financial Results Summary
7
Note: The terms “Consolidated adjusted EBITDAX,” “Adjusted EBITDAX attributable to CNX Resources Shareholders,” “Consolidated adjusted EBITDAX per share,” and
“adjusted net income“ are non-GAAP financial measures, which are reconciled to the GAAP net income below.
(1) See non-GAAP reconciliation table below.
(2) When using shares outstanding as of January 18, 2019.
Q4 2018
Consolidated Adjusted EBITDAX
Per Share(2) increased
90%year-over-year
Net Income and Adjusted EBITDAX
▪ Consolidated net income of $129 million in the 2018 fourth quarter; consolidated
adjusted net income of $160 million(1); adjusted net income excludes the following pre-
tax items:
- $37 million unrealized loss on commodity derivative instruments
- $5 million in other miscellaneous items
▪ Consolidated Adjusted EBITDAX in the fourth quarter of $314 million or $1.58
outstanding per share(1)(2); Adjusted EBITDAX attributable to CNX Resources
Shareholders was $279 million(1) in the fourth quarter
(2) (2)
$1.69 $1.65 $1.59 $1.46
$1.31 $1.22
$1.33
$1.63
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
Q1 2018 Q2 2018 Q3 2018 Q4 2018
$/M
cfe
Total Fully-Burdened Cash Costs Total Fully-Burdened Cash Margin
$1.21 $1.09 $1.04 $1.00
$1.79 $1.78 $1.88
$2.09
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
Q1 2018 Q2 2018 Q3 2018 Q4 2018
$/M
cfe
Total Production Cash Costs Total Production Cash Margin
E&P Standalone Costs and Margins Drive Rates of Return
8
Production Cash Costs(1) and Margins FY2018
Margin 58% 61% 64% 68%
CNX has the lowest per unit cash
production costs of all southwest
Marcellus operators driven largely
by low Transportation, Gathering
and Compression costs
Fully-Burdened Cash Costs(2) and Margins FY2018
Margin 44% 43% 46% 53%
Low fully-burdened cash costs and
hedged revenues drive rates of
return well above cost of capital
(1) Includes per unit Lease Operating Expense; Transportation, Gathering and Compression; and Production, Ad Valorem and Other Fees. See non-GAAP
reconciliation table below.
(2) Includes Production Cash Costs listed above plus SG&A (excluding non-cash stock compensation), Other Operating Cash Expense, Other Cash Expense
(Income), and Interest Expense.
$1.00
$0.46
$0.30
$1.76
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
Q4 2018
SWPA Central Marcellus CapEx per Mcfe
Plus Fully-Burdened Cash Costs
Company-Wide Production Cash Cost
SWPA Central Marcellus Example
Well Capital(1) $8,300,000
EUR (Bcfe/1000’) 2.8
Lateral length 9,500’
Mcfe 26,600,000
Capital Cost/Mcfe ~$0.30
Capital Efficiency Driving Down Total Costs Over Time
9
▪ Current DD&A charges ($0.89/Mcfe in Q4 2018) account for legacy
operations
▪ Based on up-to-date per well capital expenditures and expected type
curves, capital per Mcfe in SWPA Marcellus is currently $0.31
▪ Over time, DD&A charges per Mcfe are expected to decline
significantly as legacy charges roll off and recent capital efficiency is
reflected in company financials
Company Fully-Burdened Cash Costs plus
SWPA Central Marcellus Capex per Mcfe
(1) Based on Company regional type curve and economic inputs as disclosed March 13, 2018.
230.1
6.4 5.8 5.3 8.3
6.8 0.5
198.0
-
50.0
100.0
150.0
200.0
250.0
S/O 3Q17E Repurchased4Q17E
Repurchased1Q18
Repurchased2Q18
Repurchased3Q18
Repurchased4Q18 to1/18/19
Comp SharesIssued
S/O 10/16/2018
Share
s (
mill
ions)
Debt Discipline and EBITDAX Growth Drive Available Capacity
10
(1) Includes current portion.
(2) See non-GAAP reconciliation table below.
(3) Calculated by taking an average minority interest percentage of 63.91%.
E&P Midstream
Net Debt Attributable to CNX Shareholders
$ in millions December 31, 2018
Total
Total Debt (GAAP)(1)(2) $1,921.3 $477.2 $2,398.5
Less: Cash and Cash Equivalents $0.8 $16.4 $17.2
Net Debt (Non-GAAP)(2) $1,920.5 $460.8 $2,381.3
Less: Net Debt Attributable to
Noncontrolling Interest(3)- $294.5 $294.5
Net Debt Attributable to
CNX Resources Shareholders$1,920.5 $166.3 $2,086.8
In Q4 2018, CNX redeemed approximately $20 million of
5.875% notes due 2022
At December 31, 2018, the company's credit facility had $612
million of borrowings outstanding and $198 million of letters of
credit outstanding, leaving $1,290 million of unused capacity
Q4 2018 Net Debt / TTM Attributable Adjusted EBITDAX 2.25x
Shares Repurchased Since Program Announced
▪ Completed remainder of initial $450 million share repurchase
authorization
▪ Have deployed ~$490 million since the end of Q3 2017 retiring
almost 14% of shares outstanding
▪ Authorization outstanding for $300 million with no expiration date
▪ Balance sheet capacity, driven by growing EBITDAX, will continue
to expand and contract under the 2.5x leverage ceiling
- As capital allocation decisions arise, all will be analyzed
through the strict NAV/share lens and with future opportunities
in mind as well
TTM Adjusted EBITDAX Attributable to CNX Shareholders (3) $929.1
21%
38%
4%
69%
103%
53%
64%
-14%
Peer Avg 50%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 CNX Peer Avg
Only E&P of the Peer Group to have Reduced Shares Since 2013
Source: Capital IQ.
Notes: Peers include AR, CHK, COG, EQT, GPOR, RRC, and SWN.
11
Peer Share Count Percent Change: YE2013-YE2018
Expect continued substantial share count reduction over next three years
Flexibility in Development Mitigates Risk and Grows NAV/Share
12
MINIMUM BASE
OF ACTIVITY
SUPPORTS
Multiyear:
CNXM Commitments
Service Contracts
Hedge Book
INCREMENTAL
ACTIVITY
Share Repurchases
Equity Price
Forward Strip Pricing
Supply/Demand Indicators
M&A Opportunities
Utica Data Set
RISK-
ADJUSTED
RETURN
ANALYSISDRIVES
Through the Cycle:
Balance Sheet Capacity
NAV/Share Growth
Process occurring on a daily basisIN
CR
EM
EN
TA
L
DIS
CR
ET
ION
AR
Y C
AP
ITA
L
2019 Minimum Guidance Update
CNX Resources is unable to provide a reconciliation of projected Adjusted EBITDAX to projected net income, the most comparable financial measure calculated in
accordance with GAAP, due to the unknown effect, timing, and potential significance of certain income statement items.
(1) Expected 5-6% liquids.
(2) Pro forma growth comparing 2019E production with 2018 production from assets not sold of 480 Bcfe.
(3) Forward pricing date as of 1/15/2019.
(4) Includes CNX Midstream LP + GP/IDR distributions of $55 million in FY2019E.
13
2019E
Minimum Capital Expenditures($ millions)
Low High
Drilling & Completions $575 $625
Non-D&C $175 $175
Total E&P Capital $750 $800
CNX Midstream LP Capital $250 $280
Total Consolidated Capital $1,000 $1,080
Minimum Production(Bcfe)
Total Production Volumes (Bcfe)(1) 495 515
Y/Y Growth (2018 pro forma)(2) 3% 7%
Adjusted EBITDAX(3)
($ millions)
E&P Standalone + Distributions(4) $790 $825
Consolidated $945 $985
Capital budget represents a minimum set of D&C activity
Throughout the year, the company will evaluate a series
of factors to determine incremental activity and will
update capital guidance accordingly
Those factors include gas prices, CNX equity prices,
supply/demand indicators, Utica data set, M&A
opportunities, and company appetite for risk
$29
$39
$55
$-
$10
$20
$30
$40
$50
$60
FY 2017 FY 2018 FY 2019E
Dis
trib
utions R
eceiv
ed in E
ach Y
ear
($ m
illio
ns)
LP GP+IDR
LP and GP Distributions Help Grow Balance Sheet Capacity
Note: Distributions received in each respective time period correspond to prior quarter due to delay in declaration and record dates.
14
LP + GP/IDR Distributions FY2017-FY2019E
LP distributions from CNX Midstream
have consistently grown 15% year-
over-year
As growth continues, LP + GP/IDR
distributions make a larger
contribution to CNX’s incremental
available capital and balance sheet
capacity
369.3 424.4
351.5
216.7
101.9
6.7
44.2
58.8
59.9
25.0
0
50
100
150
200
250
300
350
400
450
500
2019 2020 2021 2022 2023
Gas V
olu
mes H
edged (
Bcf)
NYMEX Only Hedges Exposed to Basis NYMEX + Basis (2)
Natural Gas Hedging and Basis Protection
15
(2)
Hedge Volumes and Pricing Q1 2019 2019 2020 2021 2022 2023
NYMEX Hedges
Volumes (Bcf) 83.5 359.2 457.2 389.1 262.9 99.3
Average Prices ($/Mcf) $3.07 $3.05 $2.96 $2.91 $2.96 $2.84
Fixed Price Sales and Index Hedges
Volumes (Bcf) 5.2 16.8 11.4 21.2 13.7 27.6
Average Prices ($/Mcf) $2.84 $2.63 $2.43 $2.48 $2.56 $2.10
Total Volumes Hedged (Bcf)(1) 88.7 376.0 468.6 410.3 276.6 126.9
NYMEX + Basis (fully-covered volumes)(2)
Volumes (Bcf) 87.1 369.3 424.4 351.5 216.7 101.9
Average Prices ($/Mcf) $2.78 $2.70 $2.50 $2.36 $2.35 $2.23
NYMEX Hedges Exposed to Basis
Volumes (Bcf) 1.6 6.7 44.2 58.8 59.9 25.0
Average Prices ($/Mcf) $3.07 $3.05 $2.96 $2.91 $2.97 $2.83
Total Volumes Hedged (Bcf)(1) 88.7 376.0 468.6 410.3 276.6 126.9
(1) Hedge positions as of 1/18/2019.
(2) Includes the impact of NYMEX and basis-only hedges as well as physical sales agreements.
(3) Assuming midpoint of total dry gas production minimum guidance in 2019E.
Layering in hedges out to 2023 to protect
margins on proved developed production
and a portion of PUDs
Fully-covered hedges represent
~88% of 2019E base gas volumes(3)
NYMEX hedges added during Q4:
448.6 Bcf (for 2018 through 2023)
Basis hedges added during Q4:
361.2 Bcf (2018 through 2023)
De-risked pricing for next three
years and meaningful upside
potential
Protecting from in-basin
blowout through regional
basis hedges
Q4 and FY2018 Activity
16
(1) Measured in lateral feet from perforation to perforation.
(2) 50% working interest. Sale of OH Utica JV assets closed in Q3 2018, at which point flowing production from five TILs transferred to buyer.
Q4 2018 FY2018
TD FRAC TIL
Average
Lateral
Length(1)
HZ Rigs
at Period
End TD FRAC TIL
SWPA
Central
Marcellus 19 12 11 8,316 2 61 43 41
Utica - - - - 1 - 1 1
WV
Shirley-Penns
Marcellus - - - - - 5 5 5
Utica - - - - - - - -
CPA Utica 1 - 1 6,529 1 4 2 2
OH DryUtica
- 2 4 9,306 - 8 8 14
OH Wet(2) - - - - - - 5 5
Total 20 14 16 4 78 64 68
$1.31 $1.22 $1.26 $1.16
$1.21 $1.09
$1.04 $1.00
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Tota
l C
ash P
roduction C
osts
($
/Mcfe
)
Transportation, Gathering and Compression Lease Operating ExpenseProduction, Ad Valoerm, and Other Fees
Q4 2018 Operational Results Summary
17
▪ Marcellus Shale costs were $1.98 per Mcfe in Q4 2018, a decrease of
$0.34 from $2.32 per Mcfe vs. Q4 2017, or a 15% decline
- Driven by decreases to LOE, transportation, gathering and
compression costs, taxes, and DD&A
▪ Utica Shale costs were $1.43 per Mcfe in Q4 2018, a decrease of
$0.16 from $1.59 per Mcfe in Q4 2017, or a 10% improvement
- Excluding DD&A, Utica production cash costs were just $0.42 per
Mcfe in Q4 2018
- The increase in Utica volumes was more modest than in prior
quarters due to the divestiture of Ohio wet Utica joint venture assets
▪ E&P capital expenditures increased in Q4 2018 to $266 million from
$253 million spent in Q3 2018
(1) Average sales prices for 4Q2018, 4Q2017, and 3Q2018 include (loss) / gain on commodity derivative instruments
(cash settlements) of ($0.56), $0.19, and $0.03 per Mcf, respectively.
(2) Total Production Costs for 4Q2018, 4Q2017, and 3Q2018 include DD&A of $0.89, $1.01, and $0.93 per Mcfe,
respectively.
Cash Production Costs(1) 1Q17-4Q18
($/Mcfe) 4Q 2018 4Q 2017
Y/Y
Change 4Q 2018 3Q 2018
Q/Q
Change
Average Sales Price(1)
$3.09 $2.80 $0.29 $3.09 $2.92 $0.17
Total Production Costs(2)
$1.89 $2.17 ($0.28) $1.89 $1.97 ($0.08)
Sales Volumes (Bcfe) 136.1 118.9 17.2 136.1 119.0 17.1
Sales Volumes by Category (Bcfe)
Marcellus 87.0 64.0 23.1 87.0 70.6 16.4
Utica 34.0 33.8 0.3 34.0 33.6 0.4
CBM 15.0 16.0 (1.0) 15.0 14.7 0.3
Other 0.1 5.1 (5.0) 0.1 0.1 0.0
(1) See non-GAAP reconciliation table below.
Production Costs by Segment Show Ongoing Improvement
(1) Excludes Depreciation, Depletion and Amortization.
18
Marcellus Utica CBM & Other TOTAL
4Q18 4Q17 Δ 4Q18 4Q17 Δ 4Q18 4Q17 Δ 4Q18 4Q17 Δ
Production Volumes (Bcfe) 87.0 64.0 23.0 34.0 33.8 0.2 15.1 21.1 (6.0) 136.1 118.9 17.2
Lease Operating Expense 0.09 0.15 (0.06) 0.12 0.16 (0.04) 0.33 0.46 (0.13) 0.12 0.21 (0.09)
Transportation, Gathering and Compression 1.06 1.13 (0.07) 0.23 0.35 (0.12) 0.73 0.90 (0.17) 0.82 0.87 (0.05)
Production, Ad Valorem, and Other Fees 0.05 0.08 (0.03) 0.07 0.05 0.02 0.13 0.11 0.02 0.06 0.08 (0.02)
Depreciation, Depletion and Amortization 0.78 0.96 (0.18) 1.01 1.03 (0.02) 1.23 1.22 0.01 0.89 1.01 (0.12)
Total Production Costs 1.98 2.32 (0.34) 1.43 1.59 (0.16) 2.42 2.69 (0.27) 1.89 2.17 (0.28)
Total Production Cash Costs(1) 1.20 1.36 (0.08) 0.42 0.56 (0.14) 1.19 1.47 (0.28) 1.00 1.16 (0.16)
($/Mcfe)
Marcellus LOE and
Transportation, Gathering and
Compression fees down a
combined 10% year-over-year
Decline in Utica Production
Cash Costs to just $0.42 per
Mcfe helping drive down
company average
CBM Production Cash Costs
declined $0.28 or 19% year-
over-year
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
0 2 4 6 8 10 12 14 16 18 20
Mcf
Months
Peer 1 Type Curve Peer 1 Actuals Peer 2 Type Curve
Peer 2 Actuals CNX Type Curve CNX Actuals
Dry Gas Marcellus Wells Exceeding Expectations and Peers
Note: Peer data from company filings and DrillingInfo.
(1) Solid lines show PA state production data for dry gas wells located in Greene and Washington counties and turned-in-line in 2017 or 2018. Normalized to 9,500’
lateral length.
(2) Dotted lines on graph represent company-stated type curves for dry gas wells.19
Company
EUR
(Bcf/1000’)
Lateral
Length Total EUR
CNX 2.8 9,500 26.6
Peer 1 2.4 9,500 22.8
Peer 2 2.5 9,500 24.0
SWPA Dry Type Curves vs. Greene & Washington County
State Data Actuals: 2017-2018 TILs(1)
Recent CNX dry gas wells
currently outperforming type
curve while peers underperform
expectations on similar wells SWPA Dry Type Curves Normalized to 9,500’
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
0 20 40 60 80 100 120 140 160 180 200
Cum
ula
tive M
cf N
orm
aliz
ed t
o 7
000'
Days
Aikens 5J Aikens 5M
Gaut 4I CPA Dry Utica 3.5 TC
Bell Point 6
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
5,000
10,000
15,000
20,000
25,000
30,000
Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19
Tu
bin
g P
ressu
re (
Psi)
Flo
w R
ate
(M
cf/
d)
Gas Actuals (mcf/d) Gas Forecast Tubing Pressure Actuals
Tubing Pressure Forecast Line Pressure
Expected to cumulatively
produce 9 Bcf at the time it hits
line pressure
CPA Deep Utica Bell Point 6 Producing In-Line with Past Successes
20
Managed Pressure Expectation – 430 Days Flat
Bell Point 6 Performance vs. Existing Mamont Wells
CPA Dry Utica Pads To-Date
Geologic and
fracture
modelling allows
for the
optimization of
landing zone and
completion
designs, which
drive production
repeatability,
maximized IRRs,
and enhanced
capital efficiency
Expected to
produce at flat
rate for
approximately 430
days until hitting
line pressure in
December 2019
Anticipated
managed
pressure
drawdown of ~20
psi/day
Ohio River Waterline to Supply Core SWPA Development
21
New water line to connect core SWPA Central
development area to reliable and continuous water source
▪ In service expected: Q4 2019
▪ Expected throughput: 120 Bbl/min
▪ Project IRR: 40%-50%
▪ Connect to Richhill area and supply vast majority of SWPA
Central pads
▪ Will support deployment of Evolution all electric frac crew
Ohio River Water Line: Planned Route
~70% of CNX
water is transferred
through pipeline
infrastructure
80% cost savings compared to
trucking
Natural gas powered completions instead of diesel saves
~$200,000 per Marcellus lateral or ~$400,000 per Utica lateral
Dual pipeline construction results in
13% total cost reduction, increased
synergies, and lower project risk
Water Infrastructure Benefits
Water pipelines
constructed in
tandem with
gathering system
when appropriate
Construction of gas line with water infrastructure prior to
completion allows crews to use field gas in place of diesel
Appendix
Marketing Highlights and Liquids Realizations
23
(1) Calculation includes the impact of gas hedging cash settlements.
Marketing Highlights
▪ Directly-marketed ethane volumes were 251,400
barrels in Q4 and, on an equivalent basis, yielded a
$0.91 per MMBtu premium over CNX’s residue
natural gas alternative.
▪ $0.06 per Mcfe uplift(1) from liquids for total average
realization of $3.09 per Mcfe in Q4 2018
2018 2017
Q4 Q4
NYMEX Natural Gas ($/MMBtu) $3.64 $2.93
Average Differential (0.29) (0.76)
BTU Conversion (MMBtu/Mcf)* 0.24 0.12
(Loss) Gain on Commodity Derivative
Instruments-Cash Settlement(0.56) 0.19
Realized Gas Price per Mcf $3.03 $2.48
* Conversion factor 1.07 1.06
Natural Gas Price Reconciliation
Natural Gas Liquids, Oil and Condensate
▪ Q4 2018 liquids sold: 7.5 Bcfe
▪ Total weighted average price of all liquids decreased 19% to $25.61
per Bbl in Q4 2018 from $31.82 per Bbl in Q4 2017 and decreased
13% from $29.35 per Bbl in Q3 2018
▪ In Q4 2018, liquids comprised approximately 6% of production
volumes and 7% of total revenue and other operating income
Average Price Realization ($ per Bbl)
2018 2017
Q1 Q2 Q3 Q4 FY18 Q1 Q2 Q3 Q4 FY17
NGLs $27.48 $28.38 $28.08 $24.54 $27.30 $29.16 $15.96 $19.32 $30.48 $24.18
Oil $56.46 $58.32 $63.00 $60.54 $59.34 $44.40 $48.18 $41.94 $45.48 $45.36
Condensate $49.32 $56.82 $58.56 $38.34 $50.58 $33.84 $34.14 $41.34 $46.08 $39.54
CY2019 CY2020
Hedged Volumes Hedged Forward Forecasted Gain/(Loss)
(000 MMBtu) Price Market ($/MMBtu) ($ in 000's)
($/MMBtu)
NYMEX 386,088 $2.83 $3.07 ($0.23) ($90,344)
Basis:
DOM South (DOM) 43,800 ($0.59) ($0.38) ($0.21) ($9,242)
TCO Pool (TCO) 52,360 ($0.35) ($0.31) ($0.04) ($2,095)
Michcon (NMC) 32,263 ($0.20) ($0.18) ($0.02) ($484)
TETCO ELA (TEB) 7,300 ($0.09) ($0.12) $0.03 $212
TETCO WLA (TWB) 7,300 ($0.08) ($0.07) ($0.01) ($102)
TETCO M3 (TMT) 14,813 $0.08 $0.53 ($0.45) ($6,651)
TETCO M2 (BM2) 110,610 ($0.58) ($0.41) ($0.17) ($18,693)
Total Financial Basis Hedges 268,446 ($37,055)
Total Projected Realized Loss ($127,399)
2019E Gas Hedging Gain/Loss Projections
24
Note: Forward market prices, hedged volumes, and hedge prices are as of 1/18/2019. Anticipated hedging activity is not included in projections.
(1) January prices are settled.
(1)
▪ In addition to NYMEX and basis financial
hedges, CNX has physical fixed basis sales and
physical fixed price sales with customers
▪ CY 2019 physical fixed basis sales and physical
fixed price sales: 119.1 Bcf
▪ Physical sales provide additional basis hedge
- Flows through gas sales in financials
Q1 2019 CY2019
Hedged Volumes Hedged Forward Forecasted Gain/(Loss)
(000 MMBtu) Price Market ($/MMBtu) ($ in 000's)
($/MMBtu)
NYMEX 89,775 $2.86 $3.45 ($0.60) ($53,685)
Basis:
DOM South (DOM) 10,800 ($0.59) ($0.27) ($0.32) ($3,489)
TCO Pool (TCO) 10,800 ($0.33) ($0.23) ($0.10) ($1,026)
Michcon (NMC) 6,975 ($0.18) ($0.11) ($0.07) ($453)
TETCO ELA (TEB) 1,800 ($0.09) ($0.12) $0.03 $61
TETCO WLA (TWB) 1,800 ($0.08) ($0.09) $0.01 $13
TETCO M3 (TMT) 3,275 $0.89 $2.61 ($1.72) ($5,633)
TETCO M2 (BM2) 25,200 ($0.57) ($0.28) ($0.29) ($7,283)
Total Financial Basis Hedges 60,650 ($17,810)
Total Projected Realized Loss ($71,495)
Q1 2019E Gas Hedging Gain/Loss Projections
25
Note: Forward market prices, hedged volumes, and hedge prices are as of 1/18/2019. Anticipated hedging activity is not included in projections.
(1) January prices are settled.
(1)
Non-GAAP Reconciliation
26
Source: Company filings.
(1) CNX's unallocated expenses include other expense, gain on sale of assets, loss on debt extinguishment and income taxes.
(2) Adjusted EBITDA Attributable to Noncontrolling Interest for the three months ended December 31, 2018 is Net Income Attributable to Noncontrolling interest of $27,488 plus Depreciation,
Depletion and Amortization of $3,189, plus Interest Expense of $3,480, plus Stock-based compensation of $393. Calculated by taking an average noncontrolling interest percentage of
63.91%.
Adjusted net income consolidated for the three months ended December 31, 2018 is calculated as GAAP net income of $129,415 plus total pre-tax adjustments from the above table of
$41,931, less the associated tax expense of $11,371 equals adjusted net income of $159,975. Adjusted net income consolidated for the three months ended December 31, 2017 is calculated
as GAAP net income of $276,643 less total pre-tax adjustments from the above table of $77,612, plus the associated tax benefit of $17,850 equals the adjusted net income of $216,881.
Adjusted net income consolidated for the three months ended September 30, 2018 is calculated as GAAP net income of $146,756 less total pre-tax adjustments from the above table of
$122,887, plus the associated tax expense of $33,328 equals adjusted net income of $57,197.
Three Months Ended
December 31,
2018 2018 2018 2018 2017
($ in thousands)
E&P
DivisionMidstream Unallocated
(1) Total
Company
Total
Company
Net Income (Loss) $48,250 $39,309 $41,856 $129,415 $276,643
Less: Income from Discontinued Operations - - - - 9,391
Add: Interest Expense 26,471 6,751 - 33,222 40,319
Less: Interest Income 1 - - 1 (1,198)
Add: Income Taxes - - (23,713) (23,713) 71,566
Add: Tax Reform Benefit - - - - (269,060)
Earnings Before Interest & Taxes (EBIT) 74,722 46,060 18,143 138,925 127,661
Add: Depreciation, Depletion & Amortization 122,315 7,770 (1) 130,084 122,707
Add: Exploration Expense 2,633 - - 2,633 14,093
Earnings/(Loss) Before Interest, Taxes, DD&A, and Exploration (EBITDAX) from
Continuing Operations $199,670 $53,830 $18,142 $271,642 $264,461
Adjustments:
Unrealized Gain (Loss) on Commodity Derivative Instruments 36,727 - - 36,727 (105,879)
Loss on Certain Asset Sales - - 96 96 -
Severance Expense (55) - - (55) 177
(Gain) Loss on Debt Extinguishment - - (315) (315) 896
Stock-Based Compensation 4,842 636 - 5,478 3,907
Fair Value Put Option - - - - 3,500
Settlement Expense - - - - 19,787
Total Pre-tax Adjustments $41,514 $636 ($219) $41,931 ($77,612)
Adjusted EBITDAX from Continuing Operations $241,184 $54,466 $17,923 $313,573 $186,849
Less: Adjusted EBITDA Attributable to Noncontrolling Interest(2)
- 34,550 - 34,550 -
Adjusted EBITDAX Attributable to CNX Resources Shareholders $241,184 $19,916 $17,923 $279,023 $186,849
27
“Attributable Share” Reconciled to Consolidated Results
Note: Tables may not foot due to rounding.
(1) CNX's unallocated expenses include other expense, gain on sale of assets, loss on debt extinguishment, and income taxes.
(2) MLP cash flow from operations and CNX Gathering calculated using same percentage mix of gross adjusted EBITDA and adjusted EBITDA net to the MLP, which
in Q4 2018 was 98.8% and 1.2%, respectively. Consolidated cash flow from operations for CNX Midstream for Q4 2018 was $48.9 million.
Cash from Operations and Capital Expenditures
CNX LP ownership 34.09%
GP ownership 2.00%
Total CNX ownership 36.09%
NCI 63.91%
100.00%
Attributable Portion Calculation
Q4 2018
E&P
Standalone +
CNX
Gathering(2)
= CNX + MLP(2)
=
Total
Consolidated
Cash from Operations $146.7 $0.6 $147.3 $48.3 $195.6
Capital Expenditures $264.3 $1.8 $266.1 $56.2 $322.3
($ in millions)
Attributable to CNX Shareholders + Noncontrolling Interest = Consolidated
Inside the MLP Outside the MLP 63.91% of CNXM
Q4 2018
E&P
Standalone +
Attributable to
CNXM LP & GP + Unallocated(1)
+ CNX Gathering =
Total "Attributable to
CNX Shareholders" +
Attributable to
Noncontrolling Interest =
Total
Consolidated
Adj. EBITDAX $241.2 $12.7 $17.9 $7.2 $279.0 $34.6 $313.6
Total Debt $1,921.3 $172.2 -- $2,093.5 $305.0 $2,398.5
Total Cash $0.8 $5.9 $6.7 $10.5 $17.2
Net Debt $1,920.5 $166.3 $2,086.8 $294.5 $2,381.3
($ in millions)
Non-GAAP Reconciliation
28
Source: Company filings.
Three Months
Ended
Three Months
Ended
Three Months
Ended
Three Months
Ended
Twelve Months
Ended
March 31, June 30, September 30, December 31, December 31,
($ in thousands) 2018 2018 2018 2018 2018
Net Income $545,546 $61,394 $146,756 $129,415 $883,111
Add: Interest Expense 38,551 38,438 35,723 33,222 145,934
Less: Interest Income (76) - (42) 1 (117)
Add: Income Taxes 213,694 (31,102) 56,678 (23,713) 215,557
Earnings Before Interest & Taxes (EBIT) from Continuing Operations 797,715 68,730 239,115 138,925 1,244,485
Add: Depreciation, Depletion & Amortization 124,667 119,087 119,585 130,084 493,423
Add: Exploration Expense 2,380 3,699 3,321 2,633 12,033
Earnings Before Interest, Taxes, DD&A, and Exploration (EBITDAX) from
Continuing Operations $924,762 $191,516 $362,021 $271,642 $1,749,941
Adjustments:
Unrealized Gain on Commodity Derivative Instruments (52,078) (8,975) (15,181) 36,727 (39,507)
Settlement Expense - - 2,000 - 2,000
(Gain) Loss on Certain Asset Sales (9,487) - (130,849) 96 (140,240)
Gain on Previously Held Equity Interest (623,663) - - - (623,663)
Severance Expense 814 257 513 (55) 1,529
Fair Value Put Option (3,500) - - - (3,500)
Other Transaction Fees 1,149 - - - 1,149
Stock Based Compensation 4,909 5,709 5,245 5,478 21,341
Loss (Gain) on Debt Extinguishment 15,635 23,413 15,385 (315) 54,118
Impairment of Other Intangible Assets - 18,650 - - 18,650
Total Pre-tax Adjustments ($666,221) $39,054 ($122,887) $41,931 ($708,123)
Adjusted EBITDAX from Continuing Operations $258,541 $230,570 $239,134 $313,573 $1,041,818
Less: Adjusted EBITDA Attributable to Noncontrolling Interest(2)
22,388 $26,711 $29,083 $34,550 $112,732
Adjusted EBITDAX Attributable to CNX Resources Shareholders $236,153 $203,859 $210,051 $279,023 $929,086
Non-GAAP Reconciliation
29
Source: Company filings.
Three Months
Ended
Three Months
Ended
Three Months
Ended
Three Months
Ended
Twelve Months
Ended
March 31, June 30, September 30, December 31, December 31,
($ in thousands) 2017 2017 2017 2017 2017
Net Income ($38,965) $169,510 ($26,441) $276,643 $380,747
Less: Loss (Income) from Discontinued Operations ($36,269) ($47,126) ($7,813) $5,500 (85,708)
Add: Interest Expense 41,606 40,682 38,836 40,319 161,443
Less: Interest Income (952) (6,077) (858) (1,198) (9,085)
Add: Income Taxes (63,194) 57,381 22,988 75,427 92,602
Add: Income Tax Reform - - - (269,060) (269,060)
Earnings Before Interest & Taxes (EBIT) from Continuing Operations (97,774) 214,370 26,712 127,631 270,939
Add: Depreciation, Depletion & Amortization 95,677 91,640 102,012 122,707 412,036
Add: Exploration Expense 9,787 19,715 4,479 14,093 48,074
Earnings Before Interest, Taxes, DD&A, and Exploration (EBITDAX) from
Continuing Operations $7,690 $325,725 $133,203 $264,431 $731,049
Adjustments:
Unrealized Gain on Commodity Derivative Instruments (24,640) (116,073) (1,512) (105,879) (248,104)
Settlement Expense - - - 19,787 19,787
Gain on Certain Asset Sales - (126,707) (30,315) - (157,022)
Severance Expense 230 73 914 177 1,394
Fair Value Put Option - - - 3,500 3,500
Lease Expirations - 16,861 - - 16,861
Stock Based Compensation 3,754 4,163 5,159 3,907 16,983
(Gain)/Loss on Debt Extinguishment (822) 36 2,019 896 2,129
Impairment of E&P Properties 137,865 - - - 137,865
Total Pre-tax Adjustments $116,387 ($221,647) ($23,735) ($77,612) ($206,607)
Adjusted EBITDAX from Continuing Operations $124,077 $104,078 $109,468 $186,819 $524,442
Non-GAAP Reconciliation
30
($/Mcfe) Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Average Sales Price - Total Company 2.85$ 2.47$ 2.50$ $ 2.80 3.00$ 2.87$ 2.92$ $ 3.09
Lease Operating Expense 0.23$ 0.23$ 0.22$ 0.21$ 0.28$ 0.21$ 0.14$ 0.12$
Transportation, Gathering and Compression 0.99$ 0.94$ 0.98$ 0.87$ 0.86$ 0.82$ 0.84$ 0.82$
Production, Ad Valoren, and Other Fees 0.09$ 0.05$ 0.06$ 0.08$ 0.07$ 0.06$ 0.06$ 0.06$
Depreciation, Depletion and Amortization 1.01$ 0.98$ 1.00$ 1.01$ 0.89$ 0.91$ 0.93$ 0.89$
Total Production Costs 2.32$ 2.20$ 2.26$ 2.17$ 2.10$ 2.00$ 1.97$ 1.89$
Less: Depreciation, Depletion and Amortization 1.01$ 0.98$ 1.00$ 1.01$ 0.89$ 0.91$ 0.93$ 0.89$
Total Cash Production Costs 1.31$ 1.22$ 1.26$ 1.16$ 1.21$ 1.09$ 1.04$ 1.00$
Operating Cash Margin 1.54$ 1.25$ 1.24$ 1.64$ 1.79$ 1.78$ 1.88$ 2.09$