CNX Resources Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2023

There are 12 speakers on the call.

Operator

Good morning, and welcome to the CNX Resources Third Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, and good morning to everybody. Welcome to CNX's 3rd quarter conference call. We have in the room today Nick D'Iuliis, our President and CEO Alan Sheppard, our Chief Financial Officer Navneet Beal, our Chief Operating Officer and Ravi Srivastava, President of our New Technologies Group. Today, we will be discussing our Q3 results. This morning, we posted an updated slide presentation to our website.

Speaker 1

Also, detailed Q3 earnings release data such as quarterly E and P data, financial statements and non GAAP reconciliations are posted to our website in a document titled 3Q 2023 Earnings Results and Supplemental Information of CNX Resources. As a reminder, any forward looking statements we make or comments about future expectations are subject to business risks, which we have laid out for you in our press release today as well as in our previous Securities and Exchange Commission filings. We will begin our call today with prepared remarks by Nick, followed by Alan, and then we will open the call for Q and A, where Nav and Ravi will participate as well. With that, let me turn the call over to you, Nick.

Speaker 2

Thanks, Tyler. Good morning, everybody. Q3 of 2023, it marks our 15th consecutive quarter of free cash flow generation, Despite experiencing what I would call extremely challenging in basin pricing and our continued execution of our long term strategy, We started back in 2020. It's generated approximately $1,800,000,000 in free cash flow. It's reduced outstanding debt by approximately 385,000,000 And it's allowed us to repurchase and retire 31% of our outstanding shares at deeply discounted prices.

Speaker 2

And we remain on pace to exceed our original goals supported by our sustainable business model that has and will continue to generate significant Long term per share value for our owners. And all of that might sound like a broken record because we've been stringing out this theme for these metrics For a couple of years now, which is sort of the point, and that's the consistent execution and clinical capital allocation. Those things drive The creation of meaningful per share value over the long term. During the quarter, our operations team, It continued to execute efficiently. In fact, the team has been successful in further improving cycle times and accelerating activity, And Alan will go into some more of those details in a minute and how it impacts our full year production outlook and capital timing.

Speaker 2

More specifically, one thing I'd like to highlight during the quarter is that we brought online 4 new wells beneath the Pittsburgh International Airport's runway. And these latest wells highlight our public private partnership with the airport, and we achieved this by the way with 0 safety incidents and 0 environmental impacts. These four new wells are projected to generate almost $70,000,000 in royalty revenue for the airport through 2,000 and 42, and about $20,000,000 of that will be over the next 4 years. And this is on top of a similar amount of royalty revenue that the airports already received from our partnership that was created back in 2013. So our historic partnership with the Pittsburgh International Airport has created a sustainable fuel hub Utilizing locally sourced, lower cost, lower carbon intensity natural gas, and it's a perfect example of our Appalachia 1st Vision driving tangible results.

Speaker 2

Let's shift now to the New Technologies Group, very exciting part of our business, We continue to expect around $75,000,000 with up to potentially $100,000,000 in free cash flow in 2024 associated with the New Technologies Group. We're just getting started with Newtek, and we think this business has potential of being an even bigger free cash flow growth driver for the company moving forward. The near term Newtek free cash flow growth is through our ability to monetize environmental attributes tied to our waste methane abatement operations in Virginia And our new tech effort is poised to lead the charge into the hydrogen economy with the Adams for Clean Ammonia project, where we expect to provide ultra low carbon intensity feedstock and carbon capture and sequestration services. The DOE Recently announced the funding of this project is part of the Arch 2 Hydrogen Hub application. And while we certainly applaud the funding announcement and inclusion of Arch 2 in the award, we're also eagerly awaiting implementation guidance regarding the related hydrogen production tax credit Or the 45B provision of the IRA, and that's going to materially impact the project economics.

Speaker 2

So the intent of the hydrogen production provision of the IRA, of course, was to incentivize the creation of low carbon intensity hydrogen and to reduce emissions And to enhance U. S. Energy security and to create jobs and economic activity in energy communities. And I'll tell you the Adams Fork project squarely aligns with all those objectives. So we're monitoring developments with the 45E guidance closely and we're hopeful that DC will follow the intent of the law and help us make this important West Virginia project and others like it, frankly, a reality.

Speaker 2

Also like to highlight We reached our 2023 methane emission reduction target of 70,000 tons of carbon dioxide equivalent by the end of the Q3 of this year, which was awesome. That of course is a quarter ahead of schedule and our team is still hard at work with regard to making further adjustments and improvements to reduce emissions further. Great accomplishment by our regulatory reporting and operations teams. And by the end of this year, we expect the cumulative effect of our reduction efforts We have reduced methane emissions on a carbon dioxide equivalent tons basis by about 49% since 2020, so almost a 50% Reduction in a very short period of time. Our methane reduction goals for 2023 were focused mostly on pneumatic devices and liquids unloading.

Speaker 2

Those were the 2 biggest opportunity sets and we invested $7,000,000 of capital for specific projects and the teams got the work. Year to date, we've changed out over 700 pneumatic devices and they came in at a cost, the low cost actually Very sort of competitive one at $3 of CO2 equivalent per ton. And we now plan to add An additional 160 or so devices to our plan for the rest of the year because we're ahead of schedule due to that fantastic pace that the team has set. And in addition, the team has been working on our liquids unloading processes, as I just mentioned, which also contributes significantly to our methane emission Reduction of the 70,000 tons of CO2 equivalent. So we set difficult, but yet achievable targets and we do what we say we're going to do.

Speaker 2

So we're not going to be in the game. You're not going to see this from us of setting goals that are decades away to sort of avoid accountability. Our focus is always going to be on the tangible and the impactful and the local type of actions. Now last but certainly not least, We continue to have conviction that our shares are materially undervalued. During the quarter, we bought back an additional 1% of our shares outstanding.

Speaker 2

Our compound annual growth rate or CAGR for our share repurchase program over the past 3 years since the peak share count Around Q3 of 2020 is approximately negative 11%, and we think that's top tier across the capital markets And that it compares favorably to the classic best in class share repurchasers like AutoZone as an example, where AutoZone's retired shares at about a minus 8% CAGR over a 25 year period. So we believe that our share repurchase program provides an opportunity to create incredible value for our long term like minded owners who are going to benefit as their per share value continues to grow meaningfully over the coming years. Now let's hear from Alan.

Speaker 3

Thanks, Nick, and good morning to everyone. As Nick mentioned, this quarter represents the 15th consecutive quarter of free cash Generation through the execution of our sustainable business model and long term strategic plan. In the quarter, we generated approximately $19,000,000 of free cash flow despite the challenging price environment. As we initially laid out our free cash flow plan in the Q1 of 2020, this brings our cumulative free cash flow to approximately $1,800,000,000 around 50% of our current market cap. Looking ahead, we expect this quarter to mark the trough of our free cash flow generation as the confluence of lower capital, higher expected gas pricing and growth in our new tech cash flows solidifies our confidence in achieving robust free cash flow generation in the quarters ahead.

Speaker 3

We continue to believe that our shares trade at Significant discount to their intrinsic value and as such during the quarter bought back an additional $2,400,000 or 1% of shares outstanding at an average price of 19.5 And after the close of the quarter through October 12, we bought back an additional 1,000,000 shares at an average price of $22.20 Since the Q3 of 2020, we have now bought back approximately 31% of our total shares outstanding at an average price of $15.58 An exceptional result, not just in our industry, but anywhere in the capital markets. And we believe those results will only become more impressive as we are well positioned to continue to take advantage of this Turning briefly to the balance sheet, our significant maturity runway and robust hedge book continue to be key components that underpin our capital allocation Given these two elements, combined with our low cost position, we remain comfortable with our current leverage profile and have the luxury to remain opportunistic with respect to our debt management. Furthermore, we believe that the growth in the new technologies group over the next few years will result in a lower leverage ratio even before considering potential further reductions in absolute debt.

Speaker 3

Speaking of the new technology group, it continues to deliver tangible results in both positive free cash flow and environmental impact. During the quarter, we recorded approximately $13,000,000 in free cash flow primarily associated with sales of environmental attributes from our waste methane capture activities, This brings our year to date free cash flow from Newtek to approximately $19,000,000 Further, as Nick mentioned, we continue to have good line of sight to New Technologies Group contributing approximately $75,000,000 to $100,000,000 in free cash flow in 2024. As we said last quarter, free cash flow from Newtek has the potential meaningfully higher in the years beyond 2024. Let's now shift to the updated guidance outlook. Broadly speaking, we are reaffirming the 2023 and initial As Nick mentioned in his commentary, NAV and the operations team have done an outstanding job in compressing cycle times and accelerating our drilling and completion activity.

Speaker 3

The accelerated operational results, particularly on the completion side, have pulled the timing of capital into Q3 and accelerated online dates for our 2 most recent pads. As a result of our accelerated pace, we now have both we now expect both annual production and capital to trend towards the higher end of the ranges provided. Looking ahead to 2024, we expect to average annual production volumes of approximately 580 Bcfe. And as we discussed last quarter, we also expect total capital expenditures fall beginning in 2024 through 2025 to around $500,000,000 We will provide the full 2024 guidance with our next quarterly update. To conclude, the sustainable business model that we have created is continuing to deliver value to our shareholders throughout the commodity cycle.

Speaker 3

Our focus for the remainder of 2023 will remain on safe and compliant execution to develop our extensive natural gas asset base, Accelerating free cash flow growth from our new technologies business on consistent and clinical capital allocation to grow our long term free cash flow per share And most importantly, as always, on ensuring all our decisions continue to reflect a long term owner mindset. With that, I'll turn it back over to Tyler for Q and A.

Operator

Please pick up your handset before pressing the The first question comes from Bertrand Dinesh with Truist. Please go ahead.

Speaker 4

Hi, good morning guys. Thanks for taking my question. On the Newtek front, would you say the 75 $100,000,000 range is kind of the low hanging fruit. I know you mentioned there's the potential for meaningfully higher free cash flow. Just want to understand if that next leg up requires government legislation or new partnerships or anything like that or if The $75,000,000 to $100,000,000 can stair step quickly to that meaningfully higher free cash flow.

Speaker 5

Not making like government legislations And all those uncertainties into that guidance for next year. However, like depending on how some of these things come out, there's an opportunity to grow that Beyond 2024. And as we talked about our Adams Fork project, low peak stock sale opportunities, all that stuff is contingent on how that project progresses. So all that stuff adds to that meaningful growth opportunities in 2025 onwards. But next year, We have good line of sight on what we need to do to get to that $75,000,000 to $100,000,000 number.

Speaker 4

Okay. And then could you break out maybe where you've gotten so far that $75,000,000 to $100,000,000 between I think there's 3 buckets that you kind of you put that in and maybe the year to date range, Whether or not that is which bucket that falls into and then just little small ones here, but Does some of that have a macro pricing supply demand baked into it, like if we saw a Better environment for that with that free cash flow range move or is the $75,000,000 to $100,000,000 more of a fixed outcome? Thanks.

Speaker 3

Yes. This is Alan. To your first question, that's primarily associated with the free cash flow as you're seeing generated being in the last two quarters, which is the environmental attributes. They make up the bulk of that expectation for next year. And that's the range we give in there kind of includes some of the subjectivity to the pricing in those regulatory pathways that We already have line of sight on to Robbie's point.

Speaker 5

Right. I think some of that $75,000,000 to $100,000,000 is contemplated on where we see where the market is today. Just like any if you're in tune with where some of these environmental attribute pricing and all that stuff is, there is some level of fluctuation volatility in it, We think that $75,000,000 to $100,000,000 is still achievable.

Speaker 4

Got you. Thanks guys.

Operator

The next question comes from Zach Parham with JPMorgan. Please go ahead.

Speaker 6

Hey, guys. Thanks for taking my question. Could you give us a little more color on the trajectory of the free cash flow from Newtek going forward? Do you expect another increase in 4Q and does that get you to a 24 run rate or do you expect Newtek free cash flow to kind of continue to ramp Through 'twenty four. And then maybe based on what you see now, assuming no more governmental regulations or anything that come in, Is that $75,000,000 to $100,000,000 a good run rate for 2025?

Speaker 5

Hey, that's a good question. What I would say is, think it will be easier it's better to guide on some of these stuff on an annual basis. There is some seasonality aspect Some quarter might be better, some quarter might be worse in terms of how it kind of pans out. So we're going to try and stick to And annual guidance on this until there's better clarity on how everything shakes out. There's different pathways that we're pursuing.

Speaker 5

I think we'll have And again, like based on the pathways that's already created, the 75 to 100 on an annual basis It's something that we have a good line of sight on. And the goal for the team would be to continue to grow that in 2025 and beyond.

Speaker 6

Got it. Thanks for that color. I guess just one follow-up also on Newtek. I know you mentioned most of the free cash flow at this point is coming from The methane capture and the environmental attributes associated with that, I think most of that's coming from the Buchanan met coal mine. What's the future runway on capturing gas there?

Speaker 6

I guess, do those gas volumes decline over time? And maybe on the other side of that, are there still gas volumes that are being vented that you could capture and potentially generate Even more credits.

Speaker 5

So I think that's where some of the when I talked about an annual guidance on some of these things. Those are some of the uncertainty factors on the mining phase and some of that stuff that dictates what the volumes are. But I think there is As for the run rate for the mine, the mine has been operational for decades and it has running room for several more decades To go, Zaida, and we have capture invest infrastructure in place to continue to do that. So part of the $75,000,000,000 to $100,000,000 is contingent on capturing that methane that having a certain mining phase that we have seen over the last several years. And there's opportunity to do more beyond that particular mine itself, but that's not contemplated in 2024.

Speaker 6

Got it. I guess just one clarification there. The gas that you're capturing now, we think about shale gas, shale gas of the opportunity set there.

Speaker 5

It's a different Play altogether, so to speak, I think it's more a function of mining pace and how fast The mine is operating as opposed to the decline from the well itself.

Speaker 6

Got it. Thanks guys. Appreciate the color.

Operator

The next question comes from Leo Mariani with ROTH MKM. Please go ahead.

Speaker 7

Yes. Just a quick follow-up here on the Newtek business. So maybe just kind of looking at this a little different way. So we think about the $75,000,000 to $100,000,000 of Newtek free cash flow next year. Is that sort of contractually kind of underpinned For you folks, are you selling these credits kind of on a long term basis and maybe that volume and this sort of price is Kind of locked in or is this maybe just more your own internal prediction of what you expect for next year?

Speaker 5

Yes, it's more of an internal production of what we expect the pricing to be. There is a mix of long term Contracts in certain arenas and then there's certain other programs where the pricing and volume kind of fluctuates in some of the arenas. It's a mixed bag of those kind of opportunities. But it's our $75,000,000 to $100,000,000 is based on where we see how the different opportunities kind of shake out.

Speaker 3

Okay, that's helpful.

Speaker 7

And then just on kind of the remainder of the year, I guess you guys are saying that CapEx and production are at the higher end here. As I'm looking at kind of year to date CapEx for the 1st three quarters, And I look at this right that you've got about $100,000,000 left to spend in 4Q, which is kind of roughly half of what 3rd quarter levels are, so are you seeing just limited operational activity in the 4th quarter? And Yes, similar question on the production. I mean, I can get kind of the high end of the guide, but I guess that assumes that production can even come down a little bit in 4Q versus 3Q, I just want to verify that I'm kind of looking at these numbers right that you would expect like CapEx to be kind of cut in half in 4Q and any production tails off a little this quarter?

Speaker 3

Yes, that's right. You're going to see a significant decline in CapEx in Q4. And what we talked about there during the commentary was The completions team has just been so efficient that we pulled basically 11 of the 13 remaining tools in the second half of the year came into Q3. That's also driving kind of the production bump. But if you think about it, basically we got 1 rig running and we've kind of had to slow down to almost idle the frac crew because we've been ahead And we don't want to push volumes into this market given current prices.

Speaker 3

So we are just way ahead of schedule and you will see a big drop in Q4 capital next quarter.

Speaker 7

Okay. No, that's very helpful guys. And then just on the production, just to follow-up there. So if I look at 3rd quarter production, I mean, it looks like it's around a 5.70 Bcf annual run rate in 3Q and a little bit lower than your '24 guide of 580 and I guess production is coming down slightly here in 4th quarter. What's the kind of plan?

Speaker 7

Is there a plan for early 2024 where you kind of just make it up, but you're ramping up activity on January 1st to try to get those volumes up to that 580B level, is that kind of the high level operating plan here to kind of get back after it right when the year turns?

Speaker 3

And so if you think about the operating plan, as we mentioned, we have a continuous drilling program ongoing, right. And it's really just timing on the fracs. The fracs is kind of biggest spend on the D and C side. So Right now, we slowed down the completion activity, because we're ahead of schedule and next year, the 580 is going to come and go For the year, I mean, we're not providing specific volume guidance quarter by quarter, but the way to think about it now is we've mentioned before, we're trying to get to kind of this 1.59, 1.6 run rate, it's

Operator

The next question comes from Michael Gallia with Stephens. Please go ahead.

Speaker 8

Yes. Hi, good morning. Just to add another one on the Newtek. Just trying to understand The revenue generation there, most of the revenues are, I guess, maybe all the revenues be, Are they generated with the alternative energy credits associated with the power plant or is there any other credits that You are able to generate by abating the methane.

Speaker 5

So This is Ravi. The EA opportunity that they're pursuing, they're a combination of voluntary and compliance offsets, compliance utility programs And AEPs, so there's more to that. And then we expect to add for Carbon Credits and Wetland Mitigation, a lot of other EAs to it. So there's it's not just coming from one source. We have like pathways into multiple opportunities.

Speaker 8

Okay, got it. And are you sharing any of those Credits with anybody else or is it solely CNX that is getting those credits at this point?

Speaker 5

I mean those credits are monetized. I'm not we're not consuming them ourselves. I don't understand the question.

Speaker 8

Sorry, I'm just wondering if you are you're the only one abating The methane is

Speaker 3

at the

Speaker 8

Gutter mine. So if you generate the credits, I mean, you can monetize them with another party, but you're the only one that is abating methane at the plant.

Speaker 5

Right. If you're asking who the like there's only working one working interest

Speaker 8

Got it. Got it. Okay. Very good. It looks like you've sold some production There are some assets.

Speaker 8

I assume there was some production associated with that. Can you say what that was for the $19,000,000 that you generated in Asset sales for the quarter?

Speaker 3

The bulk of that is selling spare parts. Again, we reiterated you guys, we have a deep inventory of leases Throughout Appalachian, we're to the point now where folks come to us for a lot of unit fill in. So we're able to monetize some of this non core assets, Acreage at pretty attractive prices and we saw an upsurge of that in Q3. So it wasn't production related. We did have the second part of the close on our asset sale for The non op sale we did, but that was about $3,000,000 in the 'nineteen, but the bulk of that is just from selling from our deep inventory of leases.

Speaker 8

Sounds good. Okay. And just last one for me. I wondered any insight on what you think well costs Might look like for 2024 relative to where they were this year?

Speaker 3

Yes, I think if you're asking about sort of oilfield services inflation, things like we're modeling everything to be pretty flat. We expect Wade Nance team is going to we'll see some operational efficiencies to improve costs, but we're not modeling or thinking about any sort of Major downdraft in oilfield service costs for next year.

Speaker 9

Got it. Thank you.

Operator

The next question comes from Jacob Roberts with TPH. Please go ahead.

Speaker 10

Good morning.

Speaker 3

Good morning.

Speaker 10

Just back to the Buchanan Power facility, I'm curious if you could Let us know how to think about the uptime of that plant or the runtime of that plant relative to power pricing in the region?

Speaker 3

I mean, that's a peaker plant, right, it runs, that's called upon in the PJM,

Speaker 10

Okay. But no guardrails in terms of what PJM pricing is and when that is on or off?

Speaker 3

It's all dictated by Spark Economics, right, like with the power prices relative to flow and gas to the plant to turn it on. So it's just a traditional peaker plan, nothing

Speaker 10

And then relative to that feed gas, is CNX the sole supplier of gas to the plant And then longer term, where the plant to increase utilization, can CNX provide that supply in totality?

Speaker 5

CNX is the sole supplier of gas to that facility at this point in time.

Speaker 3

There's volumes produced in that field beyond what that plant

Speaker 10

consumes. Perfect. Appreciate the time.

Operator

The next question comes from Jon Abbott with Bank of America. Please go ahead.

Speaker 8

Hey, good morning and thank you for taking our questions. So with the new technology business and the free cash flow guide that you provided here, I mean, how do you think about the potential impact to your credit rating going forward?

Speaker 3

Yes. So we've had those discussions yet. It's not being incorporated. I think there are probably credit guys usually wait for some more quarters under our belt before they give us credit for it. I think the one thing we did want to point out was that it will create some natural deleveraging even before considering reductions in absolute debt.

Speaker 8

Very, very helpful. And then also again with the free cash flow outlook that you I mean it doesn't seem like there's any incremental CapEx spend on there. Is there incremental CapEx that we should be thinking about Related to new technology guide as it relates to copay methane abatement in 2024 2025.

Speaker 5

Yes. On 24, 25, we do expect to spend some capital on the Newtek Group front, But not necessarily on the coal mine methane abatement side of things.

Speaker 8

All right. And I guess you We'll get further clarity on that probably at year end results here. But any idea in terms of what how we should think about other capital for 2024?

Speaker 3

Yes. I mean, we'll provide the full guidance breakout when we get to Q1 January of 2024, but you should expect to see everything kind of decline from this year as we make our way towards that $500,000,000 a year.

Speaker 8

All right. Very helpful. Thank you very much.

Operator

The next question comes from Brian Beale with Capital One Securities. Please go ahead.

Speaker 9

Good morning, everybody. Really appreciate all the detail on Newtek. I have A couple of other questions that maybe you'd be able to answer and help me out a little bit. Just wondering if you could help me understand how much methane do

Speaker 1

you capture to earn one of the credits like

Speaker 9

a single credit? Sure to earn one of the credits like a single credit?

Speaker 5

I'm not sure how to answer that question, but I think what I can tell you is and we've provided details in our CSR and our Quarterly updates on we're capturing out 6,000,000 tons CO2e of methane and Different programs have different ways of monetizing that. So that's why it's difficult to answer specifically what your question was.

Speaker 9

Okay. I understand. So it sounds like just different conversion rates depending on the program. And then I guess probably answers the next question I was going to ask was, What was the credit price that you could sell these credits at that was assumed in the $75,000,000 to $100,000,000 budget or I'm sorry, free cash flow range for next year, But I assume that those price assumptions vary also by program?

Speaker 8

That's correct.

Speaker 9

Okay. One last question

Speaker 5

One last question Just

Speaker 3

based on kind of the third market.

Speaker 9

I'm sorry, say that one more time. I apologize.

Speaker 3

That's why we provided the range and then the expected range is based on kind of the current market.

Speaker 9

Perfect. And then last question, this is pretty well, very interesting stuff. I don't know anybody else that's talking about this In the E and P space, I assume maybe the way you're able to do this is your past experience in the Coal industry and relationships that you have there, is that a unique strategic advantage that you expect really only you will be able to exploit or is that something you expect other people to Kind of follow on and start doing similar things?

Speaker 5

Yes, I think it's a combination of both. I think there's other people who can do this, but we have developed Technology around capturing waste methane most effectively is like there's some skill that goes into it and we think We have the upper hand there.

Speaker 9

Got it. Thanks very much for the color. Really appreciate all the details on your tech. All the best.

Operator

The next question comes from Nitin Kumar with Mizuho. Please go ahead.

Speaker 11

Hey, good morning, guys. Obviously, a lot of interest in the Newtek and deservedly so. I guess my question is, The current free cash flows, are they only from Pennsylvania credits or are you getting anything from other states? And is it all kind of current time or are you monetizing any accrued credits from your past activities?

Speaker 5

So I think I already answered this question where not all the revenues coming from Pennsylvania program that you mentioned. And on the accrual side of things, I think most of these programs where They have a timeline on how much you can accrue. So there is it's not from previously accrued, it's whatever is permitted by the program.

Speaker 3

Generally concurrence is the way to think about it. Yes.

Speaker 11

Okay. That's helpful. And then I guess Going back to the regular gas side of things, my question was really around, it seems like you're dropping Activity, I know you pulled some CapEx in the Q3. Not looking for formal guidance, but there is a pretty Significant step up in production in 2024 based on the outlook that you've provided. So I'm just curious, Is this is there any sort of cadence of activity that you expect for 2024?

Speaker 11

Is it going to be front half faded or back half faded? Just looking at strip and trying to understand how you're planning for the year in terms of timing?

Speaker 3

Yes. I mean, Mike, I mentioned earlier, there's nothing in particular worth highlighting regarding like the quarter to quarter cadence. The way to think about it is just we're doing $580,000,000 and we targeted the sort of run rate we're at, so it should just fluctuate around that a little bit. And this year, we had a lot of capital To build up from call it the 555 to the 580 next year. So once we're back to that maintenance production of 580, that's going to be the driver of the capital declining, right.

Speaker 11

Okay. I'm going to sneak one more in, I'm sorry, but for some of us who have followed you for a while, you're coming, I think You've highlighted in the 4th year of your maintenance production plan, This is a concentrated plan in a specific area. When do you expect to start unlocking the other inventory in your portfolio and start spending some of the Midstream CapEx that was associated with that?

Speaker 3

Yes, we're still a few years out from needing to unlock anything. We still have a nice chunk of Southwest VA to develop. I think you can see in the program, we are lacing in kind of a CPA Utica well here and there. And as those results become available, we'll highlight those in the materials moving forward. We're still a few years out from meeting any sort of major infrastructure investment in a new area.

Speaker 11

Great. Thanks, guys.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Speaker 1

Great. Thank you everyone for joining this morning and thank you for your interest in CNX. Please feel free to reach out if anyone might have any additional questions. Thanks.

Operator

Thank you. The conference has now concluded. You may now disconnect.

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Key Takeaways

  • 15 consecutive quarters of free cash flow generating approximately $1.8 billion since 2020, reducing debt by about $385 million and repurchasing 31% of shares at discounted prices.
  • Operations team further improved cycle times and accelerated completions, pulling capital into Q3 and pushing full-year production and CapEx toward the high end of guidance.
  • Public-private partnership with Pittsburgh International Airport delivered four new wells beneath the runway, projected to generate nearly $70 million in airport royalties through 2042.
  • New Technologies Group is poised to deliver $75–$100 million of free cash flow in 2024 from waste methane credits while advancing the Adams Fork clean hydrogen project pending IRA 45E guidance.
  • Cumulative methane emissions have been cut by ~49% since 2020, and the 2023 target of reducing 70,000 tons CO₂e was achieved a quarter ahead of schedule through investments in pneumatic devices and liquids unloading.
A.I. generated. May contain errors.
Earnings Conference Call
CNX Resources Q3 2023
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