Big Natural Gas Producer Lays Out Plans Through 2026

SEATTLE (Oil Monster): At a time when many other companies are withdrawing future expectations amid Covid-19-related shocks to the economy and an unstable energy market, a local natural gas producer is laying out a seven-year plan that increases free cash flow at the same time it eliminates production growth.

CNX Resources Corp. (NYSE: CNX) provided investors a detailed outlook on 2020 and 2021, which includes a lowered amount of spending on drilling as well as plans to keep its natural gas production at around the same level. It also plans between 2022 and 2026 to drill about 25 wells a year and produce 560 billion cubic feet of natural gas (BCF) while spending at least $100 million less a year on capital projects.

CNX is cutting $45 million more from its 2020 capital budget, spending between $405 million and $465 million. It's also lowering its expected production to between 490 billion cubic feet of natural gas and 530 billion cubic feet, lower than the 525 BCF-555 BCF it had previously expected. Free cash flow will go to reduce debt.

For 2021, if prices remain the same, CNX will spend about $400 million and produce about 550 BCFE of natural gas. It will then move to maintenance-of-production operation, which will maximize cash flow while at the same time keep its production at about 560 BCF. It will only spend about $300 million a year on drilling and other capital projects during that time.

"Q1's results and strong free cash flow were a harbinger of things to come," said CNX CEO Nicholas J. DeIuliis in a statement Monday. "Going-forward activity pace and capital investment, largely driven by a maintenance of production approach, for the next seven years will leave years of core SWPA Marcellus and CPA Utica inventory remaining for post-2026 development."

CNX saw a big increase in free cash flow, jumping 760 percent from $15 million in the first quarter of 2019 to $129 million this past quarter. Free cash flow is one of the metrics that Wall Street is looking for in shale producers, not only due to the current Covid-19 economic downturn but after several disappointing years overall in the industry.

It expects about $300 million in free cash flow in 2020, $400 million in 2021 and an average of $500 million a year between 2022 and 2026.

CNX saw much lower revenue from natural gas in the first quarter, from $435.9 million this year to $251.5 million in the same period a year ago. But total revenue was up overall due to increases in other areas, from $278.4 million last year to $416.3 million in the first quarter of 2020.

The company recorded impairment charges of more than $500 million, $473 million for its midstream unit and $62 million on coal bed methane in southwestern Pennsylvania. That led to a loss of loss of $329 million, $1.76 a share, up from the loss of $87 million, 44 cents a share, in the same quarter a year ago.

 Courtesy: www.bizjournals.com