CNX Resources Corp. expects efficiencies and new wells in the Appalachian Basin to help lower costs and maintain natural gas output in the years ahead as it explores alternative fuels.
CNX, the first Lower 48 exploration and production (E&P) company to report fourth quarter earnings, said strong execution of last year’s program, along with more Utica Shale wells coming online in central Pennsylvania, should help drive capital lower moving forward.
The company expects production volumes of 570-590 Bcfe this year. It also expects to spend $575-625 million. Heading into 2025, management is aiming to maintain production at 580 Bcfe, with annual spending set to fall below $500 million.
To maintain volumes at that rate, CFO Alan Shepard said “production declines are lower, the capital intensity on the infrastructure side is lower, and you end up with lower completion activity. That’s right where we want to be.”
CNX produced 560 Bcfe last year, down 3% from the prior year. Management had guided lower for 2023 to help drive stronger results amid inflationary pressures.
New Technologies Advancing
The company also continues to advance a strategy launched in 2022 to cut the carbon intensity of natural gas in Appalachia. It established a New Technologies unit to help support that strategy, pursue partnerships and create products to drive growth. The unit generated $34 million in free cash flow last year, primarily by capturing waste methane from coal mining operations in Virginia and Pennsylvania.
“We have a technology portfolio to create value…and I think 2024 is going to be the year…We’ve been in the prototype and testing phase for a lot of this stuff – but this year, we’ll start to see those opportunities take commercial scale,” said New Technologies President Ravi Srivastava.
CNX expects to capture 15-18 Bcfe of waste methane this year and monetize it via government programs and sales to third parties. Srivastava said the company could grow those volumes, but he stressed that more government incentives would be needed to make it economically viable.
In the meantime, the company is evaluating other opportunities in liquefied natural gas, compressed natural gas and hydrogen. It is exploring producing hydrogen from coal mine methane and renewable natural gas.
The company has a history in the coal fields of Appalachia, splitting from miner Consol Energy Inc. in 2017 to form a standalone natural gas producer.
“Fugitive methane capture, and the utilization of that waste gas as feedstock for hydrogen production, is a win-win as it simultaneously addresses a significant climate issue while creating substantial investment and jobs in areas across Appalachia that have been hardest hit by the energy transition,” management said in prepared remarks.
CNX reported fourth quarter net income of $537.8 million ($2.89/share), compared with net income in the year-ago period of $1.2 billion ($5.68). For the full year, net income was $1.7 billion ($9.12/share), compared with a net loss of $142 million (minus 75 cents) in 2022.
Average realized prices slid to $2.61/Mcf in 2023, compared with $3.17/Mcfe in 2022, when a $2.6 billion loss on derivatives dented the annual results.
