Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CNX Resources Corp (NYSE:CNX) has successfully validated the premium nature of its Coal Mine Methane (CMM) across multiple sectors, including manufacturing, power, and hydrogen production.
• The company has positioned its activity set to maintain flat production through 2024, with flexibility to accelerate activity if market conditions are favorable.
• CNX Resources Corp (NYSE:CNX) has achieved significant capital efficiency, with a run rate goal of sub $500 million, driven by efficiencies from Unico CPA development and a low decline PDP base.
• The company reported robust free cash flow of $30 million in Q4 2024, benefiting from the monetization of environmental attributes.
• CNX Resources Corp (NYSE:CNX) is exploring multiple pathways to generate credits from its CMM business, targeting sectors like power generation, manufacturing, and data centers.

Negative Points

• There are restrictions within the 45V rules that CNX Resources Corp (NYSE:CNX) believes are inconsistent with scientific assessments, creating uncertainty for future investments.
• The company anticipates potential declines in production in the second half of 2025, contingent on market conditions and capital allocation decisions.
• CNX Resources Corp (NYSE:CNX) expects New Tech free cash flow to decrease in 2025 compared to the strong performance in Q4 2024.
• The company is awaiting clarity on overly restrictive rules related to CMM, which affects its ability to make necessary investment decisions.
• There is uncertainty regarding the new administration's stance on coal mine methane and its potential impact on CNX Resources Corp (NYSE:CNX)'s opportunities.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with CNX.

Q: Could you provide more insight into the new technologies and specifically the 45V guidance and its impact on your partnership with KeyState? A: Ravi Srivastava, President of New Technologies, explained that while the inclusion of Coal Mine Methane (CMM) in 45V is promising, there are restrictions in the rules that are inconsistent with scientific assessments. The company is awaiting further clarity from the administration to make necessary investment decisions.

Q: Can you discuss the capital allocation for the second half of 2025 and any potential for increased activity? A: Alan Shepard, CFO, stated that the company plans to keep production flat through 2024, with activity weighted towards the first half of 2025. They will assess industry production levels and storage projections post-winter to decide on accelerating activity, contingent on market conditions.

Q: What is the expected run rate spending to maintain current production levels, particularly with the Apex assets? A: Alan Shepard noted that the goal is to maintain a sub-$500 million run rate, driven by efficiencies from the Unico CPA development and a low decline PDP base. The Apex wells, completed post-acquisition, will be brought online, with production levels influenced by market pricing.

Q: Are there other pathways to generate credits from the CMM business beyond 45V? A: Ravi Srivastava highlighted that CMM offers environmental and economic advantages across sectors like manufacturing, power generation, and hydrogen production. The company is targeting these sectors for monetization opportunities and will provide updates as they progress.

Q: Can you elaborate on the free cash flow expectations for the New Technologies segment in 2025? A: Ravi Srivastava explained that the robust Q4 2024 free cash flow was due to timing in monetizing environmental attributes. The run rate for monetizing volumes is expected to be consistent, with the primary driver being the ATS program, contributing approximately $75 million annually.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.