Q1 2020 Earnings Call

April 27, 2020

Operator: Good day, and welcome to CNX Resources' Q1 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal our conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations. Please go ahead, sir.

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 Chad and then Dawn and then we will open the call up for Q&A with that. Let me turn the call over to you Nick. Hey, thanks Tyler. Good morning, everyone. Thank you for joining us. Hope that your families and institutions are doing well managing the virus and all the challenges that come with it and speaking of the viruses wage here at the end of April. It's hard not to think back to where we were at the end of January on our last quarterly call and consider just how much the world has changed in three short months. We've learned a lot confirm a lot that we already believed about our team our company and our industry during this time the way in which our our team has responded to these unprecedented times. I think it's nothing short of remarkable Thursday.

Tyler Lewis: Thank you, and good morning to everybody. Welcome to CNX's Q1 Conference Call. We have on the call today Nick DeIuliis, our President and CEO, Don Rush, our Executive Vice President and Chief Financial Officer, and Chad Griffith, our Executive Vice President and Chief Operating Officer. Today, we'll be discussing our Q1 results, and we have posted an updated slide presentation to our website. To remind everyone, CNX consolidates its results, which includes 100% of the results from CNX Gathering LLC, and CNX Midstream Partners LP. Earlier this morning, CNX Midstream Partners, ticker CNXM, issued a separate press release, and as a reminder, they will have an earnings call at 11:00AM Eastern today, which will require us to end our call no later than 10:50AM.

Tyler Lewis: Thank you, and good morning to everybody. Welcome to CNX's Q1 Conference Call. We have on the call today Nicholas J. DeIuliis, our President and CEO, Don Rush, our Executive Vice President and Chief Financial Officer, and Chad Griffith, our Executive Vice President and Chief Operating Officer. Today, we'll be discussing our Q1 results, and we have posted an updated slide presentation to our website. To remind everyone, CNX consolidates its results, which includes 100% of the results from CNX Gathering LLC, and CNX Midstream Partners LP. Earlier this morning, CNX Midstream Partners, ticker CNXM, issued a separate press release, and as a reminder, they will have an earnings call at 11:00AM Eastern today, which will require us to end our call no later than 10:50AM.

Tyler Lewis: The dial-in number for the CNXM call is 1-888-349-0097. 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 Chad, and then Don, and then we will open the call up for Q&A. With that, let me turn the call over to you, Nick.

resilient creative there

Our Frontline fuel team welcomed the monikers of essential and life-sustaining and they never missed a beat they keep producing and flowing the natural gas that our society and economy relies on in times like these similarly our corporate team transition seamlessly to the remote work scenario and they continue to provide top-notch support to the operations team. I'm tremendously proud of how we've changed our game to another level and answer the call on behalf of our fellow citizens during this time, and I wanted to take just a few minutes at the outset that thank our team and also say a word of thanks all the other essential employees and businesses out there who are on the front lines doing their best to keep us all safe and healthy through the crisis. So thank you. We start going through some of the the key highlights. I'm going to refer to the slide deck. I'm going home with slide for and the deck that we posted this morning. I think slide for highlights important points that much of the additional items were going to discuss will flow from those points on side for Thursday.

Nicholas J. DeIuliis: Okay, thanks, Tyler. Good morning, everyone. Thank you for joining us. Hope that your families and institutions are doing well managing the virus and all the challenges that come with it. Speaking of the virus, as we sit here at the end of April, it's hard not to think back to where we were at the end of January on our last quarterly call and consider just how much the world's changed in three short months. We've learned a lot, confirmed a lot, that we already believed about our team, our company, and our industry during this time. The way in which our team has responded to these unprecedented times, I think it's nothing short of remarkable. They're resilient, creative, they're driven. Our frontline field team welcome the monikers of essential and life-sustaining, and they never missed a beat.

Simple but they're crucial cnx is about optimizing the long-term nav per share and the single biggest Financial tool that we have at our disposal to do that is to generate free cash flow our companies on a Consolidated basis and then we place that cash flow that we generate and the right places at the right times. So if we do those three things focus on any of you for share generate free cash flow and then allocate that cash flow at the place is and and during the right times to count. We're going to have our owners placed in a position to succeed in this morning. We're providing a multi-year 7-year plan the Democrats cnx and cnx Midstream are going to generate free cash flow year in and year out Slide Five that's another important piece of the puzzle because it shows the cnx approach is not just talk but it is a functioning business model. There's a pretty extensive data set of accomplishments or actions standing behind it to back it up slide V shows. That cnx has been in front of and leading on Thursday.

Nicholas J. DeIuliis: They keep producing and flowing the natural gas that our society and economy relies on in times like these. Similarly, our corporate team transitioned seamlessly to the remote work scenario, and they continue to provide top-notch support to the operations team. I'm tremendously proud of how we've taken our game to another level and answered the call on behalf of our fellow citizens during this time. I want to take just a few minutes at the outset to thank our team and also say a word of thanks to all the other essential employees and businesses out there who are on the front lines doing their best to keep us all safe and healthy through the crisis. Thank you. If we start going through some of the key highlights, I'm gonna refer to the slide deck.

Nicholas J. DeIuliis: I'm gonna start with slide four in the deck that we posted this morning. I think slide four highlights important points that much of the additional items we're gonna discuss will flow from. Those points on slide four, they're simple, but they're crucial. CNX is about optimizing the long-term NAV per share, and the single biggest financial tool that we have at our disposal to do that is to generate free cash flow across our companies on a consolidated basis. Then we place that cash flow that we generate in the right places at the right times. If we do those three things, focus on NAV per share, generate free cash flow, and then allocate that cash flow at the places and during the right times to count, we're gonna have our owners placed in a position to succeed.

Out of issues surrounding EMP for some time. Now, we executed a number of strategic transactions where we streamlined our business lines the vesting what was non-core and investing and what was your day been programmatically hedging for years that is paid off. We from day one. We're very wary of committing to long-term take-or-pay owner of f t that would hobble cash flows and balance sheet. We reduced our overhead spend significantly before it was a necessity or too late. We were the first in basins who adopt technology like electric Frac fleets. We've been obsessing on being a low-cost producer for a number of years. Now, we realize the Strategic importance of retaining control of our Midstream assets and last but not least. We've been reducing debt and 11:15 for some time now.

Nicholas J. DeIuliis: This morning, we're providing a multi-year, seven-year plan that demonstrates CNX and CNX Midstream are going to generate free cash flow year in and year out. Slide five. That's another important piece of the puzzle because it shows the CNX approach is not just talk, but it is a functioning business model. There's a pretty extensive data set of accomplishments or actions standing behind it to back it up. Slide five shows that CNX has been in front of and leading on a lot of issues surrounding E&P for some time now. We executed a number of strategic transactions where we streamlined our business lines, divesting what was non-core and investing in what was core. We have been programmatically hedging for years, that has paid off. We, from day one, were very wary of committing to long-term take-or-pay onerous FT, that would hobble cash flows and balance sheet.

So I bought it shows how active q1 and early Q2 have been on keeping our approach action. There are a lot of items on Slide Five for q1 and Q2, Don and Chad are going to discuss many of them in a few minutes. But I just wanted to mention a couple of now first and most important slide seven. I think shows this cnx was free cash flow positive to the tune of $129 in q1 and we anticipate that's going to be prelude for great things to come in the next few years. Now, what drove the free cash flow for q1 a lot of things many of which I just mentioned all of which manifests into our faith in action another key accomplishment in the quarter was our ability to tap Capital markets. It very attractive rates that's evidenced on slide 8 with the Cardinal States Gathering project financing raised $175 million dollars at a six and a half percent interest rate. We talked about project financing in our prior earnings call and you saw this deal secured despite a really challenging environment overall dead.

Nicholas J. DeIuliis: We reduced our overhead spend significantly before it was a necessity or too late. We were the first in Basin to adopt technology, like electric frac fleets. We've been obsessing on being a low-cost producer for a number of years now. We realize the strategic importance of retaining control of our midstream assets. Last but not least, we've been reducing debt and deleveraging for some time now. Slide five, it shows how active Q1 and early Q2 have been on keeping our approach in action. There are a lot of items on slide five for Q1 and Q2. Don and Chad are gonna discuss many of them in a few minutes, but I just wanted to mention a couple now. First and most important, slide seven, I think shows this.

I think that shows that that's

Of our database and a strong position it occupies in the competitive commodity business that we operate within a q1 also gave us a chance to show our Capital allocation of free cash flow abilities that summarized on slide nine. We retired almost eighty million dollars in 2022 notes that is significant bargain discount the car this shows how powerful free cash flow can be and down Cycles or chaotic time when short-term market pricing and Market valuations disconnect from intrinsic value before I turn things over to Don and Chad. I did want to hit on two items for the first I may ask you to flip back to slide five and specifically take a look at the three items that are listed at the bottom half of the slide today. We roll out a 7-year business plan that shows the power of this company and its approach in action. The key result of focus on of this plan is Consolidated free cash flow across both CNS and cnx Midstream. That is the essence of how we drive our nav per share and yep.

Nicholas J. DeIuliis: CNX was free cash flow +$129 million in Q1, and we anticipate that's gonna be prelude for great things to come in the next few years. Now, what drove the free cash flow for Q1? A lot of things, many of which I just mentioned, all of which manifest into our approach and action. Another key accomplishment in the quarter was our ability to tap capital markets at very attractive rates. That's evidenced on slide 8 with the Cardinal States Gathering project financing, where we raised $175 million at a 6.5% interest rate. We talked about project financing in our prior earnings call, and you saw this deal secured despite a really challenging environment overall.

For able to effectively allocate capital and just a couple of Cliff Notes on The 7-year look before the team goes deeper into it first cnx and cnx Midstream. They are substantial fraction of generators each and every year of the seven year plan. That's true for the frontier twenty-twenty where we expect to generate $300 of free cash flow. That's true for next year 2021 where could expect to generate four hundred million dollars of free cash flow and that's true for 2022 and Beyond where we expect to generate on average $500 per year of free cash flow and that is certainly true, When we look at generate over three billion dollars of free cash flow across the two companies in the next seven years another point this plan substantially delivers our balance sheet that is already been in progress as you know, but it's only going to continue through the rest of 2021 and onward this plan over seven years has a very manageable and very modest activity pays tied to it. It's a maintenance of production plan for 22 and Beyond wage.

Nicholas J. DeIuliis: I think that shows the depth of our asset base and the strong position it occupies in the competitive commodity business that we operate within. Q1 also gave us a chance to show our capital allocation of free cash flow abilities. That's summarized on slide 9. We retired almost $80 million in 2022 notes at a significant bargain discount to par. This shows how powerful free cash flow can be in down cycles or chaotic times when short-term market pricing and market valuations disconnect from intrinsic value. Before I turn things over to Don and Chad, I did wanna hit on two items. For the first, I'm gonna ask you to flip back to slide 5, and specifically take a look at the three items that are listed at the bottom half of the slide.

Nicholas J. DeIuliis: Today, we roll out a seven-year business plan that shows the power of this company and its approach in action. The key result to focus on of this plan is consolidated free cash flow across both CNX and CNX Midstream. That is the essence of how we drive our NAV per share and how we're able to effectively allocate capital. Just a couple of CliffsNotes on the seven-year look before the team goes deeper into it. First, CNX and CNX Midstream, they are substantial free cash flow generators each and every year of the seven-year plan. That's true for the front year 2020, where we expect to generate $300 million of free cash flow. That's true for next year, 2021, where we expect to generate $400 million of free cash flow.

Requires about $25 and $300 and Consolidated capex each year to achieve another key point this plan and that must taste it leaves plenty of inventory in our Southwest PA Marcellus and leaves virtually untouched are central Pennsylvania Utica inventory. So the core inventory is going to be extensive at the end of the seven year plan and last the plans based on the reality of the forward strip when it comes to natural gas pricing if gas prices rally in the interim the ability to throttle up is there if and when we choose so again, these are sort of the cliff notes of the seven year plan A team's going to go into much more detail in a few minutes and the slide that holds much of that information in it the second and last thing I wanted to touch upon is summarized in the deck towards the back end of the the slides it starts on slides off and Beyond and that's basically the chapter on how cnx is uniquely positioned in different.

Nicholas J. DeIuliis: That's true for 2022 and beyond, where we expect to generate on average $500 million per year of free cash flow. That is certainly true cumulatively when we look to generate over $3 billion of free cash flow across the two companies in the next 7 years. Another point, this plan substantially delevers our balance sheet. That has already been in progress, as you know, but it's only going to continue through the rest of 2021 and onward. This plan over 7 years has a very manageable and very modest activity pace tied to it. It's a maintenance of production plan for 2022 and beyond, requires about 25 DUCs and $300 million in consolidated CapEx each year to achieve.

And I think the differentiation pops out across all kinds of different metrics first. We're the most hatch and the most protected in this down cycle. You can see that summarized on slide Thirty-One. If you go to slide Thirty to the next one or cash costs, they're based on leading especially when you recognize that we control our Midstream business again as summarized on on slide 32,000 balance sheet. I mentioned its strength. It's very strong particularly when County not just debt but also debt like and owner of f t obligations we illustrate that in slides thirty-three and thirty-four off that balance sheet is only going to get stronger with over three billion dollars of free cash flow projected over the next seven years and then the last point that free cash flow generation year-in and year-out. It delivered very impressive free cash flow yields for cnx. And we highlight that on slide thirty-seven impressive not just within Appalachian e&p and impressive not just for all of the MP, but I think I'm

Nicholas J. DeIuliis: Another key point, this plan and that modest pace, it leaves plenty of inventory in our Southwest PA Marcellus and leaves virtually untouched our Central Pennsylvania Utica inventory. The core inventory is gonna be extensive at the end of this seven-year plan. Last, the plan is based on the reality of the forward strip when it comes to natural gas pricing. If gas prices rally in the interim, the ability to throttle up is there if and when we choose. Again, these are sort of the Cliff Notes of the seven-year plan, and the team's gonna go into much more detail in a few minutes, and the slide deck holds much of that information in it. The second and last thing I wanted to touch upon is summarized in the deck towards the back end of the slides. It starts on slide 29 and beyond.

Is when you compare us to other Industries such as Industrials utilities and Consumer Staples, I think those cash Fields show housing.

Nicholas J. DeIuliis: That's basically the chapter on how CNX is uniquely positioned and different. I think the differentiation pops out across all kinds of different metrics. First, we're the most hedged and the most protected in this downcycle. You can see that summarized on slide 31. If you go to slide 32, the next one, our cash costs, they're basin-leading, especially when you recognize that we control our midstream business, again, as summarized on slide 32. The balance sheet, I mentioned its strength. It's very strong, particularly when counting not just debt, but also debt-like and onerous FT obligations. We illustrate that in slides 33 and 34. That balance sheet is only gonna get stronger with over $3 billion of free cash flow projected over the next 7 years.

Can access more of a capital allocation firm than an e&p firm in some ways and the CNS is a great investment opportunity for investors be on traditional energy investors now with that. I'm going to turn things over to chat who's took over some of the operational details? Okay. Thanks Nick. I'm going to start on the twenty-twenty Plan update section lot 11 highlights the following the end of the first quarter. We completed our spring wage determination of the revolving credit facility at one point nine billion dollars with bank commitments at the same level.

The reduction from the prior two point 1 billion dollar commitment was driven by the Cardinal States project financing in the queue one hits quantization of fifty-five million, Nick discussed during his remarks. The rbl was favorably predetermined wage level despite lower Bank price tax and the two transactions maintaining plenty of liquidity for the company.

Nicholas J. DeIuliis: The last point, that free cash flow generation, year in and year out, it delivers very impressive free cash flow yields for CNX, and we highlight that on slide 37. Impressive, not just within Appalachian E&P, and impressive not just for all of E&P, but I think impressive when you compare us to other industries such as industrials, utilities, and consumer staples. I think those cash yields show how CNX is more of a capital allocation firm than an E&P firm in some ways, and that CNX is a great investment opportunity for investors beyond traditional energy investors. Now, with that, I'm gonna turn things over to Chad, who's gonna go over some of the operational details.

As we work through the final days of the redetermination the oil and gas space was being hit simultaneously by two generational shocks first OPEC and Russia began a price for flooding the market with Thursday and then secondly covid-19 became a global pandemic. I'll provide some additional detail as to how we're adjusting our day-to-day business as a result of those two major events.

First we took the health and safety of our workers very seriously. We were one of the first businesses in the region to send his office staff to work from home and we quickly developed a response protocol in line with CDC recommendation to ensure our field employees could continue to perform their essential roles of minimizing contagion risk and worked very closely with our service providers to ensure broad adoption of similar. We will continue to monitor the situation and recommendations closely and hopefully soon we can all begin working our way back to normal.

Chad A. Griffith: Okay, thanks, Nick. I'm going to start on the 2020 plan update section. Slide 11 highlights that following the end of the Q1, we completed our spring redetermination of the revolving credit facility at $1.9 billion with bank commitments at the same level. The reduction from the prior $2.1 billion commitment was driven by the Cardinal States Gathering project financing and the Q1 hedge monetization of $55 million that Nick discussed during his remarks. The RBL was favorably redetermined at this level despite lower bank price decks and the two transactions maintaining plenty of liquidity for the company. As we worked through the final days of the redetermination, the oil and gas space was being hit simultaneously by two generational shocks. First, OPEC and Russia began a price war flooding the market with oil, and then secondly, COVID-19 became a global pandemic.

As always we are keeping a very close eye on the commodity markets the flood of oil into the market and sudden collapse and demand for many types of refined fuels has put tremendous pressure on oil prices rig truck and tractors on the oil patch are dropping rapidly. And with that dropping activity Associated gas will also decline which is clearly good for natural gas prices and we've seen a lot of strength returns our prices for the dead of winter and in the twenty Twenty-One, but the the biggest question is how much oil will be shut in as we work our way out of this crisis it boil and Associated gas continue to flow during the summer. We expect gas prices remain low, but rally strong in the winter as existing Wells Decline and not replace do too much lower rig activity.

Chad A. Griffith: I'll provide some additional detail as to how we're adjusting our day-to-day business as a result of those two major events. First, we took the health and safety of our workers very seriously. We were one of the first businesses in the region to send its office staff to work from home. We quickly developed a response protocol in line with CDC recommendations to ensure our field employees could continue to perform their essential roles while minimizing contagion risk, and worked very closely with our service providers to ensure broad adoption of similar protocols. We will continue to monitor the situation and recommendations closely, and hopefully soon we can all begin working our way back to normal. As always, we are keeping a very close eye on the commodity markets.

On the other hand if oil storage is full and oil producers are forced to shut it now, we would expect Associated gas to immediately disappear from the system and gas prices to be stronger over the next few months off then be pressured again when these oil wells are turned back online and we as we come out of the crisis.

Regardless of which way it plays out. We have plans to maximize our cash flow and are nav.

Slat, 12 illustrates one extreme of that plan ordinarily we would try to well on as soon as it is ready to flow the typical volatility and gas prices for the spread between summer winter just woke up to justify waiting, but the current Dynamics are so extreme and the price curve so steep that was certain Wells we would expect to make more cash flow and increase present value by shaping their near-term production profile in order to flow more their production during the dramatically higher prices in winter in in 2021 West Productions with the current pricing of ngos and condensate and it's higher operating cost, you know processing are prime candidates for this opportunity, but it could also apply to any brand new shell well due to how front-loaded their production profiles are.

Chad A. Griffith: The flood of oil into the market and sudden collapse in demand for many types of refined fuels has put tremendous pressure on oil prices. Rig activity and frac crews on the oil patch are dropping rapidly, and with that drop in activity, associated gas will also decline, which is clearly good for natural gas prices. We've seen a lot of strength return to prices for this coming winter and into 2021. To us, the biggest question is how much oil will be shut in as we work our way out of this crisis. If oil and associated gas continue to flow during the summer, we expect gas prices to remain low but rally strong in the winter as existing wells decline and not replaced due to much lower rig activity.

Chad A. Griffith: On the other hand, if oil storage is full and oil producers are forced to shut it now, we would expect associated gas to immediately disappear from the system and gas prices to be stronger over the next few months, but then be pressured again when these oil wells are turned back online as we come out of the crisis. Regardless of which way it plays out, we have plans to maximize our cash flow and our NAV. Slide 12 illustrates one extreme of that plan. Ordinarily, we would turn a well on as soon as it is ready to flow. The typical volatility in gas prices or the spread between summer and winter just aren't enough to justify waiting.

We believe the cnx is ability to do this is unique.

your group

513 illustrates the range of potential outcomes as we continually assess the changing Market if we shape our production into winter and twenty Twenty-One. We would expect 2020 production to be lower and not reflected that in the low end of our guidance range. The low case assumed the Lange to turn in line three new pads and delaying production from our from our wet gas surely Pennsboro field both until I fall

On the other hand if summer prices were improved materially we retain full flexibility to accelerate that production back into twenty-twenty and that is captured in the high end of our production guidance range. However, even in that high case we are assuming some partially delayed production from our web production areas for two to three months as we work through the worst of the NGO and condensate month.

Chad A. Griffith: The current dynamics are so extreme and the price curve so steep that with certain wells, we would expect to make more cash flow and increase present value by shaping their near-term production profile in order to flow more of their production during the dramatically higher prices in winter in 2021. Wet production with the current pricing of NGLs and condensate and its higher operating costs due to processing are prime candidates for this opportunity. It could also apply to any brand-new shale well due to how front-loaded their production profiles are. We believe that CNX's ability to do this is unique amongst its peer group. Slide 13 illustrates the range of potential outcomes as we continually assess the changing market.

514 highlight some of the impacts of the oil situation on gl's the issues for oil have also impaired the price for ngls and condensate wire optimistic that this will resolve itself quickly the storage over paying and raised the man recovery our huge wild cards. So we're taking a very conservative approach our guidance and as soon rock bottom prices for the remainder of Summer with very modest recovery in in the queue for Monday, but please note that cnx is less impacted by this current dynamic because we have very low percentage of web production and the ability to blend the portion of that web production. Overall. We're assuming around 5 or 2020 production is but by revenue is wet as wet gas.

Chad A. Griffith: If we shape our production into winter in 2021, we would expect 2020 production to be lower, and we've reflected that in the low end of our guidance range. The low case assumes delaying the turn in line of three new pads and delaying production from our wet gas Shirley-Pennsboro field, both until late fall. On the other hand, if summer prices were to improve materially, we retain full flexibility to re-accelerate that production back into 2020, and that is captured in the high end of our production guidance range. However, even in that high case, we are assuming some partially delayed production from our wet production areas for two to three months, as we work through the worst of the NGLs and condensate market conditions. Slide 14 highlights some of the impacts of the oil situation on NGLs.

516 provides more details on our updated twenty twenty guns as already discussed. We are optimizing our production profile in twenty-twenty and expect to fluctuate within this up range as commodity markets evolve or the remainder of the Year. We're also slightly reducing our capital budget primarily as a result of improved service costs Scenic Midstream announced a Revolt to the distribution this morning, which results in a reduction are stand-alone even acts of fifty million dollars during the year. Despite are even tax going down. We expect free cash flow to increase by $50.

Chad A. Griffith: The issues for oil have also impaired the price for NGLs and condensate. While we're optimistic that this will resolve itself quickly, the storage overhang and rate of demand recovery are huge wild cards. We've taken a very conservative approach in our guidance and assumed rock bottom prices for the remainder of summer with very modest recovery into the Q4. Please note that CNX is less impacted by this current dynamic because we have very low percentage of wet production and the ability to blend the portion of that wet production. Overall, we are assuming around 5% of our 2020 production by revenue is wet gas. Slide 16 provides more details on our updated 2020 guidance.

I will wrap my remarks up on 517 our Midstream company. See you next time Midstream Partners is a strategic and very valuable part of the cnx Enterprise. The company is committed a massive filled out in the southwest PA offering region to support this feature development. Now that that is complete to go forward capital intensity of the company would be significantly lower and they will maintain stable free cash flow from their fixed fee commercial agreements.

See you next time follows a similar philosophy at cnx, and it's focused on Capital allocation and strong balance sheet as I mentioned this morning. They announced the reduction to his distribution, which increases can log into the company by Thirty million dollars each quarter. This will benefit their already best-in-class balance sheet and financial and their financial position moving forward with that hand it over to Don Jose is Chad and good morning everyone. I would like to start by giving an update on our near-term maturity management plan as you heard from Nick and chat earlier, and as you can see on slide nineteen month, we have made a tremendous amount of progress in just one quarter in q1 alone. We generated three hundred million dollars to use towards the 2022 bonds and we expect to generate another $200 in addition to effectively reduce our near-term maturity by over five hundred million dollars within this calendar year.

Chad A. Griffith: As already discussed, we are optimizing our production profile in 2020 and expect to fluctuate within this updated range as commodity markets evolve over the remainder of the year. We're also slightly reducing our capital budget primarily as the result of improved service costs. CNX Midstream announced a reduction to their distribution this morning, which results in a reduction to our standalone EBITDAX of $50 million during the year. Despite our EBITDAX going down, we expect free cash flow to increase by $50 million. I will wrap my remarks up on slide 17. Our midstream company, CNX Midstream Partners, is a strategic and very valuable part of the CNX enterprise. The company has completed a massive build-out in the Southwest PA operating region to support CNX's future development.

And as mentioned previously.

We have already bought back approximately 10% of our outstanding 22 bonds this year.

Chad A. Griffith: Now that the build-out is complete, the go-forward capital intensity of the company will be significantly lower, and they will maintain stable free cash flow from their fixed-fee commercial agreements. CNXM follows a similar philosophy as CNX and is focused on capital allocation and strong balance sheets. As I mentioned, this morning they announced the reduction to its distribution, which increases cash retained to the company by $30 million each quarter. This will benefit their already best-in-class balance sheet and their financial position moving forward. With that, I'll hand it over to Don.

Slide twenty shows how much R E M P net that position changes by your end twenty-twenty and as you can see the remaining $350 of near term maturities wage can easily be managed using free cash flow that is expected to be generated by cnx protected by our heads book prior to their maturity date.

Looking forward or liquidity looking forward to 20 20 or liquidity remains strong and our next Bond maturity isn't until 2027. Once the 2022 bonds are behind us.

Donald W. Rush: Thanks, Chad, and good morning, everyone. I would like to start by giving an update on our near-term maturity management plan. As you heard from Nick and Chad earlier, and as you can see on slide 19, we have made a tremendous amount of progress in just one quarter. In Q1 alone, we generated $300 million to use towards the 2022 bonds, and we expect to generate another $200 million in 2020 to effectively reduce our near-term maturity by over $500 million within this calendar year. As mentioned previously, we have already bought back approximately 10% of our outstanding 2022 bonds this year. Slide 20 shows how much our E&P net debt position changes by year-end 2020.

Those facts coupled with our significant expected Consolidated free cash flow generation capability really are anticipated to set the company up with an ironclad balance sheet and significant free cash flow allocation optionality going forward.

Slide Twenty-One shows MP leverage ratios improving a 2020 and we expect both to continue to improve materially with cash flow generated from the business as we move forward using the current nymex gas trip. This is a unique place to be in the empty space.

Slide 22 highlights that the debt markets are starting to recognize our balance sheet strength, as you can see on the slide. Our 2022 bonds are trading very well indicating that the market anticipates we can easily address them.

Donald W. Rush: As you can see, the remaining $350 million of near-term maturities can easily be managed using free cash flow that is expected to be generated by CNX, protected by our hedge book prior to their maturity date. Looking forward to 2020, our liquidity remains strong, and our next bond maturity isn't until 2027 once the 2022 bonds are behind us. Those facts, coupled with our significant expected consolidated free cash flow generation capability, really are anticipated to set the company up with an iron-clad balance sheet and significant free cash flow allocation optionality going forward. Slide 21 shows E&P debt and E&P leverage ratios improving in 2020, and we expect both to continue to improve materially with cash flow generated from the business as we move forward using the current NYMEX gas strip.

Starting on slide twenty-four, I will begin discussing or seven year out looked in the excitement of our go for business plan and it is important to note that this plan is depends. Since it is based on the Ford gas prices as they exist today and on capex cost that we are already achieving anchoring the numbers in reality and leaving plenty of upside as we move forward. But before I get into the numbers, I want to explain the rationale of the seven year plan and really break it down into two pieces as you can see on slide 24.

We've said for a while now that our heads book not only protects us from downturns, but it also acts as a bridge and provides us the wherewithal to reposition the business for a lower for lunch or commodity strip if that's what the future would hold with the benefit of hindsight that plan was clearly very effective the $700 of Consolidated free cash flow generated across twenty twenty and twenty Twenty-One back stop by our heads booked coupled with our cost structure prior infrastructure Investments project financing our Midstream control and our team has set us up to thrive in the near-term and sets us up to thrive and produce significant free cash flow and years 2022 and Beyond in the current lower than $2.56 gas strip that is out there today.

Donald W. Rush: This is a unique place to be in the E&P space. Slide 22 highlights that the debt markets are starting to recognize our balance sheet strength. As you can see on the slide, our 2022 bonds are trading very well, indicating that the market anticipates we can easily address them. Starting on slide 24, I will begin discussing our 7-year outlook and the excitement of our go-forward business plan. It is important to note that this plan is dependable since it is based on the forward gas prices as they exist today and on CapEx costs that we are already achieving, anchoring the numbers in reality and leaving plenty of upside as we move forward. Before I get into the numbers, I want to explain the rationale of the 7-year plan and really break it down into two pieces, as you can see on slide 24.

None of our peers can make that claim.

We're one of one in that regard.

Chad is already laid out 2020. So I wanted to spend some time on 20 21 as you can see on slide twenty-five slide 20-21 is setting up extremely well and the moves we are back in 2020 or making it that much better. There's a lot of optimism out there on 2021 gas prices and I can tell you that if it ends up being reality we can easily wage increase our volumes to 600 bcfe that year and produce more than the $400 of Consolidated free cash flow that we show.

Donald W. Rush: We've said for a while now that our hedge book not only protects us from downturns, but it also acts as a bridge and provides us the wherewithal to reposition the business for a lower for longer commodity strip if that's what the future would hold. With the benefit of hindsight, that plan was clearly very effective. The $700 million of consolidated free cash flow generated across 2020 and 2021, backstopped by our hedge book, coupled with our cost structure, prior infrastructure investments, project financing, our midstream control, and our team, has set us up to thrive in the near term and sets us up to thrive and produce significant free cash flow in years 2022 and beyond in the current lower than $2.50 gas strip that is out there today. None of our peers can make that claim.

And you need to have 20 21 gas prices are not higher we can have a more conservative production profile and still produce the $400 of free cash flow that we've laid out and get ready for any price movement in 2022.

Now that the business has matured into our current production profile. We will always maintain the ability to produce significant free cash flow in an up gas price cycle or down gas price cycle that time will serve us well going forward now looking out the 2022 and Beyond or business really becomes a very simple story as you can begin to see on / 26 and 27 or Capital intensity intensity and cost structure drop. We don't have any ft or other fixed costs obligations to grow into we don't have large debt burdens to tackle Thursday. We don't have expiring Acres or inventory issues dictating or development pace.

Donald W. Rush: We are one of one in that regard. Chad has already laid out 2020, so I wanted to spend some time on 2021. As you can see on slide 25, 2021 is setting up extremely well, and the moves we are making in 2020 are making it that much better. There's a lot of optimism out there on 2021 gas prices, and I can tell you that if it ends up being reality, we can easily increase our volumes to 600 BCFE that year and produce more than the $400 million of consolidated free cash flow that we show.

Basically, we methodically Harvest our core areas at a pace of around twenty-five Wells a year on average and produced significant free cash flow under the strip. And as you can see on May 28th, we averaged $500 a year with this plan and I'm going to say it again as it's worth repeating. These projections are based all in the go-forward gas Ford's as they exist today off and as the slide shows the gas prices get back to $2.75 to $3 range the free cash with numbers will grow even larger.

Donald W. Rush: Unique to us, if 2021 gas prices are not higher, we can have a more conservative production profile and still produce the $400 million of free cash flow that we've laid out and get ready for any price movement in 2022. Now that the business has matured into our current production profile, we will always maintain the ability to produce significant free cash flow in an up gas price cycle or a down gas price cycle. That type of optionality will serve us well going forward. Now, looking out to 2022 and beyond, our business really becomes a very simple story. As you can begin to see on slides 26 and 27, our capital intensity and cost structure drop. We don't have any FT or other fixed cost obligations to grow into.

And we do feel that over the long-term $3 gas prices make more sense than 240 gas prices do most companies in the empty space are struggling to create business models that are free cash for the neutral at the current strip cash flow neutral under the strip is not a business strategy. It's more smoke and mirrors which is why the debt-equity and private Equity markets are skittish like say the least about our industry. They've been burned too many times in the past a goal of hoping to break even refinance that and then continuing to break even is not a strategy if your own know running to pay lease holders g p and t companies service companies and pay debt holders interest. You've already lost which is why we feel that over the long-term. If MP companies are forced to use their own money to fund their own cash needs prices will rise to support that.

Donald W. Rush: We don't have large debt burdens to tackle, and we don't have expiring acres or inventory issues dictating our development pace. Basically, we methodically harvest our core areas at a pace of around 25 wells a year on average and produce significant free cash flow under the strip. As you can see on slide 28, we average $500 million a year with this plan. I'm going to say it again, as it's worth repeating. These projections are based on the go-forward gas forwards as they exist today. As the slide shows, if gas prices get back to $2.75 to $3 range, the free cash flow numbers will grow even larger.

in conclusion

Like to expand on some points that Nick touched on earlier today. See you next is go for business plan is unique and it's very difficult to try and replicate our journey to get Where We Are Young was long methodical and against the grain we're proud of that what we've accomplished and how we accomplished it, but we're not done and The Best Is Yet To Come while all of our pages are trying to survive a $2.50 type nymex gas price trip to see you next plan for it and now is built to excel in it.

Donald W. Rush: We do feel that over the long term, $3 gas prices make more sense than $2.40 gas prices do. Most companies in the E&P space are struggling to create business models that are free cash flow neutral at the current strip. Cash flow neutral under the strip is not a business strategy. It's more smoke and mirrors, which is why the debt, equity, and private equity markets are skittish to say the least, about our industry. They've been burned too many times in the past. A goal of hoping to break even, refinance debt, and then continuing to break even is not a strategy. If you're only running to pay leaseholders, GP&T companies, service companies, and pay debt holders interest, you've already lost.

And the reasons we are are due to the attributes. You will find on slide 30 simply put to be successful. You need high end to your 1 Acres off. You need a best-in-class cost structure. You need a strong balance sheet and a nibble business model with low fixed-cost. It can adapt to changing commodity prices you need. Well thought-out and capitalized wage structure. You need to control your own Midstream destiny.

Donald W. Rush: Which is why we feel that over the long term, if E&P companies are forced to use their own money to fund their own cash needs, prices will rise to support that. In conclusion, I would like to expand on some points that Nick touched on earlier today. CNX's go-forward business plan is unique and is very difficult to try and replicate. Our journey to get where we are was long, methodical, and against the grain. We're proud of that, what we've accomplished, and how we accomplished it. We're not done, and the best is yet to come. While all of our peers are trying to survive a $2.50 type NYMEX gas price strip, CNX planned for it and now is built to excel in it. The reasons we are due to the attributes you will find on slide 30.

You need substantial Revenue prediction and you need a forward-thinking proactive team from top to bottom which see you next has these attributes or would allow us to have a rock-solid foundation a case.

The generate substantial free cash flow even in the low parts of the commodity cycle. And while we look at it the current strip. We will look even better in a high higher gas price environment thousand more free cash flow generation in a world-class inventory position to accelerate development and production when the time is right.

A large inventory of tier-one Southwest. Marcellus acreage and are phenomenal CPA Utica acreage will allow us to capture any upside for a long time to come.

these characteristics are what allow us to have the 7-year plan that we do and in our mind it is the only way you can be a successful e&p company over the long haul all of this was built through years and years of hard work and then ensures we are by far the best position to be the leader in this space and for years to come and I am personally looking forward to a future or Capital mortgage remain picky and where the private-equity energy model is becoming extinct a world where our peers in the empty space can only spend money that their business generate that their businesses generate wage is a world in which cnx will dominate and

Donald W. Rush: Simply put, to be successful, you need high NRI Tier 1 acres, you need a best-in-class cost structure, you need a strong balance sheet and a nimble business model with low fixed cost that can adapt to changing commodity prices. You need well thought out and capitalized infrastructure. You need to control your own midstream destiny. You need substantial revenue protection, and you need a forward-thinking, proactive team from top to bottom, which CNX has. These attributes are what allow us to have a rock-solid foundation case that generates substantial free cash flow, even in the low parts of the commodity cycle. While we look good at the current strip, we will look even better in a higher gas price environment, with even more free cash flow generation and a world-class inventory position to accelerate development and production when the time is right.

Slide twenty-seven translates our annual free cash flow projections for 20 21 into a free cash flow yield as you can see it is by far the best cash flow yield among our Appalachian. Group and the best free cash flow yield in the mid-cap e&p space.

Donald W. Rush: Our large inventory of Tier 1 Southwest PA Marcellus acreage and our phenomenal core PA Utica acreage will allow us to capture any upside for a long time to come. These characteristics are what allow us to have the seven-year plan that we do. In our mind, it is the only way you can be a successful E&P company over the long haul. All of this was built through years and years of hard work, and it ensures we are by far the best positioned to be the leader in this basin for years to come. I am personally looking forward to a future where capital markets remain picky and where the private equity energy model is becoming extinct. A world where our peers in the E&P space can only spend money that their businesses generate is a world in which CNX will dominate in.

And remember the 2021 cash flow yield shown here is protected by our best-in-class heads book going forward in 2022 and beyond our free cash flow yield climbs even higher into the the 20% range at our current share price bottom line when you couple are free cash flow yield with our strong balance sheet. It makes for a truly exceptional investment in any industry month let alone relative to our peers.

and remember

The Nexus guidance is based off of the current nymex gastro.

It takes away box on slide. Thirty-eight sums it up perfectly. See you. Next is by for the best combination of a downside protected company with an enormous amount of upside and from a relative Investor's standpoint. It is hard to find a better opportunity right now in any industry with that. I will turn it back over to Tyler great operator if you could open a line of please for Q&A at this time.

Donald W. Rush: Slide 27 translates our annual free cash flow projections for 2021 into a free cash flow yield. As you can see, it is by far the best free cash flow yield among our Appalachian peer group, and the best free cash flow yield in the midcap E&P space period. Remember, the 2021 cash flow yield shown here is protected by our best-in-class hedge book. Going forward in 2022 and beyond, our free cash flow yield climbs even higher into the mid-20% range at our current share price. Bottom line, when you couple our free cash flow yield with our strong balance sheet, it makes for a truly exceptional investment in any industry, let alone relative to our peers. Remember, CNX's guidance is based off of the current NYMEX gas strip. The takeaway box on slide 38 sums it up perfectly.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing. The keys off question has been answered and you wish to withdraw your question, please press the star then to we will pause Ramon moment to assemble our roster.

Our first question today will come from Wells Fitzpatrick of SunTrust, please go ahead and your question.

Hey, good morning. And thanks for the love. The aggressively worded prepared remarks with it's a good guy. That's a good multi-year guide off on on page twenty-five you guys, you know, you guys talk obviously to accelerating is that more function of gas prices, or is it a function of sort of the opportunity cost? Would that be you know, your bond prices or or or other other items getting less attractive?

Donald W. Rush: CNX is by far the best combination of a downside protected company with an enormous amount of upside. From a relative investment standpoint, it is hard to find a better opportunity right now in any industry. With that, I will turn it back over to Tyler.

Tyler Lewis: Great. Operator, if you could open the line up, please, for Q&A at this time.

Yeah, you know, this is Dawn appreciate while I think it's a combination of both, you know, as you roll forward, you would assume that that bond yields and those sorts of things would be better. Right if if the prices are better so, you know right now we're we're thinking along the lines of really the the dispatch incremental cruise to kind of accelerate some production. So that that's very well within a stroll to do is Chad laid out predicting the future right now is is as hard as cloudy as ever and the volatility of a what it could be on the high side of the low sides pretty meaningful. So it says we sit here today. We're kind of a wait-and-see mode. We have the ability to to quickly to move up or down depending on how the the really the summer shakes out. And I think is we're sitting here in September October will have a pretty clear indication of winter in 2021 is going to play out and if it's on the bullish side of the thesis which would be great. We have a really great opportunity to take advantage of that and if it doesn't turn out to be to be that that dog

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If your question has been answered and you wish to withdraw your question, please press star then two. We will pause for one moment to assemble our roster. Our first question today will come from Welles Fitzpatrick of SunTrust. Please go ahead with your question.

Welles Fitzpatrick: Hey, good morning, and thanks for the prepared remarks. I love the aggressively worded prepared remarks. It's a good guide. It's a good multiyear guide. On page 25, you guys, you know, talk obviously about accelerating. Is that more a function of gas prices, or is it a function of sort of the opportunity cost, whether that be, you know, your bond prices or other items getting less attractive?

We have the ability to still produce a significant amount of free cash flow and sort of save some of that say some of that production and just stay steady state for longer.

Donald W. Rush: Yeah. You know, this is Don. I appreciate, Wells. I think it's a combination of both. You know, as you roll forward, you would assume that bond yields and those sorts of things would be better, right? If gas prices are better. You know, right now we're thinking along the lines of really the idea to dispatch incremental crews to kinda accelerate some production. That's very well within our control to do. As Chad laid out, predicting the future right now is as hard and as cloudy as ever, and the volatility of what it could be on the high side or the low side is pretty meaningful. So as we sit here today, we're kind of a wait-and-see mode.

Donald W. Rush: Yeah. You know, this is Donald. I appreciate, Wells. I think it's a combination of both. You know, as you roll forward, you would assume that bond yields and those sorts of things would be better, right? If gas prices are better. You know, right now we're thinking along the lines of really the idea to dispatch incremental crews to kinda accelerate some production. That's very well within our control to do. As Chad laid out, predicting the future right now is as hard and as cloudy as ever, and the volatility of what it could be on the high side or the low side is pretty meaningful. So as we sit here today, we're kind of a wait-and-see mode.

Okay, and then on the production profile you talk about on 13 and the potential to choke back some wells and and Shirley Pennsboro. Am I correct in assuming that if there are any sort of mid-stream or processing penalties related to that they'll be relatively de minimis.

There are some well commitments and volume commitments in that area. They are they are factored into the guidance numbers that we provided. You know, what we've certainly trying to work with service providers to find find ways to you know, to to modify those where we we both benefit sort of find win-win Solutions there but there there are minimum volume commitments initially Pennsboro are dead. So those are out there. They're not they're not huge but they they they are out there in in you can see in the appendix where we go through some of our other operating expenses there. There is a slight uptick in that didn't like Chad said it's it's factored into the all in economics of these decisions and still including those from a just purely free cash near term free cash flow standpoint off next couple of years. It's a it's a more creative decision to go ahead and and, you know, wait, so on some of this production again as a strip exists today if if conditions change or processing things change then you know, maybe log

Donald W. Rush: We have the ability to quickly move up or down, depending on how really the summer shakes out. I think as we're sitting here in September, October, we'll have a pretty clear indication of how the winter in 2021 is gonna play out. If it's on the bullish side of the thesis, which would be great, we have a really great opportunity to take advantage of that. If it doesn't turn out to be that world, we have the ability to still produce a significant amount of free cash flow and sort of save some of that production and just stay steady state for longer.

Welles Fitzpatrick: Okay. On the production profile you talk about on 13 and the potential to choke back some wells in Shirley-Pennsboro. Am I correct in assuming that if there are any sort of midstream or processing penalties related to that, they'll be relatively de minimis?

We change but right now using the four numbers, it makes just logical rational sense. It's it's difficult to I guess swim upstream and enforce some of this, you know, production and products and services right now that aren't great prices. So if you have the ability and the capital structure to to wait a little bit it's the proof of choice.

Donald W. Rush: Well, there are some well commitments and volume commitments in that area. They are factored into the guidance numbers that we provided. You know, we certainly will try to work with those service providers to find ways to modify those where we both benefit, sort of find win-win solutions there. There are minimum volume commitments in the Shirley-Pennsboro area. Those are out there. They're not huge, but they are out there. You can see in the appendix where we go through some of our other operating expenses, there is a slight uptick in that. Like Chad said, it's factored into the all-in economics of these decisions.

Okay, perfect that that makes sense. Thank you for that day.

Our next question comes from Samir panjwani of tph, please. Go ahead with your question.

Good morning, guys. So when do you think about the longer-term free cash flow and debt profile, you know, the the cumulative twenty twenty-two through twenty-six free cash flow is expected to be above the cumulative outstanding debt after the 2022 maturity. So should we think about see you next transitioning to a note that business or is there a change in your thought on Leverage and with this transmission would it be fair to see or to think about see you next transitioning to more of a cash distribution model over time?

Donald W. Rush: Still including those from a just purely free cash near term, free cash flow standpoint over the next couple years, it's a more creative decision to go ahead and, you know, wait on some of this production. Again, as the strip exists today. If conditions change or processing things change, then, you know, maybe we change. But right now, using the forward numbers, it makes just logical, rational sense. It's difficult to, I guess, swim upstream and force some of this, you know, production and products into places right now that aren't great prices. If you have the ability and the capital structure to wait a little bit, it's the prudent choice.

Yes, so, this is Dawn. So I'll answer that question in a couple of parts. So so one I think you know again talked a little bit about our heads books historically being not only just returned protection and near-term cash flow and leverage protection. But really was was a bridge to allow us to reposition the business and talked about being able to do that for a little gas price environment. But but also I think it's it was a month. I don't think quite understood historically that it allowed us to change our our capital structure over this course of this couple of years. And I think it's it's pretty well known in apparent that the the goalposts for a healthy balance sheet and if he space has changed so looking forward to to where we need to position the business we do think over twenty and Twenty-One. It allows us to get into more optimal Kathy structure will for a debt would sit there today. So for 20 22 going forward will you know, obviously position the business and place the the free cash flow and and the best buckets that that wage.

Welles Fitzpatrick: Okay, perfect. That makes sense. Thank you for the update.

Operator: Our next question comes from Sameer Panjwani of TPH. Please go ahead with your question.

Operator: Our next question comes from Sameer Panjwani of Tudor, Pickering, Holt & Co. Please go ahead with your question.

Sameer Panjwani: Good morning, guys. When you think about the longer term free cash flow and debt profile, you know, the cumulative 2022 through 2026 free cash flow is expected to be above the cumulative outstanding debt after the 2022 maturity. Should we think about CNX transitioning to a no-debt business, or is there a change in your thought on leverage? With this transition, would it be fair to see or to think about CNX transitioning to more of a cash distribution model over time?

At the time sitting here today, it's hard to know which part of the the puzzle that that that would the free cash flow that we generate would go will go into I think you know, the best way to think about it is is looking would you know what we've done historically we've we've used free cash flow.

Donald W. Rush: Yeah. This is Don. I'll answer that question in a couple parts. One, I think you know, again, talked a little bit about our hedge books historically being not only just, call it, return protection, near-term cash flow, and leverage protection, but really was a bridge to allow us to reposition the business, and talked about being able to do that for a low gas price environment. Also, I think it was important, and I don't think it was quite understood historically, that it allowed us to change our capital structure over the course of those couple years. I mean, I think it's pretty well known and apparent that the goalpost for a healthy balance sheet in the E&P space has changed.

Paid on that we've just free cash flow to to grow production. We've used free cash flow for whether it's infrastructure land or Acquisitions. We've we've lose used for cash flow to return Capital to shareholders. So, you know the office location firm what we're comfortable with taking that cash flow and putting it into the place that makes the most sense at that time and you know to to sum it up it's we recognize the balance sheet and leverage ratio off TV companies have changed like I mentioned at that that's a good term good thing for for us and for the long-term health of the industry and will be ready and have a substantial amount of cash to invest in 2022 Beyond and will stay true to our philosophies and follow a math on where it goes at that time.

Donald W. Rush: Looking forward to where we need to position the business, we do think over 2020 and 2021, it allows us to get into, call it, a more optimal capital structure where our debt would sit there today. For 2022 going forward, we'll, you know, obviously position the business and place the free cash flow in the best buckets that we should at the time. Sitting here today, it's hard to know which part of the puzzle that the free cash flow that we generate would go into. I think, you know, the best way to think about it is looking at what, you know, what we've done historically. We've used free cash flow to pay down debt. We've used free cash flow to grow production.

That's really helpful. And I'm sorry if I miss it on the prepared remarks, but did you quantify what that leverage profile would look like if you talking about the shifting goalposts here?

Yes, we talked trying to figure out what slot it is. I'm sorry. I don't slide.

Flight twenty one. We have our leverage ratio going down to 2 to 1 at the end of the year and in sort of dropping below that in twenty one and clearly with the the free cash flow of generating profile. I mean if if so if so necessary like you mentioned you we could pay off all over that or if something more of a call it a one time or one-and-a-half time is the right goalpost or you know, get Maybe by 2022 and Thursday. Yeah, you have different different Capital markets at that time to to to be more conducive to call it healthier gas prices and and being more selective on who they get money to than than maybe that that's something that you could be in so somewhere in that in that range I think is where we're heading and we're we're we're exactly the land is hard to tell it's pretty clear for us over the 20 and 21 with the with the optimum kind of use of incremental dollars are and as we get get get beyond that point hard to know when you know, but we'll we'll react accordingly to the to the to the metrics and variables as the exist once we get into that.

Donald W. Rush: We've used free cash flow for whether it's infrastructure, land, or acquisitions. We've used free cash flow to return capital to shareholders. You know, as a capital allocation firm, we're comfortable with taking that cash flow and putting it into the place that makes the most sense at that time. You know, to sum it up, we recognize the balance sheet and leverage ratio metrics for healthy E&P companies have changed. Like I mentioned, that's a good turn, a good thing for us and for the long-term health of the industry. We'll be ready and have a substantial amount of cash flow to invest in 2022 and beyond, and we'll stay true to our philosophies and follow the math on where it goes at that time.

Sameer Panjwani: That, that's really helpful. I'm sorry if I missed it in the prepared remarks, but did you quantify what that leverage profile would look like as you talk about the shifting goalposts here?

Call back after 21 and into twenty twenty-two time frame.

Okay. Okay got it. And then as you lay out the maintenance program for that longer-term. How should we think about the trajectory of the base decline over time and also the wage rate of not spending we lay it out a little bit on that slide twenty-seven on on sort of non DNC spending. So, you know, we've talked a lot about the last couple months and try to be as thorough as we could explaining that some of the The Upfront Investments that we were making in our in our water systems in our land positions in our infrastructure systems were really going to call it alone now, it's a step change and costs and capital efficiency going forward and and I think you'll start your starting to see that now that we've given, you know, even more transparency and Clarity going forward. So step change meaningfully and non-wage across the Consolidated both upstream and Midstream going forward and and like you mentioned the longest day and in a maintenance of production type profile the the I guess the lower your birth.

Donald W. Rush: Yeah. We talked. I'm trying to figure out what slide it is. I'm sorry. Slide 21. We have our leverage ratio going down to 2.21 at the end of the year, and then sort of dropping below that in 2021. Clearly, with the free cash flow generating profile, I mean, if so necessary, like you mentioned, we could pay off all of our debt.

Donald W. Rush: If something more of a, call it a 1x or 1.5x is the right goalpost or, you know, again, maybe by 2022, and you have different capital markets at that time to be more conducive to, call it healthier gas prices and being more selective on who they give money to, then maybe that's something that you could be in. So somewhere in that range, I think is

Donald W. Rush: Where we're heading and where we exactly land is hard to tell. It's pretty clear for us over the 2020 and 2021 what the optimal kind of use of incremental dollars are. As we get beyond that point, hard to know when you know, but we'll react accordingly to the metrics and variables as they exist once we get into that call it back half of 2021 and into 2022 timeframe.

I used to climb gets over time. So, you know, we quoted the mid thirties, you know that'll drop into around twenty then then start to you know, head into the mid-teens as you as you move along the curve towards the month, you know, the later part of the plants were laid out.

Donald W. Rush: Okay. Got it. As you lay out the maintenance program for, you know, that longer-term period, how should we think about the trajectory of the base decline over time and also the run rate of non-D&C spending?

Got it. Thank you.

Our next question comes from Jane of people, please. Go ahead with your question. Good morning. And thanks for taking my questions. My first question is on a second quarter. I just wanted to get a little bit more inside how the squad is going is looking like maybe in terms of production and they looked at slight I think 13000 could also comment on capex and completions. Sure. So for the for the for the current quarter that we're currently in and the production profile. We we do not currently have any well shut in today due to economic reasons, right? So that is something we're we're still assessing. We we look at commodity prices every day and we are looking at the exact right way to optimize that but as I mentioned in my prepared remarks, we we do assume that that we will be

Chad A. Griffith: Yeah. We lay it out a little bit on slide 27 on sort of the non-D&C spending. You know, we've talked a lot about the last couple years and tried to be as thorough as we could, explaining that some of the upfront investments that we were making in our water systems, in our land positions, in our infrastructure systems were really going to call it allow us to step change in cost and capital efficiency going forward. I think you're starting to see that now that we've given, you know, even more transparency and clarity going forward. Step change meaningfully in non-D&C across consolidated, both upstream and midstream going forward.

Donald W. Rush: Yeah. We lay it out a little bit on slide 27 on sort of the non-D&C spending. You know, we've talked a lot about the last couple years and tried to be as thorough as we could, explaining that some of the upfront investments that we were making in our water systems, in our land positions, in our infrastructure systems were really going to call it allow us to step change in cost and capital efficiency going forward. I think you're starting to see that now that we've given, you know, even more transparency and clarity going forward. Step change meaningfully in non-D&C across consolidated, both upstream and midstream going forward.

Chad A. Griffith: Like you mentioned, the longer you stay in a maintenance of a production type profile, I guess, the lower your base decline gets over time. You know, we quoted the mid-30s. That'll drop into around 20, then start to head into the mid-teens as you move along the curve towards the later part of the plans we laid out.

Donald W. Rush: Like you mentioned, the longer you stay in a maintenance of a production type profile, I guess, the lower your base decline gets over time. You know, we quoted the mid-30s. That'll drop into around 20, then start to head into the mid-teens as you move along the curve towards the later part of the plans we laid out.

Bratayley is a certain amount of our web production probably be getting in May and Lasting in the minimum called two to three months. So so we'll be deferring that production in two months into the year to take advantage of him much higher prices that are available than in generating more cash flow and increasing the present value of those Wells if if gas prices down steep if the curve continues to seep in that's that's where we start looking at deferring more of that production later that year to even even further increased the rates of return and the present value as well, from from a capitalist standpoint. It's fairly consistent as you roll through the rest of the year. So the key one number is is sort of sat and as you think about you through the Q4 it's you know, the difference between our guidance office. Thank you one. It's fairly consistent across the Earth.

Donald W. Rush: Got it. Thank you.

Operator: Our next question comes from Jane Trotsenko of Stifel. Please go ahead with your question.

Jane Trotsenko: Good morning, and thanks for taking my questions. My first question is on Q2. I just wanted to get a little bit more insight how this quarter is going, is looking like, maybe in terms of production, and I looked at slide, I think 13. If you could also comment on CapEx and completions.

Chad A. Griffith: Sure. For the current quarter, Q2, that we're currently in the production profile, we do not currently have any wells shut in today due to economic reasons, right? That is something we're still assessing. We look at commodity prices every day, and we are looking at the exact right way to optimize that. As I mentioned in my prepared remarks, we do assume that we will be curtailing a certain amount of our wet production, probably beginning in May, and lasting a minimum of call it two to three months.

That's perfect. And it seems to me like you you guys are not completing anywhere else in 2 Q, right?

Well, we we will continue to have we have a fracture running consistently over the course of the year. That's that's pretty steady state where the real opportunity is gas prices really do run. We do a job opportunity to bring in a spot through and that's where you know sort of some of the upper range of production opportunity comes in 2021. So and and the calls the production management optimization that we're looking at is really after well as completed and and flashed out on sort of the you know, the the water kind of flow back cycle saving some of that up front of you going to later. Yeah, so we're not we're not just changing really the the capital program meaning of a smooth operating system to to mixer their comments. So we take seriously the essential part of the ecosystem the business that the gas production is, so we're we're keeping things rolling. We're just trying the thoughtful around the the production fluid management all these Wells and trying to maximize mortgages and cash flows and timing the the the bigger part of the wells and and saving some of that for later Panthers.

Chad A. Griffith: We'll be deferring that production into later into the year to take advantage of the much higher prices that are available then and generating more cash flow and increasing the present value of those wells. If gas prices continue to steepen, if the curve continues to steepen, that's where we start looking at deferring more of that production later in the year to even further increase the rates of return and the present value of those wells.

Donald W. Rush: From a capital standpoint, it's fairly consistent as you roll through the rest of the year. The Q1 number is sort of set. As you think about Q2 to Q4, it's, you know, the difference between our guidance in Q1, it's fairly consistent across the year.

You know pricing stays how it's shaped today.

Okay, got it. My follow-up is more like on the medium. Maybe you guys can talk about the well mix so like let's say you guys are going to complete 25% off to go where else and 75% of Marcella's Wells like over the medium-term. And how does West Virginia development is envisioned in this whole plan? Well, the details that we've laid out in the slot deck really is limited to twenty-twenty where we we have 34, welcome plan to turn on the line for the year and twelve Utica Lowe's we played online for the year really beyond that. The the mix is is really still to be determined as we look at. What's the what's the Right Mix? What's the right mix between wet and dry gas where do we want to be and really, you know, so as far as giving the details of what that alignment looks like over the long-term, you know, it's it's really still to be determined. We're going to follow the math. We're going to look what the best rates of return are. We're going to

Jane Trotsenko: That's perfect. It seems to me like you guys are not completing any wells in Q2, right?

Chad A. Griffith: Well, we have a frac crew running consistently.

Jane Trotsenko: Mm-hmm.

Chad A. Griffith: Over the course of the year, that's pretty steady state. Where the real opportunity is, if gas prices really do run, we do have an opportunity to bring in a spot crew, and that's where, you know, sort of some of the upper range of production opportunities comes in 2021.

Donald W. Rush: the production management optimization that we're looking at is really after a well is completed and flushed out on sort of the, you know, the water kind of flow back cycle, saving some of that upfront to deploy into later.

Donald W. Rush: The production management optimization that we're looking at is really after a well is completed and flushed out on sort of the, you know, the water kind of flow back cycle, saving some of that upfront to deploy into later.

Chad A. Griffith: Yeah.

Chad A. Griffith: We're not just changing really the capital program meaningfully. We're keeping a smooth operating system to Nick's earlier comments. We take seriously the essential part of the ecosystem, the business that the gas production is. We're keeping things rolling. We're just trying to be thoughtful around the production flow management of these wells and trying to maximize margins and cash flows and timing the bigger part of the wells and saving some of that for later, pending, you know, pricing stays how it's shaped today.

Donald W. Rush: We're not just changing really the capital program meaningfully. We're keeping a smooth operating system to Nick's earlier comments. We take seriously the essential part of the ecosystem, the business that the gas production is. We're keeping things rolling. We're just trying to be thoughtful around the production flow management of these wells and trying to maximize margins and cash flows and timing the bigger part of the wells and saving some of that for later, pending, you know, pricing stays how it's shaped today.

with the best areas for development and that's where we're

Focus our investments and if you go back we've talked a bit around just a little bit of the Southwest. Utica is leaving for funding so that you know, the one path that we did this year. That's it's basically done and it's just one more that we would do into next year to help for blend beyond that the bulk is just in the southwest PA Marcellus, you know, so the commentary the 22 to 27 plan wage like that. That's really just Southwest. Marcellus with you know, a little bit of a CPA Utica in there no need for for blending in Southwest VA Utica into that plan that that's really just walk, you know upside Southwest. That point or call it inventory extension at the end of the end of the life of the more sellers, you know over a decade from now and and near-term we talked last call that you know, the Utica that we show on the till mix on flat 13, we do we are doing another pad in in in Ohio in our in our Drive Utica over in Ohio, and the rest is really dead.

Jane Trotsenko: Okay. Got it. My follow-up is more like on the medium term. Maybe you guys can talk about the well mix. So, like, let's say you guys are going to complete 25% of Utica wells and 75% of Marcellus wells, like over the medium term. How is West Virginia development envisioned in this plan?

Chad A. Griffith: Well, the details that we've laid out in the slide deck really is limited to 2020, where we-

Jane Trotsenko: Mm-hmm.

Chad A. Griffith: We have 34 wells we plan to turn online for the year and 12 Utica wells we plan to turn online for the year. Really beyond that, the mix is really still to be determined as we look at what's the right mix between sort of wet gas and dry gas, and where do we wanna be? Really, you know, as far as giving the details of what that alignment looks like over the long term, you know, it's really still to be determined. We're gonna follow the math. We're gonna look at what the best rates of return are. We're gonna look at the best areas for development, and that's where we're gonna focus our D&C investment.

More Solace here on Southwest with with a little bit of Shirley pens ball volumes, but this Chad said some of that is is getting shifted to the back half of this year in the next year. So bulk of it Southwest. Tell us bulk of it dry gas but you know, we have a lot of flexibility to add to the program in some of these other areas if gas prices weren't it?

Donald W. Rush: If you go back, we've talked a bit around just a little bit of the Southwest PA Utica as the need for funding so that, you know, the one pad that we did this year, that's it's basically done. You know, just one more that we would do into next year to help the blend. Beyond that, the bulk is just in the Southwest PA Marcellus. You know, so the commentary, the 2022 to 2027 plan, we highlight that that's really just Southwest PA Marcellus with, you know, a little bit of Southwest PA Utica in there. No need for blending in Southwest PA Utica into that plan.

The last question is I'm a looking at slide twenty-five. What time do you have price? Would you guys need for cnx to accelerate production 10% off in 2022?

Yes, we're not going to get into an exact price. So I mean there's obviously a lot monitors the the long-term Ford strip. There's what you can hedge. There's you know how they are reacting or not reacting. And you know, I think one of them was earlier there's also the other Capital allocation opportunities that exist at the time so not not really too set in stone. I type, you know exact gas price that we make these decisions on but you know, if there there's two pieces out there to gasket is $4 so clearly $4. It's it's pretty attractive opportunity to to push more, you know money into into the empty sooner to get more production sooner. So I'm just generally we're able to do it if it makes sense and hopefully we're developing a track record of being pretty pretty full of the math on doing what's appropriate.

Donald W. Rush: That's really just, you know, upside Southwest PA Utica at that point or call it inventory extension at the end of the life of the Marcellus, you know, over a decade from now. In near term, we talked on the last call that, you know, the Utica that we show on the drill mix on slide 13, we are doing another pad in Ohio, in our dry Utica over in Ohio. The rest is really into the Marcellus here on Southwest PA with a little bit of Shirley-Pennsboro volumes. As Chad said, some of that is getting shifted to the back half of this year into next year. Bulk of it, Southwest PA Marcellus, bulk of it, dry gas.

Thank you so much.

Our next question comes from Holly Stewart of Scotia Howard Weil, please go ahead with your question.

Donald W. Rush: You know, we have a lot of flexibility to add to the program in some of these other areas if gas prices warrant it.

Good morning. Gentlemen, May 1st just starting off of the a follow-up to James question. Can you quantify the the two to three months of assumed production shut-ins?

Jane Trotsenko: The last question, if I may, looking at slide 25, what Henry Hub price would you guys need for CNX to accelerate production 10% in 2022?

Are you speaking as far as like production per day volumes, you know, it's it's it's really going to be a a function of exactly how the engine isn't coming off, you know at the at the as as I said, you know, we're looking primarily. It's really Pennsboro for this immediate production deferral is one of our web fields and certainly subject to and NGL and condensate prices. And I you know, I don't know if you guys have been paying that close of attention to what's happening there. I'm sure you have been but NGL is a condensate of really been beaten up, you know, there's a lot of you know with with with the demand destruction associate with the virus, you know fuel backing up in the storage Refinery runs being cut, you know, a lot of these ngos condensate feed directly into that Refinery process. So the stuff backing up storage is filling up. It's it's really getting hard to flow in jail since really any of you flum. It's it's the prices are

Donald W. Rush: Yes. We're not gonna get into an exact price. I mean, there

Jane Trotsenko: Mm-hmm.

Donald W. Rush: There's obviously the flat month, the long-term forward strip, what you can hedge, you know, how the NGLs are reacting or not reacting. You know, I think one of the questions earlier, there's also the other capital allocation opportunities that exist at the time. Not really a set in stone type, you know, exact gas price that we make these decisions on. You know, if you know, there's thesis out there that gas goes to $4, so clearly $4 it's a pretty attractive opportunity to push more, you know, money into D and C sooner to get more production sooner.

Donald W. Rush: Just generally, we're able to do it if it makes sense, and hopefully we're developing a track record of being pretty follow the math on doing what's appropriate.

Jane Trotsenko: Thank you so much.

Operator: Our next question comes from Holly Stewart of Scotia Howard Weil. Please go ahead with your question.

Really rock bottom so fortunately for cnx. It's not a big part of our production portfolio and and to the extent that it is we're able to blend a lot of a lot of the cast that we have Charles Cracker Barrel on forcing one of those places on an island. And so

Holly Stewart: Good morning, gentlemen. My first, just starting off with a follow-up to Jane's question. Can you quantify the 2 to 3 months of assumed production shut-ins?

So for us it's it's sort of one of those things that you know, and it's an example to us. It would be like to be like an all when wet gas producer. It's it's a really really tough place to be right now and you can see on Monday 13 Holly looks a little bit on called the hatched red red part of the graph. So for for May, you know, you can kind of highball. It is around like a 300 a day type of a of a production change if if you know want to do that.

Chad A. Griffith: Are you speaking as far as like, production per day?

Holly Stewart: Volume.

Donald W. Rush: Volumes. You know, it's really gonna be a function of exactly how the NGLs and condensate play out. As I said, you know, we're looking primarily at Shirley-Pennsboro for this immediate production deferral, which is one of our wet fields and certainly subject to NGL and condensate prices. You know, I don't know if you guys have been paying that close attention to what's happening there. I'm sure you have been. NGLs and condensate have really been beaten up lately. You know, there's a lot of, you know, with the demand destruction associated with the virus, you know, fuel backing up into storage, refinery runs being cut. You know, a lot of these NGLs and condensate feed directly into that refinery process.

Chad A. Griffith: Volumes. You know, it's really gonna be a function of exactly how the NGLs and condensate play out. As I said, you know, we're looking primarily at Shirley-Pennsboro for this immediate production deferral, which is one of our wet fields and certainly subject to NGL and condensate prices. You know, I don't know if you guys have been paying that close attention to what's happening there. I'm sure you have been. NGLs and condensate have really been beaten up lately. You know, there's a lot of, you know, with the demand destruction associated with the virus, you know, fuel backing up into storage, refinery runs being cut. You know, a lot of these NGLs and condensate feed directly into that refinery process.

Okay, so that's helpful. And then it is very thought on email or kind of price where you bring that back. Just trying to get a sense for life. You know how long you know you talk about two to three months but if prices remain low then you must immediately that volume shouldn't yeah that's you know, that's why we tried to again just be be thoughtful transparent and follow the map on the way. We've laid out guidance. I can tell you right now the next several months or more impossible to predict and the next several months of of any time frame that I've I've at least been, you know, working working at the company. So instead of trying to to predict what the next several months are going to going to hold we just wanted to make sure folks were, you know going to be transparent information on what it looks like if if things stay home. So good we'll we'll save it for later if things come back we we go ahead and add it back to the equation and you know, net net the business is still strong in the capital structure still strong leverage. This is still strong and in any near-term

Donald W. Rush: There's stuff backing up. Storage is filling up. It's really getting hard to flow NGLs, and if you can flow them, the prices are pretty rock bottom. Fortunately for CNX, it's not a big part of our production portfolio, and even to the extent that it is, we're able to blend a lot of the wet gas that we have. Shirley-Pennsboro, unfortunately, one of those places is on an island. For us, it's sort of one of those things that, you know, it's an example to us of what it would be like to be an all-in wet gas producer. It's a really tough place to be right now.

Chad A. Griffith: There's stuff backing up. Storage is filling up. It's really getting hard to flow NGLs, and if you can flow them, the prices are pretty rock bottom. Fortunately for CNX, it's not a big part of our production portfolio, and even to the extent that it is, we're able to blend a lot of the wet gas that we have. Shirley-Pennsboro, unfortunately, one of those places is on an island. For us, it's sort of one of those things that, you know, it's an example to us of what it would be like to be an all-in wet gas producer. It's a really tough place to be right now.

Donald W. Rush: Yeah, you can see on slide 13, Holly. It looks a little bit on, call it, the hatched red part of the graph. For May, you know, you can kinda eyeball it. It's around like a 300 a day type of a production change if you know, wanna do that.

Issues for both cnx, or see you next time really just sets up better longer-term fundamentals for the long-term, you know portfolios of the businesses, you know, a couple of months whenever you're solving fog term intrinsic value per share doesn't matter as much as making sure that cash flows is maximized.

Holly Stewart: Okay. Oh, that's helpful, Don. Is there a thought on just NGL or condensate price where you bring that back? Just trying to get a sense for, you know, how long you know you talk about 2 to 3 months, but if prices remain low, then you, I'm assuming you just leave that volume shut in.

Holly Stewart: Okay. Oh, that's helpful, Donald. Is there a thought on just NGL or condensate price where you bring that back? Just trying to get a sense for, you know, how long you know you talk about 2 to 3 months, but if prices remain low, then you, I'm assuming you just leave that volume shut in.

Yep. Okay, that's perfect. And then maybe it's a little color on 21. So looks like you're forty six and twenty twenty still planned. And then those that long-term 7-year guide is 25 in the plan. So you just give us some color maybe on that for $21. And then is that still a 1 and 1/2, you know rig program at a 1000 or how should we think about that plan as it's reshaped here say I guess it'd be a generic answer but it's in the middle. So I think you know, it depends on whether we want to try to try to get into took the higher end at six hundred beads. We highlighted if gas prices are good. You know, I think you'll be closer to feel confident that we've had in in twenty twenty and and likewise if if gas prices are more muted or just suck. I mean, you're you're you're going to be and I think we you know highlighted previously a 30-ball year type program kind of grows us a little bit. So that's the kind of the way to think about it. So

Donald W. Rush: Yeah, that's, you know, that's why we tried to, again, just be thoughtful, transparent, and follow the math on the way we've laid out guidance. I can tell you right now, the next several months are more impossible to predict than the next several months of any timeframe that I've at least been, you know, working at the company. Instead of trying to predict what the next several months are gonna hold, we just wanted to make sure folks were, you know, gonna have transparent information on what it looks like. If things stay not so good, we'll save it for later. If things come back, we go ahead and add it back to the equation.

Donald W. Rush: You know, net-net, the business is still strong, the capital structure is still strong, the leverage resistance is still strong. Any near term issues for both CNX or CNXM really just sets up better longer term fundamentals for the long term, you know, portfolios of the businesses. You know, a couple months, whenever you're solving for long term intrinsic value per share, doesn't matter as much as making sure that cash flows is maximized.

That's a general approach in chat. I mean you can talk to it doesn't take much to do either one of those two. It's just really hot wetness breakfast. That's right, depending, you know, we're going to keep a close eye on commodity Market on gas prices, you know, we've got we've got a little bit of a little bit of a documentary. I think what was really sort of healthy level of ducks, but you know the prices run that that enables us to bring in stock grew and complete a number of wells and get them online very easy to take advantage of the strong aspect.

Holly Stewart: Yep. Okay, that's perfect. Maybe just a little color on 2021. Looks like you have 46 DUCs in 2020 still planned, and then that long-term 7-year guide is 25 in the plan. Can you just give us some color maybe on that for 2021? Is that still a 1.5, you know, rig program and a 1 crew program, or how should we think about that plan as it's reshaped here?

Okay, okay, and then maybe one question on just that longer?

Dyed, it looks like the fully burdened cash costs that are on slide twenty-seven or a buck. Oh for what is the primary driver for that reduction? I mean if it look at the fourth quarter of this year looks like a pretty big swing down over the over the the long-term. We begin to roll out of some of our Legacy ft contracts. There's there's a number of the date from really all the way some of them they all the way back to the Dominion acquisition. If you can if you got to remember that, you know, the some of those were higher costs and and you know, so often those begin the Roloff that overall g p and t portion of that of the operating costs begins, it's been against the decline. And so that's that's really a big driver of that decreasing operating expense of our time and you'll see them to just in the the interest expense. It's flowing through the business as we deal ever and we've kind of avoid taking out some of the more expensive near term debt products that folks have had to lean to the to refi with dead.

Donald W. Rush: Yeah, no, I'd say I guess it'd be a generic answer, but it's in the middle. I think, you know, it depends on whether we wanna try to get into, you know, the higher end at 600 Bcf we highlighted. If gas prices are good, you know, I think you'll be closer to the drill count that we've had in 2020. And likewise, if gas prices are muted or we're just slightly growing, I mean, you're gonna be, and I think we, you know, highlighted previously a 30-well-a-year type program kinda grows up a little bit. That's the kind of the way to think about it. That's a general approach. Chad, I mean, you can talk to...

Donald W. Rush: It doesn't take much to do either one of those two. It's just really adding this frac crew.

Chad A. Griffith: Right. That's right. You know, we're gonna keep a close eye on commodity markets, on gas prices. You know, we've got a little bit of a DUC inventory. I think what was really sort of a healthy level of DUCs. You know, prices run, that enables us to bring in a spot crew and complete a number of wells and get them online very quickly to take advantage of those strong gas prices.

So, you know pushing through all just more efficient operation chat and team, you know, we're obviously focused on long-term conversations today, but they've made a tremendous amount of progress and just the day-to-day management company and dead operation capacity that we have here. And like we talked the the capitalized, you know water systems that we built and really helped back to that cost inside of it as well. And you know that that that that's always been sufficient for us. It's it's it it's chunky and a couple areas that are just allowing, you know, the business tip to be in a a much lower kind of steady-state cost structure going going forward.

Holly Stewart: Okay. Maybe one question on just that longer-term guide. It looks like the fully burdened cash costs that are on slide 27 are $1.04. What is the primary driver for that reduction? I mean, if you look at the Q1 of this year, it looks like a pretty big swing down.

Chad A. Griffith: Over the long term, we begin to roll out of some of our legacy FT contracts. There's a number of those. Some of them date all the way back to the Dominion acquisition, if you guys can remember that. You know, some of those were higher cost, and you know, so as those begin to roll off, that overall GP&T portion of the operating costs begins to decline. That's really a big driver of that decreasing operating expense over time.

Okay, helpful. Thanks guys.

This will conclude our question-and-answer session.

The conference is now concluded. Thank you everybody very much for attending today's presentation. You may now disconnect.

Donald W. Rush: You'll see too, just in the interest expense that's flowing through the business as we de-lever, and we've kind of avoid taking out some of the more expensive near-term debt products that folks have had to lean to refi with. You know, pushing through all just more efficient operation. Chad and team, you know, we're obviously focused on long-term conversations today, but they've made a tremendous amount of progress in just the day-to-day management of the company and the remote operation capacity that we have here. Like we talked, the capitalized water systems that we built to really help factor that cost out of it as well. You know, net-net, the GP&T line item has always been efficient for us.

Dead dead dead dead.

Donald W. Rush: It's chunky in a couple areas that are just allowing, you know, the business to be in a much lower kinda steady state cost structure going forward.

Holly Stewart: Okay. Helpful. Thanks, guys.

Operator: This will conclude our question and answer session. The conference is now concluded. Thank you everybody very much for attending today's presentation. You may now disconnect.

bulb off

Dead dead dead dead.

Q1 2020 Earnings Call

Request a DemoDemo

CNX

CNX Resources

Earnings