Q2 2024 CNX Resources Corporation Earnings Call

Operator: Good morning, and welcome to the CNX Resources second quarter 2024 Q&A conference call. All participants will be in listen-only mode.

Unknown Executive: Good morning and welcome to the CNX Resources second quarter, 2024 Q&A conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad.

Good morning, and welcome to the <unk> resources second quarter 2020 for Q&A Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

Operator: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations. Please go ahead.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask the question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Operator: Please note. This event is being recorded I would now like to turn the conference over to Tyler Lewis Vice President of Investor Relations. Please go ahead.

Tyler Lewis: I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations. Please go ahead.

Tyler Lewis: You and good morning to everybody. Welcome to CNX's second quarter Q&A conference. Today we will be answering questions related to our second quarter results. This morning, we posted on our Investor Relations website an updated slide presentation and detailed second quarter earnings release data, such as quarterly E&P data, financial statements, and non-GAAP reconciliations, which can be found in a document titled 2Q 2024 Earnings Results and Supplemental Information of CNX Resources. Also, we've posted on our Investor Relations website our prepared remarks for the quarter, which we hope everyone had a chance to read before the call, as the call today will be used exclusively for Q&A.

Tyler Lewis: You and good morning everybody. Welcome to CNX Resources' second quarter Q&A conference call. Today we will be answering questions related to our second quarter results. This morning we posted to our Investor Relations website and updated side presentation and detailed second quarter earnings release data, such as quarterly MP data, financial statements, and non-GAAP reconciliation, which can be found in a document titled 2Q2024 earnings results and supplemental information of CNX Resources. Also, we posted to our Investor Relations website a prepared remarks for the quarter, which we hope everyone had a chance to read before the call, as the call today will be used exclusively for Q&A.

Tyler Lewis: And good morning to everybody.

Welcome to <unk> second quarter Q&A conference call today, we will be answering questions related to our second quarter results.

Speaker Change: Morning, we posted to our Investor Relations website, an updated slide presentation and detailed second quarter earnings release data such as quarterly E&P data financial statements and non-GAAP reconciliation, which can be found in the document titled Q2, 2024 earnings results and supplemental information can extra resources.

Tyler Lewis: Also we posted to our Investor Relations website, our prepared remarks for the quarter, which we hope everyone had a chance to read before the call and the call today will be used exclusively for Q&A.

Tyler Lewis: With me today for Q&A are Nick DeIulis, our President and CEO, Alan Shepard, our Chief Financial Officer, Navneet Behl, our Chief Operating Officer, and Ravi Srivastava, President of our New Technology. Please note that the company's remarks made during this call, including answers to questions, include forward-looking statements, which are subject to various risks and uncertainties. These statements are not guarantees of future performance, and our actual results may differ materially as a result of many factors.

Tyler Lewis: With me today for Q&A are Nick Eolius, our President and CEO; Alan Shepherd, our Chief Financial Officer; and our new CEO, our Chief Operating Officer; and Ravi's Revost, our President of our new technology screw. Please note that the company's remarks made during this call, including answers to questions, may include forward-looking statements, which are subject to various risks and uncertainties. These statements are not guaranteed to use a future performance, and our actual results may differ materially as a result of many factors. A discussion of risks and uncertainties related to this factors and CNX's business is contained in its filings with the Securities and Exchange Commission, and in the release issued today.

Speaker Change: With me today for Q&A, our Nicki earliest our president and CEO, Alan Shepard, our Chief Financial Officer, and P O, Our chief operating officer, and Ravi <unk> President of our New technologies group.

Tyler Lewis: Please note that the company's remarks made during this call including answers to questions include forward looking statements, which are subject to various risks and uncertainties. These statements are not guarantees of future performance actual results may differ materially as a result of many factors a.

Tyler Lewis: A discussion of risks and uncertainties related to those factors and CNX's business is contained in its filings with the Securities and Exchange Commission and in the release issued today. With that, thank you for joining us this morning, and Operator, can you please open the call for Q&A at this time?

Tyler Lewis: A discussion of risks and uncertainties related to this factors in <unk> business is contained in its filings with the Securities and Exchange Commission and in the release issued today.

Tyler Lewis: With that, thank you for joining us this morning, and operator. Can you please have a call for Q&A this time? We will now begin the question and answer session. To ask you a question, you may press star, then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We will pause momentarily to assemble our roster.

Tyler Lewis: With that thank you for joining us this morning, and operator can you. Please open the call for Q&A at this time.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. We will pause momentarily to assemble our roster. The first question comes from... Bert Donnes with Truist, please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys. If at any time. Your question has been addressed and you would like to withdraw your question. Please press star.

Speaker Change: And then two we.

Operator: We will pause momentarily to assemble our roster.

Vanessa: The first question comes from Perth. Vanessa, will you please go ahead? Good morning, team. I just want to start it off on the new tech division. It looks like two Q was a bit above the run rate for the full-year guide. Is that still ramping? It looks like you're at four and a half BCF. Just wondering if that's leveling out or are you ramping up throughout the year?

Bertrand William Donnes: The first question comes from birth.

Speaker Change: Dennis will truest. Please go ahead.

Bertrand William Donnes: Hey, good morning team. I just wanted to start it off on the new tech division.

Bertrand William Donnes: Hey, good morning team I just wanted to start it off on the New Tech Division. It looks like <unk> was a bit above the run rate for the full year guide is is that still ramping it looks like you're at four and a half Bcf just wondering if that's leveling out or are you ramping up throughout the year.

Ravi Srivastava: It looks like 2Q was a bit above the run rate for the full year guide. Is that still ramping? It looks like you're at four and a half BCF. Just wondering if that's leveling out, or are you ramping up throughout the year?

Ravi Srivastava: Hey, this is Ravi. So I think the volume that we saw in Q2 is kind of in line with the projection that we had given out for the whole year, between 15 to 18 BCF. We got four and a half BCF in Q2. I think the numbers that we saw in Q2 are, like you know, the volume was on the higher end of it, the pricing was likely better, and as we talked about it last quarter, some of the transactions they kind of slip quarters depending on when the volume was produced as opposed to when the transactions took place.

Ravi Srivastava: Hey, this is Ravi. I think the volume that we saw in Q2 has kind of been lined with the projection that we had to give an out for the whole year. In 15 to 18 BCF, we got four and a half BCF in Q2. I think the numbers that we saw in Q2 is like, you know, the volume was on the higher end of the pricing was like a better. And as we talked about it last quarter, like some of the transactions, they kind of, you know, select slip quarters depending on when the volume was produced or the positive when the transactions takes place.

Ravi Srivastava: Hey, this is Ravi so.

Ravi Srivastava: And the volume that we saw in Q2 was kind of in line with the projection that.

Ravi Srivastava: Given out for the whole year would be 15 to 18 Bcf, we got four and a half a bcf in Q2 I think are the numbers that you saw in Q2.

Ravi Srivastava: The volume was on the higher end up at the pricing was slightly better and as we talked about it last quarter or like some of the transactions. They kind of you know.

Ravi Srivastava: Flex slick waters, depending on when the volume was produced as opposed to when they come back since takes place. So there's no change in that.

Ravi Srivastava: So, as there's no change in our annual free cash flow guidance, it will stay in that same range for around 75 million dollars for the year, and the volume should stay in that same range. Probably 15 to 18 BCF as we have gotten early.

Ravi Srivastava: Free cash flow guidance, certainly it will stay in that same range of around $75 million for.

Ravi Srivastava: So I think there's no change in our annual free cash flow guidance. It will stay in that same range of around $75 million for the year-end. And the volume should stay in that same range, probably 15 to 18 BCF as we had earlier.

Ravi Srivastava: For the year and the volume should stay in that same range, probably 15 to 18 Bcf that'd be earlier.

Unknown Executive: Hi, I appreciate it. Thanks.

Bertrand William Donnes: I appreciate it. Thanks.

Ravi Srivastava: I appreciate it thanks, and then the just moving real quick to the deep Utica.

Unknown Executive: And then the is moving real quick to the deep Utica. It sounds like the first two wells are, you know, in line with expectations.

Speaker Change: It sounds like the first two wells are in line with expectation could you guys. Maybe give some details just in comparison to your Marcellus wells is maybe a rough well cost or maybe how the one year Qs the work or anything like that.

Unknown Executive: Could you guys maybe give some details just in comparison to your Marcellus wells? Is maybe a rough well cost or maybe how the one-year cubes look or anything like that?

Alan Shepard: Yeah, this is Alan. Those well, they're still pretty early.

Bertrand William Donnes: Yeah, Hey, this is Alan that's why we're still pretty early so we're also going to say at this point is that there are absolutely meeting expectations.

Alan Shepard: So we're also going to say this point is that there are absolutely meaning expectations on the cost side and walk forward inside. So we're pretty excited about them. We'll provide more kind of a detailed look at those. We move forward to next couple of quarters.

Bertrand William Donnes: Cost side, and the well performance side. So we're pretty excited about them and we'll provide more kind of a detailed look at the as we move forward in the next couple of quarters.

Unknown Executive: God, it will stay tuned. Thanks a bit.

Speaker Change: Got it we'll stay tuned thanks for the update.

Zach Parham: The next question comes from Zach Parham with JP Morgan. Please go ahead. Thanks for talking to my questions. I guess first, just wanted to ask on a line out of an income statement. Your other revenue and operating income came in ahead of expectations this quarter. And it was up 23 million quarter over quarter. Can you just give us a little detail on what drove that increase in revenue?

Alan K. Shepard: And then just moving real quick to the Deep Utica, it sounds like the first two wells are, you know, in line with expectations. Could you guys maybe give some details just in comparison to your Marcellus wells? Is maybe a rough well cost or maybe how the one-year cumes look or anything like that?

Speaker Change: The next question.

Speaker Change: <unk> comes from Zach <unk> with J P. Morgan. Please go ahead.

Alan K. Shepard: This is Alan. Those balls are still pretty early, so all we're going to say at this point is that they're absolutely meeting expectations on both the cost side and the ball performance side, so we're pretty excited about them. We'll provide a more kind of detailed look at those as we move forward in the next couple of quarters.

Bertrand William Donnes: Got it. We'll stay tuned. Thanks for the update.

Alan K. Shepard: Thanks for taking my questions.

Speaker Change: I guess first I just wanted to ask on a lot of on the income statement. Your other revenue and operating income came in ahead of expectations. This quarter and it was up 23 million quarter over quarter can you just give us a little detail on what drove that increase in revenue.

Benjamin Zachary Parham: The next question comes from Zach Parham with J.P. Morgan. Please go ahead.

Alan Shepard: Yeah, some of that's what Bobby talked about earlier. I'm including there is the environmental attributes sales, which were a little higher this quarter than last. Additionally, we had a pretty good water on water revenue.

Speaker Change: Yeah somebody that's what Rob had talked about earlier, there's environmental attribute sales, which were a little bit higher this quarter than last Additionally, we had a pretty good quarter on water revenue. So we've made some investments over the last couple of years in terms of water handling and we've been able to offer those services to third parties. So we have a really good quarter supplying water.

Benjamin Zachary Parham: Thanks for taking my questions. I guess first, just wanted to ask on a line out of the income statement, your other revenue and operating income came in ahead of expectations this quarter, and it was up $23 million quarter over quarter. Can you just give us a little detail on what drove that increase in revenue?

Alan K. Shepard: Yeah, some of that's what Ravi talked about earlier, including environmental attribute sales, which were a little bit higher this quarter than last. Additionally, we had a pretty good quarter on water revenue, so we've made some investments over the last couple years in terms of water handling. We've been able to offer those services to third parties, so we had a really good quarter supplying water to some third-party fracs, which drove that number.

Alan Shepard: So we've made some investments over the last couple of years in terms of water handling. We've been able to offer those services to third parties. So we had a really good quarter. Supplying water to third party for extra of that number.

Alan K. Shepard: Third party, Frac, which drove that number.

Zach Parham: Thanks. And then also just wanted to ask on the CNG business. You mentioned that CNX had provided some CNG to a third party in July.

Benjamin Zachary Parham: And then also, just wanted to ask about the CNG business. You mentioned that CNX had provided some CNG to a third party in July. Can you give us any detail on who that third party is and maybe a little bit more color on what the opportunity set to provide CNG for third parties looks like and any potential revenue impact in the second half of the year?

Alan K. Shepard: Thanks.

Speaker Change: And then also just wanted to ask on the <unk> business, you mentioned that that seeing that you had provided some C or G to a third party in July can you give us any detail on who that third party is it maybe a little bit more color on what the opportunity set to provide C or G for third parties looks like yet.

Ravi Srivastava: Can you give us any detail on who that third party is and maybe a little bit more color of what the opportunity set to provide CNG for third parties looks like, any potential revenue impact in the second half of the year. I mean, a third party opportunity; they exist in all sort of sectors, whether it's e-frax, whether it's power generation, whether it's industrial use. So, I mean, we're really pursuing all those opportunities.

Speaker Change: Any potential revenue impact in the second half of the year.

Alan K. Shepard: I mean, third-party opportunities exist in all sorts of sectors, whether it's EFRAX, whether it's, you know, power generation, whether it's industrial use. So, I mean, we're pursuing all those opportunities. The third-party revenue is not material for a 2024 guidance change. I would say, like, we're continuing to develop that business opportunity, and we'll have more to share on how this shapes up for 2025 guidance. But nothing material to change anything in 2024.

Speaker Change: I mean, the third party opportunities exist in all sorts of sectors, whether it's <unk>, whether it's power generation, whether its light industrial use so I mean, we've been pursuing all of those opportunities. The third party revenue, it's not material correctly 24 guidance change I would say like we're continuing to develop that business opportunity.

Ravi Srivastava: The third party revenue is not material for a 2024 guidance change. I would say like we're continuing to develop that business opportunity, and we'll have more to share on how this shape support 2025 guidance. But nothing material to change anything in 2024 yet.

Alan K. Shepard: We'll have more to share on how this shapes up for 2025.

Alan K. Shepard: Guidance, but nothing material to change anything in 2020 for yet.

Leo Mariani: Thanks, Robbie. The next question comes from Leo Mariani with Roth. Please go ahead.

Ravi Srivastava: Thanks Ravi.

Leo Paul Mariani: The next question comes from Leo Mariani with Roth. Please go ahead.

Alan K. Shepard: The next question comes from Leo Mariani with Roth. Please go ahead.

Leo Paul Mariani: Hi, I just wanted to follow up a little bit more on new tech. So, obviously, you mentioned getting the CNG bids deployed to a customer in July, and I guess you've got some other aspects that are yet kind of rolled out in the second half, kind of from the AutoSEP, and OFS business. I was hoping you could just kind of characterize what some of these initial offerings to customers are. Are these, like, customer trials, you know, beta tests? Are you actually getting kind of paid, you know, for these? Or are these just kind of, like, very small test cases?

Leo Mariani: Hi, just wanted to fall a little bit more here on New Tech. So obviously you mentioned getting the CNG business deployed to a customer in July. And I guess you've got, you know, some other aspects starting to get kind of rolled off, you know, in the second half kind of from the auto step OFFS business. I was hoping to just kind of characterize what some of these initial offerings to customers are. These like customer trials, you know, beta tests are actually getting kind of paid, you know, 40s or these just kind of like very small test cases.

Leo Paul Mariani: Hi, just wanted to follow up a little bit more here on new Tech. So obviously, you mentioned getting the <unk> deployed to a customer in July and I guess you've got.

Speaker Change: Some other aspects starting yet kind of rolled off.

Speaker Change: Second half kind of in the auto sector.

Speaker Change: <unk> business.

Leo Paul Mariani: Hoping you could just kind of characterize what some of these initial offerings to customers or are these like customer trials closed beta tests are you actually getting paid.

Leo Paul Mariani: For these or are these just kind of like very small test cases, and then I guess the knee in the success case than perhaps the customers would take on these products and offerings and then kind of ramp up.

Leo Mariani: And I guess in the success case, and perhaps the customers would take on these products and offerings and then kind of ramp up, you know, next year. And obviously, you talk about revenue, and many of those sounds like relatively immaterial this year. But would you expect it to be, you know, more significant in 2025. I think it's going to start to kind of move the needle a little bit next year on these two businesses.

Ravi Srivastava: And then I guess in a success case, perhaps the customers would take on these products and offerings and then kind of ramp them up, you know, next year. And obviously, you talked a little bit about revenue a minute ago. It sounds relatively immaterial this year, but would you expect it to be, you know, more significant in 2025? Is it going to start to kind of move the needle a little bit next year on these two businesses?

Ravi Srivastava: Next year, obviously, yet you're.

Speaker Change: You talked to them about revenue in many go it sounds like relatively immaterial. This year, but would you expect it to be more significant in 'twenty. Five. So you can start to kind of move the needle a little bit next year on these two businesses.

Ravi Srivastava: Yeah, so we're excited about both businesses. I think they both solve key problems on the AutoCEP side of things.

Ravi Srivastava: Yeah, so we're excited about both the businesses. I think they both solve key problems on the honor set side of things. I mean, it's a technology that transforms our, you know, the flowback operations, which is the key step in an order and gas production value chain. And if you ask me how low back has been done in the past, if it mentions low back is kind of panel on manual cost intensive, lots of submissions. And the technology that we have developed completely transformed steps. So we're very, very excited about the solution that we offer. It's a common environmental standpoint from a cost standpoint, automation, safety standpoint.

Speaker Change: Yeah. So we're excited about both the business and I think they both solve key problems.

Ravi Srivastava: On the on the auto side of things.

Ravi Srivastava: I mean, it's a technology that transforms our flowback operations, which is a key step in our oil and gas production value chain. And if you ask me how flowback has been done in the past, conventional flowback is kind of parallel and manual, cost-intensive, lots of submissions, and the technology that we have developed completely transforms that. So, we're very, very excited about the solution that we offer. It's from an environmental standpoint, from a cost standpoint, automation, and safety standpoint. So, we've been using the technology ourselves. We don't really need to do a lot of tests.

Speaker Change: I mean, it's a it's a technology that transforms our.

Ravi Srivastava: Back operations, which is the key step in our oil and gas production value chain.

Ravi Srivastava: If you're asking me how low back had been done in the past mentioned slow back as the kind of analog manual cost intensive lots of information and the technology that we have developed completely transforms that so we're very very excited about the solutions that you offer.

Ravi Srivastava: An environmental standpoint from a cost standpoint automation safety standpoint so.

Ravi Srivastava: So we've been using the technology ourselves. We don't really need to do a lot of tests, you know. We've been doing that on our own paths for the last couple of years. We're using the technology on all of our paths this year and going forward. And the engagement with third party customers have, it's been ongoing for the last couple of months. Ever since we announced a JV, and there's a lot of excitement. And we expect to have customer sales and, you know, in the back half of this year, like the magnitude and all of all that stuff.

Ravi Srivastava: We've been using the technology ourselves and we don't really need to do a lot of tests.

Ravi Srivastava: You know, we've been doing that on our own pads for the last couple of years. And we're using the technology in all of our pads this year and going forward. And the engagement with third-party customers has been ongoing for the last couple of months. Ever since we announced the JV, there's been a lot of excitement. And we expect to have customer sales in the back half of this year. Like, the magnitude and all that stuff, we'll share more when we have more details.

Ravi Srivastava: I've been doing that on our own our own patents for the last couple of years, but are using the technology and all of our pads.

Ravi Srivastava: Year and going forward and.

Ravi Srivastava: Engagement with third party customers have been it's been ongoing for the last couple of months I've ever since we announced the JV, there's a lot of excitement and we expect to have.

Ravi Srivastava: <unk> customer sales.

Speaker Change: Maybe in the back.

Speaker Change: Half of this year like the magnitude and all that stuff will lose share more of that do you have more detailed than we expect.

Ravi Srivastava: We'll share more, and we have more details, and we expect the auto set part of it, just low back part of it, to be a more meaningful contributor to the 2025 opportunity for us.

Speaker Change: The auto part of the mobile part of it to be a more meaningful contributor to the 2025 opportunity for us on the <unk> side of things again like we're not going to be have a technology that you have done it this developed.

Ravi Srivastava: On the CNG side of things, again, again, we have a technology that we have developed in-house that uses this geobalic energy to produce compressed NASA gas without any mechanical compression. So it's a, it's a, it's a, it's a perspective from an information standpoint. It's, it's terrific and a lot of folks are looking for a solution like that, where we have constraints on pipes and how you get a power energy solution in the form of CNG to different industrial applications. So I think it checks a lot of bosses. The third party sales that we had, it's, you know, the, you know, the revenue was real.

Ravi Srivastava: And we expect the AutoCEP part of it, the flowback part of it, to be a more meaningful contributor to the 2025 opportunity for us. On the CNG side of things, again, we have a technology that we have developed in-house that uses this geobaric energy to produce compressed natural gas without any mechanical compression. So, it's cost-effective from an emission standpoint. It's terrific. And a lot of folks are looking for a solution like that where we have constraints on pipes and how you get a power energy solution in the form of CNG into different industrial applications. I think it checks a lot of boxes.

Speaker Change: Developed in house that uses this deal Barrick energy too.

Ravi Srivastava: To the produce compressed natural gas without any mechanical compression. So it's a cost effective and baker from an emission standpoint, it's a it's that's terrific.

Speaker Change: And a lot of folks are looking for a solution like that where you have constraints on pipes and how do you get Oh.

Ravi Srivastava: <unk> energy solutions in the form of PNG to different industrial applications. So I think it just takes a lot of boxes.

Leo Paul Mariani: The third-party sales that we had, the revenue was real. It's not material, but we expect to transact on many such deals in the future. And as we do that, we'll provide more guidance to you guys.

Leo Paul Mariani: And the third party sales that we had at the.

Leo Paul Mariani: But if the revenue was real it's not material, but we expect to.

Ravi Srivastava: It's, it's not material, but I'd be expect to, uh, uh, transact on many such, uh, deals in the future and then the, and as we do that, you know, we'll provide more guidance to, uh, you guys.

Leo Paul Mariani: Transact on many such.

Leo Paul Mariani: Deals in the future and then as we do that a little bit.

Leo Paul Mariani: Wide more guidance to you.

Ravi Srivastava: Okay, now that was very helpful. I know obviously, like you said, there's no guidance, but just from a high level, is the impact of these two businesses going to start to show up in the financials next year? So we'll start to kind of notice it, you know, on the investor side, and then also just wanted to confirm that as you look out, you know, the next couple years, do you see those two businesses as not really requiring CapEx? So, you know, as you ramp them up, it's kind of all gravy on the free cash flow for the Yeah, I mean, I think we do expect it.

Leo Paul Mariani: Yes.

Unknown Executive: Okay, now that was, uh, very helpful.

Speaker Change: Okay, no that was very helpful.

Unknown Executive: Um, I know, obviously, like you said, there's no guidance, but just from a high level, I mean, is the impact of these two businesses going to start to show up in the financials next year, so we'll start to kind of notice it, you know, on, you know, the investor side? And then also wanted to confirm that, as you look out, you know, the next couple years, do you see those two businesses as not really requiring, so, you know, as you ramp it, it's kind of all gravy on the free cash flow for the most part.

Ravi Srivastava: Obviously like you said, there's no guidance, but just from a high level. I mean is the impact of these two businesses going to I'm going to start to show up in the financials next year. So we'll start to kind of notice it.

Ravi Srivastava: The Investor side, and then also just wanted to confirm that and as you look out. The next couple of years do you see those two businesses is not really requiring capex. So as you ramp it it's kind of all gravy on the free cash flow for the most part.

Ravi Srivastava: Yeah, I mean, I think we do expect them, one more than the other, as a more meaningful contributor to revenue and cash flows for 2025. And, I mean, both of these are going to require capital investments, and we will provide color and all that stuff as the plan for 2025 takes form. But, yeah, I mean, we expect both of them to start contributing meaningfully from 2025 onwards.

Ravi Srivastava: Yeah, I think we do expect it, uh, uh, one more than the other, as a more meaningful contributor to revenue and cash flow for 2025.

Speaker Change: Yes, I mean, I think we do expect it.

Ravi Srivastava: One more than the other.

Ravi Srivastava: More meaningful contributor to revenue and cash flows for 2025.

Ravi Srivastava: And, uh, I mean, both of these are going to require, uh, in tapering investments, uh, and, uh, we'll move to a white tunnel and all that stuff as, uh, the plan for 2025 takes form, uh, but, uh, but yeah, I mean, we expect both of them to start at contributing, you know, meaningfully, uh, from 2025 onwards.

Ravi Srivastava: I mean, both of these are going to require.

Ravi Srivastava: Our capital investments.

Ravi Srivastava: We will provide color on all that stuff.

Ravi Srivastava: The plan for 2025 takes form.

Ravi Srivastava: But oh, well, yes, I mean, we expect both of them to start.

Ravi Srivastava: <unk> and <unk>.

Ravi Srivastava: Really from 2025 upwards.

Unknown Executive: Okay, thank you.

Speaker Change: Okay. Thank you.

Michael Scialla: The next question comes from Michael Skialo with Tevens. Please go ahead. Hi, good morning. Let me talk about the 11 deferrals that you're still planning on bringing online. Early next year, just curious if you are, in addition to that, curtailing any production at this point, and if so, can you say how much?

Michael Stephen Scialla: The next question comes from Michael Scialla with Stevens. Please go ahead.

Ravi Srivastava: The next question comes from Michael Schiavo with Stephens. Please go ahead.

Michael Stephen Scialla: Hi, good morning. You talked about the 11 deferrals that you're still planning on bringing online early next year. Just curious if you are, in addition to that, curtailing any production at this point, and if so, can you say how much?

Michael Stephen Scialla: Hi, good morning.

Michael Stephen Scialla: I know you talked about the 11 deferrals that you're still planning on bringing on line.

Michael Stephen Scialla: Early next year just curious if you are a in addition to that curtailing any production at this point.

Speaker Change: So can you say how much.

Alan Shepard: Good day, this is Alan. We're not curtailing any additional production. We want to just above, kind of our Facebook with the margin safety, then we need around that production profile and make sure we don't dip below the hedge book. Yeah, again, the plan is to make a call on whether or not to grow production next year based on how pricing develops.

Alan K. Shepard: Good day, this is Alan. We're not curtailing any additional production. We're running just above kind of our hedge book with the margin of safety that we need around that production profile to make sure we don't dip below the hedge book. Yeah, again, the plan is to make a call on whether or not to grow production next year based on how pricing develops. I think there's a lot to be seen for the rest of the summer in terms of natural production levels and kind of in-basin usage and things like that before we're ready to make that decision.

Michael Stephen Scialla: Hey, this is Alan were not.

Speaker Change: Curtailing any additional production, we're running just above kind of our hedge book with a margin of safety that we need around that production profile to make sure we don't get below the hedge book.

Alan K. Shepard: Yes again, the plan is to make a call on whether or not to grow production next year based on how pricing develops I think there's a lot to be seen for the rest of the summer in terms of natural production levels and kind of in basin usage and things like that before we're ready to make that decision.

Michael Scialla: I think there's a lot to be seen for the rest of summer in terms of natural production levels and kind of in-basin usage and things like that before we're ready to make that decision. Great, gotcha, okay.

Speaker Change: Right Gotcha Okay.

Unknown Executive: Fairly mentioned, as well, some progress, I guess, on coal mine methane being allowed under the 45-B hydrogen tax credit. Any sense for the timeline there on any of your projects, if that were to move forward? On the 45-B timing, I think there are a lot of cases out there when it's going to come out, but I think we expect the guys to come out and see you for time frame and eagerly looking forward to what comes out in that tax policy.

Michael Stephen Scialla: Right, gotcha, okay. You mentioned, as well, the progress, some progress, I guess, on coal, mine, and methane being allowed under the 45e hydrogen tax credit. Any sense for the timeline there on any of your projects if that were to move forward?

Speaker Change: You mentioned.

Speaker Change: Well the progress some progress I guess on <unk>.

Michael Stephen Scialla: Her coal mine methane being allowed under the 45.

Speaker Change: Hydrogen tax credit.

Michael Stephen Scialla: Any sense for the timeline there on any of your projects if that.

Speaker Change: Were to move forward.

Alan K. Shepard: On the 45-week timing, I think there are a lot of people... [inaudible] Eagerly looking forward to what comes out.

Speaker Change: On the 45, the timing I think there are a lot of.

Speaker Change: Oh, yes.

Speaker Change: Yes, it's out there when that's going to come out, but I think we expect the.

Speaker Change: The guidance to come out in the Q4 timeframe.

Alan K. Shepard:

Alan K. Shepard: Eagerly looking forward to what comes out.

Speaker Change: Oh, okay.

Speaker Change: And that tax policy.

Unknown Executive: Could you say, if it is favorable, when you could start moving forward on any of the projects that you have contemplated? That'll be made based on what the guy answers.

Alan K. Shepard: Could you say if it is favorable, you know, when you could start moving forward on any of the projects that you have contemplated? Yeah, that'll be made based on what the guy said.

Speaker Change: Could you say if it is favorable.

Speaker Change: When you could start moving forward on any of the projects that you have contemplated.

Alan K. Shepard: Yeah, that'll be made based on what the guidance is, so ideally, you know, the more favorable the guidance, the more quickly we can get moving on implementing some of the big projects that we're interested in participating in, but it's all going to be guidance-dependent.

Alan K. Shepard: Yeah that'll be made based on what the guidance says.

Unknown Executive: So, ideally, the more stable the guy is, the more quickly we can get moving on and planning some of the big projects that we're interested in participating in. That's all going to be that independent.

Alan K. Shepard: More favorable to guidance more quickly if we can get moving on implementing some of the big projects that were interested in participating and that's all going to be data dependent.

Unknown Executive: Makes sense.

Speaker Change: Makes sense. Thanks.

Unknown Executive: Thanks.

Unknown Executive: Again, if you have a question, please press star, then one.

Jacob Phillip Roberts: Again, if you have a question, please press star then 1. The next question comes from Jacob Roberts with TPH. Please go ahead.

Speaker Change: Again, if you have a question. Please press Star then one.

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

Jacob Phillip Roberts: The next question comes from Jacob Roberts with T. P. H. Please go ahead.

Jacob Phillip Roberts: Morning.

Ravi Srivastava: Robbie, I was wondering if you could give us more insight into the range and pricing you're seeing on the tier one credit market as you monetize those. I know you just mentioned that we expect a pretty steady state volume and value from here. So, I'm just trying to square that with the historical ranges that the PA Public Utility Commission publishes on those Tier One credits, which may be the wrong marker to be looking at. But I'm just wondering if there's an aspect that's keeping the value you're realizing more normalized over time? Yeah, so I think that the PA PUC tier one rack value is, I think it's publicly disclosed like what's coming out.

Jacob Phillip Roberts: Ravi, I was... I'm wondering if you could give us more insight into the range and pricing you're seeing in the Tier 1 credit market as you monetize those. I know you just mentioned that we should expect a pretty steady state volume and value from here, so I'm just trying to square that with the historical ranges that the PA Public Utility Commission publishes on those Tier 1 credits, which may be the wrong marker to be looking at. But I'm just wondering if there's an aspect that's keeping the value you're realizing more normalized over time.

Jacob Phillip Roberts: Robbie I was.

Jacob Phillip Roberts: I'm wondering if you could give us more insight into the range and pricing you're seeing on the tier one credit market as you monetize those I know you just mentioned that we should expect a pretty steady state.

Ravi Srivastava: Volume and value from here.

Jacob Phillip Roberts: So I'm just trying to square that with the historical ranges that are P. A public utility commission publishes on those tier one credits, which which may be the wrong market would be looking at but I'm. Just wondering if there is an aspect that is keeping the value you're realizing more normalize overtime.

Ravi Srivastava: Yeah, so I think that the PAPUC Tier 1 REC values are publicly disclosed what's coming out. I think the range that we have seen this year is, I want to say, between $33 to $36 per megawatt hour-ish, which translates into a certain amount of money in MMBTU, so don't ask me to do the math live on a call. But the value for the credits is expressed in dollars per megawatt hour, but I think it's been in that range of $33 to $36-ish dollars all year, and that's what we're forecasting that the range is going to stay in over the next two quarters.

Ravi Srivastava: Yeah, So I think that the.

Ravi Srivastava: The the PUC tier one rack values I think it's publicly disclosed like what's the what's coming out I think the range that we've seen this year is I Wanna say between 33 to $36 per megawatt hour.

Ravi Srivastava: I think the range that we've seen this year is, I want to say it's been 33 to 36 dollars per mega one hour issue, which translates into a certain $1,000 MBTU. So, don't have to do the math live on a call. But the value for the credits is expressed in these dollars per mega one hours. And I think it's been in that range of 33 to 36 dollars all year. And that's what we're forecasting that the range is going to stay in over the next the remaining two quarters.

Speaker Change: Which translates into a certain policy that might be to you don't have to go do the math LIBOR on the call but.

Ravi Srivastava: But the value for though the credits as expressed in U S dollars per megawatt hours.

Ravi Srivastava: I think it's been in that range of 33 to 36 ish dollars all year and that's what that's what we're forecasting that that range is going to stay in over the next.

Ravi Srivastava: The remaining two quarters.

Ravi Srivastava: In a, going back, if you go back a few years, I think it's been on a trend up for three years ago, I think it was in a $17 per megawatt hour range, and it's come up over the last couple of years, and it stayed at this level, and we expect it to stay at this level. If anything changes, our guidance will reflect the change in the impact it's going to have on our cash flows.

Ravi Srivastava: And going back, if you go back a few years, I think it's been on a rising trend. Three years ago, I think it was in a $17-ish per megawatt-hour range, and it's gone up over the last couple of years, and it's stayed at this level, and we expect it to stay at this level. If anything changes, our guidance will reflect that. The gene didn't boom back; it's going to have one in our cache.

Ravi Srivastava: And going back if you go back a few years I think it's been on a on a trend up.

Ravi Srivastava: Three years ago, I think it wasn't a 17 ish dollar per megawatt hour range.

Ravi Srivastava: It's come up over the last couple of years and it stayed at this level.

Ravi Srivastava: We expect it to stay at this level if anything changes our guidance will reflect.

Ravi Srivastava: But Jane doesn't pay back is going to have one eye on our cash flows.

Jacob Phillip Roberts: Got it, I appreciate that. And then maybe just in general, kind of doing some back-of-the-envelope math, if I look back to Q2'23, at that time, you had 2026 hedged around 50 to 55 percent, I believe, and then looking at today relative to 2027, that's sitting 10 to 15 percent lower, let's call it maybe 40 percent. Just wondering if that level is how we should be thinking about the business over the back half of this decade. I know it's a long time off, but I believe you mentioned on the call the willingness to go lower on the hedge book over time, but just wondering what that ultimate comfortable level may be.

Jacob Roberts: Got it. I appreciate that.

Speaker Change: Got it I appreciate that.

Unknown Executive: And then maybe just in general, kind of doing some back of the envelope math, if I look at, back to Q2 23, at that time you had 2026 heads around 50 to 55%, I believe, and then looking at today relative to 2027, that's sitting 10 to 15% lower, let's call it maybe 40%, just wondering if that level is how we should be thinking about the business over the back half of this decade. I know it's a long, long time off, but I believe you mentioned on the call to willing, just to go lower on the head to book over time, but just wondering what that ultimate comfortable level may be.

Speaker Change: And then and then maybe just.

Jacob Phillip Roberts: In general kind of doing some back of the envelope math, if I look at it.

Jacob Phillip Roberts: Back to Q2 'twenty three at that time, you had 2026 hedged around $50 to 55% I believe and then looking at today relative to 2027 about sitting 10% to 15% lower or let's call. It maybe 40% I'm just wondering if that level is how we should be thinking about the business over the back half of this.

Jacob Phillip Roberts: Decade, I know, it's a long long time off but I believe you mentioned on the call the willingness to go lower on the hedge book over time, but just wondering what that ultimate comfortable level maybe.

Ravi Srivastava: Yeah, I think we've been pretty consistent in the plus. We're trying to implement on the head book last couple of course, which is one, we want to be 80% roughly hedge going into any given upcoming year, and then beyond that first 80%, we've been looking to shorten up the duration of the book. So you've seen us have kind of sort of less hedge activity over the last few quarters as the book has come in.

Alan K. Shepard: Yeah, I think we've been pretty consistent in the philosophy we're trying to implement on the hedge book over the last couple quarters, which is one, we want to be 80% roughly hedged going into any given upcoming year. And then, you know, beyond that first 80%, we've been looking to shorten up the duration of the book. So you've seen us have kind of sort of less hedge activity over the last few quarters as the book has come in.

Speaker Change: Yes, I think we've been pretty consistent with what they were trying to implement on the hedge book last couple of quarters, which is why we wanted to be 80% roughly you hedge going into any given upcoming year and then beyond that first 80% we've been looking to shorten up the duration of the book.

Alan K. Shepard: So you've seen us have kind of a sort of less hedge activity over the last few quarters as the book has come in.

Unknown Executive: Great, appreciate the time, Grace.

Jacob Phillip Roberts: Great. Appreciate the time, guys.

Speaker Change: Great I appreciate the time guys.

Noel Parks: The next question comes from Noel Parks with 2E Brothers. Please go ahead. Hi, good morning. I apologize if you touched on this earlier, but I just wanted to talk a bit about service costs. What you're seeing on both vendors and materials, I was wondering if you've seen any shifts of equipment out of the basin. Feel like we're not hearing much on that grant these days. Thanks. On the service cost side, what you've seen is a service cost staying flat for the first half of the year, and our projections are they're going to stay almost flat for the next half of the year, too.

Noel Augustus Parks: The next question comes from Noel Parks with TUI Brothers. Please go ahead.

Speaker Change: The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.

Noel Augustus Parks: Hi, good morning. I apologize if you touched on this earlier, but I just wondered, could you talk a bit about service costs, what you're seeing from both vendors and materials. I was wondering if you've seen any shifts of equipment out of the basin. I feel like we're not hearing much on that front these days.

Noel Augustus Parks: Hi, Good morning, I apologize if you touched on this earlier, but I just wondered could you talk a bit about service.

Alan K. Shepard: Thanks.

Alan K. Shepard: Service costs, what you're seeing on both from both vendors and materials I was wondering if you've seen any any shifts of equipment out of the basin.

Alan K. Shepard: Feel like we're we're not hearing much on that.

Alan K. Shepard: These days thanks.

Alan K. Shepard: On the service cost side, what we've seen is service costs staying flat for the first half of the year, and our projections are they're going to stay almost flat for the next half of the year too.

Speaker Change: Yeah on the on the service cost side, what we've seen is service cost staying flat.

Alan K. Shepard: Our first half of the year and we.

Speaker Change: We are predictions on them, they're gonna stay you know almost flat for the next half of the two.

Noel Augustus Parks: Okay. Okay, great.

Noel Parks: Okay, great.

Speaker Change: Okay, Okay, great and I just wondered I.

Noel Parks: I just wondered, I mean, it's been such an unusual cycle when we look from pre-pandemic effect and then the inflation afterwards in services and then more broadly macro, and it seemed that we were kind of on this path of the leverage kind of remaining almost entirely in producer's hands or largely I'm pricing just as just from capital discipline really holding pretty much across the sector. Is that essentially you think we're back there, and I mean, in your modeling, I guess maybe I'd ask what's the worst case, most highest inflation scenario you entertain when you look to model rest of the year next and so forth.

Speaker Change: I mean.

Speaker Change: It's been such an unusual cycle when we look from pre pandemic pandemic effect and then the inflation afterwards sort of in services and then.

Alan K. Shepard: And I just wondered, I mean, it's been such an unusual cycle when we look from the pre-pandemic, the pandemic effect, and then the inflation afterwards, sort of in services and then, you know, more broadly macro. And it seems that we were kind of on this path of the leverage kind of remaining almost entirely in producers' hands or largely on pricing just as, you know, just from capital discipline really holding pretty much across the sector.

Alan K. Shepard: More broadly macro and it it seemed that we were kind of on this path of.

Alan K. Shepard: The the leverage kind of remaining almost entirely in producer's hands or largely on pricing just as digital gestural capital discipline really holding.

Alan K. Shepard: Pretty much across the sector is.

Speaker Change: Is that essentially you think where we're back there and.

Alan K. Shepard: Is that essentially, you think we're back there? And I mean, in your modeling, do you, you know, I guess maybe I'd ask, what's the sort of worst-case, highest inflation scenario you entertain when you look tomorrow, you know, rest of the year, next year? Yeah, we generally think about the patient as...

Alan K. Shepard: I mean in your modeling do you.

Alan K. Shepard: I guess, maybe I'd ask what's the sort of worst case, most highest the inflation.

Alan K. Shepard: Scenario, you New Entertainment you look tomorrow.

Speaker Change: Rest of the year next year and so forth.

Noel Parks: Yeah, we generally think about the base and its balance right now, but there hasn't been a lot of change in rig activities in our base, and it's specific going back to, you know, coming out of the pandemic era. So, you know, the inflation we saw on 22, we tribute mostly that to the macroeconomic inflation, just across, you know, wage gains and other things across the general economy as opposed to anything that was particular to our base in dynamic. So when we think about it going forward, it's more of what we expect national inflation levels to do because we don't see an uptake in activity in our base and on the producer's side.

Alan K. Shepard: Yeah, we generally think about the basin as balanced right now, but there hasn't been a lot of change in rig activities in our basin, in particular, going back to, you know, coming out of the pandemic era. So, you know, the inflation we saw in 22, we attribute mostly that to macroeconomic inflation, just across wage gains and other things across the general economy, as opposed to anything that was particular to our basin dynamics. So, when we think about it going forward, it's more of what do we expect national inflation levels to do because we don't see an uptick in activity in our basin on the producer side.

Speaker Change: Yeah, we generally think about the pace and it's balanced right now, but there hasn't been a lot of change in rig activities are basin specific going back to you know coming out of a pandemic era. So.

Alan K. Shepard: The inflation, we saw in 'twenty, two we attribute most of that back to the macro economic inflation.

Alan K. Shepard: Just across you know wage gains and other things across the general economy as opposed to anything that was particular to our patient dynamics.

Alan K. Shepard: Think about it going forward, it's more of what do we expect national inflation's level sit here, because we don't see an uptick in activity in our basin.

Alan K. Shepard: On the producer side.

Noel Parks: Great, thanks a lot.

Speaker Change: Okay, great. Thanks, a lot.

Unknown Executive: This concludes our question and answer session.

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

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

Tyler Lewis: I would like to turn the conference back over to Tyler Lewis for any closing remarks. Thank you again for joining us this morning, and please feel free to reach out if anyone has any additional questions. Otherwise, we're just speaking with everyone. Thank you.

Tyler Lewis: Thank you again for joining us this morning, and please feel free to reach out if anyone has any additional questions. Otherwise, we're just speaking with everyone next quarter.

Tyler Lewis: Thank you again for joining us this morning, and please feel free to reach out if anyone has any additional questions. Otherwise. We're just speaking with everyone next quarter. Thank you.

Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Unknown Executive: You may now disconnect.

Speaker Change: Uh huh.

Operator: Yeah.

Operator: Okay.

Operator: BF-WATCH TV 2021

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