Tyler Lewis: Thank you, and good morning, everybody. Welcome to CNX's Q3 Q&A conference call. Today, we will be answering questions related to our results. This morning, we posted to our investor relations website an updated slide presentation and detailed Q3 earnings release data, such as quarterly E&P data, financial statements, and non-GAAP reconciliations, which can be found in a document titled 3Q 2026 Earnings Results and Supplemental Information of CNX Resources. 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, as the call today will be used exclusively for Q&A. With me today for Q&A are Alan Shepard, our President and Chief Executive Officer, Ravi Srivastava, our Chief Financial Officer, and Navneet Behl, our Chief Operating Officer.
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 and our actual results may differ materially as a result of many factors. A discussion of risks and uncertainties related to those factors in 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. Operator, can you please open the call up for Q&A at this time?
Operator: Yes. Thank you. 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 are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble the roster. The first question comes from Gabe Daoud with Truist.
Gabe Daoud: Thanks, operator. Morning, guys. Thanks for taking my questions. Was hoping we could maybe just start with the macro backdrop, and you noted in the prepared remarks you'll certainly remain flexible and responsive to the current environment. So curious maybe how that would translate into your thoughts on 2027, just given where gas prices are.
Alan Shepard: Yeah. Hey, Gabe. Thanks for the question. Where we sit right now, so we're pretty much on the five-year average for storage levels. We'll be close to four Ts going into winter. Right now, we're not giving forward guidance, but right now it looks like we'll be in maintenance production mode, right? Unless we see something that sort of incentivizes producers to bring on more gas, we'll be staying steady state. Obviously, if it sort of degrades from here, we'll make adjustments as necessary.
Gabe Daoud: Okay. Thanks, Alan. So maintenance for now, not below maintenance given prices on the screen currently. You feel good with still maintenance?
Alan Shepard: Yeah. We are pretty hedged going into 2027. So, we are a little bit different shape than most folks. So right now, we would still be in the maintenance mode mindset.
Gabe Daoud: Right. Okay. Great. That is helpful. Then, my follow-up will be another, I guess, higher level question. A big merger in basin this week was announced, as I am sure you are all aware. We would love to hear your thoughts maybe on the transaction and just M&A in Appalachia more generally.
Alan Shepard: Yeah. We are not going to comment on other folks' M&A. Obviously, it is a commodity industry, and you see consolidation in those sorts of industries. We will see what the combined company does in terms of production levels and things like that. But not much color to provide from our side on it.
Gabe Daoud: Okay. CNX's appetite for M&A at this stage?
Alan Shepard: Yeah. It is one of the lanes of capital allocation, right? As we always talk about. We are open to things that are accretive to the long-term free cash flow per share value. It is just one of the things we review, and right now, share repurchases are sort of the bar we test all of that against, and they continue to be extremely attractive, as you saw this quarter.
Gabe Daoud: Yep. For sure. Okay. Thanks, Alan. Thanks, everyone.
Operator: Thank you. The next question comes from Leo Mariani with Roth.
Alan Shepard: Hey, Lou.
Leo Mariani: Yeah. Hey, guys. Hi. Wanted to see if you could comment on inflation. Are you starting to see that creep in areas of the business, and do you expect that to maybe get a little worse next year?
Alan Shepard: Yeah, I'll turn that over to Nav.
Navneet Behl: Yeah. Hi, Lou. On the inflation side, the cost increase we are seeing are on two things. One is diesel, another is steel. But our overall impact to our program is less than 1% of our capital.
Navneet Behl: Not much impact moving forward for us.
Alan Shepard: Yeah, Leo, if you think about it, we have driven most of the diesel out of our system through our emission reduction initiatives over the years. We run electric frac fleets. We have intensive in-water transportation. We do not run a lot of water trucks and things like that. So as Nav mentioned, our exposure to those two categories are pretty limited moving into 2027. But there is certainly increases there, as everyone has seen.
Leo Mariani: Okay. Appreciate that. Then just a question on the Utica here. I know you have had some recent wells. But as you look out a handful of years, certainly my understanding that you guys are going to continue to do more in the Utica. As you think about that, are you contemplating any kind of new midstream build-out you think might be necessary to get some of that deeper Utica in central Pennsylvania online several years down the road?
Alan Shepard: Yeah. As we move through that CPA field, we are going to develop that as efficiently as possible. We have had a lot of time to plan out the runway there. You are not going to see any major spikes in infrastructure build. Year to year, you will see some oscillation, but really call it in the $25 million ± on infrastructure.
Leo Mariani: Okay. Thanks, guys.
Alan Shepard: Yep.
Operator: Thank you. The next question comes from Phil Jungwirth with BMO.
Phil Jungwirth: Yeah, thanks. Good morning.
Alan Shepard: Good morning.
Phil Jungwirth: Previously, you talked about 40,000 to 50,000 Southwest PA Marcellus acres remaining to be developed. I guess, just wondering how you expect to transition activity in coming years. Is the focus going to be predominantly in this area through the decade, or are we going to see a more gradual pivot, which would actually extend years of inventory in the core?
Alan Shepard: Yeah, obviously the developing what's remaining in the Southwest PA area on the Marcellus front is the most sort of economic thing to do, right? The infrastructure is all there, and they're mostly return trips and things like that. As we talked about before, the way to think about it is we sort of exit the Southwest PA Marcellus as we kind of exit the decade, right? So there's another four to five years sort of to develop the rest of that. And then the program shifts over to CPA Utica predominantly with CPA Marcellus, as we call that area. And then ultimately, you would return back to Southwest PA for Southwest PA Utica and other horizons later on down the road.
Phil Jungwirth: Okay, great. And then can you remind us on maintenance CapEx for CNX, and maybe a little bit more theoretical because there's still the potential to drive down costs. But if you did shift to predominantly deep Utica position in central PA, how do you expect total spend to trend relative to this year's more Southwest PA-focused program?
Alan Shepard: Yeah. So the way we think about it is sort of a capital efficiency metric. So all in with the capital infrastructure and the D&C, you're calling that $0.85 to 0.90 range is where we want to be, sort of moving forward. Obviously, that's subject to things like inflation and amount of infrastructure in any given year. But the avenue where there's still opportunities to squeeze cost out of the system is really on the drilling days on the Utica side, right? So that's really where our focus is, and every time we go back to a new pad there, that's where we're being intentful.
Phil Jungwirth: Great. Thanks.
Operator: Thank you. The next question comes from Michael Scialla with Stephens.
Michael Scialla: Hi, good morning.
Alan Shepard: Good morning.
Michael Scialla: Morning, Alan. You had some management change during the quarter. Just wanted to see if you could add any color on Everett's departure and Robbie assuming the role of CFO.
Alan Shepard: Yeah. Excited to have Robbie. Great to have an in-house candidate with his sort of background and skill set to step in the role. I'm not going to add anything additional on the Everett departure outside what was in the 8-Ks.
Michael Scialla: Okay. Fair enough. I guess thinking long term, been some pretty robust natural gas demand forecasts out there. I guess want to see your thoughts on, do you agree with those and, if they play out, how would CNX respond? Would you do anything different than the way the company's been operating in the last really 6 years with aggressively buying back shares?
Alan Shepard: Yeah, I would say we're extremely bullish on long-term demand in basin. In terms of giving you a precise number, whether that's 2 Bs or 20 Bs, time will tell, right? There's still a lot of uncertainty on the ultimate end users in terms of AI and things like that. What's clear is natural gas, every drop of it here in Appalachia is going to get developed. From a pricing perspective, what that means is, we're still going to be constrained by the supply curve. This is the way we sort of think about it. So when we see the longer-term strip increasing in pricing to bring a call on what we have, that's when we'll bring incremental volumes to market. Until then, sort of maintenance of production is the way we think about it.
Michael Scialla: Sounds good. Thank you.
Alan Shepard: Yep.
Operator: Thank you. Once again, please press star then 1 if you would like to ask a question. The next question comes from Betty Jiang with Barclays.
Betty Jiang: Good morning.
Alan Shepard: Hi, Betty.
Betty Jiang: Thanks for taking my. Hey, good morning.
Alan Shepard: Sure.
Betty Jiang: First, on the gas differential, like Q3 differential is a bit wider than where we were expecting. Just wondering if there is anything in particular that impacted diff, and could you remind us what is your in-basin exposure?
Alan Shepard: Yeah. Our in-basin exposure is two-thirds of the whole portfolio. Been challenging up here in basin with sort of the weather and the softness. Any given day, our team is out there optimizing. We have different sales points, but a lot of the volumes ended up just staying here because it was not economic to send to Michigan or other places.
Betty Jiang: Got it. You guys do not subscribe to the curtailment strategy, right? Was there any curtailment impact?
Alan Shepard: Yeah, no. Great question, Betty. There's been some periods over the last couple of months where gas has dropped sub $1. Because we hedge, there's not a lot we need to do in terms of shut-ins, but there's been a couple of stretches where we have curtailed volumes. It's been less than 1 B, though, probably for the whole quarter. We haven't spiked that out. But we definitely are as sensitive as other folks. When you get down to $0.50, $0.60 gas in basin, there's no reason for anybody to produce at that level if you're unhedged.
Betty Jiang: Right. No, that makes sense. Then another question on capital allocation. It's the second quarter in a row now that you leaned on the balance sheet a bit for a pretty outsized buyback. Is that a level that something that you will consider continuing to do? Is there a limit on how much willingness you're willing to maybe draw on the balance sheet on a revolver?
Alan Shepard: Yeah. We generally don't try to give too much color on the short-term tactics of the buyback program because that's not in our interest. But I think if you look back at the history of what we've done, we've stepped on the gas when we see the sector trade-off, and we've laid off when the sector gives a little more bid to it. But longer term, we still view every share repurchase as a great opportunity to create long-term per share value, particularly when we think about the question about long-term gas demand, right? Instead of growing production, you can grow production per share by repurchasing shares, right? That's another way to do it.
Betty Jiang: Right. Makes sense. Thank you.
Operator: Thank you. We have another question from Mike Scialla with Stephens.
Michael Scialla: I just wanted to ask about a lot of companies talking about having conversations and some agreements on direct sales to customers. Are you having any of those kind of conversations with potential customers? If so, what sort of timeframe should we be thinking about? Are these toward the end of the decade, or could they be sooner than that?
Alan Shepard: Yeah. We are certainly in the mix with everybody else here in the basin on some of these discussions. The challenge has been what is the incentive to lock yourself up to long-term contracts if you are not getting enough of a premium to lock into that fixed delivery? So that has been the challenge. No particular timeline. As folks come to market and look for gas for these projects that are coming online over the next five years, we will participate, and we will update if there is something meaningful to update on it.
Michael Scialla: Got you. You mentioned a little bit about Deep Utica. Should we be thinking for 2027, similar kind of program as this year, turning in line seven or so wells, or could you flex that up at all, or do you have plans to do that?
Alan Shepard: Yeah, I think the mix sort of looks like this year. I do not want to give you the precise numbers because I do not have them off the top of my head. But the mix is we are blending in Deep Utica with the remaining Southwest PA that we have talked about. In any given year, I would not get too engaged in any false precision on the signal there. Like I said, we are super bullish on that horizon, and it is going to be core to the next couple of decades.
Michael Scialla: Great. Thanks, Alan.
Alan Shepard: Yep.
Operator: Thank you. This concludes our question and answer session. I will turn the conference back over to Tyler Lewis for any closing comments.
Tyler Lewis: Great. Thank you again for joining us this morning. Please feel free to reach out if anyone has any additional questions. Otherwise, we will look forward to speaking with everyone again next quarter. Thank you.
Operator: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
