CNX (CNX) Q4 2025 Earnings Call Transcript

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DATE

Thursday, January 29, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Alan Shepard
• Chief Operating Officer — Navneet Behl
• Chief Financial Officer — Everett Good
• Vice President, Investor Relations — Tyler Lewis

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TAKEAWAYS

• Capital Expenditures (CapEx) -- Approximately 60% of annual CapEx scheduled for the first half of the year, providing flexibility to accelerate completion activity in the second half if warranted by market conditions.
• Production Profile -- Guidance points to flat production across the full year, despite the front-half weighted CapEx deployment.
• Renewable Natural Gas (RNG) 45Z Tax Credit Revenue -- Current guidance implies an annual run rate of $30 million, pending final regulatory guidance.
• Deep Utica Program Activity -- Five Utica laterals are scheduled for completion this year; three deep Utica wells turned inline in the quarter, with average costs of approximately $1,700 per foot and performance in line with expectations.
• Spacing Evaluation -- Two Utica spacing tests underway, evaluating 1,300-foot and 1,500-foot spacings.
• Coal Mine Methane Volumes -- Slight downtick in volumes compared to the prior year, attributed to underlying mining activity; volume stability expected as long as mining operations continue at the Virginia metallurgical mine.
• 2027 Hedging Strategy -- Targeting approximately 80% hedge coverage with a weighted average NYMEX price of $4; currently over 60% hedged for that period.
• Marcellus and Utica Development -- Plan to bring three Marcellus CPA and three Utica wells online; Marcellus stacked pay development wells expected to yield just below 2.0 Bcf/day, with upper-end performance in the high 1s.
• Southwest Pennsylvania Marcellus Acreage -- Estimated 40,000–50,000 acres of remaining inventory, supporting runway through decade-end at current activity levels.
• AutoSet Technology -- Fully internalized and used on flowbacks, yielding cost, environmental, and safety benefits; broader adoption by an oilfield services company in Appalachia expected, though no material financial impact yet.
• Operational Resilience -- CEO Shepard stated, "The numbers that we put out today include any expected disruptions, so nothing on that front," indicating all effects from extreme weather are fully reflected in reported figures.

SUMMARY

Management confirmed that the company's flat production outlook aligns with a capital allocation strategy front-loaded in the first half, enabling potential flexibility to adjust activity if market incentives arise. The Deep Utica program advances with five laterals planned for completion and live evaluation of well spacing to refine development planning. RNG business lines are expected to generate $30 million annually via the 45Z tax credit, contingent on final regulatory guidance. The company expressed confidence in inventory depth, especially in core Marcellus acreage, supporting sustained activity through the decade. Management made clear that all currently disclosed operating results already incorporate anticipated weather-driven disruptions.

• Long-term maintenance of production reflects regulatory barriers to pipeline capacity rather than resource or economic constraints.
• Management stated willingness to consider adding frac crews only if sustained long-term price signals or additional demand justifies, explicitly excluding short-term spikes as a reason for increased capital deployment.
• Incremental brownfield pipeline expansions remain limited, with no material impact expected on maintenance-mode production stances without evidence of larger in-basin demand or final AI-driven project commitments.
• Non-core technology businesses continue to progress, but are not expected to materially affect earnings until further scaling occurs and financial contributions can be disclosed.

INDUSTRY GLOSSARY

• Turn In Line (TIL): Industry term describing when a newly completed well begins commercial production.
• 45Z: A federal tax credit supporting renewable natural gas (RNG) production under Section 45Z of the Inflation Reduction Act.
• Spacing Test: Controlled experiment drilling wells at varying distances to evaluate optimal well placement maximizing resource recovery.
• CPA: Central Pennsylvania Area, a development focus for Marcellus Shale wells.
• RNG: Renewable natural gas—methane produced from organic sources including landfill, wastewater, or coal mine methane, distinct from fossil gas.

Full Conference Call Transcript

Alan Shepard: Thanks, Tyler, and good morning, everyone. We normally do not provide opening remarks on these calls. I would be remiss today if I did not take a moment to acknowledge the hard work and incredible efforts of not just our CNX team, but of all the men and women of the natural gas industry who are working to keep the heat and lights on across America during this extraordinary cold weather event we are experiencing. Speaking on behalf of myself, everyone in the room with me, and all of our fellow citizens who are staying warm today, thank you for everything you have done and everything you will continue to do in the days, weeks, and years ahead.

With that being said, operator, can you please now open the line for questions?

Operator: We will now begin the question and answer session. The first question today comes from Jacob Roberts with TPH. Please go ahead.

Jacob Roberts: Good morning. Good morning, Jake. We wanted to ask about the commentary on the front half weighted capital until program and how we should be thinking about that translating to a flat production profile across the year? Just wondering if you can provide any more granularity on how you're thinking about the Till schedule quarter to quarter?

Everett Good: Yes. Thanks, Jacob. This is Everett. You can generally think about the first half CapEx being about 60% of the year's total. And then from a production basis, it's pretty flat throughout the year. But the weighting of that capital to the first half gives us some flexibility in the second half of the year to potentially accelerate frac activity if conditions warrant.

Jacob Roberts: Okay. Great. That's helpful. And turning to the RMG business line, we're curious to how you view the outlook on the AEC pricing and is there a pathway or to getting that back to the $65 million or $75 million annual run rate? And in terms of the 45Z outlook, is it fair to assume that $20 million are kind of grossed up $30 million? Is that also firmly tied to the met stream in terms of the volume being relatively steady going forward?

Everett Good: Yeah. So for the questions there. Let's start with the PA tier one rec market. So that market has been pretty stable since, call it, spring of last year. With the Trump administration coming in, it softened a little bit. Think longer-term outlook for that market, the prices you're seeing now are basically what you need to underwrite sort of new solar wind activity in the PGM markets. So for value megawatt hour to increase there, you're gonna need to see some of the step-ups and the required percent of contribution to the grid from renewables. So that's sort of the long-term bull case as those standards tighten and obviously, pricing moves up.

But in the near term, it's sort of settled into the marginal cost of bringing on new renewable supply. On 45Z, yeah, I think the way to think about that is, you know, our current production levels, we're able to generate on a run rate basis about $30 million a year with the initial proposed guidance, and we'll see what the final guidance looks like when it comes out if there's any adjustments to that.

Jacob Roberts: Great. I appreciate your time. The next question comes from Leo Mariani with Roth. Please go ahead.

Leo Mariani: Hi. I was hoping you could talk about the Utica program here in 2026. I'm only seeing kind of three turn in lines, probably a little bit lower than I expected. It seems like the company has been very excited about the Utica and made some good progress. So it just seemed like maybe it was a little smaller program this year. So just trying to reconcile that, but maybe some of this is timing or maybe some of the '26 wells are coming on that next year.

Alan Shepard: Yeah. I think it's the latter, Leo. I appreciate the question. I mean, it's really not indicative of the underlying kind of belief in the Utica or anything like that. It's just we have a lot of TILs from last year coming online. We have some Southwest PA inventory that we want to harvest that's really economic. And then we're gonna continue in the last half of the year back at it with reps at the wellhead on the Utica. So I don't know if Nav has got anything to add, but nothing to read into on sort of the till timing there.

Navneet Behl: Yeah. Leo, I can add a bit. We are really confident of our Deep Utica program right now. And as Alan mentioned, this is just a timing issue. Nothing else. In fact, we'll be completing about five Utica laterals this year. So it's just a function of timing on when we complete it.

Leo Mariani: Okay. No. That's very helpful for sure. And then Alan, you kind of went off the call talking about weather here. Just wanted to get a sense, are you guys expecting some disruption to the operations or the volumes here in the first quarter? Obviously, it sounds like your team is doing a great job. I just wanted to get a sense if you think there's some impact there.

Alan Shepard: No. We're not. So, you know, our team's been preparing for the last weeks heading into this event. They've done a tremendous job keeping the field running. The numbers that we put out today include any expected disruptions, so nothing on that front.

Leo Mariani: Okay. That's helpful for sure. And then just lastly on your new tech business, wanted to get a sense if there's any update in terms of how some of the other businesses are progressing like AutoSet on the service side. And I know you guys have also discussed kind of some CNG, LNG ambitions over time.

Alan Shepard: Yeah. On the AutoSet, I think as we mentioned before, we fully internalized, adopted that technology. We use it on our flowbacks. It provides tremendous cost savings, environmental, and safety benefits. We are the sort of non-op on that. We've outsourced that to an OFS company who's continuing to roll that out across Appalachia here. Everything we're seeing is it's starting to be adopted, and we think '26 might be an uptick year for that. But nothing contributing yet materially to the financial bottom line. When it does, we'll provide guidance on that. As far as the other businesses, the tech still exists for those businesses, but just nothing material to update on those right now.

Leo Mariani: Okay. Thanks.

Operator: The next question comes from Michael Scialla with Stephens. Please go ahead.

Michael Scialla: Yes, good morning. You guys said in your prepared remarks you expect to be responsive to any material changes in gas prices this year, Everett? You mentioned you'd consider adding a frac crew in the '6. Wanted to see, is that built into the CapEx guidance range, that $20 million variance for this year? Or any more detail you could provide there would suggest what CapEx could do in the for the full year.

Everett Good: Yeah. Michael, yeah, any uptick in activity is not included in our base ranges. What we're seeing right now in terms of pricing, you know, after you get beyond the February contract where it falls off pretty significantly in terms of the strip. So we're not seeing yet the price activity yet to kind of incentivize us to add frac activity in the '26.

Alan Shepard: Yeah. Just to add on. We're not gonna chase sort of spot activity. When we talk about adding, it would be some sort of long-term call associated with new infrastructure, new power plans, something like that would really get the 27, 28, 29 strip moving. We're not gonna try to jump around to catch a month of pricing.

Michael Scialla: Got it. Okay. And then just wanna see if you could add any color on the three deep Utica wells you turn in line for the quarter. I realize it's early days, but anything you can say there in terms of cost or production?

Navneet Behl: I think everything is generally aligned, Ava. Anything to add? Yeah. Our team has been really working on the drilling cost and, like, we had guided, like, our average, you know, Utica cost is about $1,700 per foot. So that's on the cost. And second, on the performance, these wells are in line with our expected performance. And we are pretty confident, and now we are into the spacing evaluation. So we have, like, two spacing tests going on now. One is 1,300-foot spacing, and then the second is 1,500-foot spacing. And as we get more results from these tests, we'll be getting that information out.

Michael Scialla: Great. Look forward to that. Thank you, guys.

Operator: Next question comes from Kalei Akamai with Bank of America. Please go ahead.

Kalei Akamai: Hey, good morning guys. For my first question, I want to ask about coal mine methane volumes. Kind of a modest downtick year over year, maybe half of the year 17.5 from last year. Can you kind of help us understand the activity set behind the volumes how that may compare to last year? How many years of visibility you have looking forward?

Alan Shepard: Yeah. The way to think about it, those volumes are really the primary driver is the underlying mining activity at that particular mine. Our expectation is that we're sort of in that range moving forward assuming that mine continues to operate. You know, that life of mine is twenty plus years and so it's a metallurgical mine in Virginia. If you're familiar with it. So really any sort of wiggle you see in volumes is just a function of the pace of their longwall and what needs degassed.

Kalei Akamai: Can you just remind us on the hedging strategy? Got it. Thank you, Alan. For my second question, when do you guys expect to be done by 2027?

Everett Good: Yeah. Yeah. Clay, I can take that. So for '27, I mean, as we approach that year, we look to be approximately 80% hedged. '27 is a really good year for us. Right now we have kind of a weighted average NYMEX price of about $4. So we target that level around there, you know, based on what we can get in the basis markets as well. So at $4 kind of swaps business forms really, really well at that level. Yeah. And we're 60% hedged already on Yeah. We're a little over 60% hedged on that.

Alan Shepard: Yeah. So we'll dig into the rest of that book throughout the year. Given we're already 60% hedged, we can be a little more opportunistic on putting those on. As Everett mentioned, we'll be at our 80% sort of number heading into that year.

Kalei Akamai: Got it. Thank you, guys.

Operator: The next question comes from Jeff Baumann with Daniel Energy Partners. Please go ahead.

Jeff Baumann: Hi, good morning everybody. I had two questions. First one, I appreciate the comments around not chasing a front month gas price or a near price. But maybe just to expand on it, can you frame maybe a little bit more of kind of what you want to see? You mentioned a 27 strip, 28 strip. Is this something where you want to get through the winter, kind of see where storage levels end in terms of kind of timing on any kind of increase in activity? Just maybe a little bit more on kind of how you're thinking about level setting from maintenance to maybe something higher? Thanks.

Alan Shepard: Yeah. So maybe break it into two parts. I think if you think long term, right, we've been in maintenance of production give or take for the last six years, and that's really a function of just the constraints up here in Appalachia. The unwillingness for regulators to allow additional pipelines to get gas to where it should go. And then some of the projects you are seeing for potential in-basin demand, they're sort of longer lead projects with the new power and AI demand. You know, we're hopeful on those, they're still a few years out. So there's no reason to build those volumes just yet.

In terms of, you know, jumping up or down 5% any given year, to make that decision as part of your planning cycle, you'd want to be able to have pretty good visibility that the prices aren't going to slip away from you by the time you bring the volumes on. So you'd want to hedge off that if you were going to increase production. And then, you know, you're just always trying to manage your chill count and your duck count to give you a little bit of flexibility. But that's all just sort of short-term tactics as opposed to sort of a longer-term strategy which we'd like to see, which is an actual increase on the demand side.

Jeff Baumann: Right. Yeah. So a follow-up question on that. Can you just speak more broadly on incremental takeaway? I get it on the greenfield, difficulties, but I'm hearing more and more there's smaller projects, brownfield expansions, moving gas west out of Pennsylvania into Ohio, kind of some of the bigger data center growth. Just any thoughts on how everybody is doing in terms of kind of pushing a little bit more gas west and south?

Alan Shepard: Yeah. A lot of the low-hanging fruit on those westbound projects was taken up last decade. I mean, there are some proposed on the table that get you back sort of to the Midwest area, the kind of area. But those haven't been greenlit yet. I mean, the cost of some of those projects is just a little bit challenging just yet. I think everyone's sort of waiting to see sort of what the final outlook is here on AI demand. Right? You need those guys to make their decisions, and then, you know, we'll be right behind them with the fuel supply to support all that.

But, yeah, there are some cats and dogs out there, but nothing material to kind of move anybody off maintenance production in my view.

Jeff Baumann: Gotcha. Thank you very much.

Operator: The next question comes from Betty Chang with Barclays. Please go ahead.

Betty Chang: Good morning. Thank you for taking my question. I have a question on the 2020 activity of going to do the three wells in Marcellus in CPA and three wells in Utica. Just surprised just with the Marcellus activity, what's your expectation for the Marcellus productivity in that region?

Alan Shepard: Yes. So the way to think about that, that's kind of our stacked pay development. Right? So we're going first with the Utica. You think about putting incremental laterals above that on the Marcellus. Think you're in the sort of just shy of two o range, right, with the high ones on those wells?

Betty Chang: Got it. And back to your core South Southwest PA Marcellus, where you're focusing most of your activity, in that could you just remind us what is your latest inventory runway area if you maintain at the 2026 level?

Alan Shepard: Yeah. So I think we'll put out the updated acreage counts at the '1, but generally, we're in the, call it, 40 to 50,000 acres remaining. So it'll get you towards the end of the decade.

Betty Chang: Okay. Got it. That's it. Thank you.

Operator: 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: Great. Thank you for joining us everyone this morning. Please feel free to reach out if anyone has any additional questions. Otherwise, we look forward to speaking with everyone again next quarter. Thank you.

Navneet Behl: Thank you.

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

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