CNX Resources (CNX) Q2 2026 Earnings Call Transcript

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DATE

Thursday, July 30, 2026, at 10 a.m. ET

CALL PARTICIPANTS

• Senior Vice President of Finance and Treasurer — Tyler Lewis
• President and Chief Executive Officer — Alan K. Shepard
• Chief Financial Officer — Everett Good
• Chief Operating Officer — Navneet Behl

TAKEAWAYS

• Adjusted EBITDAX Guidance -- $1,265 million to $1,315 million, representing an update from the previous range of $1,310 million to $1,360 million.
• Free Cash Flow Guidance -- approximately $525 million, reflecting a reduction from the prior estimate of $550 million.
• FCF Per Share Guidance -- approximately $3.41, based on 141.5 million shares outstanding as of April 15, 2026.
• Total Production Guidance -- 605 Bcfe to 620 Bcfe, with liquids expected to comprise 7% to 8% of the total volume.
• Total Capital Expenditures -- $556 million to $586 million, with the company aiming for the midpoint of the range.
• Drilling and Completion CapEx -- $390 million to $410 million, focused on sustaining the current activity level in the field.
• Non-D&C Capital Expenditures -- $150 million to $160 million, covering midstream and corporate infrastructure.
• Natural Gas Hedging -- 81% of 2026 production volumes, providing price stability for the majority of the current year's output.
• 45Z Credit Monetization -- approximately $40 million annually starting in 2027, following a confirmation that methane extraction for the first four months of 2025 qualified for credits.
• Combined Credit Run Rate -- approximately $90 million annually, derived from the combination of 45Z credits and environmental attribute sales.
• Q3 Cash Flow Impact -- $30 million from the sale of tax credits in early July, which management expects to be recorded in third quarter cash flows.
• Marcellus TIL Count -- 12 to 13 turn-in-lines scheduled for the third quarter from a single large pad.
• Annual TIL Target -- 34 total wells for the full year, including a Utica pad scheduled for late in the fourth quarter.
• Utica Well Costs -- approximately $1,700 per foot, with drilling improvements noted as the primary driver of potential future efficiency.
• Asset Sale Proceeds -- approximately $45 million expected for the full year 2026.
• Open Volume Gas Price -- a NYMEX natural gas price of $3.64 per MMBtu for unhedged volumes.
• Gas Price Differential -- ($0.64) per MMBtu for open volumes, reflecting regional basis expectations.
• NGL Realized Price -- approximately $24.75 per barrel for unhedged natural gas liquids volumes.
• Apex Acquisition -- $10.3 million, representing the net cash cost of the transaction completed during the first quarter of 2026.
• Utica Shale Rights Payment -- $16 million for rights acquisition as part of the total capital plan.
• Utica Drilling Activity -- two wells drilled during the quarter, as management focused on well construction and record 24-hour drilling performance.
• Q3 CapEx Timing -- management expects higher capital spending in the third quarter compared to the second quarter due to the timing of field activity.
• Basis Exposure -- 14 Bcf of 2026 hedged volumes remain exposed to regional basis fluctuations.

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RISKS

• Shepard stated, "2026 going into 2027 setting up to be a little bit soft," in reference to the near-term outlook for the natural gas market.
• Good noted, "We do see some level of volatility in that market," when discussing the Pennsylvania AEC market.

SUMMARY

CNX Resources (NYSE:CNX) management updated its 2026 financial guidance, including adjustments to free cash flow and adjusted EBITDAX expectations. The company stated that its low-carbon initiatives, specifically 45Z tax credit monetization, are projected to contribute to its annual run rate beginning in 2027. Operational activity is scheduled to increase in the third quarter with multiple turn-in-lines, followed by a reduction in capital expenditure in the fourth quarter. The company maintained its focus on its capital allocation strategy, which includes opportunistic share repurchases despite a softening near-term outlook for natural gas prices.

• CEO Shepard emphasized the company's 6.5-year commitment to its capital allocation philosophy, stating, "we are seeing some attractive opportunities right now on the equity side."
• CFO Good clarified that the $30 million credit sale in July will appear in the income tax expense line of the financial statements rather than in EBITDA.
• Shepard confirmed that Utica wells are performing in line with expectations, stating that management thinks the assets are "top tier in the basin."
• The company is evaluating additional methane remediation opportunities to lower carbon intensity scores, though no definitive expansion plans were announced for 2026.
• COO Behl specified that a large Marcellus pad is currently in process, which will drive the turn-in-line of 12 to 13 wells during the third quarter.
• Management confirmed its intention to continue its share repurchase program, noting it would consider outspending free cash flow to buy back stock if the margin of safety is wide.

INDUSTRY GLOSSARY

• 45Z: A federal tax credit established for the production of clean fuels based on carbon intensity scoring.
• AEC: Alternative Energy Credit, a tradeable certificate representing the environmental attributes of energy production.
• Bcfe: Billion cubic feet equivalent, a unit of volume that combines natural gas and liquid hydrocarbons.
• EBITDAX: Earnings before interest, taxes, depreciation, depletion, amortization, and exploration expenses.
• Marcellus Shale: A major natural gas-producing rock formation located in the Appalachian Basin.
• MMBtu: One million British Thermal Units, a standard unit of measure for energy content in natural gas.
• TIL: Turn-in-line, the process of connecting a completed well to a gathering system to begin production.
• Utica Shale: A geological formation in the Appalachian Basin that contains significant reserves of natural gas and liquids.

Full Conference Call Transcript

Operator: Good day, and welcome to the CNX Resource Second Quarter 26 Question and Answer Conference Call. Today, all participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Tyler Lewis, Senior Vice President of Finance and Treasurer. Please go ahead.

Tyler Lewis: Thank you, and good morning, everybody. Welcome to CNX's 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 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 26 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. The call today will be used exclusively for Q&A. With me today for Q&A Alan K.

Shepard, our President and Chief Executive Officer Everett Good, our Chief Financial Officer and Navneet Behl, our Chief Operating Officer. Please note that the company's remarks made during this call, including answers to questions include forward looking statements 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. And operator, can you please open the call for Q&A at this time?

Operator: Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star then the number 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. At any time your question has been addressed and you would like to withdraw it, please press star then the number 2. And today's first question will come from Gabe Daoud with Truist. Please go ahead.

Gabe Daoud: Thanks, operator. Good morning, everyone. Was hoping we could hey. Morning, guys. Can we just start with 45Z maybe and just the updated guidance there around credit monetization? How should we think about I guess, timing around treasury issuing a final ruling to feel comfortable about that $40 million revenue number for 2027?

Alan K. Shepard: Yeah. On the treasury guidance itself, that is going to be sometime second part of this year. And I will turn it over to Everett. He can sort of walk you through the what happened. So there are a couple of pieces that we disclosed.

Everett Good: 1 was a step up in cash flows for the current year where we had confirmation that the methane stream cash for the first 4 months of 2025 qualified for credit. So we stepped up our monetization this year. And then, treasury also refined its carbon intensity calculations in its CRET model, which raised the value of our annual monetization. To approximately $40 million a year. So we combine our 45Z sales going forward which will be monetized in 2027, plus our environmental attributes were targeting approximately a $90 million a year run rate between the 2.

Gabe Daoud: Okay. Okay. 90 million a year. Okay. Great. Great. Thanks for that. And then maybe just a follow-up. Could we get your updated thoughts around capital allocation moving forward Maybe a little bit of a weaker near term macro environment with a medium to longer term, improving picture. So how does CNX maybe think about capital allocation given that and your you know, attractive cadence on the buyback?

Alan K. Shepard: Yeah. So we, you know, nothing's changed from our process. I mean, we are on year 6.5 of executing our capital allocation. Philosophy. Our focus is on creating long term value per share. And when we see sort of opportunities where the margin of safety is pretty big, we are going to go ahead and take advantage of that. So, we do not sort of signal as to what we are going to do, but we have a lot of flexibility, and we are seeing some attractive opportunities right now on the equity side. Great. Thanks, guys.

Operator: And our next question is from Leo Mariani with Roth. Please proceed.

Leo Mariani: Yes. Hi, good morning. I was hoping you could talk a little bit to capital here. In your prepared remarks, you guys said that third quarter CapEx is moving up some. Versus 2Q and I guess it is going to move back down in 4Q. I mean, just kind of eyeballing that, looks like it kind of puts you at the higher end of the 2026 CapEx range. Just wanted to verify that is generally accurate and maybe you guys are seeing some inflation starting to hit the numbers here.

Alan K. Shepard: No. I would not ever read into that, Leo. You know, we are still guiding to the midpoint of those numbers and, you know, the commentary is more just about reflecting of the timing of activity we have going on in the field. Right? So you are just going to see slightly higher in Q3 and then sort of level out in Q4 and that just matches up with the activity in the field. Not seeing really anything on the inflation side to note.

Leo Mariani: Okay. that is helpful. And just on production, guys talked about how fourth quarter was the peak. Obviously, there is been weakness in gas. Are you guys kind of attempting to sort of manage your turning lines a bit to try to get production to hopefully peak in winter when maybe prices are a little bit better? Does that mean third quarter is a little bit weaker and fourth quarter is kind of the strongest? Just trying to get a little sense what you are doing on production.

Alan K. Shepard: Yeah. I think the schedule usually naturally sets up like that where we have some of the pads coming on towards the end of the year. But again, we do not over engineer for that answer. We are solving for sort of a different outcome. Yeah, the way it lines up this year, you will see a big couple of whales come on in Q3, and then you will see the rest of them sort of surge into Q4.

Leo Mariani: Okay. that is helpful. And just on the 45Z, I will mention that, you monetized, you sold the $30 million of credits Is that kind of all going to hit like in the third quarter it is kind of 1 lump sum payment for you guys? Yes, Just trying to understand that.

Everett Good: Yes. As a reminder, you will see it come through in the cash flow in Q3? that is why we disclosed it sort of early July activity. When you see it in the financials, remember, comes through the income tax expense line and shows up there. So you do not really see it in EBITDA. But you see it you will see the cash flow impact, is the most important thing. Coming through in Q3?

Leo Mariani: Okay. Thank you.

Operator: And the next question is from Michael Scialla with Stephens. Please proceed.

Michael Scialla: Good morning, everybody. Looking at your morning. Looking at your second quarter spending, I realize you do not guide quarterly, but it was a little bit lower than we were anticipating. I think the street in general as well. Looks like you only drilled 2 wells, granted they were in the Utica, but anything slow down activity during the quarter? Or was that pretty much as planned?

Alan K. Shepard: Yeah. that is as planned. I think it is just a function of us not providing quarterly guidance, which we do not-- we are not planning on doing. Again, I would just look to sort of where the full year guidance is and where those midpoints sit, and that is the right way to think about it. Okay.

Michael Scialla: And on the 45Z, obviously encouraging there. Given that, any plans for additional remediation or are you just kind of stick with the Buchanan mine going forward?

Alan K. Shepard: No. that is the right question. I mean, we are-- you are starting to see this carbon intensity score come down and the value of these credits creep up. We are getting close to where that might make sense, and we are we are always evaluating the opportunities to expand the system. We certainly have some rights and opportunities to do that. Nothing definitive at this time. You know, as we keep making progress, that would be the goal longer term. So probably nothing this year, but longer term. Yeah. Nothing for the rest of this year. Okay.

Michael Scialla: I just wanted to sneak 1 more in if I could. Sure. On-- it looked like your-- you last couple quarters, you have set some 24 hour drilling records on the Utica. Anything you can say there in terms of well costs? I know you I think you are in kind of that $1.7 thousand per foot range. Is that still a good number there, or is that moving either way?

Alan K. Shepard: Yeah. I would say that is sort of the number we are staying with right now. I mean, we have seen what we have talked about last time is the opportunity for improvement is in the drilling side. Completions in the rest of the well construction is pretty steady. But, you know, every time we go back to 1 of these pads, every time we get a new well, we are getting better and better as you would expect as the industry shown over the years. So we will provide, you know, when we are ready and we have a fulsome data set, we will provide maybe an update on that at a future point. Sounds good. Thanks, Alan. Yep.

Operator: Thank you. The next question comes from Jacob Roberts with TPH. Please go ahead.

Jacob Roberts: Good morning. Hi, Jacob. Hey. I know you just specifically said no quarterly guidance, but I am wondering if you could help us out a little bit on the activity plan from here. And specifically how we should be thinking about the TIL count by quarter relative to the higher level of spending in Q3? And maybe specifically, if you could comment on where the remaining Utica tilt will fall in the back half of the year?

Navneet Behl: Yeah. I will give you some direction there. So we have got a large Marcellus pad in process right now that will come on in Q3? So that is 12 to 13 of your TILs will hit in Q3? And then that Utica pad that we are in the process of right now, that will hit later in Q4.

Jacob Roberts: Perfect. that is that is very helpful. And maybe for Everett, on the low carbon side, obviously, positive to the 45Z uplift there, but I wanted to focus on the Pennsylvania AEC market. It sounded to me like if you are thinking about $90 million for next year, that is a flat run rate on the AEC market going forward. I am just curious if you could speak to what you are seeing in that market and kind of the confidence you have around the numbers for the rest of this year and into 2027?

Everett Good: Yeah. We are essentially just marking it to market off of where we are seeing it trade off ice. So we are assuming it is stable to flat. We do see some level of volatility in that market and we will, as we provide, go forward guidance, we can constantly market to market. But we are seeing relative stability there in the price. Great. I appreciate the time.

Operator: And the next question comes from Betty Chang with Barclays. Please proceed.

Betty Jiang: Great. Thank you. Good morning. Good morning, Betty. Good question. On the buyback, clearly, you are really leaning into the countercyclical buyback here. Just wondering philosophically, I think you took down some debt on the revolver. what is your willingness to lean on the debt to buy back more stock in this environment?

Alan K. Shepard: that is a good question. I think maybe think about the short term outlook for gas and the longer term outlook, maybe that is informative, right? 2026 going into 2027 setting up to be a little bit soft. But longer term, you know, the outlook for gas here in Appalachia in particular is tremendous. You know? So if that is your view, you should be much more as a sort of an upstream operator, much more interested in repurchasing shares. Right? I think based on our activity level, there is a reasonable argument that we are probably the most bullish of the operators here in Appalachia. So yeah.

And under those circumstances, with the right constraints and risk management around it, you could certainly see outspend if that is what made sense. But, you know, regardless of any of that, we are gonna keep running the process we have been running for the last 6 years, and allocate capital to the best use.

Betty Jiang: Got it. Okay. Makes sense. And then operationally, a 2-part, 2-focus. 1, the lateral length is a lot longer in Q2 in Southwest PA. Just if you could comment on that specific to Q2 or just generally your program is getting longer in lateral length? And then secondly, on the Central PA, now that your 1 QL has been on for a while and you also brought on Utica, in the second quarter. Just maybe how these wells are faring relative to your expectations?

Alan K. Shepard: Yes. On the lateral length, that is really a function of what your acreage position is. Obviously, the longer the better in terms of well economics. So we try to fit them in to optimize for that. But again, it is a function of where you have acreage. On the Utica side, I think you see from the state data and from whatever else that has been published out there these wells are performing as we guided to. So we are very pleased with sort of the results from the Utica, and we think it is top tier in the basin. Got it. Thank you.

Operator: And this does conclude today's question and answer session. I would now like to turn the conference back over to Tyler Lewis for any closing remarks.

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

Alan K. Shepard: Thank you. Thanks everybody.

Operator: And the conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

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