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    CNX Resources (CNX)

    CNX Q1 2025: $125M Buyback & 19 New Wells Signal Production Growth

    Reported on Apr 24, 2025 (Before Market Open)
    Pre-Earnings Price$30.59Last close (Apr 23, 2025)
    Post-Earnings Price$30.00Open (Apr 24, 2025)
    Price Change
    $-0.59(-1.93%)

    What went well

    • Increased Production Pipeline: The company reported 19 turn-in-lines in Q1, with additional TILs expected in Q2 and Q4, suggesting an upward trajectory in production capacity.
    • Shareholder-Friendly Capital Allocation: A robust $125 million buyback demonstrates management's confidence in the stock and commitment to enhancing shareholder value.
    • Operational Upside from Well Performance: The 8 Apex wells have been performing better than expected, indicating strong operational performance and potential for further production gains.

    What went wrong

    • Production Volatility: The scheduling of turn-in-lines heavily in Q1 with anticipated lulls in Q3 and subsequent TILs in Q4 indicates a potentially uneven production trajectory, which could raise concerns about consistent production and revenue generation.
    • Exposure to Price Volatility: Although the company is 85% hedged, the remaining 15% of volumes exposed to open pricing leaves it vulnerable to natural gas price fluctuations, which could adversely affect free cash flow if market conditions deteriorate.
    • Emerging Tax Pressures: The unexpected cash tax payment in Q1—even if de minimis—coupled with emerging state tax impacts could signal potential future tax liabilities that might strain cash flow if these trends accelerate.

    Q&A Summary

    1. Price & FCF
      Q: Why remains FCF guidance stable?
      A: Despite declines in NYMEX and NGL strip pricing and widening gas differentials, management noted that 85% of volumes are hedged, so only a small portion is exposed—hence free cash flow guidance holds in its stated range.

    2. Production Outlook
      Q: What is the production schedule outlook?
      A: Management highlighted that most turn-in-lines occurred in late Q1 with additional completions planned in Q2, a slowdown in Q3, and more activity in Q4, maintaining steady production momentum.

    3. Capital Allocation
      Q: How are cash taxes and buyback viewed?
      A: They explained that cash taxes remain de minimis until cumulative free cash flow hits around $3 billion, and the robust $125 million buyback is seen as an attractive capital allocation strategy.

    4. Activity Flexibility
      Q: Will gas price volatility alter activity?
      A: Management stated there are no planned changes; instead, they will monitor storage levels through the shoulder season to guide any adjustments.

    5. Production & CapEx
      Q: What are the production and CapEx expectations?
      A: They expect production to stay within a consistent range, prioritizing free cash flow per share over hitting a specific production target, with no detailed CapEx figures disclosed.

    6. Acreage & M&A
      Q: What impact from Westmoreland deal?
      A: The recent transaction is viewed as validation of the basin’s quality, reinforcing their strong acreage position and long-term outlook.

    7. Apex Performance
      Q: How are the Apex wells performing?
      A: Management reported that the eight new Apex wells are performing better than expected, contributing positively to their long-term production outlook.

    8. Facility Impact
      Q: Does PJM deactivation affect sales credits?
      A: They confirmed that deactivation at one facility won’t impact EA sales, as multiple facilities are used to generate the necessary credits.

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