CNX Q2 2024: 4.5Bcf output supports $75M free cash flow forecast
- Strong Q2 Operational Performance: Q2 production of 4.5 Bcf supports their full‐year production range of 15–18 Bcf and backs their free cash flow guidance of about $75 million for the year.
- Promising New Technology Initiatives: Their AutoSep and CNG solutions are already deployed on internal pads and with early third‐party engagements, setting the stage for material revenue contributions starting 2025.
- Effective Cost and Production Management: Consistent well performance and a controlled hedging strategy—with no additional production curtailment—demonstrate operational discipline and margin stability.
- Slower near-term revenue growth: The new technology offerings, including AutoSep and CNG, are expected to be immaterial to 2024 revenue, with meaningful contributions pushed into 2025, suggesting near-term revenue may lag expectations.
- Capital investment requirements: Both new technology initiatives will require additional capital expenditures, which could depress free cash flow and delay profitability improvements.
- Dependence on external market and policy factors: Future production, cash flow performance, and project advancement hinge on uncertain market pricing, hedge book adjustments, and tax policy guidance (e.g., for coal mine methane projects), which introduces further risk.
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Hedge Book
Q: Future hedge levels compared to past?
A: Management emphasized targeting about 80% hedging for upcoming years while shortening hedge duration beyond that, indicating a deliberate, risk-managed approach. -
Tier 1 Credits
Q: What are current Tier 1 prices?
A: They reported stable Tier 1 credit values in the $33–$36 per MWh range, reflecting consistent market pricing. -
Revenue Increase
Q: What drove the $23M revenue boost?
A: The $23M increase was driven by stronger environmental attribute sales and solid water revenue performance, showcasing operational efficiency. -
New Tech Division
Q: How is the new tech ramp performing?
A: With 4.5 Bcf in Q2, the division exceeded expectations and is poised to contribute more significantly from 2025, despite minimal current revenue impact. -
Production Levels
Q: Is production being curbed now?
A: Management confirmed no additional curtailment, maintaining production slightly above the hedge book levels as a safety measure. -
Tax Credit Timeline
Q: When will the coal mine methane credit guidance come?
A: They expect guidance on the coal mine methane tax credit in Q3–Q4, with project progress tied to favorable policy developments. -
Service Costs
Q: Are service costs shifting notably?
A: Service costs have held flat through the first half and are projected to remain steady, reflecting stable operating expenses.
Research analysts covering CNX Resources.