CNX Resources Q4 2024: Navigating Contradictions in New Technologies, Methane Volumes, and Drilling Strategies

These are the key contradictions discussed in CNX Resources' latest 2024Q4 earnings call, specifically including: New Technologies spending and impact on free cash flow, outlook for coal mine methane volumes, New Technologies business outlook and guidance, production plans, and Utica drilling strategy:



New Technologies and 45V Guidance:
- CNX Resources' New Technologies Group is awaiting clarity on the 45V guidance rules to move forward with their projects, particularly coal mine methane (CMM) as a low-carbon intensity feedstock for hydrogen production.
- The company has successfully validated CMM's premium nature in various sectors but seeks clarity on rules to facilitate necessary investments.

Capital Expenditure (CapEx) Efficiency and Production Flatlining:
- CNX Resources plans to keep production flat in 2025 with a run rate spending of sub-$500 million, leveraging efficiencies from Utica CPA development and low decline PDP base.
- The company is focusing on maintaining flat production while optimizing capital allocation based on market pricing conditions.

Environmental Attributes and Free Cash Flow:
- CNX Resources expects New Tech free cash flow to be $75 million in 2025, driven by monetization of environmental attributes in the ATS program, with values staying in the $30 to $35 per megawatt-hour range.
- The company anticipates expansion of AutoSep and CNG/LNG businesses beyond their current footprint in 2025, contributing to free cash flow generation.

Apex Acquisition and Utica Development:
- The Apex acquisition includes 8,600 net acres of Utica, with potential for further development, as the current footprint has not been developed yet.
- CNX Resources aims to optimize Utica development on this acreage, with expectations of 3 Bcf per 1,000 feet of lateral and improving capital efficiency in drilling.

Marketing Strategy and Cash Taxes:
- CNX Resources optimizes its marketing strategy for its firm transportation portfolio daily, with no new FT contracts affecting market splits.
- Despite volatility in the tax strip, the company will remain a de minimis cash taxpayer until reaching cumulative $3 billion in free cash flow, with material cash tax payments expected by late 2026 or early 2027.