CNX Resources' Q1 2025 Earnings Call: Unpacking Contradictions in Production, Pricing, and Cash Flow Strategies

Turn-in-lines and production trajectory, hedge book strategy and pricing exposure, production and operational strategy, turn-in-line schedule and production trajectory, and cost management and free cash flow are the key contradictions discussed in CNX Resources' latest 2025Q1 earnings call.



Turn-In-Line Activity and Production Trajectory:
- CNX Resources reported a significant number of turn-in-lines (TILs) in Q1, with a total of 19.
- The majority of these TILs were brought in line during the later part of the first quarter, with additional TILs expected in Q2 and Q4, followed by a lull in Q3.
- CNX's production trajectory for the back half of the year and into 2026 is expected to follow the TIL schedule, with increased activity in the first half and a decline in Q3.

Buyback Program and Shareholder Returns:
- CNX Resources announced a robust buyback program in Q1, repurchasing $125 million worth of shares at the current levels.
- The buyback was deemed a compelling investment given the current stock price levels.
- This decision aligns with the company's strategy to return value to shareholders while maintaining financial flexibility.

Tax Payments and Cash Flow Expectations:
- The company paid cash taxes in Q1, although it remains a de minimis cash taxpayer.
- The slight increase in cash taxes is attributed to noise in the deferred tax reconciliation, mainly from the hedge book.
- CNX is expected to become a material cash taxpayer only after achieving about $3 billion in cumulative free cash flow, estimated to occur around 2027 or 2028.

Free Cash Flow Guidance and Market Conditions:
- CNX reaffirmed its free cash flow guidance for the year despite a decline in NYMEX and NGL pricing and widening natural gas differentials.
- The company remains 85% hedged, with only 15% of its volumes exposed to open pricing, limiting the impact of market fluctuations on its free cash flow projection.
- Resilience in free cash flow is attributed to improved operational efficiency and strategic hedging efforts.

Apex Project Performance and Long-Term Outlook:
- The company brought online 8 wells from the Apex project, which are producing better than expected.
- The positive performance of these wells has increased optimism regarding the long-term production potential of the Apex project.
- The positive results from the initial Apex wells are expected to inform future development strategies and guide the company's production outlook.