CNX Resources Analyst & Investor Meeting Presentation

117 Pages·2017·7.68 MB·English

Analyst & Investor
Meeting
Pittsburgh, Pennsylvania
March 13, 2018
Cautionary Language
Risk Factors. This presentation, including the oral statements made in connection herewith, contains forward-looking statements, estimates and projections within the meaning of the federal
securities laws. Statements that are not historical are forward-looking andmay include our operational and strategic plans; estimates of gas reserves and resources; projected timing and rates of
return of future investments; and projections and estimates of future production, revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those statements, estimates and projections. Investors should not place undue reliance on forward-looking statements as a prediction of future
actualresults.Theforward-lookingstatementsinthispresentationspeakonlyasofthedateofthispresentation;wedisclaim anyobligationtoupdatethestatements,andwecautionyounottorely
onthemunduly.
Specific factors that could cause future actual results to differ materially from the forward-looking statements are described in detail under the captions "Forward Looking Statements" and "Risk
Factors"in ourannualreport onForm 10-Kfortheyear ended December31,2017filed withtheSEC,as supplemented byour quarterlyreports onForm 10-Q. Those risk factorsdiscuss,among
other matters, pricing volatility or pricing decline for natural gas and NGLs; our operational relationship with other parties, including midstream facilities; operational risks relating to pipeline
systems, drilling natural gas wells, and customer interactions; theimpact of laws and regulations on our business and industry; competitive and economic concerns; risks associated with our debt
and hedging strategy; our ability to acquire economically recoverable natural gas reserves; challenges associated with strategic determinations, including the allocation of capital to strategic
opportunities;ourdevelopmentandexplorationprojects,aswellasCNXM'smidstreamsystem development.
Reserves. Currently, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a companyanticipates as of a
givendateto beeconomicallyandlegallyproducible anddeliverable byapplication of development projectstoknownaccumulations. Wemayusecertain terms inthis presentation, suchasEUR
(estimatedultimaterecovery),unprovedreservesandtotalresourcepotential,thattheSEC'srulesstrictlyprohibitusfromincludinginfilingswiththeSEC.WecautionyouthattheSECviewssuch
estimates as inherently unreliable and these estimates may be misleading to investors unless the investor is an expert in the natural gas industry. These measures are by their nature more
speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from
aggregatingproved,probableandpossiblereservesinfilingswiththeSECduetothedifferentlevelsofcertaintyassociatedwitheachreservecategory.
Title. Exceptfor provedreserve data, theinformationincluded inthis presentationis basedonasummaryreview of thetitletothegas rights wehold.As is customaryinthegas industry, prior to
the commencement of natural gas drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects. We are typically
responsible for curing any title defects at our expense. As a result of our title review or otherwise, we may be required to acquire property rights from third parties at our expense in order to
effectivelydrillandproducethegasrightswecontrolandthirdpartiesmayparticipateinthewells wedrill, therebyreducingourworkinginterestinthosewells.
Reconciliation. As it relates to the disclosures within this presentation of projected Adjusted EBITDA and EBITDAX for fiscal or quarterly periods in 2018-2022, for CNX or CNXM, CNX
Resources is unable to provide a reconciliation of such metrics to projected operating income, the most directly comparable financial measure calculated in accordance with GAAP, due to the
unknowneffect,timing,andpotentialsignificanceofcertainincomestatementitemsforeachofCNXandCNXM,respectively.
Data. This presentation has been prepared by CNX and includes market data and other statistical information from sources believed by CNX to be reliable, including independent industry
publications,governmentpublicationsandotherpublishedindependentsources. SomedataarealsobasedonCNX’sgoodfaithestimates,whicharederivedfrom itsreviewofinternalsourcesas
well as the independent sources described above. Although CNX believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy or
completeness. ThispresentationdoesnotconstituteanoffertosellorasolicitationofofferstobuysecuritiesofCNXResourcesCorporationorCNXMidstream PartnersLP.
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Agenda
Strategic Overview Marketing
Nick DeIuliis, Chief Executive Officer Chad Griffith, VP – Marketing
Operations Finance
Tim Dugan, Chief Operating Officer Don Rush
Andrea Passman, VP – Development Chuck Hardoby, VP – Finance
Business Development Questions & Answers
Don Rush, Chief Financial Officer
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Strategic Overview
Nick DeIuliis
154-Year Legacy is a Competitive Advantage
The Dominion The vast
Industrialist
assets CNX
interwoven
Andrew Mellon
acquired in 2010
financed the nature of
trace their roots
consolidation of the CNX
to the late 1800s
the coal estate acreage
and John D.
throughout
Rockefeller’s holdings
Appalachia
Standard Oil has
leading to the
Company, which resulted in
founding of
formed
non-
Consolidation
Consolidated
Coal Company operated
Natural Gas
well data
1860 1960 1980 2000 2008 2010 2014 2017 2018
from more
than 800
Marcellus
and Utica
wells
dating
back to
1968
5
Greater than the Sum of the Parts
Set in motion more than a decade ago, CNX emerged as a
premier standalone E&P company on November 29, 2017
The separation of the businesses allows CNX to efficiently
deploy its capital allocation strategy
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Asset Base Creates Compelling Value Creation Opportunity
Net Marcellus Acres / Reserves to
% Operated Proved Reserves
Large Net Utica Acres(1) Production (years)
Contiguous
Acreage 531,000 /
95.5% 18.6 7.6 Tcfe
Position 652,000
2017 Average Net 5-Year Half-Cycle Portfolio Current Deep Dry
Production Production CAGR IRR Utica Performance
Highly
Productive
1,116 3.7
Asset Base 20% 75%
MMcfe/d Bcfe/1000’
2018E Total Cash
2017 Targeted Leverage
Production and 2017 Recycle Ratio
EBITDAX Margin Ratio by YE2018
Leading Gathering Costs
Economic
$1.01-$1.11
Profile 32% 3.3x 2.5x
/Mcfe
(1) See appendix slide 102 for complete acreage breakdown by region.
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The CNX Strategy is to Grow NAV/Share via Capital Allocation
Key drivers of the strategy:
Methodical execution driving IRR and EBITDAX growth
Basin disruption through stacked pay development
Top-tier balance sheet
Opportunistic share count reduction
CNXM 15% distribution growth stability and drop inventory
Strategy is reinforced by management philosophy, company values, incentive plans, and ownership
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Methodical Execution Driving IRR and EBITDAX Growth
Expected Five-Year Plan Portfolio Economics Drill Bit Investment Driving EBITDAX Growth
80%
75%
$2,000
70%
60%
$1,500
50% s
n
o
)% illim
( R 40% 38% n $1,000
R i
I $
30%
20% $500
10%
0% $0
Full Cycle Half Cycle 2018E 2022E
Low High
Note: See appendix for full and half cycle economic assumptions.
(1) Based on midpoint of financial guidance.
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Stacked Pay Development Will Disrupt the Appalachian Basin
Stacked pay provides 30%
CNX has a non-replicable asset base
increase to total field NPV
allowing for stacked pay development
Stacked pay drives superior IRRs through
Stacked Pay Pad Economics Example
economies of scale and greater flexibility
$300 120%
▪ Reduces capital
▪ Reduces cycle times $250 100%
▪ Reduces LOE
$200 80%
)
s
▪ Reduces gathering and processing fees n )
o %
▪ Seismic across acreage hold that de-risks drilling, illim n $150 60% ( RRI
completion, and production i $ $100 40%
(
V
P
▪ Increases utilization and efficiencies
N
$50 20%
▪ Extends growth opportunity
$0 0%
$2.00 $2.50 $3.00
Gas Price
Unstacked NPV Stacked NPV
Unstacked IRR % Stacked IRR %
Note: Assumes six Marcellus laterals at 9,500’ and six Utica laterals at 8,500’.
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