PITTSBURGH, Feb. 9, 2021 /PRNewswire/ -- CNX Resources
Corporation (NYSE: CNX) ("CNX" or "the company") announced
today total proved reserves of 9.55 Tcfe, as of December 31, 2020, which is a 13% increase,
compared to the previous year. CNX organically added 2,247 Bcfe of
proved reserves through extensions and discoveries, which resulted
in the company replacing over 440% of its 2020 net production of
511 Bcfe.
"The take-in transaction of CNX Midstream Partners LP resulted
in a positive impact to our year-end PV-10 and proved reserves by
structurally lowering CNX's operating costs, which materially
offset the impact of the lower SEC commodity price in 2020,"
commented Yemi Akinkugbe, Chief
Excellence Office. "We do not believe that our peers can replicate
our cost structure, which should provide CNX with superior economic
inventory for decades to come."
In 2020, drilling and completion costs incurred directly
attributable to extensions and discoveries were $480 million. When divided by the extensions and
discoveries of 2,247 Bcfe, this yields a drill bit F&D cost of
$0.21 per Mcfe.
The following table shows the summary of changes in
reserves:
Summary of Changes
in Proved Reserves (Bcfe)
|
Balance at December
31, 2019
|
8,426
|
Extensions and
discoveries
|
2,247
|
Performance
Revisions
|
1,432
|
Price Revisions and
other
|
(1,377)
|
Plan
Changes
|
(667)
|
Production
|
(511)
|
Balance at December
31, 2020
|
9,550
|
|
Note: The
proved reserve estimate as of December 31, 2020, was prepared
by
CNX Resources and
audited by Netherland, Sewell & Associates, Inc.
|
During the year, total net revisions were negative 612
Bcfe. Proved developed and undeveloped reserves were 5,200
Bcfe (54%) and 4,350 Bcfe (46%), respectively, for 2020. PUDs at
year-end 2020 represent 74% of the total wells the company expects
to drill over the next five years. The low PUD to 5-year plan
percentage implies meaningful future upside in both the Marcellus
and Utica shales in Pennsylvania and West Virginia.
During 2020, in the Marcellus Shale, CNX turned-in-line (TIL) 34
gross wells with an average completed lateral length of
approximately 11,700 feet and EURs averaging 2.7 Bcfe per
thousand feet of completed lateral. The company continues to
achieve superior economics and production performance through the
use of extended reach laterals in the Marcellus Shale, which have
allowed CNX to drive value through maximizing the ultimate recovery
of the company's in-place resources. These advancements have also
allowed CNX to book Marcellus Shale PUDs with average EURs of
approximately 2.7 Bcfe per thousand feet of completed lateral.
During 2020, in the Ohio and
Pennsylvania Utica Shale, CNX turned-in-line (TIL) 11 gross wells
with an average completed lateral length of approximately 8,300
feet and EURs averaging 2.3 Bcfe per thousand feet of completed
lateral. The majority of the company's proved undeveloped
Utica Shale locations exist in its CPA operating region with
average EURs of approximately 3.5 Bcfe per thousand feet of
completed lateral.
As of December 31, 2020, CNX has
total proved, probable, and possible reserves (also known as "3P
reserves") of 12.3 Tcfe, which are comprised only of reserves
expected to be developed in the company's five-year plan. There are
an additional 116 Tcfe of recoverable resources in the Other
Resource Potential that the company expects to develop beyond the
five-year plan. This large inventory of 2P, 3P and Resource assets
in addition to our peer leading cost and asset value will continue
to allow the company to add extensions and discoveries over the
foreseeable future. The company's 3P reserves have been determined
in accordance with the guidelines of the Society of Petroleum
Engineers Petroleum Resources Management System.
The following table shows the breakdown of reserves, in Bcfe,
from the company's current development and exploration plays:
|
Proved
Developed
|
Proved
Developed
Non-
Producing
|
Proved
Un-
Developed
|
Total
Proved
|
Probable
|
Possible
|
Total
3P
|
Other
Resource
Potential
|
Total
Reserve
&
Resource
|
Marcellus
Shale
|
3,843
|
0
|
3,148
|
6,991
|
1,908
|
589
|
9,488
|
34,235
|
43,723
|
Coalbed
Methane
|
778
|
1
|
321
|
1,100
|
-
|
-
|
1,100
|
956
|
2,056
|
Utica
Shale
|
488
|
52
|
881
|
1,421
|
147
|
103
|
1,671
|
44,579
|
46,250
|
Other
(1)
|
38
|
-
|
-
|
38
|
-
|
-
|
38
|
36,099
|
36,137
|
Total
|
5,147
|
53
|
4,350
|
9,550
|
2,055
|
692
|
12,297
|
115,869
|
128,166
|
|
|
(1)
|
Other includes
Conventional, Upper Devonian and Other Shale formations.
|
|
|
Definition:
Total Reserve & Resource includes total 3P and other resource
potential outside of 3P.
The estimates of reserves and future revenue were prepared in
accordance with the
definitions and guidelines of the SEC Regulation S-X Rule
4.10(a).
|
The table below summarizes the Securities and Exchange
Commission (SEC) pricing as of December 31,
2020:
|
SEC
|
|
Pricing
(1)
|
Benchmark
Pricing:
|
|
WTI Oil Price
($/Bbl)
|
$39.57
|
NYMEX Natural Gas
Price
($/MMBtu)
|
$1.985
|
C2+ Natural Gas
Liquids ($/Bbl)(2)
|
$13.18
|
Condensate ($/Bbl)
(3)
|
$35.65
|
|
|
(1)
|
The SEC rules require
that the proved reserve calculations be based on the
first day of the month unweighted arithmetic average prices over
the preceding twelve months.
|
(2)
|
NGL Pricing is 33.3%
of WTI, which includes regional market differentials.
|
(3)
|
Condensate Pricing is
90.1% of WTI, which includes regional market
differentials.
|
The average of these prices over the remaining lives of the
properties and adjusted for quality, hedges, transportation costs,
and basis differentials ($1.70 per
Mcf, $13.18 per barrel of natural gas
liquids, $35.61 per barrel of
condensate and crude oil, respectively). The pre-tax discounted
(10%) present value ("PV-10") of the company's proved reserves was
$3.60 billion for 2020, compared to
$4.18 billion at year-end 2019. The
reduction in PV-10 was modest despite pricing, as governed by the
Securities and Exchange Commission (SEC) decreasing by 23% for
natural gas and 29% for crude oil.
Standardized Measure of Discounted Future Net Cash
Flows
The following information was prepared in accordance with the
provisions of the Financial Accounting Standards Board's Accounting
Standards Update No. 2010-03, "Extractive Activities-Oil and
Gas (Topic 932)." This topic requires the standardized measure of
discounted future net cash flows to be based on the average, first
day-of-the-month price for the year ended December 31, 2020.
Because prices used in the calculation are average prices for that
year, the standardized measure could vary significantly from
year-to-year based on the market conditions that occurred.
The projections should not be viewed as realistic estimates of
future cash flows, nor should the "standardized measure" be
interpreted as representing current value to CNX. Material
revisions to estimates of proved reserves may occur in the future;
development and production of the reserves may not occur in the
periods assumed; actual prices realized are expected to vary
significantly from those used and actual costs may vary. CNX's
investment and operating decisions are not based on the information
presented, but on a wide range of reserve estimates that include
probable as well as proved reserves and on different price and cost
assumptions.
The standardized measure is intended to provide a better means
for comparing the value of CNX's proved reserves at a given time
with those of other gas producing companies than is provided by a
comparison of raw proved reserve quantities.
Reconciliation of
PV-10 to Standardized Measure
|
|
|
|
|
December
31,
|
(Dollars in millions,
except gas price/MMBtu)
|
|
2020
|
|
2019
|
|
2018
|
NYMEX Natural Gas
Price ($/MMBTU)
|
|
$
1.99
|
|
$
2.58
|
|
$
3.10
|
Future cash
inflows
|
|
$
16,578
|
|
$
19,490
|
|
$
26,610
|
Future production
costs
|
|
(6,072)
|
|
(7,903)
|
|
(7,730)
|
Future development
costs (including abandonments)
|
|
(1,958)
|
|
(1,121)
|
|
(1,600)
|
Future net cash flows
(pre-tax)
|
|
8,548
|
|
10,466
|
|
17,280
|
10% discount
factor
|
|
(4,945)
|
|
(6,290)
|
|
(11,108)
|
PV-10 (Non-GAAP
measure) (1)
|
|
3,603
|
|
4,176
|
|
6,172
|
Undiscounted income
taxes
|
|
(2,235)
|
|
(2,721)
|
|
(4,147)
|
10% discount
factor
|
|
1,268
|
|
1,615
|
|
2,630
|
Discounted income
taxes
|
|
(968)
|
|
(1,106)
|
|
(1,516)
|
Standardized GAAP
measure
|
|
$
2,636
|
|
$
3,070
|
|
$
4,655
|
|
|
(1)
|
We calculate
our present value at 10% (PV-10) in accordance with the following
table. Management believes that the presentation of
the non-Generally Accepted Accounting Principle (GAAP) financial
measure of PV-10 provides useful information to investors
because
it is widely used by professional analysts and sophisticated
investors in evaluating oil and gas companies. Because many factors
that
are unique to each individual company impact the amount of future
income taxes estimated to be paid, the use of a pre-tax measure
is
valuable when comparing companies based on reserves. PV-10 is not a
measure of the financial or operating performance under GAAP.
PV-10 should not be considered as an alternative to the
standardized measure as defined under GAAP. We have included a
reconciliation
of the most directly comparable GAAP measure-after-tax discounted
future net cash flows.
|
About CNX Resources
CNX Resources Corporation is one of the largest independent
natural gas exploration, development, and production companies,
with operations centered in the major shale formations of the
Appalachian basin. The company deploys an organic growth strategy
focused on responsibly developing its resource base. As of
December 31, 2020, CNX had 9.55
trillion cubic feet equivalent of proved natural gas, natural gas
liquids, condensate, and oil reserves. The company is a member of
the Standard & Poor's Midcap 400 Index. Additional information
may be found at www.cnx.com.
Cautionary Statements
We are including the following cautionary statement in this
press release to make applicable and take advantage of the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995 for any forward-looking statements made by, or on behalf of
us. With the exception of historical matters, the matters discussed
in this press release are forward-looking statements (as defined in
21E of the Securities Exchange Act of 1934 (the "Exchange Act"))
that involve risks and uncertainties that could cause actual
results to differ materially from projected results. Accordingly,
investors should not place undue reliance on forward-looking
statements as a prediction of actual results. These forward-looking
statements may include projections and estimates concerning the
timing and success of specific projects and our future production,
revenues, income, and capital spending. When we use the words
"believe," "intend," "expect," "may," "should," "anticipate,"
"could," "estimate," "plan," "predict," "project," "will," or their
negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe a strategy that involves risks or uncertainties, we are
making forward-looking statements. The forward-looking statements
in this press release speak only as of the date of this press
release; we disclaim any obligation to update these statements. We
have based these forward-looking statements on our current
expectations and assumptions about future events. While our
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies,
and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the following: prices
for natural gas and natural gas liquids are volatile and can
fluctuate widely based upon a number of factors beyond our control
including oversupply relative to the demand for our products,
weather and the price and availability of alternative fuels;
unsuccessful drilling efforts or continued natural gas price
decreases requiring write downs of our proved natural gas
properties, or changes in assumptions impacting management's
estimates of future financial results as well as other assumptions
such as movement in our stock price, weighted-average cost of
capital, terminal growth rates and industry multiples, could cause
goodwill and other intangible assets we hold to become impaired and
result in material non-cash charges to earnings; a loss of our
competitive position because of the competitive nature of the
natural gas industry, consolidation within the industry or
overcapacity in the industry adversely affecting our ability to
sell our products and midstream services; deterioration in the
economic conditions in any of the industries in which our customers
operate, a domestic or worldwide financial downturn, or negative
credit market conditions; hedging activities may prevent us from
benefiting from price increases and may expose us to other risks;
negative public perception regarding our industry could have an
adverse effect on our operations; events beyond our control,
including a global or domestic health crisis; dependence on
gathering, processing and transportation facilities and other
midstream facilities owned by others, and disruption of, capacity
constraints in, or proximity to pipeline, and any decrease in
availability of pipelines or other midstream facilities;
uncertainties in estimating our economically recoverable natural
gas reserves, and inaccuracies in our estimates; the high-risk
nature of drilling, developing and operating natural gas wells; our
identified drilling locations are scheduled out over multiple
years, making them susceptible to uncertainties that could
materially alter the occurrence or timing of their development or
drilling; the substantial capital expenditures required for our
development and exploration projects, as well as midstream system
development; decreases in the availability of, or increases in the
price of, required personnel, services, equipment, parts and raw
materials in sufficient quantities or at reasonable costs to
support our operations; our ability to find adequate water sources
for our use in shale gas drilling and production operations, or our
ability to dispose of, transport or recycle water used or removed
in connection with our gas operations at a reasonable cost and
within applicable environmental rules; failure to successfully
estimate the rate of decline or existing reserves or to find or
acquire economically recoverable natural gas reserves to replace
our current natural gas reserves; losses incurred as a result of
title defects in the properties in which we invest or the loss of
certain leasehold or other rights related to our midstream
activities; the impact of climate change legislation, litigation
and potential, as well as any adopted, environmental regulations,
including those relating to greenhouse gas emissions; environmental
regulations can increase costs and introduce uncertainty that could
adversely impact the market for natural gas with potential short
and long-term liabilities; existing and future government laws,
regulations and other legal requirements and judicial decisions
that govern our business may increase our costs of doing business
and may restrict our operations; significant costs and liabilities
may be incurred as a result of pipeline operations and related
increase in the regulation of gas gathering pipelines; changes in
federal or state income tax laws; the outcomes of various legal
proceedings, including those which are more fully described in our
reports filed under the Exchange Act; risks associated with our
current long-term debt obligations; a decrease in our borrowing
base, which could decrease for a variety of reasons including lower
natural gas prices, declines in natural gas proved reserves, asset
sales and lending requirements or regulations; Risks associated
with our convertible senior notes due May
2026 (the "Convertible Notes"), including the potential
impact that the Convertible Notes may have on our reported
financial results, potential dilution, our ability to raise funds
to repurchase the Convertible Notes, and that provisions of the
Convertible Notes could delay or prevent a beneficial takeover of
the Company; the potential impact of the capped call transaction
undertaken in tandem with the Convertible Notes issuance, including
counterparty risk; challenges associated with strategic
determinations, including the allocation of capital and other
resources to strategic opportunities; acquisitions and
divestitures, we anticipate may not occur or produce anticipated
benefits; there is no guarantee that we will continue to repurchase
shares of our common stock under our current or any future share
repurchase program at levels undertaken previously or at all; we
may operate a portion of our business with one or more joint
venture partners or in circumstances where we are not the operator,
which may restrict our operational and corporate flexibility and we
may not realize the benefits we expect to realize from a joint
venture; CONSOL Energy may not be able to satisfy its
indemnification obligations in the future and such indemnities may
not be sufficient to hold us harmless from the full amount of
liabilities for which CONSOL Energy will be allocated
responsibility; cyber-incidents could have a material adverse
effect on our business, financial condition or results of
operations; our success depends on key members of our management
and our ability to attract and retain experienced technical and
other professional personnel; terrorist activities could materially
adversely affect our business and results of operations.
Additional factors are described in detail under the captions
"Forward Looking Statements" and "Risk Factors" in our latest
annual report on Form 10-K filed with the Securities and Exchange
Commission, as supplemented by our quarterly reports on Form
10-Q.
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