Appalachia pure-play CNX Resources Corp. plans to increase some of its previously curtailed natural gas production beginning in July, with additional adjustments to be made as conditions warrant.
The producer began “sculpting” its production profile on May 1, shutting in as much as 375 MMcf/d to take advantage of the large spread between summer and winter gas prices, according to management. Shut-ins are to be reduced to around 300 MMcf/d by July.
The production profile optimization should result in more than $30 million in incremental free cash flow (FCF) over the next few years, assuming the wells are turned back online Nov. 1 and using current forward strip pricing, CNX said. Meanwhile, the company monetized hedges for the summer months and added hedges for the winter months.
CNX management touted capital efficiency improvements in the core Southwest Pennsylvania (SWPA) Marcellus Shale wells. The most recent eight-well Marcellus Shale pad, RHL 99, averaged 1,570 lateral feet/day and achieved a peak of 2,600 lateral feet in a 24-hour period.
During stimulation of the RHL 99 pad, carried out by an electric fracture fleet, the company used about 140,000 Mcf of its natural gas to power the fleet instead of diesel, resulting in a fuel savings of about $2.4 million.
“The company is cruising at high efficiency,” said COO Chad Griffith.
CNX also drilled two SWPA Utica Shale wells at what management said was a “record high pace and a record low cost.” When compared to prior Pennsylvania Utica wells drilled, the average drilling costs decreased by 53% to $447/foot, with drilling times down by 22%.
The company also increased its estimated ultimate recovery (EUR) expectations for Bell Point 6, its most recent Central Pennsylvania (CPA) Utica well, to a range of 4.5-5.0 Bcfe/1,000 feet, which makes it the company’s most productive Utica well to date.
“Coupled with the recent cost performance of the SWPA Utica wells, our Pennsylvania Utica offers compelling economic returns on future capital investment opportunities,” Griffith said.
CNX has indicated that because of an extensive midstream buildout in SWPA, only incremental compression and well-connects are needed going forward.
“These metrics combine to allow the company to be highly efficient and meet or exceed our seven-year, $3 billion consolidated FCF plan,” CFO Don Rush said.
CNX in April cut its 2020 production guidance to 490-530 Bcfe from the previous level of 525-555 Bcfe. Capital expenditures were also cut for the year in what management said was primarily related to lower oilfield services costs. The company now expects to spend $830-900 million, compared with a previous range of $885-950 million.
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