CNX Resources Corp. plans to significantly increase capital expenditures (capex) in 2018 now that it’s a standalone natural gas producer after the split with Consol Energy Inc., announcing on Tuesday a $790-880 million budget aimed at setting the stage for growth beyond this year.
The capex plan includes $515-580 million for drilling and completion (D&C) activities and $275-300 million for land, midstream and water infrastructure. The company added that non-D&C spending would help drive production in the coming years by strengthening the land and infrastructure positions needed to advance more stacked pay development.
CNX reiterated its 2018 production guidance of 520-550 Bcfe, which would set it up for roughly 30% year/year production growth at the midpoint, compared with 2017 guidance of 410-415 Bcfe. Before the split from Consol, the exploration and production business in 2017 allocated up to $645 million for operations.
Separately, CNX said it would spend $100 million on capital contributions to CNX Midstream Partners LP (formerly Cone Midstream Partners) after it acquired Noble Energy Inc.’s general partner interest in the system.
For spending beyond D&C, CNX has also budgeted up to $100 milion to build out water infrastructure in two unspecified stacked pay project areas in Appalachia that it expects to be ready by 4Q2019. The buildout is forecast to save money and create future dropdown opportunities to CNX Midstream.
As delineation continued last yar CNX said it planned to fold more Utica Shale acreage into its core to build an inventory and aid future growth. The company plans to continue spending more on the Utica, with 35% of the 2018 D&C budget allocated to the formation. The remainder is to go toward the Marcellus Shale.
The company also released additional deep Utica results in Pennsylvania. The Aikens 5J and 5M wells in Westmoreland County, which offset to the Gaut 4IH well, each averaged 25 MMcf/d over 35 days on restricted choke. The Gaut well tested at more than 61 MMcf/d in 2015. The Aikens wells have an average lateral length of 7,500 feet and had combined cumulative production of 1.74 Bcf over the 35-day period.
The Aikens wells cost about $15 million each, or about 48% less than the Gaut 4IH.
“Given the continuation of extraordinary results of these dry Utica wells, at substantially lower capital costs compared to our initial well, we have successfully proven the commercial viability of developing the deep dry Utica Shale in Pennsylvania,” said COO Tim Dugan. “The future of dry Utica development is on the immediate horizon and CNX will significantly benefit from stacked pay opportunities through leveraging existing pads, gathering and water infrastructure, and takeaway capacity.”
CNX plans to run three rigs during the first half of this year and add a fourth rig in July.
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