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CNX Utica Volumes Soar in First Quarter; Coal Exit Complete
CNX Resources Corp. reported a 184% year/year (y/y) increase in Utica Shale volumes during the first quarter, as it continues to build more of the play into its development program.
Utica volumes increased to 43.5 Bcfe from 15.3 Bcfe at the same time last year. While the gain was primarily driven by the Ohio Utica assets, the company continues to delineate the deep, dry Utica in Pennsylvania, where it’s been increasingly focused on stacked pay potential.
Management said the RHL 11 in Greene County, PA, and the Marchand 3M well in Indiana County about 15 miles away from other prolific deep Utica wells, came online and are flowing on managed pressure drawdown to help the company collect more data. COO Tim Dugan said the wells are “both important steps on the path to delineate the formation and build the stacked pay factory” the company has been discussing.
CNX became a standalone natural gas company late last year when it split from the coal business, which became Consol Energy Inc. The company took the last steps to finalize that lengthy process during the first quarter, when it sold its shallow oil and gas assets to an undisclosed buyer for $102 million. The assets included some coalbed methane and 11,000 wells in West Virginia and Pennsylvania. The buyer also assumed $200 million in liabilities that were primarily related to asset retirement obligations.
“The key takeaway, at least from our perspective, is the age of legacy liabilities when it comes to CNX Resources are over,” said CEO Nicholas Deluliis on Thursday during an earnings call with financial analysts. “This transaction finalized the process and focus that’s been underway for years.”
In another deal with the privately held West Virginia-based producer HG Energy, CNX’s midstream master limited partnership CNX Midstream Partners LP agreed to an amended gathering agreement in exchange for more well commitments and a high pressure pipeline. For CNX, the deal adds 11,400 acres that are prospective for the Marcellus and 3,600 acres that are prospective for the Utica in southwest Pennsylvania.
Overall, the company produced 129.5 Bcfe during the first quarter, up from 95 Bcfe in the year-ago period and from 118.9 Bcfe in 4Q2017. The Marcellus continued to drive production for the company, with volumes increasing 14% y/y to 65.9 Bcfe.
CNX’s average realized sales price increased to $3.00/Mcfe during the period, up from $2.85/Mcfe in 1Q2017. Revenues also increased to $495.7 million from $319.9 million over the same time.
In the first full quarter since the coal split, CNX reported first quarter net income of $545.5 million ($2.38/share), compared with a net loss of $39 million (minus 17 cents) in the year-ago period.
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