PITTSBURGH, June 29, 2018 /PRNewswire/ -- CNX Resources
Corporation (NYSE: CNX) ("CNX" or "the company") today announced
that it has reached an agreement to sell its Ohio Utica joint
venture ("JV") assets to Ascent Resources-Utica, LLC for
net cash proceeds of approximately $400
million. The divestiture includes 50 net producing wells
with an average net revenue interest ("NRI") of 48%; five 50%
working interest wells the company recently completed and expects
to turn-in-line in July; two 50% working interest wells for which
the company has drilled the top hole; and approximately 26,000 net
undeveloped acres. The divested assets, which are owned in
conjunction with Hess Corporation ("Hess"), are located in the wet
gas Utica Shale areas of Belmont,
Guernsey, Harrison, and Noble counties. The divested acres were not
dedicated to CNX Midstream Partners LP (NYSE: CNXM) ("CNXM") and do
not impact future dropdown opportunities.
Aside from the five recently completed wells, CNX did not have
any additional activity associated with the divested assets in its
future development plans. Starting on the effective date of the
transaction of April 1, 2018, for the
next twelve months, the company expects net production associated
with these assets to be approximately 85 MMcfe per day, or 31 Bcfe,
resulting in EBITDAX of approximately $50
million. The company expects full-year 2019 EBITDAX of
approximately $25-$35 million. CNX will retain all related
production and EBITDAX generated between the effective date and
closing, which the company expects to be in the third quarter of
2018, subject to customary closing conditions and adjustments.
Cash proceeds from the transaction are expected to be used
to:
- Pay down debt;
- Continue the ongoing share repurchase program;
- Invest in the drilling and completion activities; or
- Make bolt-on acreage acquisitions as opportunities become
available.
"The sale of the Ohio Utica JV assets is only the most recent
example of the disciplined capital allocation process that CNX has
employed over the past several years," commented Nicholas J. DeIuliis, president and CEO. "This
transaction is immediately accretive and brings forward the value
of assets that were simply outranked by other options in CNX's
opportunity set. We will evaluate the use of proceeds through the
same capital allocation filter and be methodical in our
decision-making. CNX remains committed to the share repurchase
program and a healthy balance sheet, both of which we expect to be
beneficiaries of this transaction."
As a result of the transaction, CNX expects to record a non-cash
gain of approximately $135 million in
the third quarter 2018, subject to post-closing adjustments. CNX
does not expect to pay taxes on the transaction due to the
utilization of existing net operating losses (NOLs).
Guidance Update
The company expects the divestiture to result in a 10 Bcfe
reduction to 2018 production guidance based on Ohio wet Utica volumes previously planned between the
expected third quarter 2018 close date and the end of the year. As
a result, full-year 2018 production guidance is expected to be
490-515 Bcfe, compared to previous guidance of 500-525 Bcfe. Also,
CNX expects a reduction of approximately $15
million to 2018 EBITAX attributable to CNX shareholders, or
$810-$835
million, compared to the previous guidance of $825-$850
million.
For 2019 and 2020, the divestiture is expected to reduce total
production volumes by 20-25 Bcfe and adjusted EBITDAX to CNX
shareholders by $25-$35 million, for each year.
Non-GAAP Financial Measures
"EBITDAX," "EBITDAX attributable to CNX shareholders," and
"adjusted EBITDAX attributable to CNX shareholders" are non-GAAP
financial measures.
EBITDAX is defined as earnings before deducting net interest
expense (interest expense less interest income), income taxes and
depreciation, depletion and amortization and exploration expense.
Adjusted EBITDAX is defined as EBITDAX after adjusting for certain
discrete, non-recurring items. Adjusted EBITDAX attributable to CNX
shareholders is defined as adjusted EBITDAX less adjusted EBITDAX
attributable to noncontrolling interests. Although EBITDAX,
adjusted EBITDAX, and adjusted EBITDAX attributable to CNX
shareholders are not measures of performance calculated in
accordance with generally accepted accounting principles,
management believes that they are useful to an investor in
evaluating CNX because they are widely used to evaluate a company's
operating performance. We exclude stock-based compensation from
adjusted EBITDAX because we do not believe it accurately reflects
the actual operating expense incurred during the relevant period
and may vary widely from period to period irrespective of operating
results. Investors should not view these metrics as a substitute
for measures of performance that are calculated in accordance with
generally accepted accounting principles. In addition,
because all companies do not calculate these measures identically,
the definitions here may not be comparable to similarly titled
measures of other companies.
Further, CNX is unable to provide a reconciliation of projected
EBITDAX, adjusted EBITDAX or adjusted EBITDAX attributable to CNX
shareholders to projected operating income, the most comparable
financial measure calculated in accordance with GAAP, due to the
unknown effect, timing, and potential significance of certain
income statement items.
About CNX Resources
CNX Resources Corporation (NYSE: CNX) 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, 2017, CNX had 7.6
trillion cubic feet equivalent of proved natural gas 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; an extended decline in the prices we receive for our natural
gas and natural gas liquids affecting our operating results and
cash flows; our dependence on gathering, processing and
transportation facilities and other midstream facilities owned by
CNXM and others; disruption of, capacity constraints in, or
proximity to pipeline systems that could limit sales of our natural
gas and natural gas liquids, and decreases in availability of
third-party pipelines or other midstream facilities interconnected
to CNXM's gathering systems; uncertainties in estimating our
economically recoverable natural gas reserves, and inaccuracies in
our estimates; the high-risk nature of drilling 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 drilling; the
impact of potential, as well as any adopted environmental
regulations including any relating to greenhouse gas emissions on
our operating costs as well as on the market for natural gas and
for our securities; environmental regulations introduce uncertainty
that could adversely impact the market for natural gas with
potential short and long-term liabilities; the risks inherent in
natural gas operations, including our reliance upon third party
contractors, being subject to unexpected disruptions, including
geological conditions, equipment failure, timing of completion of
significant construction or repair of equipment, fires, explosions,
accidents and weather conditions that could impact financial
results; decreases in the availability of, or increases in the
price of, required personnel, services, equipment, parts and raw
materials to support our operations; if natural gas prices remain
depressed or drilling efforts are unsuccessful, we may be required
to record write-downs of our proved natural gas properties; a loss
of our competitive position because of the competitive nature of
the natural gas industry or overcapacity in this industry impairing
our profitability; 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; our inability to
collect payments from customers if their creditworthiness declines
or if they fail to honor their contracts; existing and future
government laws, regulations and other legal requirements 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 and related facility integrity
management program testing and any related pipeline repair or
preventative or remedial measures; our ability to find adequate
water sources for our use in natural gas drilling, or our ability
to dispose of or recycle water used or removed from strata in
connection with our gas operations at a reasonable cost and within
applicable environmental rules; the outcomes of various legal
proceedings, including those which are more fully described in our
reports filed under the Exchange Act; acquisitions and divestitures
we anticipate may not occur or produce anticipated benefits; risks
associated with our debt; failure to find or acquire economically
recoverable natural gas reserves to replace our current natural gas
reserves; decrease in our borrowing base, which could decrease for
a variety of reasons including lower natural gas prices, declines
in natural gas proved reserves, and lending requirements or
regulations; 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; changes in federal or state income
tax laws, particularly in the area of intangible drilling costs;
challenges associated with strategic determinations, including the
allocation of capital and other resources to strategic
opportunities; our development and exploration projects, as well as
CNXM's midstream system development, require substantial capital
expenditures; terrorist attacks or cyber-attacks could have a
material adverse effect on our business, financial condition or
results of operations; construction of new gathering, compression,
dehydration, treating or other midstream assets by CNXM may not
result in revenue increases and may be subject to regulatory,
environmental, political, legal and economic risks; our success
depends on key members of our management and our ability to attract
and retain experienced technical and other professional personnel;
we may not achieve some or all of the expected benefits of the
separation of CONSOL Energy; CONSOL Energy may fail to perform
under various transaction agreements that were executed as part of
the separation, including with respect to indemnification
obligations; 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 has been allocated
responsibility; the separation could result in substantial tax
liability; and, with respect to the sale of the Ohio Joint Venture
Utica assets, disruption to our business, including customer,
employee and supplier relationships resulting from this
transaction, risks that the conditions to closing may not be
satisfied and the sale may not occur, and the impact of the
transaction on our future operating and financial results.
Additional factors are described in detail under the captions
"Forward Looking Statements" and "Risk Factors" in our annual
report on Form 10-K for the year ended December 31, 2017 filed with the Securities and
Exchange Commission, as supplemented by our quarterly reports on
Form 10-Q.
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SOURCE CNX Resources Corporation