CNX Resources (CNX) Reports 2018 Capital Budget of $790-$880 Million

CNX Resources Corporation (NYSE: CNX) ("CNX" or the company) announced today an updated 2018 capital expenditure forecast of $790-$880 million, excluding the recent acquisition of the general partner interest of CNX Midstream Partners LP (NYSE: CNXM) ("CNXM"). The 2018 budget includes $515-$580 million of drilling and completion ("D&C") capital and approximately $275-$300 million of capital associated with land, midstream, and water infrastructure. The 2018 D&C capital budget is allocated approximately 65% to the Marcellus Shale and 35% to the Utica Shale.

"CNX's updated 2018 capital plan reflects an industry leading balance sheet and the company's commitment to invest in high rate of return projects, which will result in substantial value creation in 2018 and beyond," commented Nicholas J. DeIuliis, president and CEO. "Our development program in 2018 is largely supported by our robust hedge book, which, as of December 31, 2017, has fully-covered volumes with both NYMEX and basis hedges of approximately 375 Bcfe, or 70% of 2018 production volumes, based on the midpoint of guidance. This de-risking of our revenue allows us to lock in attractive rates of return and confidently execute our development plans."

The company expects 2018 non-D&C capital for midstream, water, and land to drive future stacked pay development and further differentiate CNX's unique asset base. With CNX recently closing the acquisition to now control 100% of CNXM, stacked pay development has begun to directly impact the capital budgeting process and 2018 represents the initial investment required. This non-D&C capital is primarily driving production over the course of 2019, 2020 and beyond. The new stacked pay development lifecycle allows CNX to develop a single formation first and then come back on a pad to take advantage of existing, first formation, infrastructure. This development sequencing is essentially doubling the life and value of a field. As a result, rates of return on future development should benefit meaningfully from this infrastructure build-out as CNX capitalizes on the sequencing of dual formation development.

With the company's recent purchase of Noble Energy's general partner interest in CNXM, CNX has absorbed Noble Energy's 50% of capital contributions that they previously made to CNXM. As a result, CNX expects midstream capital in 2018 to be approximately $100 million. Much of the 2018 midstream capital will go towards building out development companies (DevCo's) outside of DevCo I, which will create future dropdown opportunities.

The company is increasing water capital in 2018 to approximately $75-$100 million, which includes building water infrastructure for two major stacked pay project areas that the company expects to be ready in the fourth quarter of 2019. This additional infrastructure will increase completion efficiencies by improving cycle times, resulting in additional production, lower costs per barrel, and lower future capital costs. Overall, the company estimates material cost savings by building out water infrastructure, compared to the alternative of trucking water. This water capital investment will benefit the company through future dropdowns of ownership interest into CNXM.

The company's 2018 land capital is approximately $100 million, which includes title, land acquisition, and permitting, in order to maximize future development. Land capital in 2018 will help CNX build out its core Marcellus and extensional stacked pay Utica areas that are part of the company's 5-year development plan. A negligible amount of land capital is associated with 2018 development, but instead, the capital that the company is spending in the current year is driving net asset value per share growth by securing future development beyond 2018.

CNX is maintaining its 2018 expected production volumes of 520-550 Bcfe, which equates to an approximately 30% annual increase, compared to 2017 expected volumes, based on the midpoint of guidance. CNX plans to run three rigs through the first half of 2018 and will add a fourth rig starting in July.

2018 Development Program:

In addition to the table above: CNX expects to drill and TIL 26 and 25 CBM wells in 2018, respectively.

Financial Guidance:Based on current NYMEX natural gas prices, as of January 3, 2018 the company expects Adjusted 2018 EBITDA attributable to CNX of $845-$895 million. Also, CNX expects to continue its previously announced share buyback program, of which the company has bought back approximately $100 million to-date under the one-year $450 million authorization. The company continues to focus on maintaining a solid balance sheet and expects to finish the year under a 2.5x net debt to EBITDA leverage ratio.

Note: CNX Resources Corporation is unable to provide a reconciliation of projected Adjusted EBITDA 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.

Dry Utica Results:In late November 2017, CNX turned-in-line the Aiken's 5J and 5M dry Utica wells located in Westmoreland County, Pennsylvania, which had an average lateral length of 7,500 feet. Similar to the Gaut 4IH dry Utica well, which is offset to the Aikens wells, the company is utilizing managed pressure drawdown. Each well averaged approximately 25 MMcf per day for a period of 35-days under restricted choke, with an average flowing casing pressure of 8,830 psi. Cumulative production for both wells combined is 1.74 Bcf over the same period. The company believes that the pressure data provides a positive indication for production volumes and an estimated ultimate recovery (EUR). Total costs for the Aikens wells averaged $15 million each, which is a reduction of $13.7 million, or 48%, compared to the CNX's initial Gaut 4IH well. Based on these capital costs, strip pricing, and assuming the same 3.5 Bcfe per 1,000 feet of lateral EUR of the Gaut 4IH, the company expects average after-tax rates of return from the Aikens wells of approximately 50%.

"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," stated Timothy C. Dugan, Chief Operating Officer. "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. Also, stacked pays will give us the flexibility to toggle between accelerating and decelerating activity based on varying market conditions. Our dry Utica and stacked pay opportunity-set cannot be replicated and it gives CNX a tremendous competitive advantage."

Earnings call information:CNX Resources Corporation will report financial results for the quarter ended December 31, 2017 at 6:45 a.m. ET on Tuesday, January 30, followed by a conference call at 10:00 a.m. ET. The call can be accessed at the investor relations section of the company's website, at www.cnx.com.

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