Earnings Results - CNX Resources Corporation

[Pages:47]Earnings Results

Third Quarter 2019

October 29, 2019

Cautionary Language

For purposes of this presentation: (i) "CNX", "CNX Resources", "Company", "we" and "our" refer to CNX Resources Corporation (ii) "CNXM" refers to CNXM Midstream Partners LP; and (iii) "CNXM GP" refers to CNX Midstream GP LLC

Risk Factors. This presentation, including the oral statements made in connection herewith, contains forward-looking statements, estimates and projections within the meaning of the federal securities laws. Statements that are not historical are forward-looking and may include our operational and strategic plans; estimates of gas reserves and resources; projected timing and rates of return of future investments; and projections and estimates of future production, revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those statements, estimates and projections. Investors should not place undue reliance on forward-looking statements as a prediction of future actual results. The forward-looking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation to update the statements, and we caution you not to rely on them unduly.

Specific factors that could cause future actual results to differ materially from the forward-looking statements 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, 2018 filed with the SEC, as supplemented by our quarterly reports on Form 10-Q. Those risk factors discuss, among other matters, pricing volatility or pricing decline for natural gas and NGLs; operational risks relating to midstream facilities, pipeline systems, drilling natural gas wells, access to key services and equipment, access to adequate water sources and customer interactions; the impact of laws and regulations on our business and industry; competitive and economic concerns; risks associated with our debt and hedging strategy; our ability to acquire economically recoverable natural gas reserves; challenges associated with strategic determinations, including the allocation of capital to strategic opportunities; our development and exploration projects and potential acquisitions or divestitures, as well as CNXM's midstream system development.

Reserves. Currently, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this presentation, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. We caution you that the SEC views such estimates as inherently unreliable and these estimates may be misleading to investors unless the investor is an expert in the natural gas industry. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category.

Title. Except for proved reserve data, the information included in this presentation is based on a summary review of the title to the gas rights we hold. As is customary in the gas industry, prior to the commencement of natural gas drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects. We are typically responsible for curing any title defects at our expense. As a result of our title review or otherwise, we may be required to acquire property rights from third parties at our expense in order to effectively drill and produce the gas rights we control and third parties may participate in the wells we drill, thereby reducing our working interest in those wells.

Reconciliation. As it relates to the disclosures within this presentation of projected Adjusted EBITDA, projected EBITDAX, projected cash flow and other projected non-GAAP metrics for fiscal or quarterly periods in 2019 or beyond, for CNX or CNXM, CNX is unable to provide a reconciliation of such metrics to projected operating income, the most directly comparable financial measure calculated in accordance with GAAP, due to its inability to calculate projected operating income due to the unknown effect, timing, and potential significance of certain income statement items for each of CNX and CNXM, respectively.

Data. This presentation has been prepared by CNX and includes market data and other statistical information from sources believed by CNX to be reliable, including independent industry publications, government publications and other published independent sources. Some data are also based on CNX's good faith estimates, which are derived from its review of internal sources as well as the independent sources described above. Although CNX believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy or completeness.

Trademarks. CNX owns or has rights to various trademarks, service marks and trade names that it uses in connection with the operation of its business. This presentation also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. CNX's use or display of third parties' trademarks, service marks, trade names or products in this presentation is not intended to, and does not imply, a relationship with CNX or an endorsement or sponsorship by or of CNX. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation may appear without the ?, TM or SM symbols, but such references are not intended to indicate, in any way, that CNX will not assert, to the fullest extent under applicable law, its rights or the right of the applicable licensor to these trademarks, service marks and trade names.

Not an Offer. This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CNX Resources Corporation or CNX Midstream Partners LP.

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Major Highlights

Large, High Quality Inventory in the Core Marcellus and Utica Low Cash Costs Matters Even More in a Low Price Environment Strong Hedge Position Protects Future Cash Flows and Ensures Capital Returns On Track to Significantly Lower SG&A Increasing Free Cash Flow Despite Lower Commodity Price Since Last Update Strong Performance in Q3 for both CNX and CNXM An Emphasis on Flexibility and Ability to React to Dynamic Commodity Price Environment Strong Balance Sheet

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CNX Acreage Position Remains Top-Tier in Appalachia

Appalachian Peer Group Net Acres

1,400,000

CNX SWPA Central Marcellus Locations(1)

1,200,000

1,000,000

800,000

600,000

400,000

200,000

Peer 1 CNX Peer 2 Peer 3 Peer 4 Peer 5 Peer 6

SWPA Tier 1 Undeveloped Acres Divided by

Acres per well Equals

Total Undrilled Locations

Average wells TIL (2018-2020E) Years Inventory remaining

69,800

163

427 36 12

Assuming a run rate of 36 SWPA Central Marcellus TILs per year: CNX maintains ~12 years of core inventory after YE2020

CNX maintains approximately 12 years of additional inventory in Shirley/Pens WVa., assuming 1 pad per year

CNX's production grows with only 40 wells per year

CNX's controlled acres are only ~6% developed

Source: Company reports. Peers include AR, COG, EQT, GPOR, RRC, SWN.

(1) Locations calculated by dividing total controlled acreage in type curve region by the area of a well (9,500' lateral length * 750' inter-lateral spacing).

(2) Any incremental leasing and associated land leasing capital spend would increase the number of undeveloped locations.

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Low Production Cash Costs Create Competitive Advantage

2.25

TTM Q2/Q3 2019 Production Cash Costs per Mcfe(1)

$2.15

1.50

$0.78 0.75

$0.79

$1.11

$1.15

$1.25

$1.31

$1.70

-

CNX (2) Consolidated

Peer 1

CNX

Peer 2(3)

Peer 3

Peer 4 (4)

Peer 5

Peer 6

Lease Operating Expense ($/Mcfe) Production, Ad Valorem, and Other Fees ($/Mcfe) Transportation, Gathering and Compression - E&P ($/Mcfe)

Avg. Daily

1.5

2.2

1.5

1.4

4.2

2.3

2.2

3.1

Production(5)

(Bcfe/d)

CNX's top-tier production cash costs and substantial hedge book create a significant advantage in a weak natural gas pricing environment

(1) TTM as of Q3 2019 end for CNX and TTM as of Q2 2019 for peers. Peers include AR, COG, EQT, GPOR, RRC, SWN. For peers that net transportation costs from revenue, $0.30 per

Mcfe has been added to Transportation, Gathering and Compression to estimate total production costs.

(2) CNX consolidated includes total company gathering rates with benefit of MLP.

(3) Does not include firm transportation.

(4) Lease operating expense for this producer includes gathering and processing costs, but not firm transportation.

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(5) Average daily production TTM as of Q3 2019 for CNX and TTM as of Q2 2019 for peers.

Workflow Integration Driving Significant SG&A Savings

Consolidated FY2018 Actual $113M(1)

PREVIOUS Consolidated

FY2019E Guidance $110M(1)

UPDATED Consolidated

FY2019E Guidance $100M(1)

PREVIOUS Consolidated

FY2020E Guidance $110M(1)

UPDATED Consolidated

FY2020E Guidance $85M(1)

~$30M in consolidated SG&A savings expected in 2020, compared to 2018

(1) Consolidated cash SG&A excludes non-cash stock compensation expense and based on the midpoint of the guidance range.

UPDATED Stand-Alone

FY2020E Guidance $70M(1)

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Substantial Hedges in 2020 and 2021 with Strongest Hedge Price

% of Consensus Prod. Hedged Price Floor ($/Mcf)

% of Consensus Prod. Hedged Price Floor ($/Mcf)

2020E(1) Hedged Gas Production

100 % $2.97

$3.00

80 %

94 %

91 % $2.87

$2.88

$2.90

$2.77 $2.77

$2.80

2021E(1) Hedged Gas Production

100 %

$ 2.93

$3.00

80 %

79 % 76 % $ 2.83 $2.79

$2.90 $2.80

2021E % of production hedged increases to 80% under a scenario of flat 2020 gas volumes of 520 Bcf

60 % 40 % 20 %

59 % 58 % $2.63

30 % 16 %

NYMEX Strip $2.40 in 2020

$2.70 $2.60 $2.50 $2.40

60 %

40 % 20 %

$ 2.55

26 % 23 %

NYMEX Strip $2.43 in 2021

$2.70

~53% of 2022E production

hedged at NYMEX $3.01

$2.60

per Mcf under a scenario

of flat 2020 gas volumes

of 520 Bcf

$2.50

$2.40

0 %

0 %

$2.30

CNX Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6

2020 % of Production Hedged 2020 Average NYMEX Price Floor

0% 0% 0%

0 %

$2.30

Peer 1 CNX Peer 2 Peer 3 Peer 4 Peer 5 Peer 6

2021 % of Production Hedged 2021 Average NYMEX Price Floor

Note: Peers include AR, COG, EQT, GPOR, RRC, SWN. As of Q3 2019 for CNX and as of Q2 2019 for peers. NYMEX as of October 9, 2019.

(1) Based on Bloomberg consensus estimates for 2020E and 2021E annual gas production. CNX 2020 % of production hedged based on the midpoint of natural gas

guidance.

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Despite Weaker Gas Prices, Preserved FCF and Bolstered 2021 Inventory

OLD 2020 FCF Guidance Q2

$135M Free Cash Flow

Outside Changes Management Changes

NYMEX Declined in 2020 ($2.55 to $2.40 per MMBtu) & 2019

Volumes

Capital

Costs

NEW 2020 FCF Guidance Q3

$146M Free Cash Flow

2019 also improved: EBITDAX $5M Capital $17.5M

Despite gas prices significantly weakening in 2019 & 2020, CNX increased its 2019 & 2020 FCF by over $30M

Note: CNX Resources Corporation is unable to provide a reconciliation of projected E&P Stand-alone FCF to projected operating income, the most comparable

financial measure calculated in accordance with GAAP. This is due to our inability to calculate GAAP projected operating income given the unknown effect, timing, and potential significance of certain income statement items.

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