Good morning, and welcome to the CNX Resources Fourth Quarter 2024 Q&A Conference Call. All participants will be in listen-only mode. After today’s brief presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everybody. Welcome to CNX's Fourth Quarter Q&A Conference Call. Today, we will be answering questions related to our fourth quarter results. This morning, we posted to our Investor Relations website an updated slide presentation and detailed fourth quarter earnings release data, such as quarterly E&P data, financial statements and non-GAAP reconciliations, which can be found in a document titled 4Q 2024 Earnings Results and Supplemental Information of CNX Resources. Also, we posted to our Investor Relations website our prepared remarks for the quarter, that we hope everyone had a chance to read for the call, as the call today will be used exclusively for Q&A. With me today for Q&A are Nick Deiuliis, our President and CEO; Alan Shepard, our Chief Financial Officer; Navneet Behl, our Chief Operating Officer; and Ravi Srivastava, President of our New Technologies Group. Please note, the company's remarks made during this call include answers to questions including forward-looking statements, which are subject to various risks and uncertainties. These statements are not guarantees of future performance, and our actual results may differ materially as a result of many factors. A discussion of risks and uncertainties related to those factors in CNX's business is contained in its filings with the Securities and Exchange Commission and in the release issued today. With that, thank you for joining us this morning. And operator, can you please open the call up for Q&A at this time.

We will now begin the question-and-answer session. Our first question today comes from Gabe Daoud with TD Cowen. Please go ahead.

Hey, thanks. Good morning, everyone. I was hoping to start first on New Technologies and specifically 45V. Would you be able to walk us through your interpretation of guidance and whether the existing partnership with KeyState will move forward? I thought that even with flaring as the counterfactual, the carbon intensity of CMM would still put you in a position to recognize maximum credit value. So would love, I guess, a bit more understanding on that.

Yes. Thanks for the question. This is Ravi. So I think you had quite a few layers in that question so we'll be trying to address them one after the other. First of all, the route provides us an important federal recognition for the capture of coal mine methane as a low carbon intensity feedstock for hydrogen production, and we're pretty excited about that and kind of validate CMM's potential to decarbonize a range of sectors. With this inclusion, we have successfully validated the premium nature of our coal mine methane previously in manufacturing, then in power, and now we have validation within the hydrogen production sector. While we're excited about the recognition of CMM in 45V and the way the first productive rules came out, that was pretty good. But there were quite a few restrictions that were introduced within the rules, which we believe are inconsistent with the scientific assessment of CMM that was done by the National Labs and what the intent of the IRA work. We're looking forward with the new administration; we'll have an opportunity to improve the rules to ensure there is clarity to make necessary investment decisions in the future to scale this hydrogen economy. Our participation in moving some of these projects forward is going to be contingent on clarity on these rules going forward.

Okay. Got it. So need more clarity before moving forward on anything. Okay. Okay. Thanks for that. And then as a follow-up, I'll switch gears to the E&P side. Could you maybe just talk a little bit about the second half of 2025, with capital being heavily weighted to the first half, obviously, would expect some declines in the second half into 2026. So any additional commentary on maybe timing of reaccelerating activity or what you need to see to spend more capital in 2025? Any additional clarity there would be helpful. Thanks, everyone.

Yes. So this is Alan. The way we think about it, we position the activity set, basically the whole production flat coming through 2024. The activity set is primarily weighted upfront in Q1. We need to wait and see kind of where the industry production levels are coming out of winter. We need to finalize projected storage levels, and then we'll make an assessment. We want to create that flexibility. If prices stay high or go higher, you could see us accelerate some activity and bring up some more volumes, but it's too early to tell at this point.

Got it. Thanks, guys.

Next question is from Zach Parham with JPMorgan. Please go ahead.

Thanks for taking my questions. I wanted to follow-up on the 2025 budget. I mean it seems very efficient and seems to be benefiting from some DUCs on the Apex assets. Could you just give us some color on what the run rate spending would be if you were going to hold this level of production flat going forward?

Yes. So I think we talked about this at the beginning of last year. The goal for run rate is sub-500. There are two factors driving that. You're starting to see the efficiencies from the Utica CPA development combined with our low decline PDP base. We're comfortable on the legacy assets that you could hold that below 500 for the upcoming years. With respect to Apex, we had the TILs that are going to come online here. Those wells were completed post-close. All we need to do is kind of flow those back and turn them in. Ultimately, what we do with that position will depend on market pricing later in the year as part of our capital allocation process.

Got it. Thanks for that color. And I wanted to follow up on Gabe's question. You spoke about 45V, but could you talk about other potential pathways to generate credits from the CMM business in the future? Just really trying to think about what could be next for this environmental attributes business.

Yes. So we've been talking about this where coal mine methane offers a clear environmental and economic advantage as an energy source, and we have successfully validated its premium pricing in manufacturing with a deal in the power generation sector, and now through 45V for hydrogen production. We will continue to target different sectors, whether it's in power generation, manufacturing, data centers, and more. The validation that we get from recognition of these programs opens up many other monetization opportunities. We'll keep driving those efforts, and we'll share more information as we have updates to share on that front.

Thanks a lot.

The next question is from Leo Mariani with ROTH. Please go ahead.

Hi. I just wanted to dive in a little bit more into some of the New Tech numbers here. The fourth quarter of 2024 saw very robust free cash flow at $30 million. As we're looking ahead into 2025, you seem to be guiding to say that New Tech free cash flow will be down a little bit this year. Maybe you could just provide a little color around that, given the strength that we saw in 4Q? Additionally, have you seen any real contribution yet from the oilfield service business or the CNG/LNG business in 2024 to that free cash flow? Do you expect those businesses to be additive here in 2025?

Yes. So this is Ravi again. The fourth quarter numbers are primarily benefiting from the monetization of more environmental attributes in Q4 itself. The overall volume is consistent, and we were able to bring some volume that would have been monetized in January into December, which allowed the Q4 number to be high. On a run rate basis, the volumes that we'll be able to monetize in the ATS program is in the range of 17 to 18 Bcf, and the value recognition is still in the $30 to $35 per megawatt hour range. I think that's going to be the primary driver for free cash flow in that segment, approximating $75 million per year. There may be some ebbs and flows depending on when some of those volumes get monetized, but largely, that's the driver. The AutoSep and CNG business are still in early commercialization phases. AutoSep is fully deployed on CNX's footprint, and we're seeing the cost benefits, safety benefits, operational efficiencies, and emission reduction objectives that we wanted to achieve with that. We expect some expansion beyond CNX's footprint in 2025. As that materializes, we'll share more information.

Okay. That's helpful. Additionally, I think in your comments, you folks referred to the hope that the new administration here might take a fresh look at the 45V rule interpretation and possibly make more favorable changes. Overall, you have 45Q legislation pending as well. Clearly, we had a red sweep that happened with the elections. It’s been a short period of time since the Trump administration has taken over. Do you folks have any read on how the new administration would be viewing coal mine methane in terms of the abatement and potential opportunities? Any signals indicating they might be helpful?

I would say it's too early at this point in time. Coal mine methane has a lot of inherent environmental and socio-economic benefits. We will continue to advocate and make the case for it. The 45Q and other processes will run their political course. We will stay connected with the right folks, but in the meantime, we will continue to pursue opportunities in these other markets and sectors for monetization pathways.

Okay. No, that's helpful. Additionally, regarding your comments on production, I just wanted to confirm my understanding. The goal of 2025 production is to keep base volumes flat while expecting some modest declines on the Apex volumes as we get into the second half of the year. You're bringing some deferred TILs online, which will help production in the near term, but you anticipate a modest decline in the second half. If conditions are favorable in the gas market, you might have a few more wells late this year to flatten that out into 2026. Did I understand correctly?

Yes, that's right. The guidance we provided speaks to what you're discussing with the optionality to increase or accelerate volumes in the second half of the year if pricing and capital allocation methodologies suggest we should do that.

The next question is from Bert Donnes with Truist. Please go ahead.

Hey, good morning, guys. On the coal mine methane front, I just want to confirm your comments. You're only seeking clarity on the overly restrictive rules. If those are cleared up, the financial incentives will be enough, correct? And is there any capital levels that would be associated if the rules were clarified positively regarding CapEx you'd need to spend?

Hey, Bert. The restricted nature of the rules and the lack of clarity on the book and claim methods create confusion. It will take time to understand how all those pieces will fit together. Once we have a better idea, that will clarify how to plan for capital investments. There’s too much uncertainty at this point, and we need time to sort out how the rules will be fixed and then how the Treasury and DOE clarifications will come into play.

So, this is Nick. Just to clarify, with coal mine methane and the climate benefits tied to it as a fuel stock blend to different industries, we’ve established a premium pricing in manufacturing, entry into the hydrogen economy now through the recently issued 45V guidance, and we've got the power generation sector with programs like the APS standards in Pennsylvania. We're continuing to work all avenues to optimize that portfolio. Some of this will involve things like 45Q and 45V, pursuing opportunities in sectors like AI power generation to recognize the benefits of fugitive methane capture. These individual rules and programs are part of a bigger puzzle; it'll take time to see how it all lands.

That's perfect. Thank you. The other question relates to the buyback activity. I was surprised you didn't step in Q1 of 2025. Were there some blackout periods due to Apex, or perhaps a view on the macro? Or is it preserving capital for potential acceleration in the second half instead of using it on buybacks now? Any thoughts?

Yes, as discussed before, we don't talk about tactics on these calls. We refer back to our continuous capital allocation process, which includes a blackout period as part of that consideration.

The next question is from Michael Scialla with Stephens. Please go ahead.

Thank you. Good morning, everybody. I wanted to ask about the Apex acquisition. You talked about 8,600 net acres there of undeveloped Utica. Was the Utica developed on a large portion of the entire acquisition of 36,000 acres, or is it limited by geology? Looking for a little more color.

Yes. Our view is that there's developable Utica across that footprint, and there hasn't been any development on that particular asset just yet on the Utica.

So does that imply there's upside to that 8,600? I’m trying to understand how you arrived at that number.

The 8,600 that we disclosed on the acquisition are the controlled rights at acquisition. That's what they had in terms of Utica on their lease.

Got you. And of those eight wells that are going to be turned in line on that acreage, are they all Marcellus or any of those Utica?

Those are all Marcellus.

Okay. And just one more on Utica. Are you still thinking about 3 Bcf per 1,000 foot of lateral and any update on cost per lateral foot in those wells?

Yes, Mike, that's correct. The wells we guided last quarter, like the well, are holding production like we expected, and they are in line for completion of 1,000 feet.

And anything on the cost side you can share?

I would just say, part of the capital efficiency number that you're seeing in the total CapEx, we're delivering these wells at the target numbers. We believe there's a little room for improvement, and we're going to continue to work on that, but we're pleased with our current drilling and capital efficiency.

Great. Appreciate it, guys.

The next question is from Noah Hungness with Bank of America. Please go ahead.

Good morning, Nick and team. I guess the first question here is also on the Utica. If you could give any latest thoughts on spacing for new drill locations?

Yes, I can do that. It's Nav. So on the spacing, so far with the BP6 wells, they are at 1,300 foot spacing, which is in line. We have a few more spacing tests coming at 1,500 feet. We will be able to provide that information later this year.

Appreciate it. And my second question is on cash taxes for 2025. How should we think about those considering how volatile strip has been?

Yes. We're still a de minimis cash taxpayer until we reach a cumulative $3 billion of free cash flow. So we don't foresee material cash tax payments until late 2026, early 2027.

Okay. Thanks.

The next question is from Jacob Roberts with TPH. Please go ahead.

Good morning. I wanted to touch on the comment about coal mine methane volumes relative to the anticipated mining plans. Can you give any insight into how much clarity you have into those plans and the timeframe of mine development? Is that comment on development specific to the Buchanan complex, or could other mines at smaller volumes present opportunities? Are there limitations on capturing those volumes?

Yes. Our volumes are primarily at the Buchanan mine at this point. We have some capture operations in our Northern Appalachian footprint as well. We work closely with the mine operators to understand their annual or long-term plans and try to provide guidance based on the best information available.

Thank you. And my second question is on marketing. What's driving the change year-over-year in the percentages across various sales points? What are you seeing in those markets at the moment, and how could that shift through the year?

Marketing is on a daily basis; we're continually optimizing our FT portfolio and which end markets we have. Any variation you're seeing quarter-to-quarter or year-to-year is simply optimization on the marketing side. We haven't entered into any new FT contracts that would fundamentally change the market split.

Thank you. Appreciate the time.

This concludes our question-and-answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Thank you again for joining us this morning. Please feel free to reach out if anyone has additional questions. Otherwise, we look forward to speaking with everyone again next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.