Thank you, and good morning to everybody. Welcome to CNX's second quarter Q&A conference call. Today, we will be answering questions related to our second quarter results. This morning, we posted to our Investor Relations website an updated slide presentation and detailed second quarter earnings release data such as quarterly E&P data, financial statements and non-GAAP reconciliations, which can be found in a document titled 2Q 2025 Earnings Results and Supplemental Information of CNX Resources. Also, we posted to our Investor Relations website, our prepared remarks for the quarter, which we hope everyone had a chance to read before the call. As the call today will be used exclusively for Q&A. With me today for Q&A are Nick DeIuliis, our Chief Executive Officer; Alan Shepard, President and Chief Financial Officer; and Navneet Behl, our Chief Operating Officer. Please note that the company's remarks made during this call, including answers to questions, include 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 for Q&A at this time.

I wanted to ask on the 45Z tax credit. Could you just give us a little detail on the timing and ability to claim those credits? And as the rules are laid out today, would those credits just run through 2029?

Yes. Zach, good question. So the way the program is set up currently, right, as the initial rule guidance, as you point out, there needs to be final rule making. As long as everything comes in, in line with the initial guidance, the first-year eligibility to claim credits would be in 2025. So you saw in our materials, we were talking about 2026, would be the first potential opportunity to get some of that $30 million a year run rate. And then yes, the program got extended under the OBB through '29. It would be the first time that it would be up for re-extension.

And also just wanted to ask on activity levels at the E&P business. Any plans to grow volumes here? I know at one point, you all talked about having optionality to add some activity back in the second half of the year. And if not, can you talk about what a maintenance program might look like in 2026? Would that be flattish CapEx year-over-year? Just trying to get a sense of what activity levels may look like.

Yes. Regarding the first point, we had some flexibility in our plans. It's now evident that we are heading towards approximately 4 TCF in storage. In that case, we will continue with the initial level of activity we had set for the start of the year. Therefore, no changes are anticipated at this time. When considering capital efficiency, we should refer back to our previous guidance. The key figures are $580 million in production, or 580 million cubic feet, against $500 million in CapEx, resulting in a capital efficiency ratio of about $0.85 per million. Moving forward, aside from the production well targets, which focus on optimizing free cash flow per share, that ratio is the correct way to assess the business's capital efficiency, likely falling in the mid-80s range, with some fluctuations due to the one rig program; this will provide a clearer perspective as we progress.

I wanted to see if you could get a little bit more color on drilling and completion activity levels in the second half. I know you all have said that CapEx was pretty front half weighted in '25. But just looking at your turn-in-line schedule, the vast majority of turn-in-lines, I think they happen here in 1Q. So if you could kind of maybe speak to whether or not there's a bit of a lull in activity here in the second half and maybe that activity kind of picks up a little bit in the winter. And then could you also kind of relate that to CapEx trends? I mean it looks like CapEx is down a little bit in 2Q versus 1Q, but maybe just kind of help a little bit with the trajectory on CapEx in the second half.

Yes, sure. Sort of similar to what we talked about last time, Leo. Basically, the bulk of the turn-in-lines were weighted towards the front half of the year. Our next batch of turn-in-lines would be towards the latter part of Q4. So what you'll see on the production front is kind of sequential decline, so it will be lower in Q3 and then lower in Q4 until that next batch of turn-in-lines comes on. And then CapEx will track that, right? So CapEx will be lighter in Q3 and then pick back up in Q4 when we get back to it on the activity front.

Okay. So it sounds like there's a bit of a hiatus in activity then it kind of picks off late this year to get you all ready for kind of the winter in '26. Is that kind of the way to think about it?

Yes, that's the right way to think about it. We're going to continue to run the one rig program on the drilling side and then completion activities will hit a bit of a lull, and then those will pick back up in the fall as we get ready for the turn-in-lines that I talked about in the December time frame.

Okay. That's helpful. And then just on the Utica, obviously, you all seem excited about that. It sounds like the costs are already below your target here on the wells. It's nice to see. At this point, given you've beaten the target, do you think there's more room to go on the cost side or maybe that can kind of come down? And apart from the cost, could you kind of speak to the actual well results, production performance? How are the results trending versus your expectations? And maybe just overall, how do you see this kind of competing with the Marcellus?

This is Navneet. I wanted to provide an update on the Utica. The team has done an excellent job optimizing our drilling and completion operations over the past couple of years. We are pleased with our performance so far, but we are still striving for more. We are actively working to enhance our performance in the coming quarters, so stay tuned for updates on how we can increase our operational efficiency and lower our costs. Regarding our performance, all our Utica wells are meeting our expectations, and our latest turn-in-lines from Q2 are slightly exceeding our target. We are very enthusiastic about the deep Utica play and look forward to continuing our development in this area.

And then Leo, maybe I'll address the last part of your question on how we think about the Utica and the Marcellus sort of mix. So we've been very intentional in giving Nav and the operating team a nice runway here to really demonstrate their prowess in being able to drive these costs down. Moving ahead, obviously, we're going to continue to develop our core Southwest Pennsylvania field over the next few years. But we also, as Nav pointed out, we want to keep getting him reps at the Utica wellhead there so we can continue to work on cost efficiencies.

I was hoping to ask on 45Z again.

Yes.

When do you think you'd be able to reach that $30 million a year run rate? And when you do realize the full $30 million of additional free cash flow from 45Z, should we think that all of your RMG gas would be sort of shifted to qualify for this 45Z opportunity? Or will some of it still be used to qualify for the PA AEC Tier 1 credit?

Yes. So the way to think about timing, like I said, so 2025 is the first year of eligibility for the program, but the cash associated with that wouldn't occur until you file your tax return for 2025 and 2026, right? That's when you would create the tax credit that would be fungible, and you can convert that to cash in the market. In terms of volumes that qualify, I mean, bigger picture, our initial read on the guidance is that it's stackable. So you're able to take advantage of both programs in terms of 45Z and the PA Tier 1 REC. But the volumes don't qualify one for one. So some volumes might qualify under Tier 1 RECs and some volumes might qualify under 45Z. So it's a blend of which ones do, and which ones don't. And at this time, it's all still subject to that final rule. We're optimistic as long as things follow the initial guidance, but there's still a bit of wait and see on that.

Got you. That's helpful color. And then for my second question, could you maybe talk about what credit price is underwriting the revised environmental attribute free cash flow guide of $65 million.

Yes. It's sort of where the market is at now. We treat it very similar to how we report kind of the open prices for the rest of year. Just kind of look at the PA Tier 1 strip, and that's in the mid-20s right now for the megawatt hour. Yes.

Maybe a bit of a follow-on to that last question. Should we be thinking about the $30 million as a function of the RMG input or the result of some sort of downstream output?

The tax credit incentivizes the collection of waste gas from coal mines and turns it into a sellable product for the pipeline. This is primarily aimed at reducing emissions.

Okay. That's helpful. And then I just wanted to give you guys the opportunity to talk a little bit about the AI and Energy Summit. I know you mentioned it in the release. And specifically, we're wondering how much the RMG product is factoring into those conversations with any counterparties, maybe in particular, the tech guys. And ultimately, do you think there is a pathway for RMG to get better economics on some of the potential deals there relative to the current pathways you've laid out?

Yes, that's a great question. We are very excited. Our focus here is on Appalachia first. All of the developments in AI are going to benefit both the region and the industry. You've correctly identified our current priority, which is to present the RMG product to the market as a genuine sustainable energy solution that helps users of natural gas achieve a zero-carbon profile for new data centers. We have been engaging with various parties and collaborating with third-party marketers during these discussions. We are eager to see this progress, not just with existing volumes, but also with the potential for additional volumes driven by incentives from the voluntary markets.

And Jacob, this is Nick. Just to sort of follow on with Alan. The way we look holistically at the AI opportunity and remediated mine gas RMG. It's another industry pathway, whatever you want to call it, to get the value of it recognized and utilized. So we started with manufacturing and arm's length transactions that recognized it for manufacturing downstream products. We've got it recognized, of course, in the power grid under the Pennsylvania PUC. We then were able to get it recognized in the hydrogen economy with 45V, now transportation of alternative fuels with 45Z, and this would be another critical pathway that I think makes a whole bunch of sense and has a certain level of inevitability to it, but the timing and the magnitude of it, it's still a TBD.

Great. Appreciate the time, guys.

Yes, Rob.

Just to follow-on the AI topic there. Obviously, a lot of news recently on gas providing power for data centers in the region. I just want to get your updated thoughts on in-basin demand. And does that have any impact on your long-term view of natural gas prices and your hedging strategy?

I don't believe it will affect our hedging strategy in the short term. Our approach to hedging is tied to how we manage our balance sheet and our overall capital allocation program. In the long run, anything that increases in-basin demand will be beneficial, especially considering the interstate pipeline restrictions we've faced over the past decade. Therefore, we are currently in a wait-and-see mode. We have sufficient inventory and the capability to deliver gas; now it’s just a matter of seeing which projects come online and how we can take advantage of those opportunities.

Yes, Michael, our past experiences and similar opportunities in the industry and region suggest that the actual outcome will be different from current projections. Many factors will influence which plants are constructed, their timelines, and the overall situation. Therefore, there is much to determine between now and the future. The volatility in pricing since the summit reinforces the excitement we feel about the potential for increased demand for natural gas and the possibility of revitalizing many communities in the region. However, in terms of making decisions today or speculating on impacts such as hedge books and capital allocation, our strategy and outlook remain unchanged.

Yes. It makes sense. I want to get your thoughts on the second quarter production surprised a little bit. I just wanted to see if you can pinpoint where that came from? Was it new wells outperforming expectations, base decline, anything else?

Our production outperformance can be attributed to four key factors. Firstly, our new turn-in-line performance, particularly from the Apex Marcellus wells and our Utica wells, has been impressive. Secondly, our operational execution has enabled us to advance some of our initiatives. Thirdly, we've achieved efficiency gains in our base production. Lastly, our uptime on base production has also been strong. The combination of these four elements led to our results.

I want to go back and ask about the deep Utica results again. In your view, how much do you think cost will have to come down for the deep Utica to compete with Marcellus returns? And then broadly speaking, from what we can tell, the Utica wells are fairly concentrated right now. So would love to get your thought about the consistency of Utica performance on our acreage.

Yes. I would say on the first question, where we're at right now on sort of the cost structure, we think that makes those wells competitive with kind of best in-basin opportunities even on the Southwest Pennsylvania sort of Marcellus stuff. The longer term, we're going to step out from where we're at now, but our expectation is that there's a pretty long runway across our field up there to make these results repeatable.

Okay. A follow-up on the New Tech. Just as related to the gas power for AI, when you think about your value recognition for the gas. Is it fair to think about it from a voluntary and carbon credit perspective where you're selling the attributes to tech companies looking to reduce their carbon footprint? Or is it through compliance market or other channels?

Yes. On the RMG front, we're going to sell to whichever market recognizes the highest value, right? I mean, currently, that is the latter of the one that you pointed out, kind of the renewable energy credit markets for the existing RPS programs. But there is a finite amount of this resource that's available, and we think the environmental attributes should result in some voluntary pricing that rivals the regulatory pathways in the long term.

Betty, you also bring up another good point with the question, which is the focus currently, right, has really shifted with the opportunity of AI in places like Appalachia to natural gas demand and the construction of the data centers and power plants to power them, et cetera. But there's also another issue that's been there from the get-go that will remain. It just maybe has perhaps fallen a bit below the radar, which is the sustainability solution or the sustainability path to making all this growth occur. And the ultimate sort of clients and drivers of that, the tech industry hasn't sort of backed up with regard to sustainability or carbon goals one step since they originally set them. And now this new growth option for them is going to make that even more of a heightened challenge. So I think RMG playing a role in how this ultimately plays out has never been in more demand. And to your point, I think the tech industry will play a key role in that.

I would like to follow up on that answer. From the perspective of the voluntary carbon market, would that be an addition to the PA REC market or 45Z?

At some point, you can only sell into one market. So traditionally, the voluntaries, depending on which pathway you're using, they might not be stackable. So it's all very facts and circumstances dependent. So I hesitate to give a general answer. But the way to think about it is you can generally get maybe one to two stacking, but you're not going to get beyond that.

Yes, I view it as another option that competes with your other alternatives. So generally, it is not stackable.

I just wanted to follow-up on just the Utica mix. You talked about just giving more at bats next year. As we just think about the general activity level that you guys have laid out, should we think about the Utica taking more share of the program over the next couple of years? Or is there still some more headway to make on the cost side before it becomes a larger contribution?

No. I would go back to what I said on one of your earlier questions. I think at this point in the cost structure, these wells are in the mix in terms of IRR competitiveness. So you're going to see them in the program moving forward. And what we're really trying to do is balance the harvesting of the Southwest Pennsylvania sort of field that's fully developed with any potential kind of step out in the new CPA area. So we look at every project on a kind of full cycle IRR basis, and that's how we determine the mix. You said we've been very intentional recently in just giving Nav lots of at bats to demonstrate repeatability. But moving forward, I think we're comfortable that we can be super focused on just the best projects at the right time.

Appreciate that. And then just a follow-up on conversations just around marketing and obviously, in-basin demand. As you sit today, we go into winter, you guys talked about before kind of hitting tank tops or so as we get into fall, and then sort of setting up for 2026. There's been a lot of contracts that seem like they're in the early days of being signed right now. From where you sit, do you think it's sort of best to see this market get appreciably tight over the next few years and see in-basin demand increase before signing long-term agreements? Or is that something that you think is going to be in your relative near future?

Yes. I believe the first indication you want to look for is a data center becoming connected to some of the natural gas projects. Once you see the first data center commit to purchasing electricity in Appalachia, it will provide a clearer picture of how value will be distributed along the supply chain. Until that happens, there may be some reluctance to finalize your ownership of that economic opportunity. As Nick mentioned, there are still many developments ahead. We are still in the early stages, but there is definite potential, and it's wise to wait and observe how things unfold before committing to any long-term agreements.

Thank you again for joining us this morning. Please feel free to reach out if anyone has any 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.