CNX Resources Corp (CNX) Q3 2026 Earnings Call Transcript

Good day, and welcome to the CNX Resources 3rd Quarter 2026 Q&A Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, press star then 2. Please note, this event is being recorded. I would now turn the conference over to Tyler Lewis. Please go ahead.

Thank you, and good morning, everybody. Welcome to CNX's third quarter Q&A conference call. Today, we will be answering questions related to our current results. This morning, we posted to our Investor Relations website an updated slide presentation and detailed third-quarter earnings release data, such as quarterly E&P data, financial statements, and non-GAAP reconciliations, which can be found in a document titled 3Q-2026, 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 Alan Shepard, our President and Chief Executive Officer, Ravi Shrivistava, our Chief Financial Officer, and Navneet Bell, 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 up for Q&A at this time?

Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If any time your question has been addressed and you would like to withdraw it, please press star, then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Gabe Daoud with a truest.

Thanks, Operator. Morning, guys. Thanks for taking my questions. I was hoping we could maybe just start with the macro backdrop, and you noted in the prepared remarks you'll certainly remain flexible and responsive to the current environment. So, curious maybe how that would kind of translate into your thoughts on 27, just given where gas prices are.

Yeah, hey, Gabe. Thanks for the question. You know, where we sit right now, so we're pretty much on the five-year average for storage levels. You know, we'll be close to four Ts going into winter. Right now, you know, we're not giving forward guidance, but right now it looks like we'll be in maintenance production mode, right? Like, unless we see something that sort of, you know, incentivizes producers to bring on more gas, we'll be staying steady state. And obviously, if it, you know, sort of degrades from here, we'll make adjustments as necessary.

Okay. Okay. Thanks, Alan. So, maintenance for now, like, not below maintenance given prices on the screen currently. You feel good with still maintenance?

Yeah, we're pretty edge going into 27. So, you know, we're a little bit different shape than most folks. So, right now, we'd still be in the maintenance mode mindset. Right, right.

Okay. Okay, great. That's helpful. And then my follow-up would be another, I guess, higher-level question. A big merger in Basin this week was announced, as I'm sure you're all aware. We'd love to hear your thoughts maybe on the transaction and just M&A and Appalachia more generally.

Yeah, we're not going to comment on other folks, M&A. Obviously, it's a commodity industry, and you see consolidation in those sorts of industries. We'll see what the combined company does in terms of production levels and things like that, but not much color to provide from our side on it.

Okay, and just seeing X's appetite for M&A at this stage?

Yeah, so it's one of the lanes of capital allocation, right, as we always talk about. You know, we're open to things that are accretive to the long-term free cash flow per share value. But, you know, it's just one of the things we review. And right now, share repurchases are sort of the bar we test all of that against. And they continue to be extremely attractive, as you saw this quarter.

Yep, for sure. Okay, thanks, Alan.

And the next question comes from Lou Mariani with Roth. Hey, Leo.

Hi. I wanted to see if you could comment on inflation. Are you starting to see that creep in in areas of the business, and do you expect that to maybe get a little worse next year?

I'll turn that over to Nav.

Yeah. Hi, Leo. On the inflation side, the cost increase we are seeing are on two things. One is diesel, another is steel. But our overall impact to our program is less than 1% of our capital. So it's not much impact moving forward.

Yeah, Leah, if you think about it, we've driven most of the diesel out of our system through sort of our emission reduction initiatives over the years. You know, we run electric frack fleets. We have intensive sort of in-water transportation, right? We don't run a lot of water trucks and things like that. So, as Nat mentioned, our exposure to those two categories are pretty limited moving into 27, but there is certainly increases there, as everyone's seeing.

Okay, appreciate that. And then just a question on sort of the Utica here. I know you haven't had some recent wells, but as you look out a handful of years, certainly my understanding that you guys are going to continue to kind of do more in the Utica. As you think about that, are you contemplating any kind of new midstream buildout you think might be necessary to kind of get some of that deeper Utica in central Pennsylvania online several years down the road?

Yeah, as we sort of move through that CPA field, right, we're going to develop that as efficiently as possible, right? You know, we've had a lot of time to sort of plan out the runway there. You're not going to see any major spikes in sort of infrastructure build. Year to year, you'll see some oscillation, but really call it in the $25 million plus or minus range on infrastructure.

Okay. Thanks, guys.

Thank you. And that's a question from John Worth with BMO.

Yeah, thanks. Good morning. Previously, you talked about 40,000 to 50,000 southwest PA Marcellus acres remaining to be developed. I guess just wondering how you expect the transition activity in coming years. Is the focus going to be predominantly in this area through the decade, or are we going to see a more gradual pivot, which would actually extend years of inventory in the core?

Yeah, obviously, developing what's remaining in the southwest PA area on the Marcellus front is the most sort of economic thing to do, right? The infrastructure is all there, and they're mostly return trips and things like that. As we talked about before, the way to think about it is we sort of exit the southwest PA Marcellus as we kind of exit the decade, right? So there's another four or five years sort of to develop the rest of that. And then the program shifts over to CPA Utica predominantly with CPA Marcellus, as we call that area. And then, you know, ultimately, you would return back to Southwest PA for Southwest PA Utica and other horizons later on down the road.

Okay, great. And then can you remind us on maintenance CapEx for CNX and maybe a little bit more theoretical because there's still the potential to drive down costs. But if you did shift a predominantly deep Utica position in Central PA, how do you expect total spend to trend relative to this year's more Southwest PA-focused program?

Yeah, so the way we think about it, sort of the capital efficiency metric, so all in with the capital infrastructure and the DNC, you're calling that 85 to 90 cent range is where we want to be, sort of moving forward. Obviously, that's subject to things like inflation and, you know, amount of infrastructure in any given year. But, you know, the avenue where there's still opportunities to sort of squeeze cost out of the system is really on the drilling days on the Utica side, right? So that's really where our focus is. And, you know, every time we go back to a new pad there, that's where we're being intentful.

Great. Thanks.

Thank you. And the next question comes from Michael Scalia with Stevens.

Hi. Good morning. Good morning. Good morning, Alan. You had some management change during the quarter. Just wanted to see if you could add any color on Everett's departure and Robbie assuming the role of CFO.

Yeah, excited to have Robbie. Great to have an in-house candidate with his sort of background and skill set to sort of step in the role. I'm not going to add anything additional on sort of the Everett departure outside what was in the 8Ks.

Okay, fair enough. So I guess thinking long-term, been some pretty robust natural gas demand forecasts out there. I guess I wanted to see your thoughts on do you agree with those, and if they play out, how would CNX respond? Would you do anything different than the way the company's been operating the last really six years with aggressively buying back shares?

Yeah, I would say we're extremely bullish on sort of long-term demand in basin. In terms of giving you a precise number, whether that's 2Bs or 20Bs, time will tell, right? I mean, there's still a lot of uncertainty on the ultimate end users in terms of AI and things like that. But what's clear is natural gas, every drop of it here in Appalachia is going to get developed. From a pricing perspective, what that means is we're still going to be constrained by the supply curve. This is the way we sort of think about it. So when we see the longer-term strip increasing in pricing to sort of bring a call on what we have, that's when we'll bring incremental volumes to market. Until then, sort of maintenance of production is the way we think about it.

That was good.

Thank you.

Thank you. And once again, please press star, then one, if you would like to ask a question. And the next question, customer Betty Zhang with Barclays.

Good morning. Thank you for taking the mic. Hey, good morning. Okay. First on the gas differential, like 3Q differential is a bit wider than where we were expecting. So just wondering if there's anything in particular that impacted Diff, and could you remind us what's your in-basin exposure? Sure.

Yeah, I mean, our in-basin exposure is two-thirds. Yeah, two-thirds of the whole portfolio, right? Been challenging up here in-basin with sort of the weather and the softness. You know, any given day, our team's out there optimizing. You know, we have different sales points, but a lot of the volumes ended up just staying here because it wasn't economic to sort of send to Mishcon or other places.

Got it. And you guys don't subscribe to the curtailment strategy, right? Was there any curtailment impact?

Yeah, no, great question, Betty. So there's been some periods over the last couple of months where gas has dropped sub $1. Because we hedged, you know, there's not a lot we need to do in terms of shut-ins, but there's been a couple of stretches where we have curtailed volumes. It's been less than a B, though, probably for the whole quarter, so we haven't sort of spiked that out. But we definitely are, you know, sensitive as other folks. When you get down to 50, 60-cent gas in basin, there's no reason for anybody to sort of produce at that level if you're unhedged.

Right. No, that makes sense. And then another question on capital allocation. It's the second quarter in a row now that you laid down the balance sheet a bit for a pretty outsized buyback. Is that a level that – something that you will consider – continue to do, and is there a limit on how much willingness you're willing to maybe draw on the balance sheet on a revolver?

Yeah, you know, we generally don't try to give too much color on the short-term tactics of the buyback program because that's not sort of in our interest. But I think if you look back at the history of what we've done, we've sort of stepped on the gas and we see the sort of sector trade off and we blade off when the sector gets a little more bid to it. But longer term, we still view every share we repurchase as a sort of great opportunity to create long-term per share value, particularly when we think about, you know, the question about long-term gas demand, right? Like, instead of growing production, you can, you know, grow production per share by repurchasing shares, right? That's another way to do it, so.

All right. Makes sense. Thank you.

Thank you, and we have another question from Mike Sciarro with Stevens.

I just wanted to ask about a lot of companies talking about having conversations and some agreements on direct sales to customers. Are you having any of those kind of conversations with potential customers, and if so, what sort of time frame should we be thinking about? Are these, like, toward the end of the decade, or could they be sooner than that?

Yeah, we're certainly in the mix with everybody else here in the basin on some of these discussions. I mean, the challenge has been, you know, what's the incentive to lock yourself up to long-term contracts if you're not getting sort of enough of a premium to lock into that fixed delivery? So that's been the challenge. So no particular timeline, you know, as folks come to market and look for gas for these projects that are coming online over the next five years. We'll participate and we'll update if there's something meaningful to update on it.

Gotcha. And you mentioned a little bit about Deep Butica. Should we be thinking for 27, similar kind of program as this year, turning in line seven or so wells, or could you flex that up at all, or do you have plans to do that?

Yeah, I think the mix sort of looks like this year. I don't want to give you the precise numbers because I don't have them off the top of my head, but the mix is we're blending in DP to go with the remaining sort of Southwest PA that we've talked about. And, you know, any given year, I wouldn't get too engaged in sort of any false precision on the signal there. Like I said, we're super bullish on that horizon, and it's sort of going to be core to the next couple of decades.

Great. Thanks, Alan.

Thank you. And this concludes our question and answer session. I will turn the conference back over to Tyler Lewis for any closing comments.

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

Thank you. The conference is now concluded. Thank you for attending today's presentation. We now disconnect your lines.