CNX FY2026 Q3 Earnings Call Transcript
Date: 2026-10-29
Source: Financial Modeling Prep

Operator: Good day, and welcome to the CNX Resources third 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 one on your telephone keypad. To withdraw your question, press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Tyler Lewis. Please go ahead.
Tyler Lewis: 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 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 Srivastava, our 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 up for Q&A at this time?
Operator: Yes. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star, then two. At this time, we will pause momentarily to assemble the roster. The first question comes from Gabe Daoud with Truist.
Gabe Daoud: Thanks, operator. Morning, guys. Thanks for taking my questions. Was hoping we could maybe just start with the macro backdrop, and you noted in the prepared remarks you will certainly remain flexible and responsive to the current environment. Curious maybe how that would translate into your thoughts on 2027, just given where gas prices are.
Alan Shepard: Yeah. Hey, Gabe. Thanks for the question. Where we sit right now, we are pretty much on the five-year average for storage levels. We will be close to four Tcf going into winter. Right now, we are not giving forward guidance, but right now it looks like we will be in maintenance production mode, right? Unless we see something that incentivizes producers to bring on more gas, we will be staying steady state. Obviously, if it sort of degrades from here, we will make adjustments as necessary.
Gabe Daoud: Okay. Thanks, Alan. So maintenance for now, not below maintenance given prices on the screen currently. You feel good with still maintenance?
Alan Shepard: Yeah. We are pretty hedged going into 2027. So we are in a little bit different shape than most folks. Right now, we would still be in the maintenance mode mindset.
Gabe Daoud: Right. Okay. Great. That's helpful. My follow-up will 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 M&A in Appalachia more generally.
Alan Shepard: 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. Not much color to provide from our side on it.
Gabe Daoud: Okay. CNX's appetite for M&A at this stage?
Alan Shepard: Yeah. It's one of the lanes of capital allocation, right? As we always talk about, we're open to things that are accretive to the long-term free cash flow per share value. But it's just one of the things we review. 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.
Gabe Daoud: Yep. For sure. Okay. Thanks, Alan. Thanks, everyone.
Operator: Thank you. The next question comes from Leo Mariani with Roth.
Alan Shepard: Hey, Leo.
Leo Mariani: Yeah. Hey. 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?
Alan Shepard: I will turn that over to Nav.
Navneet Behl: 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. It is not much impact moving forward for us.
Alan Shepard: Leo, if you think about it, we have driven most of the diesel out of our system through our emission reduction initiatives over the years. We run electric frac fleets. We have intensive in-field water transportation, right? We do not run a lot of water trucks and things like that. As Nav mentioned, our exposure to those two categories are pretty limited moving into 2027. But there is certainly increases there, as everyone has seen.
Leo Mariani: Okay. Appreciate that. Just a question on sort of the Utica here. I know you haven't-
Alan Shepard: Yep
Leo Mariani: had some recent wells. Certainly my understanding that you guys are going to continue to do more in the Utica. As you think about that, are you contemplating any kind of new midstream build-out you think might be necessary to get some of that deeper Utica in central Pennsylvania online several years down the road?
Alan Shepard: Yeah. As we sort of move through that CPA field, we're going to develop that as efficiently as possible. We've had a lot of time to plan out the runway there. You're not going to see any major spikes in infrastructure build. Year to year, you'll see some oscillation, but really call it in the $25 million plus or minus range on infrastructure.
Leo Mariani: Okay. Thanks, guys.
Operator: Thank you. The next question comes from Phillip Jungwirth with BMO.
Phillip Jungwirth: Yeah, thanks. Good morning.
Alan Shepard: Good morning.
Phillip Jungwirth: Previously, you talked about 40,000-50,000 Southwest PA Marcellus acres remaining to be developed. I guess, just wondering how you expect to 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?
Alan Shepard: Yeah, obviously, developing what is remaining in the Southwest PA area on the Marcellus front is the most economic thing to do, right? The infrastructure is all there, and they are 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 exit the decade, right? So there is another four to five years sort of to develop the rest of that. Then the program shifts over to CPA Utica predominantly with CPA Marcellus, as we call that area. Then, ultimately, you would return back to Southwest PA for Southwest PA Utica and other horizons later on down the road.
Phillip Jungwirth: Okay, great. Then can you remind us on maintenance CapEx for CNX and maybe a little bit more theoretical because there is still the potential to drive down costs. But if you did shift to 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?
Alan Shepard: Yeah. So the way we think about it, sort of a capital efficiency metric. So all in with the capital infrastructure in the D&C, you are calling that $0.85-$0.90 range is where we want to be, sort of moving forward. Obviously, that is subject to things like inflation and amount of infrastructure in any given year. But the avenue where there is still opportunity to sort of squeeze costs out of the system is really on the drilling days on the Utica side, right? So that is really where our focus is. And every time we go back to a new pad there, that is where we are being intentional.
Phillip Jungwirth: Great. Thanks.
Operator: Thank you. The next question comes from Michael Scialla with Stephens.
Michael Scialla: Hi, good morning.
Alan Shepard: Good morning.
Michael Scialla: 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 Ravi assuming the role of CFO.
Alan Shepard: Yeah. Excited to have Ravi. Great to have an in-house candidate with his sort of background and skill set to step in the role. I am not going to add anything additional on the Everett departure outside what was in the 8-Ks.
Michael Scialla: Okay, fair enough. I guess thinking long term, there have been some pretty robust natural gas demand forecasts out there. I guess I want 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 has been operating in the last really six years with aggressively buying back shares?
Alan Shepard: Yeah. I would say we are extremely bullish on long-term demand in basin. In terms of giving you a precise number, whether that is 2 Bs or 20 Bs, time will tell, right? There is still a lot of uncertainty on the ultimate end users in terms of AI and things like that. But what is 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 are still going to be constrained by the supply curve. This is the way we think about it. When we see the longer-term strip increasing in pricing to bring a call on what we have, that is when we will bring incremental volumes to market. Until then, sort of maintenance of production is the way we think about it.
Michael Scialla: Sounds good. Thank you.
Alan Shepard: Yep.
Operator: Thank you. Once again, please press star then one if you would like to ask a question. The next question comes from Betty Jiang with Barclays.
Betty Jiang: Good morning.
Alan Shepard: Hi, Betty.
Betty Jiang: Thank you for taking mine. Hey, good morning.
Alan Shepard: Sure.
Betty Jiang: First, on the gas differential, the 3Q differential is a bit wider than where we were expecting. Just wondering if there's anything in particular that impacted diff, and could you remind us what's your in-basin exposure?
Alan Shepard: Yeah. Our in-basin exposure is two-thirds. Yeah, two-thirds of the whole portfolio, right? It's been challenging up here in-basin with the weather and the softness. Any given day, our team's out there optimizing. We have different sales points, but a lot of the volumes ended up just staying here because it wasn't economic to send to Michigan or other places.
Betty Jiang: Got it. You guys don't subscribe to the curtailment strategy, right? Was there any curtailment impact?
Alan Shepard: Yeah, no. Great question, Betty. There's been some periods over the last couple of months where gas has dropped sub $1. Because we hedge, there's not a lot we need to do in terms of shut-ins, but there's been some couple of stretches where we have curtailed volumes. It's been less than 1 B, though, probably for the whole quarter, so we haven't split that out. But we definitely are sensitive as other folks. When you get down to $0.50, $0.60 gas in-basin, there's no reason for anybody to produce at that level if you're unhedged.
Betty Jiang: Right. No, that makes sense. Another question on capital allocation. It is the second quarter in a row now that you leaned on the balance sheet a bit for a pretty outsized buyback. Is that a level that something that you will consider continuing to do, and is there a limit on how much willingness you are willing to maybe draw on the balance sheet on a revolver?
Alan Shepard: Yeah. We generally don't try to give too much color on the short-term tactics of the buyback program, because that is not sort of in our interest. But I think if you look back at the history of what we have done, we have sort of stepped on the gas when we see the sort of sector trade-off, and we have laid off when the sector gives a little more bid to it. But longer term, we still view every share repurchase as a sort of great opportunity to create long-term per share value, particularly when we think about the question about long-term gas demand, right? Instead of growing production, you can grow production per share by repurchasing shares, right? That is another way to do it.
Betty Jiang: Right. Makes sense. Thank you.
Operator: Thank you. We have another question from Mike Scialla with Stephens.
Michael Scialla: 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? If so, what sort of timeframe should we be thinking about? Is it toward the end of the decade, or could they be sooner than that?
Alan Shepard: 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 what's the incentive to lock yourself up to long-term contracts if you're not getting enough of a premium to lock into that fixed delivery? That's been the challenge. So no particular timeline. 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.
Michael Scialla: Got you. Then you mentioned a little bit about Deep Utica. Should we be thinking for 2027, similar kind of program as this year? You turn in line 7 or so wells, or could you flex that up at all, or do you have plans to do that?
Alan Shepard: 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 Deep Utica with the remaining sort of Southwest PA that we've talked about. 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.
Michael Scialla: Great. Thanks, Alan.
Alan Shepard: Yep.
Operator: Thank you. This concludes our question-and-answer session. I will turn the conference back over to Tyler Lewis for any closing comments.
Tyler Lewis: 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.
Operator: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.