CNX Announces 21% Increase in Proved Reserves to 7.6 Tcfe
PITTSBURGH, Feb. 7, 2018 /PRNewswire/ -- CNX Resources Corp. (NYSE: CNX) ("CNX" or the company) announced today total proved reserves of 7.6 Tcfe, as of December 31, 2017, which is a 21% increase, compared to the previous year. Oil, condensate, and liquids account for 460 Bcfe, or 6.1%, of the 7.6 Tcfe total proved reserves, of which the Marcellus and Utica Shale represent over 99% of these heavier hydrocarbons.
During 2017, CNX added 1.89 Tcfe of proved reserves through extensions and discoveries, which resulted in the company replacing 463% of its 2017 net production of 407 Bcfe.
In 2017, total capital costs incurred were $633 million. Total capital costs incurred divided by the summation of 1,887 Bcfe for extensions and discoveries, negative 99 Bcfe for the sale of reserves in-place, and negative 51 Bcfe for revisions, yields an all-in finding and development (F&D) cost for proved reserve additions of $0.36 per Mcfe.
In 2017, drilling and completion costs incurred directly attributable to extensions and discoveries were $536 million. When divided by the extensions and discoveries of 1,887 Bcfe, this yields a drill bit F&D cost of $0.28 per Mcfe.
Future development costs for proved undeveloped reserves (PUDs) are estimated to be approximately $1.283 billion, or $0.40 per Mcfe.
The following table shows the summary of changes in reserves:
| Summary of Changes in Proved Reserves (Bcfe) | |
| Balance at December 31, 2016 | 6,252 |
| Revisions | (51) |
| Extensions and discoveries | 1,887 |
| Production | (407) |
| Sale of reserves in-place | (99) |
| Balance at December 31, 2017 | 7,582 |
| Note: The proved reserve estimate as of December 31, 2017, was prepared by CNX Resources and audited by Netherland, Sewell & Associates, Inc. |
During the year, total net revisions were negative 51 Bcfe and included the following factors: 458 Bcfe negative revision due to reprioritizing other operational areas and removing a substantial number of wells in the Ohio wet Utica Shale area from the company's development plans, 181 Bcfe positive pricing revision from increased natural gas prices compared to year-end 2016, and 239 Bcfe positive revisions due to improved well performance.
Proved developed reserves of 4,409 Bcfe in 2017 comprised 58% of total proved reserves, compared to 59% in 2016. PUDs were 3,173 Bcfe at December 31, 2017, or 42% of total proved reserves, compared to 41% at year-end 2016. PUDs at year-end 2017 represent 47% of the total wells the company expects to drill over the next five years, with the majority of the remaining wells located within the dry Utica Shale in Pennsylvania and West Virginia.
During 2017 in the Marcellus Shale, CNX turned-in-line (TIL) 31 gross wells with an average completed lateral length of approximately 8,400 feet and expected ultimate recoveries (EURs) ranging between 1.1 and 2.9 Bcfe per thousand feet of completed lateral. Enhanced completion techniques have been a significant contributor to Marcellus Shale EUR improvements in 2017. These enhanced completion techniques have allowed the company to book approximately 70% of Marcellus Shale PUDs with EURs of 2.3 Bcfe per thousand feet of completed lateral, compared to 2.0 Bcfe per thousand feet booked during the previous year. CNX expects to see further improvements in EURs for all of the company's remaining PUD locations due to continuous improvement initiatives regarding completion optimization. As of December 31, 2017, the Marcellus Shale proved reserves were 4,336 Bcfe, which included 2,170 Bcfe of proved developed reserves.
During 2017 in the Utica Shale, CNX TIL 22 gross wells with an average completed lateral length of approximately 8,800 feet and EURs ranging between 2.0 and 3.5 Bcfe per thousand feet of completed lateral. In 2017, the company's type curves that were applied to PUDs increased from the previous year due to enhanced completion techniques, which allowed the company to book approximately 37% of Utica Shale PUDs with EURs of 2.6 Bcfe per thousand feet of completed lateral, compared to 2.4 Bcfe per thousand feet of completed lateral during the previous year. In 2017, CNX booked 1,372 Bcfe of Utica Shale proved reserves with 1,002 Bcfe coming from the dry gas region, compared to 624 Bcfe in the dry gas region the previous year. This 61% increase is attributable to the continued drilling success in the deep dry Utica Shale.
As of December 31, 2017, CNX has total proved, probable, and possible reserves (also known as "3P reserves") of 50.4 Tcfe, which is an increase of 9.0 Tcfe, or 22%, in 3P reserves from the 41.4 Tcfe reported at year-end 2016. The increase in 3P reserves is primarily attributed to more certainty of the success in the dry Utica Shale, as well as the continued success and optimization in the Marcellus Shale. The company continues testing dry Utica Shale potential in Pennsylvania, Ohio, and West Virginia and believes that these areas will provide additional opportunities for the company's proved reserves over time. The company's 3P reserves have been determined in accordance with the guidelines of the Society of Petroleum Engineers Petroleum Resources Management System.
The following table shows the breakdown of reserves, in Bcfe, from the company's current development and exploration plays:
| Breakdown of Reserves (Bcfe) | ||||||||
| Proved | Proved Developed Non- Producing | Proved | Total |
|
| Total 3P | Total | |
| Marcellus Shale | 2,170 | 0 | 2,166 | 4,336 | 20,515 | 6,452 | 31,303 | 31,804 |
| Coalbed Methane | 964 | 17 | 373 | 1,353 | 744 | 297 | 2,394 | 3,414 |
| Utica | 734 | 5 | 633 | 1,372 | 4,908 | 8,978 | 15,258 | 56,306 |
| Other | 518 | 2 | -- | 520 | 199 | 747 | 1,466 | 35,947 |
| Total | 4,386 | 24 | 3,173 | 7,582 | 26,366 | 16,474 | 50,421 | 127,471 |
| Definition: Total Reserve & Resource includes total 3P and other resource potential outside of 3P. |
| The estimates of reserves and future revenue were prepared in accordance with the definitions and guidelines of the SEC Regulation S-X Rule 4.10(a). |
The table below summarizes the Securities and Exchange Commission (SEC) pricing as of December 31, 2017:
| SEC | |
| Pricing (1) | |
| Benchmark Pricing: | |
| WTI Oil Price ($/Bbl) | $51.34 |
| NYMEX Natural Gas Price ($/MMBtu) | $2.98 |
| C2+ Natural Gas Liquids ($/Bbl)(2) | $23.61 |
| Condensate ($/Bbl) (3) | $37.94 |
| (1) | The SEC rules require that the proved reserve calculations be based on the first day of the month average prices over the preceding twelve months. |
| (2) | NGL Pricing is 46% of WTI, which includes regional market differentials. |
| (3) | Condensate Pricing is 74% of WTI, which includes regional market differentials. |
Based on these prices adjusted for energy content, quality, hedges, transportation costs, and basis differentials ($2.44 per Mcf, $23.61 per barrel of natural gas liquids, $37.94 per barrel of condensate and $46.34 per barrel of crude oil, respectively), the pre-tax discounted (10%) present value ("PV-10") of the company's proved reserves was $4.14 billion for 2017, compared to $1.56 billion at year-end 2016. The $4.14 billion includes $42 million associated with hedges.
Standardized Measure of Discounted Future Net Cash Flows
The following information was prepared in accordance with the provisions of the Financial Accounting Standards Board's Accounting Standards Update No. 2010-03, "Extractive Activities-Oil and Gas (Topic 932)." This topic requires the standardized measure of discounted future net cash flows to be based on the average, first-day-of-the-month price for the year ended December 31, 2017. Because prices used in the calculation are average prices for that year, the standardized measure could vary significantly from year-to-year based on the market conditions that occurred.
The projections should not be viewed as realistic estimates of future cash flows, nor should the "standardized measure" be interpreted as representing current value to CNX. Material revisions to estimates of proved reserves may occur in the future; development and production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used and actual costs may vary. CNX's investment and operating decisions are not based on the information presented, but on a wide range of reserve estimates that include probable as well as proved reserves and on different price and cost assumptions.
The standardized measure is intended to provide a better means for comparing the value of CNX's proved reserves at a given time with those of other gas producing companies than is provided by a comparison of raw proved reserve quantities.
| Reconciliation of PV-10 to Standardized Measure | ||||||
| December 31, | ||||||
| (Dollars in millions) | 2017 | 2016 | 2015 | |||
| Future cash inflows | $ 19,262 | $ 11,303 | $ 11,838 | |||
| Future production costs | (7,234) | (5,851) | (6,585) | |||
| Future development costs (including abandonments) | (1,711) | (1,550) | (1,220) | |||
| Future net cash flows (pre-tax) | 10,317 | 3,902 | 4,033 | |||
| 10% discount factor | (6,177) | (2,343) | (2,374) | |||
| PV-10 (Non-GAAP measure) (1) | 4,140 | 1,559 | 1,659 | |||
| Undiscounted income taxes | (2,476) | (1,483) | (1,534) | |||
| 10% discount factor | 1,467 | 879 | 894 | |||
| Discounted income taxes | (1,009) | (604) | (640) | |||
| Standardized GAAP measure | $ 3,131 | $ 955 | $ 1,019 | |||
| (1) | We calculate our present value at 10% (PV-10) in accordance with the following table. Management believes that the presentation of the non-Generally Accepted Accounting Principle (GAAP) financial measure of PV-10 provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because many factors that are unique to each individual company impact the amount of future income taxes estimated to be paid, the use of a pre-tax measure is valuable when comparing companies based on reserves. PV-10 is not a measure of the financial or operating performance under GAAP. PV-10 should not be considered as an alternative to the standardized measure as defined under GAAP. We have included a reconciliation of the most directly comparable GAAP measure-after-tax discounted future net cash flows. |
About CNX Resources
CNX Resources Corp. is one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. The company deploys an organic growth strategy focused on responsibly developing its resource base. As of December 31, 2017, CNX had 7.6 trillion cubic feet equivalent of proved natural gas reserves. The company is a member of the Standard & Poor's Midcap 400 Index. Additional information may be found at www.cnx.com.
Important Information about Company Names and Stock Trading Symbols
Effective November 28, 2017, the company known as CONSOL Energy Inc. (NYSE: CNX) separated its gas business (GasCo or RemainCo) and its coal business (CoalCo or SpinCo) into two independent, publicly traded companies by means of a separation of CoalCo from RemainCo.
- The gas business, CNX Resources Corp. (RemainCo, GasCo or CNX), continues to be listed on the NYSE, retaining the ticker symbol "CNX". Information regarding CNX and its natural gas business is available at www.cnx.com.
- The coal business, CONSOL Energy Inc. (SpinCo, CoalCo or CONSOL), is listed on the NYSE under the ticker symbol: "CEIX". CoalCo owns, operates and develops coal assets, including the Pennsylvania Mining Complex, the Baltimore Marine Terminal, and approximately one billion tons of greenfield coal reserves. Information regarding the new CONSOL Energy and its coal business is available at www.consolenergy.com.
- The master limited partnership that was named CNX Coal Resources LP (NYSE: CNXC) has changed its name to CONSOL Coal Resources LP and trades on the NYSE under a new ticker symbol: "CCR". CONSOL owns 100% of the general partner of CONSOL Coal Resources LP (representing a 1.7% general partner interest), as well as all of the incentive distribution rights and the common and subordinated interests in CNX Coal Resources LP that were owned by CNX prior to the spin-off. Information regarding CONSOL Coal Resources LP is available at www.ccrlp.com.
- Following the closing of CNX's purchase of Noble Energy's 50% interest in CNX Gathering LLC, which occurred on January 3, 2018, the master limited partnership that was named CONE Midstream Partners, LP has changed its name to CNX Midstream Partners LP and now trades on the NYSE under a new ticker symbol: "CNXM". CNX indirectly owns 100% of the general partnership interests of CNX Midstream Partners LP as well as all of its incentive distribution rights. Information regarding CNX Midstream Partners LP is available at www.cnxmidstream.com.
Cautionary Statements
We are including the following cautionary statement in this press release to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us. With the exception of historical matters, the matters discussed in this press release are forward-looking statements (as defined in 21E of the Securities Exchange Act of 1934 (the "Exchange Act")) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "will," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe a strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release speak only as of the date of this press release; we disclaim any obligation to update these statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following: prices for natural gas and natural gas liquids are volatile and can fluctuate widely based upon a number of factors beyond our control including oversupply relative to the demand for our products, weather and the price and availability of alternative fuels; an extended decline in the prices we receive for our natural gas and natural gas liquids affecting our operating results and cash flows; our dependence on gathering, processing and transportation facilities and other midstream facilities owned by CNXM and others; disruption of, capacity constraints in, or proximity to pipeline systems that could limit sales of our natural gas and natural gas liquids, and decreases in availability of third-party pipelines or other midstream facilities interconnected to CNXM's gathering systems; uncertainties in estimating our economically recoverable natural gas reserves, and inaccuracies in our estimates; the high-risk nature of drilling natural gas wells; our identified drilling locations are scheduled out over multiple years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling; the impact of potential, as well as any adopted environmental regulations including any relating to greenhouse gas emissions on our operating costs as well as on the market for natural gas and for our securities; environmental regulations introduce uncertainty that could adversely impact the market for natural gas with potential short and long-term liabilities; the risks inherent in natural gas operations, including our reliance upon third party contractors, being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions that could impact financial results; decreases in the availability of, or increases in the price of, required personnel, services, equipment, parts and raw materials to support our operations; if natural gas prices remain depressed or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural gas properties; a loss of our competitive position because of the competitive nature of the natural gas industry or overcapacity in this industry impairing our profitability; deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial downturn, or negative credit market conditions; hedging activities may prevent us from benefiting from price increases and may expose us to other risks; our inability to collect payments from customers if their creditworthiness declines or if they fail to honor their contracts; existing and future government laws, regulations and other legal requirements that govern our business may increase our costs of doing business and may restrict our operations; significant costs and liabilities may be incurred as a result of pipeline and related facility integrity management program testing and any related pipeline repair or preventative or remedial measures; our ability to find adequate water sources for our use in natural gas drilling, or our ability to dispose of or recycle water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules; the outcomes of various legal proceedings, including those which are more fully described in our reports filed under the Exchange Act; acquisitions and divestitures we anticipate may not occur or produce anticipated benefits; risks associated with our debt; failure to find or acquire economically recoverable natural gas reserves to replace our current natural gas reserves; decrease in our borrowing base, which could decrease for a variety of reasons including lower natural gas prices, declines in natural gas proved reserves, and lending requirements or regulations; we may operate a portion of our business with one or more joint venture partners or in circumstances where we are not the operator, which may restrict our operational and corporate flexibility and we may not realize the benefits we expect to realize from a joint venture; changes in federal or state income tax laws, particularly in the area of intangible drilling costs; challenges associated with strategic determinations, including the allocation of capital and other resources to strategic opportunities; our development and exploration projects, as well as CNXM's midstream system development, require substantial capital expenditures; terrorist attacks or cyber-attacks could have a material adverse effect on our business, financial condition or results of operations; construction of new gathering, compression, dehydration, treating or other midstream assets by CNXM may not result in revenue increases and may be subject to regulatory, environmental, political, legal and economic risks; our success depends on key members of our management and our ability to attract and retain experienced technical and other professional personnel; we may not achieve some or all of the expected benefits of the separation of CONSOL Energy; CONSOL Energy may fail to perform under various transaction agreements that were executed as part of the separation, including with respect to indemnification obligations; CONSOL Energy may not be able to satisfy its indemnification obligations in the future and such indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which CONSOL Energy has been allocated responsibility; and the separation could result in substantial tax liability. Additional factors 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, 2017 filed with the Securities and Exchange Commission, as supplemented by our quarterly reports on Form 10-Q.
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SOURCE CNX Resources Corp.
Contact
Investor: Tyler Lewis, at (724) 485-3157; Media: Brian Aiello, at (724) 485-3078
