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CNX to Lower Debts, Buy Back Shares With Asset Sale Proceeds

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CNX Resources Corporation (CNX - Free Report) announced that it has entered in an agreement with Ascent Resources-Utica, LLC to sell its 50% interest in Ohio Utica joint venture (JV) assets to the latter for $400 million. CNX Resources’ Utica shale JV was formed with Hess Corporation (HES - Free Report) and the latter, in a separate agreement, decided to sell its 50% interest in the JV to Ascent Resources for $400 million.

This company expects this transaction to close in the third quarter of 2018, subject to customary closing conditions and adjustments. CNX Resources has plans to utilize the sell proceeds to lower its outstanding debts and continue with ongoing share repurchase program. In addition, the company will try to expand acreage through acquisition, and invest in drilling and completion activities.

The net annual production from the assets earmarked for sell to be nearly 31 Bcfe (billion cubic feet equivalent), resulting in EBITDAX of approximately $50 million.

Revision in Guidance
 
As a result of divestiture of its Utica Shale interest, CNX Resources expects 2018 production to decline 10 Bcfe at both ends and drop to 490-515 Bcfe. The company expects 2018 EBITAX to drop $15 million to a range of $810-$835 million compared with the prior guided range of $825-$850 million.

For 2019 and 2020 each, CNX Resources expects divestiture of Utica Shale interest to lower total production volume by 20-25 Bcfe and adjusted EBITDAX by $25-$35 million.

Looking Ahead

CNX Resources’ divestiture of Ohio Utica Shale interest will result in increasing focus on its Marcellus Shale holding. However, the company will retain some interest in Southwest and Central Pennsylvania in the Utica Shale.

The sell of assets will allow the company to continue with share buyback program and thereby increase the value of its shareholders. CNX Resources has nearly $250 million remaining on its $450 million share repurchase authorization for 2018.

Future of Natural Gas

Demand and usage of natural gas is rising in the United States due to its clean burning nature, low price and wide availability in the country. A release from U.S. Energy information Administration (EIA) indicates that total consumption of natural gas will increase 7.2% year over year to 79.57 billion cubic feet per day in 2018.

CNX Resources will gain from increased usage of natural gas. The enhanced usage will also create opportunity for further growth of Chesapeake Energy Corporation (CHK - Free Report) and Southwestern Energy Company (SWN - Free Report) , among other natural gas producers in the space.

Price Movement

In the past six months, CNX Resources’ shares have gained 16.7%, outperforming its industry’s growth of 3.9%.



Zacks Rank

CNX Resources Corporation currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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