CNX Resources Corporation (CNX) Earnings Call Transcript & Summary

Good day, and welcome to the CNX Resources Second Quarter 2026 Question-and-answer Conference Call. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Tyler Lewis, Senior Vice President of Finance and Treasurer. Please go ahead.

Thank you, and good morning, 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 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 Shepherd, our President and Chief Executive Officer; Everett Good, 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 for Q&A at this time.

[Operator Instructions] And today's first question will come from Gabe Daoud with Truist.

Can we start with 45Z maybe and just the updated guidance there around credit monetization? How should we think about, I guess, timing around treasury issuing a final ruling to feel comfortable about that $40 million revenue number for 2027?

Yes. On the Treasury guidance itself, that's sometime second part of this year. And I'll turn it over to Everett, he can sort of walk you through the -- what happened.

Yes. So there are a couple of pieces that we disclosed. One was a step-up in cash flows for the current year, where we had confirmation that the methane stream captured for the first 4 months of '25 qualified for credit. So we stepped up our monetization this year. And then Treasury also refined its carbon intensity calculations in its GREET model, which raised the value of our annual monetization to approximately $40 million a year. So when you combine our 45Z sales going forward, which will be monetized in '27, plus our environmental attributes, we're targeting approximately a $90 million a year run rate between the two.

Okay. Okay. $90 million a year. Okay. Great. Great. And then maybe just a follow-up. Could we get your updated thoughts around capital allocation moving forward, maybe a little bit of a weaker near-term macro environment with a medium- to longer-term improving picture. So how does CNX maybe think about capital allocation given that and your attractive cadence on the buyback?

Yes. So we -- nothing's changed from our process. I mean we're on year 6.5 of sort of executing our capital allocation philosophy, our focus is on creating long-term value per share. And when we see sort of opportunities where the margin of safety is pretty big, we're going to go ahead and take advantage of that. So we don't sort of signal as to what we're going to do, but we have a lot of flexibility, and we're seeing some attractive opportunities right now on the equity side.

And our next question is from Leo Mariani with ROTH.

I was hoping you could talk a little bit to capital here. In your prepared remarks, you guys said that third quarter CapEx is moving up some versus 2Q. And I guess it's going to move back down in 4Q. I mean just kind of eyeballing that, it looks like it kind of puts you at the higher end of the '26 CapEx range. Just wanted to verify that, that's generally accurate and maybe you guys are seeing some inflation starting to hit the numbers here.

No, I would never read into that, Leo. We're still guiding to the midpoint of those numbers. And the commentary is more just about reflecting of the timing of the activity we have going on in the field, right? So you're just going to see slightly higher in Q3 and then sort of level out in Q4 and that just matches up with the activity in the field. Not seeing really anything on the inflation side to note.

Okay. That's helpful. And just on production, you guys talked about how fourth quarter was the peak. Obviously, there's been weakness in gas. Are you guys kind of attempting to sort of manage your turned-in-lines a bit to try to get production hopefully peak in winter when maybe price is a little bit better? And does that mean third quarter is a little bit weaker and fourth quarter is kind of the strongest? Just trying to get a little sense of what you're doing on the production.

Yes. I think the schedule usually naturally sets up like that where we kind of have some of the pads coming on towards the end of the year. But again, we don't overengineer for that answer. We're solving for sort of a different outcome. But yes, the way it lines up this year, you'll see a big couple of wells come on in Q3, and then you'll see the rest of them sort of surge into Q4.

Okay. That's helpful. And just on the 45Z, you all mentioned that you monetized, you sold the $30 million of credits. Is that kind of all going to hit like in the third quarter, as kind of one lump sum payment for you guys? Just trying to understand that.

Yes. As a reminder, you'll see it come through in the cash flow in Q3. That's why we disclosed it sort of early July activity. When you see it in the financials, remember, it comes through the income tax expense line and shows up there. So you don't really see it in EBITDA. But you'll see the cash flow impact, which is the most important thing coming through in Q3.

And the next question is from Michael Scialla with Stephens.

Just looking at your second quarter spending, I realize you don't guide quarterly, but it was a little bit lower than we were anticipating, I think, TheStreet in general as well. It looks like you only drilled 2 wells, granted they were in the Utica. But anything slow activity during the quarter? Or was that pretty much as planned?

Yes, that's as planned. I think it's just a function of us not providing quarterly guidance. We don't -- we're not planning on doing. Again, I would just look to sort of where the full year guidance is and where those midpoints sit, and that's the right way to think about it.

Okay. And on the 45Z, obviously encouraging there. Given that, any plans for additional remediation? Or you just going to stick with the Buchanan Mine going forward?