Earnings call transcript: CNX Resources beats Q2 2025 forecasts significantly

CNX Resources Corp reported a substantial earnings beat for Q2 2025, with an EPS of $2.53, far exceeding the forecast of $0.43. Revenue also surpassed expectations, coming in at $485.03 million compared to the anticipated $462.08 million. The stock responded positively, rising 1.78% in pre-market trading to $33.72. According to InvestingPro analysis, CNX is currently undervalued, with a market capitalization of $4.7 billion and a beta of 0.67, indicating lower volatility than the broader market.

Key Takeaways

• CNX Resources delivered a significant earnings and revenue beat.
• The company focuses on Utica and Marcellus plays, with strong well performance.
• AI-driven natural gas demand presents new growth opportunities.
• Production is expected to decline in Q3 and Q4 before recovering.

Company Performance

CNX Resources showcased robust performance in Q2 2025, driven by efficient operations and strong well outputs in the Utica and Marcellus plays. The company’s strategic initiatives in AI-driven natural gas demand and RMG opportunities position it well for future growth. Despite expected production declines in the coming quarters, the company remains optimistic about its long-term prospects.

Financial Highlights

• Revenue: $485.03 million, up from the forecast of $462.08 million.
• Earnings per share: $2.53, significantly above the forecasted $0.43.
• The company continues to manage competitive well costs effectively.

Earnings vs. Forecast

CNX Resources’ Q2 2025 earnings per share of $2.53 represented a 488.37% surprise over the forecast of $0.43. Revenue also exceeded expectations by 4.97%, marking a strong quarter for the company.

Market Reaction

Following the earnings report, CNX Resources’ stock price increased by 1.78% in pre-market trading. This positive movement reflects investor confidence in the company’s operational efficiency and strategic focus. The stock has demonstrated strong momentum with a 33% return over the past year, though year-to-date performance shows a decline of about 10%, according to InvestingPro data.

Outlook & Guidance

Looking ahead, CNX Resources anticipates potential growth in AI-driven natural gas demand and RMG opportunities. The company expects production to decline in Q3 and Q4 due to lighter drilling activities but projects recovery as new TIL wells come online. The eligibility for 45Z tax credits starting in 2025 could provide an additional $30 million annual run rate.

Executive Commentary

CEO Nick Deulius emphasized the company’s strategic focus, stating, "Our mantra around here is Appalachia first." CFO Alan Shepard highlighted the company’s investment approach, saying, "We look at every project on a full cycle IRR basis."

Risks and Challenges

• Production declines in the upcoming quarters could impact short-term results.
• Volatility in carbon credit markets presents financial uncertainties.
• The development of AI data centers and their impact on demand remains uncertain.

Q&A

During the earnings call, analysts queried the timing and eligibility of 45Z tax credits, RMG marketing strategies, and the comparative development strategies for Utica versus Marcellus. The potential for AI-driven gas demand was also a focal point of discussion.

Full transcript - CNX Resources Corp (CNX) Q2 2025:

Conference Operator: Good day, and welcome to the CNX Resources Second Quarter twenty twenty five Q and A Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations.

Please go ahead.

Tyler Lewis, Vice President of Investor Relations, CNX Resources: Thank you, and good morning to everybody. Welcome to CNX’s second quarter Q and 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 and P data, financial statements and non GAAP reconciliations, which can be found in a document titled 2Q twenty twenty five 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 and A.

With me today for Q and A are Nick Deulius, our Chief Executive Officer Alan Shepard, President and 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 for Q and A at this time?

Conference Operator: Certainly. We will now begin the question and answer session. And your first question comes from Zach Parham with JPMorgan. Please go ahead.

Zach Parham, Analyst, JPMorgan: Hey, thanks for taking my questions. I wanted to ask on the 45Z tax credit. Could you just give us a little detail on the timing and ability to claim those credits? And as the rules are laid out today, would those credits just run through 2029?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. Hi, Zach. Good question. So the way the program is set up currently, right, as the initial guidance, as you point out, there needs to be final rulemaking. As long as everything comes in line with the initial guidance, the first year eligibility to claim credits would be in 2025.

So if you saw in our materials, were talking about 2026, would be the first potential opportunity to get some of that $30,000,000 a year run rate. And then, yes, the program got extended under the OBB through ’twenty nine. It would be the first time that it would be up for re extension.

Navneet Bell, Chief Operating Officer, CNX Resources: Thanks. And also just wanted

Zach Parham, Analyst, JPMorgan: to ask on activity levels at the E and P business. Any plans to grow volumes here? I know at one point, you all talked about having optionality to add some activity back in the second half of the year. And if not, can you talk about what a maintenance program might look like in 2026? Would that be flattish CapEx year over year?

Just trying to get

David Deckelbaum, Analyst, TD Cowen: a sense of what activity levels may look like.

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. So maybe on the first one, we were positioned with some optionality. Had we seen sort of the end of year storage level stay low? I mean, this point, it’s pretty clear that we’re going to creep towards kind of four TCF and storage. And under that scenario, we’re just going to maintain the initial set of activity that we planned for the beginning of the year.

So no changes expected at the current time. When we think about, sort of capital efficiency levels, I think the way to do that is to sort of tie back to what we guided to a few years back or a few quarters back. The two numbers that stand out are sort of the $580,000,000 of production or five eighty Bs of production over the $500,000,000 CapEx. So that ratio is about $0.85 per million in terms of capital efficiency. I think moving forward, if you set aside the actual production we’ll target, which we always talk about as being a function of optimizing free cash flow per share, that’s the

Jacob Roberts, Analyst, TPH: right ratio to kind of think about the business as capital efficiency moving forward, kind of

Alan Shepard, President and Chief Financial Officer, CNX Resources: that mid-80s range and it will wiggle plus or minus a little bit in any given quarter, just with the lumpiness with the one rig program, but that’s the right way to think about it moving forward.

Zach Parham, Analyst, JPMorgan: Thanks, Alan. Appreciate the color.

Jacob Roberts, Analyst, TPH: Yes.

Conference Operator: And your next question comes from Leo Mariani with ROTH. Please go ahead.

Leo Mariani, Analyst, ROTH: Yes. Good morning here. Wanted to see if you could get a little bit more color on drilling and completion activity levels in the second half. I know you all had said that CapEx was pretty front half weighted in 2025. But just looking at your turn in line schedule, the vast majority of turn in lines, I believe they happen here in 1Q.

So if you could kind of maybe speak to whether or not there’s a bit of a lull in activity here in the second half and maybe that activity kind of picks up a little bit in the winter? And then could you also kind of relate that to CapEx trends? I mean it looks like CapEx is down a little bit in 2Q versus 1Q and maybe just kind

Nick Deulius, Chief Executive Officer, CNX Resources: of help a little bit with

Leo Mariani, Analyst, ROTH: the trajectory on CapEx in the second half.

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes, sure. Sort of similar to what we talked about last time, Leo. Basically, the bulk of the TILs were weighted towards the front half of the year. Our next batch of TILs would be towards the latter part of Q4. So what you’ll see on the production front is kind of sequential decline.

So it will be lower in Q3 and then lower in Q4 until that next batch of TILs comes on. And then CapEx will track that, right? So CapEx will be lighter in Q3 and then pick back up in Q4 when we get back to it on the activity front.

Leo Mariani, Analyst, ROTH: Okay. So it sounds like there’s a bit of a hiatus in activity, then it kind of picks up late this year to get you all ready for kind of the winter in 2026. Is that kind of the way to think about it?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes, that’s the right way to think about it. We’re going continue to run the one rig program on the drilling side and then completion activities will hit a bit of a lull. And then those will pick back up in the fall as we get ready for the TILs that I talked about in the December timeframe.

Leo Mariani, Analyst, ROTH: That’s helpful. Then just on the Utica, obviously, you all seem excited about that. It sounds like the costs are already below your target here on the wells. That’s nice to see. At this point, given you’ve beaten the target, do you think there’s more room to go on the cost side or maybe that can kind of come down?

And apart from the cost, could you kind of speak to the actual well results, production performance? How are the results trending versus your expectations? And maybe just overall, how do you see this kind of competing with the Marcellus?

Navneet Bell, Chief Operating Officer, CNX Resources: This is Navne. So just wanted to kind of outline on the Utica. We’ve done a really team has done a really great job over on optimizing our drilling and completion operation over the last couple of years. We’re really pleased with the performance so far, but we’re not satisfied yet. So and we are aggressively trying to improve the performance over the next few quarters.

So stay tuned on where we can get down increase our operational efficiency and reduce our costs. So that’s one. Second, on the performance, all our Utica wells, our performance are within our expectations and our latest TILs that we got in Q2 are slightly above our expectation. So we are really excited about the deep Utica play and we look forward to kind of continuing to kind of get more wells in there.

Alan Shepard, President and Chief Financial Officer, CNX Resources: Then Leo, maybe I’ll address the last part of your question on how we think about the Utica and the Marcellus sort of mix. So we’ve been very intentional in giving Nav and the operating team a nice runway here to really demonstrate their prowess in being able to drive these costs down. Moving ahead, obviously, we’re going continue to develop our core Southwest PA field over the next few years. But we also, as Nat pointed out, we want to keep getting him reps at the Utica wellhead there, so he can continue to work on cost efficiencies.

Leo Mariani, Analyst, ROTH: Okay. Appreciate all the detail. Thank you.

Alan Shepard, President and Chief Financial Officer, CNX Resources: Thank you.

Conference Operator: And your next question comes from Noah Hungness with Bank of America. Please go ahead.

Noah Hungness, Analyst, Bank of America: Good morning. I was hoping to ask on 45Z again. When do you think you’d be able to reach that $30,000,000 a year run rate? And when you do realize the full $30,000,000 of additional free cash flow from 45Z, Should we think that all of your RMG gas would be sort of shifted to qualify for this 45Z opportunity? Or will some of it still be used to qualify for the PA AEC Tier one credit?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. So the way to think about timing is, like I said, so ’25 is the first year of eligibility for the program, but the cash associated with that wouldn’t occur until you file your tax return for ’25 and ’26, right? That’s when you would create the tax credit that would be fungible and you can convert that to cash in the market. In terms of volumes that qualify, I mean, picture, initial read on the guidance is that it’s stackable. So you’re able to take advantage of both programs in terms of 45Z and the PA Tier one rec.

But the volumes don’t qualify one for one. So some volumes might qualify under Tier one recs and some volumes might qualify under 45Z. So it’s a blend of which ones do and which ones don’t. And at this time, it’s all still subject to that final rule. We’re optimistic as long as things follow the initial guidance.

There’s still a bit of a waiting, wait and see on that.

Noah Hungness, Analyst, Bank of America: Got you. That’s helpful color. And then for my second question, could you maybe talk about what credit price is underwriting the revised environmental attribute free cash flow guide of $65,000,000

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. It’s sort of where the market is at now. We treat it very similar to how we report kind of the open prices for the rest of the year. You just kind of look at the PA Tier one strip and that’s in the mid-20s right now from a megawatt hour.

Conference Operator: And your next question comes from Jacob Roberts with TPH. Please go ahead.

Alan Shepard, President and Chief Financial Officer, CNX Resources: Good morning. Good morning.

Jacob Roberts, Analyst, TPH: Maybe a bit of a follow on to that last question. Should we be thinking about the $30,000,000 as a function of the RMG input or the result of some sort of downstream output?

Alan Shepard, President and Chief Financial Officer, CNX Resources: The tax credit is for the incentivizing the collection of waste gas off the backside of coal mines and creating a saleable product into the pipeline, if that makes sense. So that’s why it’s thought about more as remediating or abating an emission source.

Jacob Roberts, Analyst, TPH: Okay. That’s helpful. And then I just wanted to give you guys the opportunity to talk a little bit about the AI and Energy Summit. I know you mentioned it in the release. And specifically, we’re wondering how much the RMG product is factoring into those conversations with any counterparties, maybe in particular, the tech guys?

And ultimately, do you think there is a pathway for RMG to get better economics on some of the potential deals there relative to the current pathways you’ve laid out?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes, great question. We’re super excited. Our mantra around here is Appalachia first. All of this AI stuff is going to be great for the region, great for the industry. And in particular, you nailed kind of our lane that we’re super focused on right now, which is offering the RMG product to the market as a true sustainable kind of energy solution to get folks that are using nat gas down to a zero carbon sort of profile on these new data centers.

Obviously, we’ve been having discussions with folks. We have third party marketers having discussions with folks, and we’re excited to see that develop and not just on the existing volumes, but enough incentive from the voluntary markets to go out and gather some additional volumes hopefully.

Nick Deulius, Chief Executive Officer, CNX Resources: And Jacob, this is Nick. Just to sort of follow on to Ballon. The way we look holistically at the AI opportunity and mediated mine gas RMG, it’s another industry pathway, whatever you’d want to call it, to get the value of it recognized and utilized. So we started with manufacturing and arm’s length transactions that recognized it for manufacturing downstream products. We’ve got it recognized, of course, in the power grid under the Pennsylvania PUC.

We then were able to get it recognized in the hydrogen economy with 45E, now transportation of alternative fuels with 45Z. And this would be another critical pathway that I think makes a whole bunch of sense and has a certain level of inevitability to it, but the timing and the magnitude of it, it’s still a TBD.

Jacob Roberts, Analyst, TPH: Great. Appreciate the time guys.

Conference Operator: And your next question comes from Michael Scialla with Stephens. Please go ahead.

Tyler Lewis, Vice President of Investor Relations, CNX Resources0: Hi, good morning everybody. Just to follow on the AI topic there. Obviously, lot of news recently on gas providing power for data centers in the region. Just want to get your updated thoughts on in basin demand and does that have any impact on your long term view of natural gas prices in your hedging strategy?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. I don’t think it has the impact on our hedging strategy, in the short term. Our hedging strategy is a function of how we manage the balance sheet and how we manage our overall capital allocation program. I think long term, it’s absolutely going to be bullish, anything that creates in basin demand, given our kind of interstate pipe restrictions that we’ve experienced over the last decade, is going to help everyone in basin. So it’s more of in wait and see mode, From our position, it’s we have the depth of inventory.

We have the ability to deliver gas. It’s just now wait and see which projects come online and how we can benefit from that.

Nick Deulius, Chief Executive Officer, CNX Resources: Yes. Michael, I think to prior experiences that we’ve had in similar types of opportunities for the industry and for the region, when you’re looking at potentially new demand being created, that journey to where we end up actually versus what we’re hearing and what people are projecting today, obviously it’s going to be very different. There’s going to be all kinds of factors and changes and twists and turns. So as to which plants get built and when they’re online and what the timing of all that is, there’s just a lot of things to be figured out between today and then the future. And that’s why and I think you saw that too since the summit with what’s going on with volatility on pricing.

That’s why we basically love the opportunity and the developments it would mean for demand for natural gas and what it could mean for the region in terms of sort of a re industrialization or revitalization of a lot of these communities. But in terms of taking positions today and speculation of what that’s specifically going to mean when comes to things like hedge book and capital allocation, our playbook, our philosophy, our approach remains exactly the same.

Tyler Lewis, Vice President of Investor Relations, CNX Resources0: Yes, makes sense. Want to get your thoughts on second quarter production surprised a little bit. I wanted to see if you could pinpoint where that came from. Was it new wells outperforming expectations, base decline, anything else?

Navneet Bell, Chief Operating Officer, CNX Resources: Hi. So our production outperformance was basically like four things coming together for us. The first one is our new Till performance, the Apex Marcellus wells and our Utica wells, and they’ve done really well. And the second part is our operational execution, which has given us opportunity to kind of move some of this forward. The third part is our production efficiency gains on our base production.

So we are doing really well there. And the last part is like our uptime on base production. So all four combined kind of led to this result.

Tyler Lewis, Vice President of Investor Relations, CNX Resources0: Sounds good. Thank you very much guys.

Conference Operator: And your next question comes from Betty Jiang with Barclays. Please go ahead.

Tyler Lewis, Vice President of Investor Relations, CNX Resources1: Good morning. Thank you for taking my question. I want to go back and ask about the Deep Utica results again. In your view, how much do you think costs will have to come down for the Deep Utica to compete with Marcellus returns? And then broadly speaking, from what we can tell, the Utica wells are fairly concentrated right now.

So we’d love to get your thought about the consistency of Utica performance on your acreage.

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. I would say on the first question, where we’re at right now on sort of the cost structure, we think that makes us well as competitive with kind of best in basin opportunities even on the Southwest PA sort of Marcellus stuff. The longer term, we’re going to step out from where we’re at now, but our expectation is that there’s a pretty long runway across our field up there to make these results repeatable.

Tyler Lewis, Vice President of Investor Relations, CNX Resources1: Okay. Thanks. A follow-up on Newtek. Just as related to the gas power for AI, when you think about your value recognition for the gas, is it fair to think about it from a voluntary carbon credit perspective where you’re selling the attributes to tech companies looking to reduce their carbon footprint? Or is it through compliance market or other channels?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. On the RMG front, we’re going sell to whichever market recognizes the highest value, right? I mean, currently that is the latter, the one that you pointed out, kind of the renewable energy credit markets through the existing RPS programs. But there is a finite amount of this resource that’s available. And we think the environmental attributes should result in some voluntary pricing that rivals the regulatory pathways in the long term.

Nick Deulius, Chief Executive Officer, CNX Resources: Betty, you also bring up another good point with the question, which is the focus currently, right, has really shifted with the opportunity of AI in places like Appalachia to nat gas demand and the construction of the data centers and power plants to power them, etcetera. But there’s also another issue that’s been there from the get go that will remain. It just maybe has perhaps fallen a bit below the radar, which is the sustainability solution or the sustainability path to making all this growth occur. And the ultimate sort of clients and drivers of that, the tech industry, hasn’t sort of backed up with regard to sustainability or carbon goals one step since they originally set them. And now this new growth option for them is going to make that even more of a heightened challenge.

So I think RMG playing a role in how this ultimately plays out has never been in more demand. And to your point, I think the tech industry will play a key role in that.

Tyler Lewis, Vice President of Investor Relations, CNX Resources1: I’m sorry, if I could just follow-up on Thank you. If in the voluntary carbon market perspective, would that be incremental to PA rec market or 45D?

Alan Shepard, President and Chief Financial Officer, CNX Resources: At some point, you can only sell into one market. So traditionally, the voluntary is, depending on which pathway you’re using, they might not be stackable. So it’s all very facts and circumstances dependent. So hesitate to give a general answer. But the way to think about it is you can generally get maybe one to two stacking, but you’re not going to get beyond that.

Nick Deulius, Chief Executive Officer, CNX Resources: Yes. Think of it as another pathway that would compete with your other alternatives. Not generally not stackable.

Tyler Lewis, Vice President of Investor Relations, CNX Resources1: It. Thanks.

Conference Operator: Your next question comes from David Deckelbaum with TD Cowen. Please go ahead.

David Deckelbaum, Analyst, TD Cowen: Thanks Nick and Alan and team for taking my questions today. I just wanted to follow-up on just the Utica mix. You talked about just giving more at bats next year. As we just think about the general activity level that you guys have laid out, should we think about the Utica taking more share of the program over the next couple of years? Or is there still some more headway to make on the cost side before it becomes a larger contribution?

Alan Shepard, President and Chief Financial Officer, CNX Resources: No, would go back to what I said on one of your earlier questions. I think at this point in the cost structure, these wells are in the mix in terms of IRR competitiveness. So you’re going to see them in the program moving forward. And what we’re really trying to do is balance the harvesting of the Southwest PA sort of field that’s fully developed with any potential kind of step out in the new CPA area. We look at every project on a kind of full cycle IRR basis and that’s how we determine the mix.

Because we’ve been very intentional recently and just given NAV lots of at bats, to demonstrate repeatability. But moving forward, I think we’re comfortable that we can be super focused on just the best projects at the right time.

David Deckelbaum, Analyst, TD Cowen: Appreciate that. And then just a follow-up on conversations just around marketing and obviously in basin demand. As you sit today, go into winter, you guys talked about before kind of hitting tank tops or so as we get into fall and then sort of setting up for 2026. There’s been a lot of contracts that seem like they’re in the early days of being signed right now. From where you sit, do you think it’s sort of best to see this market get appreciably tight over the next few years and see in basin demand increase before signing long term agreements?

Or is that something that you think is going to be in your relative near future?

Alan Shepard, President and Chief Financial Officer, CNX Resources: Yes. I think the first signal you want to see is an actual data center connected to some of the nat gas projects. I think once you see the first sort of data center sign up for electricity off take here in Appalachia, that will give folks a real sense of how the value is going to get distributed across the chain. Until you see that, you’re a little bit hesitant to lock in your kind of respective ownership of that economics. So there’s as Nick pointed out, there’s still a lot of innings here.

We’re still very early, but there’s some definite value in the wait and see how this plays out before locking up anything long term.

David Deckelbaum, Analyst, TD Cowen: Appreciate it. Best of luck, guys.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Tyler Lewis, Vice President of Investor Relations, CNX Resources: 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.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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