CNX Sells $400M Utica JV Assets, Focuses on Marcellus Shale

CNX Resources CorporationCNX has completed the sale of its 50% interest in Ohio Utica joint venture (JV) assets to Ascent Resources-Utica, LLC for $400 million. This purchase price is subject to customary adjustments. The company formed this JV with Hess Corporation (HES), with the deal announced in June 2018. (Read more: CNX to Lower Debts, Buy Back Shares With Asset Sale Proceeds ).

Focus on Marcellus

CNX Resources currently has nearly 530,000 net acres in the Marcellus shale, and about 65% of the company's 2018 drilling and completion capital was allocated for further development of the shale. A significant portion of its proved undeveloped reserves from extensions and discoveries during the past three years was due to the addition of wells on its Marcellus Shale acreage.

The divestiture of Ohio Utica JV shale assets will further increase the importance of this shale in the company's total production mix. Total Marcellus sales volume at the end of first-half 2018 was 130.6 billion cubic feet equivalent (Bcfe), up 13.7% from the comparable year-ago period.

Usage of Proceeds

Including asset sale proceeds from Ohio JV, CNX Resources sold non-core assets worth $765 million. The company utilized the proceeds to strengthen its balance sheet via lowering its debt level and buying back shares. CNX Resources also utilized the proceeds for drilling and completion activities, and making acquisitions when opportunities arise.

CNX Resources redeemed $300 million 8% notes due 2023 during the second quarter, resulting in net savings of $14 million per year for the next five years. The company still has $172 million remaining under its share repurchase authorization for 2018. The sale proceeds will allow CNX Resources to buy back more shares.

What's Ahead?

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. United States has also started to export LNG, which will further lead to a rise in demand for natural gas.

At the end of second quarter, CNX Resources raised its E&P capital expenditure guidance to $900-$950 million from $790-$915 million projected earlier. The company reaffirmed its production guidance of 490-515 Bcfe, which was revised downward post the announcement of Utica Sale divestiture.

Zacks Rank & Key Picks

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

Some better-ranked stocks from the same industry are Denbury Resources Inc. DNR , Southwestern Energy Company SWN and Northern Oil and Gas Inc NOG , each holding a Zacks Rank of 2 (Buy).

Denbury Resources pulled off an average positive surprise of 162.86% in the trailing four quarters. The Zacks Consensus Estimate for 2018 EPS has moved 23.7% up over the past 60 days to 47 cents per share.

Southwestern Energy delivered an average four-quarter positive earnings surprise of 6.48%. The consensus mark for 2018 EPS has been revised 11.4% upward over the past 60 days to 88 cents per share.

Northern Oil and Gas delivered an average positive earnings surprise of 138.54% in the trailing four quarters. The consensus mark for 2018 EPS has been revised 40.5% upward over the past 60 days to 52 cents per share.

On a year-to-date basis, shares of the above-mentioned companies have gained against a decline of the broader industry.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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