CNX Resources Corporation

Good morning and welcome to the CNX Resources fourth quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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.

Thank you, and good morning to everybody. Welcome to CNX's fourth quarter conference call. We have in the room today Nick Deolius, our President and CEO, Don Rush, our Chief Financial Officer, Chad Griffith, our Chief Operating Officer, and Yemi Akinkube, our Chief Excellence Officer. Today we will be discussing our fourth quarter results. This morning we posted an updated slide presentation to our website. Also, detailed fourth quarter earnings release data, such as quarterly E&P data, financial statements, and non-GAAP reconciliations are posted to our website in a document titled 4Q2020, Earnings Results and Supplemental Information of CNX Corporation. As a reminder, any forward-looking statements we make or comments about future expectations are subject to business risks, which we have laid out for you in our press release today as well as in our previous Securities and Exchange Commission filings. We will begin our call today with prepared remarks by Nick, followed by Dawn, and then we will open the call up for Q&A, where Chad and Yemi will participate as well. With that, let me turn the call over to you, Nick.

Thanks, Tyler. Good morning, everybody. I want to emphasize four points in my brief remarks before I turn it over to our CFO, Don Rush. All four of these are emphasized in the slide deck that we posted this morning. First up, the first one is 2020 marked the most successful year we've seen as an EMP, and frankly, as a public company going back to the late 1990s, is measured by free cash flow. Better yet, this bar setting level of free cash flow and free cash flow per share It steadily and substantially grew as 2020 unfolded. Our original guidance for 2020 free cash flow was around $135 million compared to over the $356 million, or approximately $1.60 per share, that we actually posted. It's been an awesome year on the simplest yet most crucial of metrics. Our debt and share count both declined in a quarter as we allocated that free cash flow to the great benefit of our owners. And execution allowed us to strengthen our balance sheet and return capital to shareholders, all of it in the middle of one of the most challenging of years and decades. The second point I want to make, we expect 2021 to be materially better than 2020 as measured by free cash flow. We expect to deliver approximately $425 million of free cash flow in 2021. So that builds upon and then exceeds what we accomplished in a very successful 2020. And that's at the current strip pricing, not consensus pricing. Third point, we built a free cash flow generated machine. And that should deliver, on average, $500 million of free cash flow per year between 2022 and 2026. Of course, that's a market improvement from our 2021 target that I just mentioned of $425 million. And that creates a sequencing to position us for a three-peat on free cash flow level setting when you run through 2020, 2021, and 2022. And again, that's also at the current strip, not consensus pricing. And that assumes the incremental interest expense for our bond issuance that we did last year. Our seven-year, $3-plus billion free cash flow plan that we unveiled last April, it remains in place, and the first year is now successfully in the books. Fourth and last point I want to make, we expect a generation of $500 million per year of free cash flow to continue for many years beyond 2026. Our basin-leading cash costs, which were just a penny over a buck all in for the fourth quarter, it remains a huge differentiator for the capital markets, and I think they're just starting to wake up to that fact. Extensive swaths of our acreage footprint and inventory, they work quite well at the forward strip because of our cost structure that fires the engine for the free cash flow machine that creates an annuitized and sizable free cash flow stream for years measured in decades. It's no coincidence that all four of these points that I just highlighted, they speak to the same metrics of free cash flow and free cash flow per share. Free cash flow, it informs our execution focus, our strategy, our capital allocation, incentive comp, our investment thesis, and our M&A screening process. We secure the drivers of it, like low costs and midstream integration. We execute to generate it, and then we astutely allocate it by applying clinical math. It's a simple yet very powerful concept. Now, before turning things over to Don Rush, one final thought. I just said our approach is simple and powerful, but it's also different from the industry. The management team and board of CNX, we didn't make our names originally in E&P, and what we've accomplished to date sort of proves that. How? We said we were different than a typical E&P from the get-go, and at the time there were a lot of industry experts that were skeptics. That really didn't matter. We took a 150-year-old coal company at the time, And through constant battling, toiling, and perseverance, we transformed it in really every imaginable way into the premier manufacturer of natural gas and free cash flow per share, as well as the leader in tangible and impactful ESG performance in our space. We shunned the conventional E&P wisdom, and we took a best-in-class approach to discipline capital allocation that was injected by our board to create even more per share value. And we achieved all this during some of the most tumultuous times seen in generations. A traditional E&P team or board coupled with a standard asset base would have driven the company to a very different place. We know it because we see it out there. Fortunately, our differentiated approach set us up in the position of strength that we enjoy today, and it positions us for even more great things on a per share basis moving forward. This is the team investors and other stakeholders want as stewards of their capital. With that, I'm going to turn things over now to Don Rush, our CFO.