CNX Resources Corporation

Good morning and welcome to the CNX Resources fourth quarter 2021 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. 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, everybody. Welcome to CNX's fourth quarter conference call. We have in the room today Nick Deulius, 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 4Q-2021 Earnings Results and Supplemental Information of CNX Resources. 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 Don. 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.

Tyler, thanks. Good morning. Like a string of recent quarters the past couple of years, we had yet another clean, easy to understand quarter. and just allow me to spend a couple of minutes on a few highlights. In the fourth quarter of 21, approximately 80% of our free cash flow was returned to shareholders, and that was in the form of buybacks at very discounted prices. And while taking advantage of bringing in shares at those attractive free cash flow yields, we also put the remaining 20% of free cash flow to debt management, which in the fourth quarter meant really three things. First, We paid call premiums and fees for a positive rate of return bond deal where we issued $400 million of 4.75% notes that are due in 2030. And we used those proceeds to retire $400 million of 6.5% notes that were due in 2025. The second thing we did is that we paid the fees to extend both of our upstream and midstream RBLs to October of 26. And then third and finally, we reduced our net debt In fact, we paid down, I think, over half a billion dollars, $508 million of debt over the last eight quarters or two years. Now, all three balance sheet strengthening moves that we saw in the fourth quarter, when you couple those with the cumulative free cash flow allocation toward debt reduction, that was recognized by another upgrade in our credit rating by Fitch. That places us one notch below investment grade. This year, we expect a market improvement in free cash flow generation relative to what was effectively a stellar 2021. And we issued 2022 guidance of approximately $600 million in free cash flow. That's about three bucks a share. And that's assuming, of course, the current share account, just over 200 million shares. The past two years, the most challenging, I think, that a lot of companies and industries and people have seen in decades, it really tested and proved out CNX's brand of a sustainable business model in action. So what did we do? We invested heavily in our people, in our regional communities, to set the best team possible on the field of play. We were steady, safe, and compliant in our execution that the team was able to deliver and in that region where we operated and we manufactured our free cash flow. The significant free cash flow that we generated that allowed for capital allocation opportunities that went towards strengthening our balance sheet through debt reduction or maturity extensions and also reducing our share count through the acquisition of our discounted shares. So those moves They deliver impressive free cash flow per share, compounded growth rates, and intrinsic per share value growth, two things that we're absolutely focused on. In 2022, our path continues to be pinned to optimizing intrinsic per share value by long-termism, by methodical execution, by de-risking, and of course, by astute capital allocation. So again, going back to sort of the cliff notes for fourth quarter 2021, free cash flow and free cash flow per share, they were up. Net debt was reduced, maturities were extended materially, share count was reduced at deep discount pricing, and we beat our 2021 free cash flow guidance. We're going to keep clinically following the math when allocating free cash flow. Rest assured, our actions are going to continue to match our words and shoot for 2022 and beyond. So let's hear from Don.