...Welcome to the CNX Resources second quarter 2024 Q&A conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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 to 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 2024 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 Nick DeIuliis, our President and CEO, Alan Shepard, our Chief Financial Officer, Navneet Behl, our Chief Operating Officer, and Ravi Srivastava, President of our New Technologies Group. 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? We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We will pause momentarily to assemble our roster. The first question comes from Bert Donnes with Truist. Please go ahead. Hey, good morning, team. Just wanted to start it off on the new tech division. It looks like 2Q was a bit above the run rate for the full year guide. Is that still ramping? It looks like you're at 4.5 BCF. Just wondering if that's leveling out or are you ramping up throughout the year? Hey, this is Ravi. So, I think the volume that we saw in Q2 is kind of in line with the projection that we had kind of like given out for the whole year, between 15-18 BCF. We got 4.5 BCF in Q2. I think the numbers that we saw in Q2 is like you know the volume was on the higher end of it. The pricing was slightly better. And as we talked about it last quarter, like some of the transactions they kind of you know like slip quarters depending on when the volume was produced as opposed to when the transactions takes place. So I think there's no change in our annual free cash flow guidance. So it'll stay in that same range of around $75 million for the year. And the volume should stay in that same range, probably 15-18 Bcf, as we had guided earlier. I appreciate it. Thanks. And then, just moving real quick to the Deep Utica. It sounds like the first two wells are, you know, in line with expectations. Could you guys maybe give some details just in comparison to your Marcellus wells? Is maybe a rough well cost or, or maybe how the one-year cumes look or, or anything like that? Yeah. This is Alan. Those wells are still pretty early, so we're all we're gonna say at this point is that they're absolutely meeting expectations on both the cost side and the well performance side. So we're pretty excited about them. We'll provide more kind of a detailed look at those as we move forward in the next couple of quarters. Got it. We'll stay tuned. Thanks for the update. The next question comes from Zach Parham with JPMorgan. Please go ahead. Thanks for taking my questions. I guess first just wanted to ask on a line item on income statement. Your other revenue and operating income came in ahead of expectations this quarter, and it was up $23 million quarter-over-quarter. Can you just give us a little detail on what drove that increase in revenue? Yeah. Some of that's what Ravi talked about earlier, including there's the environmental attribute sales, which were a little bit higher this quarter than last. Additionally, we had a pretty good quarter on water revenue. So we've made some investments over the last couple of years in terms of water handling, and we've been able to offer those services to third parties. So we had a really good quarter supplying water for some third-party fracs, which drove that number. Thanks. And then also just wanted to ask on the CNG business, you mentioned that CNX had provided some CNG to a third party in July. Can you give us any detail on who that third party is, and maybe a little bit more color on what the opportunity set to provide CNG for third parties looks like, and any potential revenue impact in the second half of the year? I mean, the third-party opportunities, they, they exist in all sorts of sectors, whether it's fracs, whether it's, you know, power generation, whether it's, industrial use. So, I mean, we've been pursuing all those opportunities. The third-party revenue is... It, it's not material for a 2024 guidance change. I would say, like, we're, we're continuing to develop that business opportunity, and, we'll have more to share, on how this, this shapes up for 2025, guidance, but, nothing material to, to change anything in 2024 yet. Thanks, Ravi. The next question comes from Leo Mariani with Roth. Please go ahead. Hi, just wanted to follow up a little bit more here on new tech. So, obviously, you mentioned getting the, you know, CNG b iz deployed to a customer in July, and I guess you've got, you know, some other aspects that are getting kind of rolled off in the second half, kind of from the AutoSep OFS business. I was hoping you could just kind of characterize what some of these initial offerings to customers are. Are these, like, customer trials, you know, beta tests? Are you actually getting kind of paid, you know, for these, or are these just kind of like very small test cases, and then I guess in the success case, then perhaps the customers would take on these products and offerings and then kind of ramp up, you know, next year? And obviously, you have -- you talked a little about revenue a minute ago. It sounds like relatively immaterial this year, but would you expect it to be, you know, more significant in 2025? Is it gonna start to kind of move the needle a little bit next year on these two businesses? Yeah. So, we're excited about both the businesses. I think they both solve key problems. On the AutoSep side of things, I mean, it's a technology that transforms our, you know, the flowback operations, which is a key step in our oil and gas production value chain. And, if you ask me how flowback has been done in the past, I mentioned flowback is, kind of analog, manual, cost-intensive, lots of emissions, and the technology that we have developed completely transforms that. So we're very, very excited about the solution that we offer. It's, from an environmental standpoint, from a cost standpoint, automation, safety standpoint. So, we've been using the technology ourselves, so we don't really need to do a lot of tests. You know, we've been doing that on our own pads for the last couple of years. We're using the technology on all of our pads this year and going forward. And the engagement with third-party customers have, it's been ongoing for the last couple of months, ever since we announced the JV, and there's a lot of excitement, and we expect to have customer sales, you know, in the back half of this year. Like, the magnitude and all of all that stuff, we'll share more as we have more details, and and we expect the AutoSep part of it, the flowback part of it, to be a more meaningful contributor to the 2025 opportunity for us. On the CNG side of things, again, like, you know, again, we have a technology that we have developed, this developed in-house, that uses this geobaric energy to produce compressed natural gas without any mechanical compression. So it's cost effective from an emission standpoint. It's terrific. And a lot of folks are looking for a solution like that, where we have constraints on pipes and how do you get a power energy solution in the form of CNG to different industrial applications. So I think it checks a lot of boxes. And the third-party sales that we had, it's you know, the revenue was real. It's not material, but we expect to transact on many such deals in the future. And then, and as we do that, you know, we'll provide more guidance to you guys. Okay, no, that was very helpful. I know obviously, like you said, there, there's no guidance, but just from a high level, I mean, is the impact of these two businesses gonna, gonna start to show up in the, in the financials next year? So we'll, we'll start to kind of notice it, you know, on the, you know, the investor side. And then also just wanted to confirm that as you look out, you know, the next couple of years, do you see those two businesses as not really requiring CapEx? So, you know, as you ramp it, it's kind of all gravy on the, the free cash flow for the most part. Yeah, I mean, I think we do expect it one more than the other as a more meaningful contributor to revenue and cash flows for 2025. And I mean, both of these are gonna require capital investments, and we'll provide color on all that stuff as the plan for 2025 takes form. But yeah, I mean, we expect both of them to start contributing in, you know, meaningfully from 2025 onwards. Okay. Thank you. The next question comes from Michael Scialla with Stephens. Please go ahead. Hi, good morning. I know you talked about the 11 deferrals that you still plan on bringing online early next year. Just curious if you are, in addition to that, curtailing any production at this point, and if so, can you say how much? Yeah, this is Alan. We're not curtailing any additional production. We're running just above kind of our hedge book with the margin of safety that we need around that production profile to make sure we don't dip below the hedge book. Yeah, again, the plan is to make a call on whether or not to grow production next year based on how pricing develops. I think there's a lot to be seen for the rest of the summer in terms of natural production levels and kind of in-basin usage and things like that, before we're ready to make that decision. Right. Gotcha. Okay. You mentioned, as well, the progress, some progress, I guess, on coal mine methane being allowed under 45V hydrogen tax credit. Any sense for the timeline there on any of your projects if that were to move forward? On the 45V timing, I think there are a lot of guesses out there when it's gonna come out, but I think we expect the guidance to come out in Q2 for a timeframe, and eagerly looking forward to what comes out in that tax policy. Could you say if it is favorable, you know, when you could start moving forward on any of the projects that you have contemplated? Yeah, that, that'll be made based on what the guidance is. Ideally, you know, the more favorable the guidance, the more quickly we can get moving on implementing some of the big projects that we're interested in participating in. That's all going to be guidance dependent. Makes sense. Thanks. Again, if you have a question, please press star then one. The next question comes from Jacob Roberts with TPH. Please go ahead. Morning. Ravi, I was wondering if you could give us more insight into the range and pricing you're seeing on the Tier 1 REC market as you monetize those. I know you just mentioned that we should expect a pretty steady state volume and value from here. So I'm just trying to square that with the historical ranges that the PA Public Utility Commission publishes on those Tier 1 RECs, which may be the wrong market to be looking at. But I'm just wondering if there's an aspect that's keeping the value you're realizing more normalized over time. Yeah. So I think that the PA PUC tier one REC value is. I think it's publicly disclosed, like, what's coming out. I think the range that you've seen this year is, I want to say, between $33-$36 per megawatt hour, which translates into a certain dollars in MMBtu. So don't ask me to do the math live on the call, but the value for the credits is expressed in these dollars per megawatt hours, and it's—I think it's been in that range of $33-$36-ish dollars all year. And that's what we're forecasting, that the range is going to stay in over the next, the remaining two quarters. And going back, if you, if you go back a few years, I think, it's been on a, on a trend up. Three years ago, I think it was in a $17-ish per megawatt hour range, and it's, it's come up over the last couple of years, and it's stayed at this level. And we, we expect it to stay at this level. If anything changes, our guidance will reflect, the change and the impact it's going to have on our, on our cash flows. Got it. I appreciate that. And then in general, kind of doing some back-of-the-envelope math. If I look at back to Q2 2023, at that time, you had 2026 hedged around 50%-55%, I believe. And then looking at today, relative to 2027, that's sitting 10%-15% lower, let's call it maybe 40%. Just wondering if that level is how we should be thinking about the business over the back half of this decade. I know it's a long, long time off, but I believe you mentioned on the call the willingness to go lower on the hedge book over time, but just wondering what that ultimate comfortable level may be. Yeah, I think we've been pretty consistent in the philosophy we're trying to implement on the hedge book the last couple of quarters, which is, one, we want to be 80% roughly hedged going into any given upcoming year. And then, you know, beyond that first 80%, we've been looking to shorten up the duration of the book. So you've seen us have kind of sort of less hedge activity over the last few quarters as the book has come in. Great. Appreciate the comments. The next question comes from Noel Parks with Tuohy Brothers. Please go ahead. Hi, good morning. I apologize if you touched on this earlier, but I just wondered, could you just talk a bit about service costs, what you're seeing on both for both vendors and materials? Just wondering if you've seen any shifts of equipment out of the basin. Feel like we're not hearing much on that front these days. Thanks. Yeah, on the service cost side, what we have seen is service costs staying flat for first half of the year. And we, you know, our projections are they're gonna stay, you know, almost flat for next half of the year, too. Okay. Okay, great. And I just wondered... I mean, it's been such an unusual cycle when we look from pre-pandemic, pandemic effect, and then the inflation afterwards, sort of in services and then, you know, more broadly, macro. And it seemed that we were kind of on this path of the leverage kind of remaining almost entirely in producers hands, or largely on pricing, just as, you know, just from capital discipline really holding, pretty much across the sector. Is, is that essentially you think we're back there and, I mean, in your modeling, do you, you know, I guess maybe I'd ask, what's the sort of worst case, most highest inflation scenario you entertain when you look to model, you know, rest of the year, next year, and so forth? Yeah, we generally think about the basin as balanced right now, but there hasn't been a lot of change in rig activities in our basin in specific, going back to, you know, coming out of the pandemic era. So, you know, the inflation we saw in 2022, we attribute most of that to the macroeconomic inflation just across, you know, wage gains and other things across the general economy, as opposed to anything that was particular to our basin dynamic. So when we think about it going forward, it's more of what do we expect national inflation levels to do? Because we don't see an uptick in activity in our basin on the producer side. Okay, great. Thanks a lot. This concludes our question and answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks. Thank you again for joining us this morning, and 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. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.