#USA #Pittsburgh #CNX Resources #Apex Energy #Appalachian Basin

CNX Resources Corporation Expands Through Strategic Acquisition

In a move that highlights its aggressive growth strategy, CNX Resources Corporation has announced a definitive agreement to acquire the natural gas upstream and midstream operations of Apex Energy II, LLC. This transaction is set against a backdrop of evolving dynamics in the Appalachian Basin, where natural gas production has seen an uptick due to various factors, including technology advancements and rising market demand. The total cash consideration for this acquisition stands at approximately $505 million, and the closure of the deal is anticipated in the first quarter of 2025, subject to standard closing conditions.

Strategic Considerations

According to Nick Deiuliis, CNX's president and CEO, this acquisition is a unique opportunity. He noted that it complements CNX's existing operations, significantly expanding its infrastructure in the region. The acquisition includes approximately 36,000 net acres, primarily located in Westmoreland County, Pennsylvania, with substantial undeveloped assets in both the Utica and Marcellus formations. This strategic move underscores CNX's commitment to maximizing its output in these prolific plays, particularly as they tap into their stacked pay development potential.

Financial Implications

From a financial perspective, this acquisition is expected to be immediately accretive to CNX’s free cash flow per share, strengthening its balance sheet and capital allocation flexibility. The assets being acquired are projected to generate an average daily production of 180 - 190 MMcfe/d in 2025, with an EBITDA of around $150 - $160 million based on current market conditions. Furthermore, the company's operational costs for the newly integrated assets are expected to maintain low levels, estimated at about $0.16/Mcfe, aligning with CNX’s overarching strategy of low-cost operations.

Infrastructure and Synergies

The transaction not only expands CNX's development footprint but also enhances their existing infrastructure. With a focus on midstream operations integrated into their acquisition, CNX positions itself to leverage this infrastructure for future development. The potential for operational synergies is high, allowing for increased efficiency and additional value generation in the coming years.

Financing Strategy

CNX plans to fund the $505 million purchase through its secured credit facility, which was recently amended in May 2024 to extend the maturity to 2029 and to increase the total commitment amounts to $2.0 billion. As of September 30, 2024, the company had substantial borrowing capacity, ensuring minimal impact on its leverage ratios post-acquisition.

Advisors Involved

BofA Securities is on board as the exclusive financial advisor for CNX, while Jones Day provides legal advice. On the other side, Piper Sandler & Co. acts as the exclusive financial advisor to Apex, with Kirkland & Ellis LLP serving as their legal counsel. This collaborative approach brings substantial expertise to facilitate a smooth transaction.

Company Background

CNX Resources Corporation stands out as a key player in the natural gas sector, focusing on ultra-low carbon intensive development and production. Its substantial asset base, backed with over 8.74 trillion cubic feet of proved reserves as of the end of 2023, positions CNX well within the energy sector. Bridging the gap between technology and natural resource management, CNX emphasizes responsible resource development while maximizing shareholder value.

In conclusion, this acquisition not only signifies CNX's commitment to enhancing its asset portfolio but also positions the company for sustainable growth in the ever-evolving energy landscape. As the industry continues to adapt, CNX aims to leverage its strategic advantages to capitalize on opportunities that arise in the natural gas market.