Fitch Ratings affirms CNX Resources Corporation's (CNX) Long-Term Issuer Default Rating at 'BB+'.

The Rating Outlook is Stable. The revolving credit facility was affirmed at 'BBB-'/'RR1' and the senior unsecured notes were affirmed at 'BB+'/'RR4'.

CNX's rating reflects its material generation of FCF and the expectation that this trend will continue over the forecast horizon along with debt reduction efforts, a robust hedging program, lack of near-term maturities and material liquidity.

Key Rating Drivers

Material FCF Generation: CNX's ability to consistently generate positive FCF is supportive of its credit quality. FCF is driven by the company's low operating cost structure, reduced finding and development costs, strong hedging program that locks in future revenues and modest production growth. CNX's strong hedging program increases certainty in projected cash flow despite the volatility of natural gas prices. Fitch anticipates continued positive FCF, which will be applied primarily to stock buybacks over the forecast horizon.

Low-Cost Operator: A low-cost position allows for profitability even in low price environments. CNX is one of the lowest-cost operators in the Appalachian Basin, driven by relatively lower firm transportation charges, midstream ownership and investment in water infrastructure. Transportation, gathering and compression costs are well-below most competitors, as CNX has kept production growth goals modest, which allowed the company not to compete for high-cost, long-term capacity.

Cost position is benefited by a strategy of using significant basis hedging as opposed to locking up significant transportation to move gas out of the basin. The company generated Fitch-calculated fully burdened cash costs, such as operating; selling, general and administrative (SG and interest of $1.29/mcfe in 2023.

Robust Hedging Program: Fitch views CNX's hedging strategy as a credit positive. The company has one of the strongest hedging positions in the industry, with approximately 87% of expected 2024 gas production hedged at an average of $2.45/mcf with all of this amount basis hedged. 70% of expected 2025 gas production is hedged at an average of $2.43/mcf with nearly 100% of this amount also basis hedged. CNX attempts to match NYMEX and basis hedges for the next 12 months of production. The company maintains a material portion of hedges through 2027.

Fitch believes CNX has a thoughtful hedging program that locks in expected returns and reduces volatility in cash flows, while extensive basis hedging protects from potential disruptions in the Appalachian Basin. CNX's hedge program, combined with a low-cost structure, allows for capital allocation flexibility for its future development program.

Production Scale and Inventory: Fitch believes scale is important as it can reduce operating and capital costs per unit and provides ability to enhance liquidity. CNX is significantly smaller in terms of production than other 'BB' rated issuers, such as Southwestern Energy Company (BB+/Rating Watch Positive [RWP]) and Chesapeake Energy Corp. (BB+/RWP). CNX's low-cost position and focus on in-basin sales of gas are offset by a robust basis hedging strategy; however, this position allows the company to avoid costly long-term transportation and gathering costs.

Fitch estimates reserve to production at 16 years. There are questions as to the remaining amount of high-quality inventory, which could provide for some uncertainty in future cash flows. We believe the company's strong credit metrics provide for opportunities to address these uncertainties over time.

Single Basin Risk: CNX's operations are primarily in Appalachia, which exposes the company to significant basis risk due to takeaway constraints, although differentials improved as new pipeline capacity was installed. CNX resisted signing into long-term, takeaway contracts to avoid entering into firm transportation commitments that could have resulted in expensive long-term obligations. Instead, the company used hedges to mitigate pricing risk.

CNX was able to move production without entering into contracts that would make it inflexible to adjust production during periods of low natural gas prices as it had to meet takeaway commitments. This strategy could be risky if Appalachian takeaway becomes constrained but thus far the avoidance of long-term transportation obligations has benefited the company.

Derivation Summary

CNX's production profile of 1.5 billion cubic feet equivalent per day (bcfed) in 2023 is below Appalachian peers, such as Antero Resources Corporation (Antero; BBB-/Stable) at 3.4 bcfed, Ascent Resources Utica Holdings, LLC (Ascent; B+/Positive) at 2.1 bcfed, Chesapeake Energy Corp. (BB+/RWP) at 3.7 bcfed, EQT Corporation (EQT; BBB-/Stable) at 5.5 bcfed and Southwestern Energy Company (Southwestern; BB+/RWP) at 4.6 bcfed. CNX's Fitch-calculated unit production expenses are $1.03/mcfe for 2023, which is well below all of the peers which range from $1.11/mcfe at Chesapeake to $2.49/mcfre for Antero.

Consolidated leverage of 2.4x is slightly worse than 'BB' category-rated peers, such as Chesapeake at 0.8x and Southwestern at 1.7x. Fitch-calculated unhedged cash netback margin, as of YE 2023, of 45% was towards the middle of the range, with Antero at 25%, Ascent at 35%, Chesapeake at 54%, EQT at 44% and Southwestern at 43%.

CNX hedges approximately 87% of expected 2024 production compared with Southwestern at roughly 47%, Chesapeake at 45%, and EQT at 43%. CNX attempts to match its NYMEX hedge with basis hedges, which provides significantly more price protection than peers. Fitch believes a strong hedge program is important given the volatility of natural gas prices. CNX. CNX's low cost position and consistent hedging allows for strong stress case performance relative to peers.

Key Assumptions

Floating rate debt using the three-month SOFR forward curve (4.5% for 2024, 3.5% for 2025, 3.5% for 2026 and 3% thereafter);

Henry Hub natural gas prices of $2.50/mcf in 2024, $3.00/mcf in 2025, $3.00/mcf in 2026 and $2.75/mcf thereafter;

West Texas Intermediate oil prices of $75/bbl in 2024, $65/bbl in 2025, $60/bbl in 2026 and 2027, and $57/bbl thereafter;

A decline in production of 2% in 2024, growth flat to mid-single digit thereafter;

Capex between $500 million and $550 million throughout the forecast period;

FCF used for share repurchases.


Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Production scale approaching 2.5bcfed or proved reserves approaching 20 trillion cubic feet (tcfe);

An increase in diversification of upstream operations;

Mid-cycle EBITDA leverage approaching 1.5x.

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Inability to replace reserves or a material reduction in net production;

Mid-cycle EBITDA leverage above 2.5x;

Material reduction in FCF or reduced credit metrics from weakening of unit cost profile or allocation of FCF to shareholder-friendly actions;

Deviation from stated financial policy, including material reduction in hedging.

Liquidity and Debt Structure

Adequate Liquidity Position: CNX has $443,000 of consolidated cash on hand and $1.25 billion of borrowing capacity on its revolver as of YE 2023, after consideration for LOC. Borrowing base and revolver commitments were $2.25 billion and $1.35 billion, respectively, as of YE 2023, and maturity is in October 2026.

The revolving credit facility (RCF) includes a springing maturity at any point after Jan. 30, 2026, if availability under the RCF, minus the aggregate principal amount of any and all such outstanding convertible notes is less than 20% of the aggregate commitments under the RCF. There is also a maximum net leverage ratio of no greater than 3.5/1.0, which is based on net debt. CNX must also maintain a minimum current ratio of no less than 1.0/1.0.

CNX Midstream Partners LP has its own RCF not guaranteed by CNX. The facility has $600 million in commitments and had $105.2 million of borrowings outstanding, leaving availability at $494.9 million after consideration for LOC, as of YE 2023. Fitch considers CNX's maturity schedule manageable with the next major maturity being the senior unsecured convertible notes in 2026.

We believe there is a good chance these notes could be converted to equity before the maturity. Fitch believes near-term liquidity should be sufficient, given the ability to generate material FCF, which benefits from a high degree of certainty through the hedge program and low-cost structure.

Issuer Profile

CNX Resources Corporation (NYSE: CNX) is an independent oil and gas company focused on the exploration, development, production, gathering, processing and acquisition of natural gas properties primarily in the Appalachian Basin. The company focuses on unconventional shale formations, primarily in the Marcellus and Utica shales.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit

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