They define success as generating and growing FCF per share, 30% of the company has been bought back in 2.5 years, and the Chairman wrote The Outsiders. Is CNX one of THOSE companies?
Do you think there is any possibility that their results from 2018/2019 would repeat in the future with low gas prices? Or have they overcome some issue that prevents that?
I think the cost profile of the company really helps set a floor, especially after the CNXM merger. Right now it's the lowest in the basin and the all in cash cost is less than the one I highlighted. If Nat Gas trades below $1.50 then the entire industry will be losing money and will likely pull back supply. I actually think the lower the prices the better for CNX because they can withstand the headwinds by cashing in on the hedges.
The hedging program started in 2017 so '18-'19 were the first few years of implementation. I don't think its impossible but given the current state of the company, the hedging strategy, and the current NYMEX strip I would be really surprised f they are not FCF positive in each year going forward. Plus, they tout this "2020-2026 FCF Goal" all the time and I don't think they would keep pounding the drum if they didn't think it was unlikely.
BTW, love all the work you do. Thank you for sending your thoughts.
It's also a share buyback cannibal, with it potentially set up to buyback 23% to 31% of the company's market cap over the next year alone. And management's compensation is also based on per share cashflow results.
CONSOL is an interesting situation. During the brief research about them for this article I couldn't help but notice the competitive position and cash flow potential. I'll definitely give your article a read!
good article, thanks. One issue here regards the type of properties they have so perhaps some time should be spent looking at reserves etc. One common concern is that they have drilled the easiest locations, but personally I have not the expertise to analyse that
Good write-up, thanks for sharing!
Thanks Alex!
A very interesting idea.
Do you think there is any possibility that their results from 2018/2019 would repeat in the future with low gas prices? Or have they overcome some issue that prevents that?
I think the cost profile of the company really helps set a floor, especially after the CNXM merger. Right now it's the lowest in the basin and the all in cash cost is less than the one I highlighted. If Nat Gas trades below $1.50 then the entire industry will be losing money and will likely pull back supply. I actually think the lower the prices the better for CNX because they can withstand the headwinds by cashing in on the hedges.
The hedging program started in 2017 so '18-'19 were the first few years of implementation. I don't think its impossible but given the current state of the company, the hedging strategy, and the current NYMEX strip I would be really surprised f they are not FCF positive in each year going forward. Plus, they tout this "2020-2026 FCF Goal" all the time and I don't think they would keep pounding the drum if they didn't think it was unlikely.
BTW, love all the work you do. Thank you for sending your thoughts.
Thanks for that input. I’m definitely interested in this idea. Always interesting with the chairman of the board being the Outsiders guy.
Talk about a cool setup.
Feel free to reach out if you wanna compare notes. I’d be more than happy to help.
Michael, fantastic writeup. You've got us intrigued. Especially when you mentioned William Thorndike!
Funny you mentioned CONSOL Energy. We wrote it up two weeks ago.
https://specialsituationinvesting.substack.com/p/the-cannibal-coal-company-consol#details
It's also a share buyback cannibal, with it potentially set up to buyback 23% to 31% of the company's market cap over the next year alone. And management's compensation is also based on per share cashflow results.
CONSOL is an interesting situation. During the brief research about them for this article I couldn't help but notice the competitive position and cash flow potential. I'll definitely give your article a read!
Awesome. Let us know what you think.
good article, thanks. One issue here regards the type of properties they have so perhaps some time should be spent looking at reserves etc. One common concern is that they have drilled the easiest locations, but personally I have not the expertise to analyse that
Thanks for the follow up! I don't have any expertise in the drilling area either but the question is worth digging into. I appreciate the feedback