In its earnings call last week, CNX Resources highlighted its share buyback plan and continued positive free cash flow. They also discussed continuing plans to develop deep Utica acreage, particularly assets acquired in its purchase of Apex Energy II earlier this year (seen in the map below). The deep Utica is the portion of the Utica shale located in Western Pennsylvania that overlaps with Marcellus shale. It has historically been less developed than the Marcellus in Southwest Pennsylvania and the Utica in Ohio because its greater depth makes drilling more expensive, but that is changing now as producers like CNX take advantage of the deep Utica’s position near Marcellus takeaway infrastructure.
CNX emphasized the cost reductions they have achieved as they gain more experience drilling in the deep Utica over the past year. Drilling costs have dropped from $2,200 per foot last year to $1,750 per foot this year – a reduction of almost 20%. However, the company reported that they had no new wells during the third quarter, as drilling activity “was focused on a four-well deep Utica pad.” This led to production volumes declining in the third quarter. For the fourth quarter of this year, the company expects to bring seven wells online, including three in the deep Utica. For the following year the company wants to retain flexibility “to respond to whatever sort of pricing environment develops.” In the long run, the company emphasized the need for more takeaway infrastructure to handle the low decline rates of deep Utica production but did not refer to specific plans.
