Good morning and welcome to the CNX Resources First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. 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, Mr. Lewis.

Thanks, Anita, and good morning, everybody. Welcome to CNX Resources' first quarter conference call. We have in the room today Nick DeIuliis, our President and CEO; Don Rush, our Executive Vice President and Chief Financial Officer; and Tim Dugan, our Chief Operating Officer. Today, we will be discussing our first quarter results, and we posted an updated slide presentation to our website. To remind everyone, with CNX acquiring the remaining 50% membership interest in CNX Gathering LLC this quarter, CNX is consolidating its results, which includes 100% of the results from CNX, CNX Gathering LLC, CNX Midstream GP LLC and CNX Midstream Partners LP. Earlier this morning, CNX Midstream Partners, ticker CNXM, issued a separate press release. As a reminder, they will have an earnings call at 11:30 today. The dial-in number for that call is 888-349-0097. As a reminder, any forward-looking statements we make or comments about future expectations are subject to business risks, which we've laid out for you in our press release today as well as in our previous Securities and Exchange Commission filings. We will begin our call today with prepared remarks by Nick, followed by Don and then Tim, and then open it up for Q&A. With that, let me turn the call over to you, Nick.

Thanks, Tyler. Good morning, everybody. Let's begin with a very important theme for some time now and one that has continued into the quarter. Off the heels of the separation of the company late last year and the Midstream acquisition at the beginning of this year, first quarter of 2018 provided us the opportunity to really kick our capital allocation philosophy into high gear, as we moved exclusively into execution mode. And sure, we're in an era of playing offense and our opportunity set is robust. More on this and the thoughts on this in a moment. Before turning it over to the team for specifics on financial and operational metrics, let's get some of the important highlights for the quarter. Most of you are aware; we held an Analyst & Investor Meeting on March 13, providing a tremendous amount of updated information. Some of that information already contained a few of the highlights from the first quarter with the meeting having taken place towards the end of the quarter. So I'll provide just a quick summary of what you might have already heard back in March as well as some key updates. If you turn to slide 3 in our deck that we posted this morning, this slide really helps pull together some of the major takeaways from the first quarter, but it doesn't include everything. Said differently maybe, it was an exceptionally busy and very successful quarter. Tim Dugan's going to touch on operations in more detail, but you can see it's highlighted on the slide that we had record production in the first quarter of 129.5 Bcf or average daily production of 1.439 Bcf per day. First quarter does include contribution from the shallow oil and gas assets that we sold, which I'll get to in a…

Great. Thanks, Nick, and good morning, everyone. And as Nick mentioned, I will be walking through specifics of the HG transaction on our Midstream call at 11:30 today. So for those interested in more on that, please be sure to tune in then. Shifting to CNX in the quarter now. As Nick mentioned, this was the first full quarter for CNX as a standalone E&P company, and it was an impactful one. From the GP closing to the Shirley-Penns drop, to the SOG sale, to the HG transaction, and most importantly, to our year-on-year EBITDA growth, our Q1 results really show how quickly we have moved and how well we are executing. But before I discuss those results, I want to clarify a few things regarding recent changes in our financial reporting due to our recent 100% ownership of CNX Gathering. These are laid out on slide 7. Prior to the closing of the transaction on January 3, we accounted for a 50% interest in CNX Gathering through the equity method of accounting. However, starting in the first quarter, we have begun consolidating 100% of the results of CNX, CNX Gathering, CNX Midstream GP LLC and CNXM into our financials. We think it is important to understand each of these businesses: CNX and CNX Midstream, individually first, and then to understand the different ways they can be grouped together. In our press release this morning, we distinguished between figures that are consolidated, meaning, 100% of both companies and those that are attributable to CNX shareholders. These attributable results subtract CNX's non-controlling interest in CNX Midstream, which is approximately 64%. This percentage represents the share of LP units not owned by CNX. This math is being used to highlight some of the main metrics as depicted on the slide. Now, for…

Thanks, Don, and good morning, everyone. With the spin transaction in the Midstream GP acquisition firmly in the rearview mirror, the team is excited to focus more and more on operational execution. And that's just what we did in the first quarter of 2018, as we drove record production volumes and lowered unit cost helping to set the stage for very strong year-over-year EBITDAX growth in the full year. Now, I'd like to take a second just to clarify one statement on the HG transaction that Nick talked about that we closed late yesterday. We brought in 15,000 undeveloped acres in the Southwest PA Central type curve region. 11,400 of those acres were Marcellus, not 14,100, which means we brought in 3,600 Utica acres. So, moving to slide 12, let's go through some of the operational highlights for the quarter. As already highlighted by the team, total sales volumes of 129.5 Bcfe represent an increase of 9% over the fourth quarter of 2017 and a 36% increase over the same period last year. Much of that increase can be attributed to the higher dry Utica volumes out of Monroe County, Ohio, as total Utica production is up almost 200% year-over-year. Our team continues to see successes with some revised completion designs and field optimization decisions in Monroe County, which we'll talk about shortly. Total production costs are down $0.22 per Mcfe year-over-year as the growth in Ohio dry Utica volumes with favorable gathering rates reduced overall gathering costs. There was an additional benefit from lower per unit DD&A year-over-year as rates were re-evaluated as of year-end 2017. And we expect to see DD&A unit cost around this level for the rest of the year. We did experience some higher than usual per unit lease operating expense in the quarter, driven…

That concludes our prepared commentary. Anita, if you could please open the line up for Q&A at this time.

We will now begin the question-and-answer session. The first question today comes from Holly Stewart with Scotia Howard. Please go ahead.

Good morning, gentlemen. Maybe the first question for Tim. I know you mentioned you only have one more kind of deep Utica well planned for the year, but it looks like you pushed up the end service of the Marchand well. So, should we think about this as this is the plan or could things change if well performance continues to outpace your expectations?

Well, the pushing up of the Marchand was just due to cycle time improvements across the board. Our plan that we laid out in March has not changed. So the wells that we laid out or the number of wells that we laid out for the dry Utica in March in the next year or two stays the same, and we will continue to pursue the delineation program and move into development in CPA and in Southwest PA. As I mentioned, we'll be moving into the stacked pay mode here full-fledged in 2019.

And speaking of that, can you remind us are there any official stacked pay wells planned for 2018?

There's just another delineation well later in the year that we highlighted, Holly, the one additional CPA well a little bit later in the year.

Yes. I think the first stacked pay well will be – or pad will be in 2019.

Okay.

And into that year, we'll get more heavily into stacked pay development. It is just an ongoing progression.

Okay, great. And then, maybe one for Nick. Just to get a better sense of how you might proceed with the buyback. I know the leverage metric seems to be your sort of governor here, but you've got $250 million remaining, I think, and that expires in September. So if you exhaust that before September or if it expires, how should we think about sort of moving forward? You just get board approval for a new one or just kind of give us a sense of how to think about the ongoing buyback?

Holly, I think it really goes back to the approach we use on why we are interested in the share repurchases. These are viewed from the get go as opportunistic more than what I call programmatic. So it's not something or an instance where we'd want to allocate so much of our cash flows per year or per quarter to something like share count reduction. It is instead more looking for windows of time when we have disconnects between what we think the company is worth and what the shares are trading at and doing those types of activities then and at some point stopping them when you get parity to what we think the company is worth on an NAV per share basis. So, looking forward for the rest of the year, I still see a window there to get really strong, greater returns on share repurchases above our margin of safety. And unless something changes materially on share price, the expectation should be that we continue in some fashion. Now, as to what happens when we get into sort of the end of the one-year authorization and whether we keep going or put another program in or the specific timings of when the $450 million program wraps up, probably premature to say at this point. But right now, we see a window, and right now, we plan on continuing on.

That's great. And maybe just one final one from me, just kind of high level, looking at this strategic transaction with HG. Is there anything, since you're adding acreage, that we should expect to sort of play into the 2018-2019 development plans?

I think the way to look at that, in particular with the question you're asking is one or two ways and it really goes to – I think it was slide 6 in our deck that was a repeat of what we had in March. So I was making a point back in March that our core-of-the-core Southwest PA Marcellus locations, if you take our activity set that we projected out over the 2018, 2019, 2020 timeframe, we would still be left with – at the time, I think it was 217 core-of-the-core locations. So the point at that time was we've got additional running room with Marcellus after that time period or has opportunity to grab upside or cover contingency items in the front three years. This deal when you look at it from a Resources perspective, it adds to that inventory and using the acreage numbers that we quoted with our spacings, et cetera, it takes that what was 217 up to 287 of remaining inventory at the end of 2020. So, that added inventory could do a couple of things on the Resources side and then translate into value on the Midstream side. That could be additional upside capacity for us if we continue to compress cycle times. That could be a contingency covering or fallback positions, Plan B, so to speak, if something or some bottleneck pops up over the coming years with respect to our plans and growth. But suffice to say, no matter which one of those two we end up in, these are some of the highest, if not the highest, rate of return capital allocation options we have within the portfolio. And being able to grow that by 32% is a really good thing not just for Resources, but also for Midstream. We just closed yesterday, so we're going to be working like crazy across the Resources and Midstream team to figure out what impact, if any, result in a new sort of optimized view of that over the coming years. But I think with everything we've laid out in March and everything we've laid out today, the overall picture, the overall game plan has not changed, other than we got more running room.

Yes. Okay, great. Thanks, guys.

The next question comes from Welles Fitzpatrick with SunTrust. Please go ahead.

Hey. Good morning. Maybe the first one to follow-up on Holly's question, and obviously, you guys are going to talk more about this on the Midstream call. But the 70 additional locations from the transaction, is it safe to assume that those are in the kind of 9,500 foot lateral range and that the royalty is probably a little bit closer to market price than the kind of 9% to 13% that you guys currently enjoy in Southwest PA?

Yeah. I don't have the breakout of the royalty interests offhand. There is some feed (00:38:51) properties associated with some of that. I don't remember the split offhand. But in general, these are wet properties. So they sort of kind of add some of those inventories to our positions and attractive – Tim can talk more, but attractive acreage footprint that allow us a lot of different options on how we want to lay out the laterals.

Okay, perfect. Sorry. Go ahead.

It'll fit with the average lateral lengths that we've laid out from our Analyst Day.

Okay, wonderful. And then just a modeling one. Obviously, the water disposal costs you hit on pushed up 1Q LOE. But obviously, we have full year guidance out there, but should we see a big drop into 2Q with the shallow divestiture? Presumably, those had a much higher per unit LOE even though the production wasn't that flush.

I think the shallow operating wells were – did have an higher operating cost. So, the impact of that'll be reflected. Those being moved out. And then, as far as the water, we've already taken steps to improve those costs. That was really – a lot of that was tied to – it's tied activity set. It was also impacted by weather. We had to take more of our water to disposal. And because of the weather that we saw early on in the quarter, more operators had to take water to disposal because of slowdown in activity and created some long wait times of disposal wells and increased our disposal cost. But we've already – like I said, we've already taken steps to improve that significantly.

Okay. Makes sense, and then just one last one from me. Any update on the Cardinal open season? And post the CBM sale, is that thought of internally as much more of a drop candidate than a sale candidate?

Yeah. So, no further updates on any open season there. But we've laid it out as a potential drop candidate into CNXM. We do think highly of the asset. It's a positive free cash flow producing asset like anything. We're always looking to maximize opportunities any time they present themselves. But right now, we're just going to continue to enhance the value there.

That's great. Thanks and congrats and it looks like a great transaction with HG.

Yeah. Thank you.

Thanks, Welles.

Next question comes from Sameer Panjwani with Tudor. Please go ahead. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: Hey, guys. Good morning.

Good morning. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: On the Utica in Southwest PA and Central PA, are you planning to test spacing in 2019? Just looks like you're a little bit tighter versus the Ohio, Utica where spacing was widened out a little bit.

I think that'll be a part of the natural progression as we move from delineation into development mode with the two Aikens wells that we drilled. We did some testing that would give us some thoughts into spacing. But, yes, as we do more and more, that will be a part of our development process, understanding proper spacing, proper completion designs and size, and we'll move forward with that. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay, great. And then, on the asset exchange with HG, looks like you're giving up a bit on the Midstream side. I just wanted to see if there is any impact to the dropdown EBITDA potential. And then, kind of following on with that, does the transaction on the Midstream side help the Midstream entity potentially pull forward, I guess, the timing of any potential dropdowns?

Yeah, great question. So ultimately, the $200 million of potential drop into EBITDA, the vast majority of that was EBITDA associated with CNX assets and CNX properties, so very de minimis to the $200 million that we quoted at the Analyst Day. And we do feel that it enhances the MLP's ability on the drop side of the fence. And we'll get into that more on the second call, but the certainty in distribution growth, coupled with the potential upside of incremental volumes, incremental wells being drilled, enhances its ability to finance things sooner than it otherwise could have. So we feel this is a big enhancer to both the Midstream companies' sort of standalone value and its ability to do drops with CNX Resources. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay. Perfect. And then last one for me. Just thinking about the leverage metric governor of 2.5 times, as you guys think about it internally in terms of potential capacity for additional buybacks, do you guys internally think about it on an annualized kind of full year basis or do you kind of look at it as a quarterly annualized number on the EBITDA?

Yes. So another great question. I think sort of how we talked a little bit about making sure you look at things multiple ways earlier on in the call, it's important – and we think it's important to do similar for our leverage ratio target. So, we kind of take a holistic approach. We do look at trailing 12 months. We look at next 12 months. We look at last quarter annualized. And we kind of use all three of those to kind of govern a comfortable place going forward. This, we feel, allows us to ensure that we're tracking properly and in a good spot, whether we have growing EBITDA, potentially declining EBITDA, flat EBITDA, those three across the board will always kind of keep you in a comfortable zone. So we look at them all and we'll continue to look at them all as we go forward. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay Thanks, guys.

This concludes our question-and-answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Great. Thanks, Anita. And thank you, everyone for joining. We look forward to speaking with everyone again next quarter. Thank you.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.