Good morning, and welcome to the CNX Resources First Quarter 2024 Q&A Conference Call. [Operator Instructions] 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.

Thanks, and good morning, everybody. Welcome to CNX's First Quarter Q&A Conference Call. Today, we will be answering questions related to our first quarter results. This morning, we posted to our Investor Relations website an updated slide presentation and detailed first quarter earnings release data such as quarterly E&P data, financial statements and non-GAAP reconciliations, which can be found in a document titled 1Q 2024 Earnings Results and Supplemental Information of CNX Resources. Also, we posted to our Investor Relations website our prepared remarks for the quarter, which we hope everyone had a chance to read before the call as the call today will be used exclusively for Q&A. With me today for Q&A are Nick DeIuliis, our President and CEO; Alan Shepard, our Chief Financial Officer; Navneet Behl, our Chief Operating Officer; and Ravi Srivastava, President of our New Technologies Group. Please note that the company's remarks made during this call, including answers to questions, include forward-looking statements which are subject to various risks and uncertainties. These statements are not guarantees of future performance, and our actual results may differ materially as a result of many factors. A discussion of risks and uncertainties related to those factors and CNX's business is contained in its filings with the Securities and Exchange Commission and in the release issued today. With that, thank you for joining us this morning. And operator, can you please open the call for Q&A at this time.

[Operator Instructions] The first question is from Zach Parham with JPMorgan.

First, I just wanted to ask on New Tech. Earlier this week, you announced 2 new ventures in that business, one in OFS and one in alternative fuels. Could you just quantify the potential cash flow generation potential of these 2 ventures and give us some detail on the timing of these 2 ventures generating some cash flow?

Zach, this is Ravi. Our guidance for 2024 is unchanged. Our free cash flow guidance for 2024 remains at $75 million a year from -- for the New Tech business group -- business unit. And as far as the future potential, the commercial opportunities are still taking concrete form. I think we'll be able to talk more about these opportunities more in greater detail in the coming quarters, but we expect them to start taking form towards the end of '24 and have more meaningful impact in '25 and '26. So stay tuned.

Got it, Ravi. And then shifting gears a little bit. You were aggressive with the buyback again in the first quarter. And over the last 3 quarters, you've been really aggressive, bought back at about double the level of free cash flow generation. It does seem like the buyback pace slowed a little bit in April. Can you just give us your latest thoughts on how you're thinking about allocating free cash flow between buybacks and debt reduction going forward?

Yes. Look, this is Alan. Look, we talked about in the prepared commentary, our unsecured maturity runway and kind of low secured debt gives us a lot of flexibility on a quarter-to-quarter basis. We're always evaluating the pace and timing of buybacks. In Q1, we saw a real opportunity. The stock was trading in the 20s to grab a lot there, modulated a little bit. Later in the quarter as the stock kind of ran up, I think if you look at $50 million over the projected $300 million, there's still a lot of room to buy back shares for the remainder of the year. So consistent as always, we're going to be flexible, try to maintain flat to declining debt, but no real changes to the strategy.

The next question is from Leo Mariani with ROTH MKM.

I just wanted to continue to focus a bit on the New Tech businesses here. Obviously, kind of a lot going on with the new kind of CNG, LNG business as well as the OFS business. I was hoping you could speak a little bit more to kind of what the physical mechanism here is on these businesses? I mean it sounds like from the press release, there could be some type of proprietary devices that allow you guys to really capture the CNG without the aid of additional mechanical compression. And just also on the well flowback as well, presumably there's some kind of proprietary device that you guys are using here. So maybe can you just kind of speak to that and give us a little bit more color on exactly kind of what this product is that you're going to be rolling out to folks?

Thanks for the question. I haven't heard the rest of the questions, but this might be my favorite question for this hour because we want to talk about the technology that we have developed. We are pretty excited about it. It's been in the works for a few years now. We have teased in the past earnings calls, and we're very happy that we've reached this milestone where we've engaged in these partnerships, where we can start to bring these technologies to market. So to talk more about the technology, what I would do is like I would break the technology to 2 segments. And the first step involves combining various discrete functions that are performed in a conventional flowback, like pressure management, solid and sand removal and high rate flowback fluid removal. So these are discrete steps in the conventional flowback. What our technology does is it combines all this into one equipment, into one step, and we can implement all this from a highly automated piece of equipment. And we can perform all this at a very high pressure and rate. And because our solution does this in a materially smaller footprint, it reduces the environmental impact. And the footprint that's required to deploy this technology, it can be deployed much faster than a conventional flowback spread, which results in a lower cost and reduced cycle times for operators. It's a sealed system, and because of that, it eliminates any fugitive methane emissions. And it's highly automated, which results in the reduced manpower required to operate this, which results in improved safety performances and reduced costs. So for this particular technology, for this particular application, like our estimate shows that there's 20,000 wells that are flowed back in U.S. and 60,000 wells internationally. And all of these wells,…

Leo, this is Nick. Maybe, too, it will be helpful because to your point, there are specific questions about technology and market for these announcements we've made. But also, these announcements are sort of additional developments, I call them in a much bigger thing that we've been working on now with New Tech for a couple of years. And it ties to a couple of realities, facts out there in the world today in our industry, right? One is that you got this global demand for energy that keeps growing. And you see it in advanced economies like ours, with AI and data centers, you see it in a developing world where they're looking for and insisting on better quality of life for their people and citizens. So the world wants all these additional Btus, horsepowers, kilowatt hours, and they want lower emissions to go along with it. But there's other truths that we're seeing as well. Wind and solar at scale, when you couple that with electrifying everything, that is a recipe for grid disaster and the degree of subsidy probably doesn't change the physics of the matter. So that exclusively is going to have some challenges. We see ideas right or opportunities to export more Appalachian gas and LNG units to places like India, China, Europe, wherever. And that sounds great, and it's got a certain degree, I guess, of logical merit to it. But the reality there is that you're going to have to build extensive pipelines and LNG facilities to do it. And in this lifetime, that's going to be really challenging. So in terms of the near intermediate term, that's sort of [ DOE -- DOA ], I'm sorry, as an option. And really, it's sort of inefficient when you think about it because in…

That's certainly helpful. I certainly appreciate all of the detail here. I think many, many folks are sort of wondering about a lot of this. So I think that's very helpful. And just a quick follow-up to that. So if I kind of read you correctly, it sounds like that you may be kind of starting to roll this out to third-party customers later this year and start to see some revenue end of this year and into 2025. Can you maybe just talk to the capital side? Do you expect any meaningful capital associated with any of these new businesses that you've announced? Or is it a fairly kind of low capital intensity endeavor for the company?

Leo, this is Ravi again. So the capital needs for these solutions are very, very low, especially compared to our E&P program. And there's no -- at this stage, no incremental capital is planned for 2024.

The next question is from Bertrand Donnes with Truist.

Just wanted to shift gears real quick on to the activity curtailments. Maybe just get your thoughts on why you kind of stopped at 11 wells. I would think there's some argument that your hedging is insulating you, but probably another side of that is, why don't you just pocket the hedging gains and also curtail production? We had quite recent drop. Just any thoughts on -- are you more inclined to hold at this level? Or are you kind of seeing prices and thinking about dropping more?

Yes. I think insulating now, we're kind of sticking to the guidance we gave, we're going to hold a few 11 deferrals for now. It's something we constantly watch. In terms of the discrete decision on those wells, it's a function of coordinating with your operations team on where there's a clean break in terms of which wells you can stop on versus which ones might already be in process. So there's no real magic to that other than taking up with operations to get to the best answer overall from a free cash flow basis.

Sorry. I mean what about actual shut-ins or any of that kind of activity?

No, not costs at this time. Most of our wells run a very low variable costs. So we're still making pretty healthy margins on those. As you pointed out, we're getting pretty close to hedge levels. So we have very little in terms of open volumes. So we're kind of just working the -- just some volumes we have into the hedge book.

That makes sense. And then just to pile on to the New Tech, maybe just a little bit of a different approach for this. In the prepared remarks, you referenced the potential to be a meaningful free cash flow contributor on the DWS side. I just wasn't sure, am I reading too much into that versus the NuBlu agreement? Or is there a tangible difference between the two?

I would say, I mean, Ravi talked about a little bit -- they both have very large addressable markets. I think the market for flowback is a little more developed, right? It's very identifiable, and we think we'll probably ramp quicker into that market because there is an activity going on and it's a clear superior technology to deploy. CNG and LNG, we've been pushing on those. There are markets for those currently with a lot of the electric frac fleets and market penetration there we're optimistic on, but it will probably be a little bit slower than Deep Well, that's why we made that comment. Does that make sense? Ravi, I don't know if you have anything?

That's absolutely correct. I think the flowback market is something that we can penetrate into very, very quickly. And CNG market is going to take a little bit more time to walk.

[Operator Instructions] The next question is from Jacob Roberts with TPH & Company.

I just wanted to -- I just wanted to touch base on the kind of the preliminary 2025 outlook. Just curious with the activity levels assumed in that $550 million program? And then maybe if you could provide any color on the kind of the price outlook you might need to see to trigger that incremental $50 million beyond the $500 million you've spoken to about relative to maintenance?

Yes. It's the same underlying activity set that we talked about on the last call that we can guide to kind of that $500 million run rate. All you're seeing there is the shifting of those 11 wells that we defer into early next year, if we were to ramp back up from, call it, this 550, 560 area back to that 580 target. So that's all we're trying to indicate there. And we're going to watch where kind of the pricing develops to. I think we've got a lot to be learned over the summary here in terms of how sustainable the production drops are, how hot summer is. There's a lot of factors that will go into the ultimate planning for 2025. And once we're in a position to firm that up, we will.

Great. And the second question, looking at Slide 5 of the deck, with the debt stack kind of not really weighted to the first part of the next decade. Just curious if it changes the philosophy around the duration of the hedge book as we enter the back half of this decade?

Yes. No, great question. So definitely, the balance sheet and the hedge book are correlated or have a relationship. I think what we've talked about in the past on hedging is that we're looking to shorten up the overall length of the book. Historically, we've got around 5 years. We've been kind of watching the books come in by 12 to 18 months. So we're still very much in the camp of hedging going into the near-term year, but just trying to maintain flexibility in kind of the outer years as we see the volatility continue in our space, particularly with some of the projections you're seeing in power demand and in gas demand, we want to make sure that we're able to capture those through our hedging program but not getting too far out.

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

Thank you again for joining us this morning. Just feel free to reach out if anyone has any additional questions. Otherwise, we look forward to speaking with everyone again next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.