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$7 Billion in Clean Hydrogen Grants: Winners and LosersCNX Resources NYSE: CNX outlined its outlook for federal clean-fuel tax credits, capital allocation, drilling activity and production timing during its second-quarter 2026 question-and-answer conference call.
Management said updated Treasury guidance and confirmation regarding qualifying methane streams have increased the company’s expectations for monetizing credits under Section 45Z. The company also reiterated that its capital-allocation approach remains centered on long-term per-share value, including potential share repurchases when management sees a substantial margin of safety.
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45Z Credit Expectations Rise Chief Financial Officer Everett Good said CNX received confirmation that methane captured during the first four months of 2025 qualified for the 45Z credit. That confirmation supported an increase in the company’s expected cash flows for 2026.
Good said Treasury also refined carbon-intensity calculations in its GREET model, raising CNX’s projected annual 45Z monetization value to about $40 million. He said CNX expects to combine future 45Z credit sales with environmental attributes to target a run rate of approximately $90 million annually beginning in 2027.
President and Chief Executive Officer Alan Shepard said Treasury guidance is expected during the second half of 2026.
CNX said it monetized $30 million of credits, with the cash-flow impact expected to appear in the third quarter. Shepard said the accounting treatment will be reflected through the income-tax expense line rather than EBITDA.
On potential expansion of its methane-remediation activities, Shepard said the company is monitoring whether lower carbon-intensity scores and higher credit values could support additional investment. CNX has rights and opportunities to expand the system, he said, but no definitive expansion plans are in place.
“Nothing near term, no. Nothing for the rest of this year,” Shepard said in response to a question about additional remediation projects beyond the Buchanan Mine.
Good also addressed the Pennsylvania alternative energy credit, or AEC, market. He said CNX is using observed ICE market pricing in its assumptions and is currently modeling the market as stable to flat, while recognizing that the market can be volatile.
Capital Spending and Share Repurchases CNX said its projected capital spending remains positioned around the midpoint of its full-year 2026 guidance range. While third-quarter spending is expected to rise from second-quarter levels and then level out in the fourth quarter, Shepard said that timing reflects field activity rather than cost inflation.
“Not seeing really anything on the inflation side to note,” Shepard said.
Management declined to provide quarterly capital-spending guidance, emphasizing that investors should evaluate the company against its full-year guidance range.
Shepard said CNX has not changed the capital-allocation process it has followed for roughly six and a half years. He said the company’s priority is creating long-term value per share and that CNX has flexibility to act when it identifies attractive opportunities in its equity.
Asked about the company’s willingness to use debt, including its revolving credit facility, to support additional repurchases, Shepard said the near-term natural-gas outlook appears softer heading into 2027, while the longer-term outlook for Appalachian gas remains strong.
Under that view, he said, an upstream operator could be more interested in repurchasing shares, subject to appropriate constraints and risk management. He added that CNX would continue evaluating capital deployment through its established process.
Drilling Activity and Production Timing Management said second-quarter drilling activity and spending were in line with its plans, despite questions from analysts about whether spending was lower than expected. CNX drilled two Utica wells during the quarter, and Shepard said the pace reflected the company’s planned activity schedule.
For the second half of the year, CNX expects a large Marcellus pad currently in progress to enter production during the third quarter. Shepard said the pad represents approximately 12 to 13 annualized wells.
The company’s current Utica pad is expected to come online later in the fourth quarter. Shepard said that schedule should result in a couple of larger wells coming online in the third quarter, followed by additional production growth in the fourth quarter.
He said CNX does not over-engineer its production schedule around seasonal gas-price expectations, though the company’s planned completion timing naturally positions some production later in the year.
Utica Performance and Well Costs CNX said it continues to see operational improvement in its Utica drilling program. Shepard said the company has achieved recent 24-hour drilling records and continues to improve drilling performance as it returns to pads and advances through additional wells.
The company continues to use an estimated well-cost level of approximately $1,700 per foot for the Utica, according to Shepard. He said the most significant potential for future improvement remains in drilling, while completions and other well-construction costs have been relatively steady.
CNX plans to provide a further update when it has a more complete data set, he said.
Shepard also said the company’s Utica wells in central Pennsylvania are performing in line with CNX’s prior guidance. Based on state data and other available information, he said management is pleased with the results and considers the asset “top tier in the basin.”
Regarding longer lateral lengths in southwestern Pennsylvania during the second quarter, Shepard said the lengths are primarily determined by acreage configuration. CNX seeks to maximize lateral length where possible because longer laterals generally improve well economics.
About CNX Resources (NYSE:CNX)CNX Resources Corporation is a natural gas and natural gas liquids producer with operations concentrated in the Appalachian Basin. Established as an independent, publicly traded entity in 2018 following its spinoff from Consol Energy, the company focuses on the exploration, development and production of hydrocarbon resources in the Marcellus and Utica shales across Pennsylvania, West Virginia and Ohio.
In addition to its upstream activities, CNX Resources has invested in midstream infrastructure through its subsidiary that gathers, processes and transports natural gas.
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