CNX Gas Reports that Proved Reserves Increase 6% to 1.4 Tcf; 3P Reserves Increase 20% to 2.7 Tcf; Net Unrisked Resource Potential of 4.7 to 12.6 Tcf
An additional 1,323 Bcf are categorized as probable or possible reserves as of
Additionally, CNX Gas updated its estimates of net unrisked resource potential of the company’s extensive Eastern Shale position in a range from 4.7 trillion cubic feet (Tcf) to 12.6 Tcf. When combined with the 3P reserves, it means that total recoverable reserves and resources could range from 7.4 Tcf to 15.3 Tcf.
“CNX Gas invested
CNX Gas drills infill wells to accelerate the monetization of its fields and improve its return on capital employed. Additional reserves from infill locations are booked in the year in which the company receives regulatory approval for downspacing, not the year in which the wells are ultimately drilled.
The 182.7 Bcf from extensions and discoveries which were booked during 2008, when divided by 2008 production of 76.6 Bcf, means that the company replaced 238% of production in 2008.
Of the 1,422 Bcf of proved reserves, 783 Bcf, or 55%, are categorized as proved developed. At year-end 2007, 671 Bcf, or 51% were categorized as proved developed. This is another measure of the increased efficiency of capital employed. If CNX Gas achieves its production guidance of 85 Bcf for 2009, it means that the company has a reserves-to-production ratio, or R/P, of 16.7 years. This is a reduction from 17.5 years in 2008, when CNX Gas produced 76.6 Bcf from a starting proved reserve base of 1,343 Bcf. To put this into perspective, in 2005 when CNX Gas became a public company, the R/P ratio was over 21 years.
The proved reserve estimates for both 2008 and 2007 were prepared by Data & Consulting Services Division of Schlumberger Technology Corporation.
The following table shows the breakdown of reserves, in Bcf, from the company’s current development and exploration plays. Over 99 percent of the company’s proved reserves are gas:
Proved Proved Total Total
Developed Undeveloped Proved Probable Possible 3P
--------- ----------- ------ -------- -------- --
Virginia Operations
(CBM) 679 601 1,280 284 375 1,939
Mountaineer (CBM) 55 17 72 31 214 317
Nittany (CBM) 20 5 25 11 47 83
--- --- ----- --- --- -----
Total Appalachian
CBM 754 623 1,377 326 636 2,339
Chattanooga Shale 4 7 11 9 23 43
Marcellus Shale 4 6 10 40 59 109
Other 21 3 24 2 228 254
--- --- ----- --- --- -----
Total 783 639 1,422 377 946 2,745
Definition: Total 3P is a summation of total proved, probable, and
possible reserves.
Schlumberger calculated that the future net cash flows of the CNX Gas proved gas reserves have a present value of nearly
CNX Gas has also updated its estimated range of net unrisked resource potential of the company’s extensive Eastern Shale position.
Low High
Acres (Bcf) (Bcf)
----- ----- -----
Chattanooga Shale 244,000 1,100 2,500
Huron Shale 203,000 450 1,100
Marcellus Shale 186,000 2,000 7,000
------- ----- -----
Total Appalachian Shale 633,000 3,550 10,600
New Albany Shale 337,000 1,100 2,000
------- ----- ------
Total Eastern Shale 970,000 4,650 12,600
The range of net unrisked resource potential is based on both internal and external sources. In the Marcellus Shale, no value is assigned to the 79,000 acres that are in
CNX GAS CORPORATION is an independent natural gas exploration, development, production and gathering company operating in the Appalachian and
Reconciliation of PV-10 to Standardized Measure (as of December 31)
2008 2007 2006
Future cash inflows $8,856,817 $9,509,665 $7,105,265
Future Production Costs (3,525,901) (3,004,619) (2,568,731)
Future Development Costs (793,591) (636,436) (552,114)
--------- --------- ---------
Future net cash flows (4,537,325) 5,868,610 3,984,420
10% discount factor 2,579,396 (3,581,183) (2,484,756)
--------- --------- ---------
PV 10% (Non-GAAP measure) 1,957,929 2,287,427 1,499,664
Undiscounted Income Taxes 1,713,713 (2,259,415) (1,500,533)
10% discount factor 974,218 1,361,528 935,760
--------- --------- ---------
Discounted Income Taxes 739,495 (897,887) (564,773)
Standardized GAAP measure $1,218,434 $1,389,540 $934,891
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements in this release, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934). These statements involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following: our business strategy; our financial position; our cash flow and liquidity; declines in the prices we receive for our gas affecting our operating results and cash flow; uncertainties in estimating our gas reserves; replacing our gas reserves; uncertainties in exploring for and producing gas; our inability to obtain additional financing necessary in order to fund our operations, capital expenditures and to meet our other obligations; disruptions, capacity constraints in or other limitations on the pipeline systems which deliver our gas; competition in the gas industry; the availability of personnel and equipment; increased costs; the effects of government regulation and permitting and other legal requirements; legal uncertainties regarding the ownership of the coalbed methane estate; costs associated with perfecting title for gas rights in some of our properties; our need to use unproven technologies to extract coalbed methane in some properties; our relationships and arrangements with CONSOL Energy; and other factors discussed under “Risk Factors” in the 10-K for the year ended
CAUTIONARY STATEMENT CONCERNING 3P AND PROBABLE AND POSSIBLE RESERVES AND RESOURCES
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as “3P” and “probable” and “possible” reserves and/or “resource potential” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. We also caution you that the SEC views such “3P” and “probable” and “possible” reserves and/or “resource potential” estimates as inherently unreliable and these estimates may be misleading to investors unless the investor is an expert in the gas industry.
The “3P” and “probable” and “possible” reserve data and/or “resource potential” contained in this release is based on a summary review of the title to coalbed methane and other gas rights we hold, as well as a summary review of the title to the coal from which many of our rights derive. As is customary in the gas industry, prior to the commencement of gas drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects. We are typically responsible for curing any title defects at our expense. This curative work may include the acquisition of additional property rights in order to perfect our ownership for development and production of the gas estate.
Contact:
Dan Zajdel
Vice President - Investor Relations
(724) 485-4169
danzajdel@cnxgas.com
www.cnxgas.com
SOURCE CNX Gas Corporation