CNX Gas Corporation reported net income attributable to CNX Gas shareholders of $35.5 million, or $0.23 per diluted share, for the quarter ended September 30, 2009. This compares to $67.4 million, or $0.45 per diluted share, for the quarter ended September 30, 2008.
Production was 24.8 billion cubic feet (Bcf), or 269 million cubic feet (MMcf) per day, for the quarter ended September 30, 2009. This was another quarterly production record, and 26% higher than the 19.7 Bcf, or 214 MMcf per day, for the year-ago quarter. It was also 10% higher than the 22.5 Bcf produced in the quarter ended June 30, 2009.
"We are pleased to announce that CNX Gas set another quarterly production record, and did it safely," said J. Brett Harvey, chairman and chief executive officer. "With our increasing Virginia coalbed methane production and our Marcellus Shale success, we are again raising our 2009 production guidance. If you recall, our original 2009 production guidance was 85 Bcf. In July, we raised it to 89 Bcf. And now, we've raised it by another 3 Bcf, to 92 Bcf. If achieved, this would represent a 20% increase in production from the 76.6 Bcf we produced in 2008. While our quarterly earnings are lower because of weak spot gas prices, we've been successful in lowering unit costs.
"CNX Gas is growing production faster than most of the competition, is reporting better earnings than most of the competition, and is continuing to invest in its significant growth prospects, especially in coalbed methane and the Marcellus Shale. I believe that investors will increasingly recognize CNX Gas as a core holding for their energy portfolios."
Overview of Operations
Central Appalachia Operations
Total production in Central Appalachia, which includes Virginia CBM and Chattanooga Shale, was 18.7 Bcf in the quarter ended September 30, 2009. This was 2.2 Bcf higher than the 16.5 Bcf produced in the quarter ended September 30, 2008. The Central Appalachia September run rate was 207 MMcf per day.
CNX Gas drilled 45 vertical frac wells in its Virginia CBM Operations during the third quarter and 163 wells in the first nine months. CNX Gas expects to drill 175 wells in Virginia in 2009.
CNX Gas continues to be encouraged by its early Chattanooga Shale results. The company has been pursuing a delineation program across its position, which now stands at 268,000 mostly contiguous acres. One well, which came online on October 21, 2008, has produced over 140 MMcf, and is now producing at a daily rate of 861 Mcf, plus a few barrels of oil. A four-stage nitrogen foam frac was employed on this well. CNX Gas continues to acquire acreage in the Chattanooga Shale.
Northern Appalachia Operations
Total production in Northern Appalachia, which includes Mountaineer CBM, Nittany CBM, and Marcellus Shale, was 6.0 Bcf in the quarter ended September 30, 2009. This was 2.9 Bcf more, or almost double, the 3.1 Bcf produced in the quarter ended September 30, 2008. The Northern Appalachia September run rate was 66 MMcf per day.
Of this Northern Appalachian production, 1.5 Bcf was from the Marcellus Shale in the just-ended quarter, versus zero in the same quarter last year.
No coalbed methane wells were drilled in Northern Appalachia in the just-ended quarter.
In the Marcellus Shale, CNX Gas drilled, completed, and brought three more horizontal wells online, raising the total to eleven. The peak daily production from well CNX#2B was 3.0 MMcf and from well GH34CV was 2.5 MMcf. The latest well to come online, GH15CV, has not yet reached its peak.
The latest well drilled, NV20CV, is located in northern Greene County, Pa. It is the first horizontal Marcellus Shale well that CNX Gas has drilled outside of its original Greene Hill area, in central Greene County. It is also the first in a set of six wells to be drilled on a single pad. NV20CV is currently awaiting hydraulic fracturing.
The cost of the horizontal wells drilled during this quarter averaged less than $3.5 million per well.
The company continues to be excited about its success in the Marcellus Shale play and, as a result, has increased its capital for lease and land acquisition.
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