CNX Resources Corporation (NYSE: CNX) ("CNX" or "the company") announced it has entered into a definitive agreement to acquire the natural gas upstream and associated midstream business of Apex Energy II, LLC ("Apex"), a portfolio company of funds managed by Carnelian Energy Capital Management, L.P. ("Carnelian"), in the Appalachian Basin for total cash consideration of approximately $505 million, subject to certain adjustments including an effective date of October 1, 2024. Completion of the transaction, which is subject to the satisfaction of customary closing conditions, is expected to occur in the first quarter of 2025.
CNX president and CEO Nick Deiuliis stated, "This transaction represents a rare opportunity to acquire a highly complementary asset adjacent to our existing operations. It underscores our confidence in the stacked pay development opportunities that have been unlocked from pioneering the deep Utica in this region."
The acquisition strategically expands CNX's existing stacked Marcellus and Utica undeveloped leasehold in the CPA region and provides an existing infrastructure footprint that can be leveraged for future development. Additionally, CNX expects operational and other development synergies to add incremental value to the core business in the coming years.
The acquisition is expected to be immediately accretive to CNX's key metric of free cash flow per share. The attractive acquisition price and free cash flow profile of the assets allows the company to maintain its strong balance sheet and preserve significant capital allocation flexibility moving forward.
Transaction Highlights
- Valuation supported by substantial cash flow from existing production base:
- Expected 2025 average daily production of 180 - 190 MMcfe/d
- Expected 2025 EBITDA1 of approximately $150 - $160 million at recent strip
- Fully integrated gathering midstream aligns with CNX's low-cost strategy:
- Expected 2025 operating costs of approximately $0.16/Mcfe for the acquired assets
- Significant existing infrastructure can be leveraged for future stacked pay development of the Marcellus and Utica
- Expands core strategic development footprint:
- Adds approximately 36,000 total net acres (94% held) in Westmoreland County, Pennsylvania
- Includes approximately 8,600 acres of undeveloped Utica and 12,600 acres of undeveloped Marcellus
Financing Highlights
Total cash consideration for the acquisition is approximately $505 million and will be funded with CNX's secured credit facility. In May 2024, CNX amended its secured credit facilities, extending the maturities to May 2029 and increasing the total elected commitment amounts to $2.0 billion. As of September 30, 2024, CNX had approximately $1.8 billion of available borrowing capacity under the secured credit facilities. Post acquisition, the company expects leverage ratios to be minimally impacted, preserving its significant capital allocation flexibility.
Advisors
BofA Securities is serving as exclusive financial advisor to CNX. Jones Day is serving as legal advisor to CNX. Piper Sandler & Co is serving as exclusive financial advisor to Apex and Carnelian. Kirkland & Ellis LLP is serving as legal advisor to Apex and Carnelian.
