CNX Gas (CXG) at Howard Weil

CNX Gas

Most assets in Appalachian Basin – total company wide is 1.3 TCF proved reserves. 3.8 million acres total company.

Very far ranging assets – they have Coal Bed Methane, Shale plays, tight gas, etc.

Although these are assets which are very old and were handed down – they were never worked over because they were owned by Consolidated, which focused on coal.

7% of acreage holds all proved assets.

CBM assets – Virginia, Mountaineer, Nittany, and Illinois Basin. The majority of reserves are in Virginia and will drill 300 wells there in 2008. Total inventory is 2578. Seven active rigs. CXG owns its own midstream assets in area and has two pipelines and can sell into two different hubs.

Mountaineer play is key play – 100 wells to be drilled in 2008 – 6 rigs running - this was a new start up area 2 ½ years ago.

Nittany – in Pennsylvania – production started in November 2007 – 100 wells in 2008.

Shale Potential – Want to go slow - $88 million plan to examine these areas – they have 4 areas – Marcellus, Chatanooga, Huron and New Albany.

Marcellus – acreage goes from Upstate New York down to Pennsylvania, Ohio and West Virginia.

CNX Gas and Valuation

In late January, the parent who owns 80% tried to buy the rest – they abandoned this plan and the stock has been flat since then. Company feels this is unjustified.

Proved reserves have grown 7.5% from 2003-2007 but remember company is not focused on growing proved reserves during that time when it spent most resources moving PUD’s to PDP’s.

15.5% production growth through 2010.

Finding costs of $1.25 per MCF calculated as drilling CAPEX of $175 million divided by net reserves ads and production of 136 BCF.

Company says they are “debt free” and can fund entire CAPEX program with cash flow.