I am assigning CNX Resources Corporation (NYSE:CNX) a positive risk/reward rating based on its core acreage position in the heart of the Marcellus and Utica shale plays, its discounted valuation, substantial free cash flow generation, its shareholder-friendly capital allocation, and its proximity to long-term technical support.
Risk/Reward Rating: Positive
The Appalachian basin houses two of the largest gas resources in the world, the Marcellus and Utica shale plays. They are geographically similar in terms of surface footprint, with the Utica being deeper than the Marcellus. While there remains great uncertainty about the ultimate recoverable gas resource, official estimates have been proven conservative throughout the history of the play. The trend of consistent and material upside surprises in gas production, and thus the ultimate resource potential, should continue.
As we will see, official estimates remain conservative today. A recent report authored by Ray Boswell, “Evaluation of Technically-Recoverable Resources in the Marcellus and Utica Shale Gas Plays of the Appalachian Basin,” was published by the National Energy Technology Laboratory on June 23, 2021. The report captures the current state of estimates for what some have called “the Saudi Arabia of natural gas.”
The Saudi Arabia Of Natural Gas
The cornerstone of the CNX Resources investment case is the size and quality of its resource base, which is composed entirely of its Marcellus and Utica acreage in Pennsylvania, West Virginia, and Ohio. As a result, reviewing the resource base is a top priority.
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