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Why CNX Resources Stock Is Surging Today

By Matthew DiLallo - Jul 30, 2019 at 12:35PM

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The natural gas drilled pleased investors.

What happened

Shares of CNX Resources (CNX -0.66%) rallied nearly 16% by 10:45 a.m. EDT on Tuesday. Fueling the natural gas driller's surge was its second-quarter earnings report.

So what

CNX Resources reported $162 million, or $0.84 per share, of adjusted net income, which came in well ahead of the analysts' consensus estimate of $0.14 per share. That's because the company recorded an unrealized gain on commodity price hedges of $211 million during the quarter. After adjusting for one-time items, the company's net income was $0.06 per share.

A natural gas well with pipelines at sunset.

Image source: Getty Images.

The company's operations performed well during the second quarter. CNX Resources' sales volumes rose 10% year over year while cash costs declined 23%. That helped the company partially offset weaker commodity prices during the period.

CNX Resources also updated its full-year guidance. The company now expects to produce between 510 billion and 530 billion cubic feet equivalent (Bcfe) of natural gas this year. That's an increase from its prior view that production would be between 495 and 515 Bcfe. The company also reaffirmed its capital expense budget range. It expects to produce more gas for the same amount of money.

The natural gas driller also updated its 2020 outlook. It now expects to grow its production by another 12% next year while generating $135 million in free cash flow at current gas prices.

Now what

CNX Resources is doing a good job navigating through the challenging natural gas market. The company continues to focus on drilling high-returns wells, which has it on track to produce significant free cash flow next year. That inflection point is why this natural gas stock caught the attention of one of the world's best investors.

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