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CNX emphasizes free cash flow advantage ahead of 'stingier' capital markets from SNL Energy Finance Daily CNX emphasizes free cash flow advantage ahead of 'stingier' capital marketsByline: Allison Good While CNX Resources Corp.'s free cash flow record may not drive its equity value, the Appalachian shale gas driller's executives are confident that the firm will have an easier time tapping capital markets in the future. The producer is targeting $425 million of free cash flow in 2021 and an average $500 million of free cash flow per year between 2022 and 2026. Still, CFO Donald Rush said investment banks' focus on EBITDA multiples overshadows free cash flow regarding CNX's stock price. "If you just look at the research community and others, they're still valuing companies off of EBITDA multiples ... but it hasn't actually showed up in shareholder value," he said during a Jan. 28 fourth-quarter earnings conference call. "Everybody, I think, will be better off if the focus on free cash flow is the main driver on how companies are viewed and EBITDA multiples remain the soup of the day." Analysts at Truist Securities told clients Jan. 28 that they "continue to forecast CNX to have nearly the highest FCF yield this year in our coverage group," creating opportunities for paying down debt, repurchasing shares and reestablishing a quarterly dividend. Buying out its midstream arm proved particularly lucrative for CNX's free cash flow, Rush noted. "Do we think that it's a big part of what drives the future economics of the company? Yes. Do we think it's a big piece of why our cash flows are so much lower-risk than the peers? Absolutely," he said. "What our peers would look like at a 50-cent higher gas price, we look like now." The free cash flow metric will become even more important as upstream firms compete for funding, according to CNX President and CEO Nick DeIuliis. "It's going to get stingier in terms of being able to make your case to secure capital, and those that can be free cash flow generators and self-fund and take advantage of the stingier capital environment are going to be the ones that not just navigate through it but thrive in it," he said. CNX separately on Jan. 28 reported a fourth-quarter 2020 adjusted net income of $47 million, an increase from $21 million in the same period in 2019. Fourth-quarter 2020 net income attributable to CNX Resources shareholders came in at $195.8 million, compared to a net loss of $271.4 million in the prior-year period. The corporation's production came in at 146.5 Bcfe in the fourth quarter of 2020, compared to 143.4 Bcfe in the same quarter in 2019. |
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