Investment in our securities is subject to various risks, including risks and uncertainties inherent in our business.
−Removed: In addition to the other information contained in this Form 10-K, the following risk factors related to our business, operations, investments, financial position or future financial performance or cash flows should be considered in evaluating our company.
−Removed: If any of the following risks were to occur, it could cause an investment in our securities to decline and result in a loss.
+Added: In addition to the other information contained in this Form 10-K, the following risk factors related to our industry, business, operations, financial position and performance should be considered in evaluating our Company.
+Added: If any of the following risks were to occur, it could negatively impact our Company and cause an investment in our securities to decline in value.
Risks Related to Economic Conditions and our Industry
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This oversupply of natural gas, beginning in 2012, has resulted in depressed domestic prices for most of that period.
−Removed: Industry drilling has continued in these plays, despite these lower gas prices, as producers continued to become more efficient.
+Added: Development has continued in these plays, despite these lower gas prices, as producers continue to become more efficient.
+Added: Evidence of volatility was present during 2022 as natural gas prices were significantly higher primarily due to lower domestic production and increased LNG export demand.
CNX expects continued volatility of natural gas prices in the future.
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Not all of the natural gas produced in this region can be consumed by regional demand and must, therefore, be exported to other regions, which causes natural gas produced and sold locally to be priced at a discount to many other market hubs, such as the benchmark Henry Hub price.
−Removed: This discount, or negative basis, to the Henry Hub price is forecasted to continue in future years for Appalachian Basin producers.
+Added: This discount, or negative basis, to the Henry Hub price is forecasted to continue in future years for all Appalachian Basin producers.
While new interstate pipeline projects could reduce this discount, it could increase further if production in the basin continues to grow and projects to move gas out of the basin are cancelled, delayed or denied for any reason, such as permitting and regulatory issues or environmental lawsuits.
−Removed: In July 2020, the Atlantic Coast Pipeline project, which was designed to move produced natural gas out of the northeast, was cancelled by its partners after nearly six years of work;
−Removed: and on January 25, 2022, the U.S.
−Removed: Court of Appeals for the Fourth Circuit invalidated the U.S.
−Removed: Forest Service and Bureau of Land Management (BLM) approvals for the Mountain Valley Pipeline to pass through the Jefferson National Forest.
−Removed: The ruling sends the permit back to the Forest Service and BLM for reconsideration.
−Removed: An extended period of lower natural gas prices can reduce cash flow, which decreases funds available for capital expenditures to replace reserves or increase production.
−Removed: Our drilling plans also include some activity in areas of shale formations that may also contain NGLs, condensate and/or oil.
+Added: For example, in July 2020, the Atlantic Coast Pipeline project, which was designed to move produced natural gas out of the northeast, was cancelled by its partners after nearly six years of work;
+Added: and in January 2022, the Mountain Valley Pipeline, which was to move produced natural gas from northwestern West Virginia through southern Virginia and into North Carolina, had its permits to pass through the Jefferson National Forest invalidated by the U.S.
+Added: Court of Appeals for the Fourth Circuit.
+Added: Our development plans and operations also include some activity in areas of shale formations that may also contain NGLs, condensate and/or oil.
The prices for NGLs, condensate and oil are also volatile for reasons similar to those described above for natural gas.
−Removed: Although the Company is able to hedge natural gas benchmarks and local basis differentials, it has not found acceptable instruments to hedge its relatively minor quantities of NGL, condensate and oil.
−Removed: In addition, similar to the oversupply of natural gas, historically, increased drilling activity by third parties in formations containing NGLs has led to a significant decline in the price CNX receives for our NGLs.
+Added: Although the Company is able to hedge natural gas benchmarks and local basis differentials, it generally does not hedge its relatively minor quantities of NGL, condensate and oil.
+Added: In addition, similar to natural gas, increased drilling activity by third parties in formations containing NGLs may led to a decline in the price CNX receives for our NGLs.
International demand and storage levels also affect NGL prices.
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• changes in levels of international demand and tariffs associated with international export;
−Removed: • the impact of domestic and foreign governmental laws and regulations, including environmental and climate
−Removed: change regulations and delays.
+Added: • the impact of domestic and foreign governmental laws and regulations, including environmental and climate change regulations and delays.
Lack of market demand could result in temporarily shut-in wells due to low commodity prices and it is possible that some of our wells may be shut-in in the future or sales terms may be less favorable than might otherwise be obtained should demand for our products decrease and/or prices decrease.
−Removed: If natural gas prices decrease or drilling efforts are unsuccessful, CNX may be required to record write-downs of our proved natural gas properties.
+Added: If natural gas prices decrease or operational efforts are unsuccessful, CNX may be required to record write-downs of our proved natural gas properties.
Additionally, changes in assumptions impacting management’s estimates of future financial results as well as other assumptions related to the Company's stock price, weighted-average cost of capital, terminal growth rates and industry multiples, could cause goodwill and other intangible assets CNX holds to become impaired and result in material non-cash charges to earnings.
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When this occurs, or when our estimates of development costs increase, production data factors change or our exploration results deteriorate, accounting rules require us to write down, as a non-cash charge to earnings, the carrying value of our natural gas properties.
−Removed: CNX is required to perform impairment tests on our assets at least annually or whenever events or changes in circumstances lead to a reduction of the estimated useful life or estimated future cash flows that would indicate that the carrying amount may not be recoverable or whenever development plans change with respect to those assets.
+Added: CNX is required to perform impairment tests on our assets at least annually or whenever events or changes in circumstances lead to a reduction of the estimated useful life or estimated future cash flows that would indicate that the carrying amount may not be recoverable, indicate a potential impairment in the carrying value of goodwill or intangible assets as defined by GAAP, or whenever development plans change with respect to those assets.
In the past CNX has had to record an impairment charge related to certain assets and CNX may incur impairment charges in the future, which could have an adverse effect on our results of operations in the period taken.
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The impairment was related to an economic decision to temporarily idle certain CBM wells and the related processing facility during the first quarter of 2020.
−Removed: There were no impairments for the year ended December 31, 2021.
+Added: There were no impairments for the year ended December 31, 2022 and 2021.
Future acquisitions may lead to the acquisition of additional goodwill or other intangible assets.
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The natural gas, exploration, production and midstream industries are intensely competitive with companies from various regions of the United States, and increasingly face competition in international markets.
−Removed: The industry has been experiencing increased competitive pressures as a result of both consolidation within the exploration and production space, along with the continued proliferation of stand-alone midstream companies.
+Added: The industry has been experiencing increased competitive pressures as a result of both consolidation within the exploration and production space, along with the continued competition from stand-alone midstream companies.
Midstream, transmission and processing consolidation in the industry could lead to a less competitive environment for CNX to find partners for projects needed to support development, which could increase costs.
−Removed: Many of the companies with which CNX competes are larger and have more resources to deploy, and if CNX were unable to compete, our company, our operating results, financial position or other parts of the business may be adversely affected.
+Added: Many of the companies with which CNX competes are larger and have more resources to deploy,
+Added: and if CNX were unable to compete, our company, our operating results, financial position or other parts of the business may be adversely affected.
In addition, CNX competes with larger companies to acquire new natural gas properties for future exploration, limiting our ability to replace the natural gas CNX produces or to grow our production.
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The industry also faces competition from alternative energy sources.
−Removed: The highly competitive environment in which CNX operates may negatively impact our ability to acquire additional properties at prices or upon terms CNX views as
+Added: The highly competitive environment in which CNX operates may negatively impact our ability to acquire additional properties at prices or upon terms CNX views as favorable.
Any reduction in our ability to compete in current or future natural gas markets could materially adversely affect our business, financial condition, results of operations and cash flows.
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Economic conditions in a number of industries in which our customers operate, such as electric power generation, have experienced substantial deterioration in the past, resulting in reduced demand for natural gas.
−Removed: Renewed or continued weakness in the economic conditions of any of the industries CNX serves or that are served by our customers, or the increased focus by markets on carbon-neutrality, could adversely affect our business, financial condition, results of operation and liquidity in a number of ways.
+Added: Renewed or continued weakness in the economic conditions of any of the industries CNX serves or that are served by our customers, or the increased focus by markets on carbon-neutrality or alternative energy sources, could adversely affect our business, financial condition, results of operation and liquidity in a number of ways.
• demand for natural gas and electricity in the United States is impacted by industrial production, which if weakened would negatively impact the revenues, margins and profitability of our natural gas business;
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• a decline in our creditworthiness may require us to post letters of credit, cash collateral, or surety bonds to secure certain obligations, all of which would have an adverse effect on our liquidity;
−Removed: In addition, the ongoing coronavirus (COVID-19) pandemic has materially and adversely impacted many businesses, industries and economies.
+Added: • increased inflationary pressure in the broader macro-economic environment may impact our business by increasing costs and tightening the supply of critical goods and services needed to support our operations.
+Added: In addition, the continuing repercussions of the coronavirus (COVID-19) pandemic, and the governments’ response thereto, has materially and adversely impacted many businesses, industries and economies.
For further detail regarding the risks to our business resulting from COVID-19, see the Risk Factor titled “Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.”
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To the extent that CNX engages in hedging activities, CNX may be prevented from realizing the near-term benefits of price increases above the levels of the hedges.
−Removed: If CNX chooses not to engage in or otherwise reduce our future use of hedging arrangements or are unable to engage in hedging arrangements due to lack of acceptable counterparties, CNX may be more adversely affected by changes in natural gas prices than our competitors who engage in hedging arrangements to a greater extent than CNX does.
+Added: If CNX chooses not to engage in or otherwise reduce our future use of hedging arrangements or are unable to engage in hedging arrangements due to lack of acceptable counterparties, CNX may be more adversely affected by changes in natural gas prices than our competitors
+Added: who engage in hedging arrangements to a greater extent than CNX does.
Increases or decreases in forward market prices could result in material unrealized (non-cash) losses or gains on commodity derivative instruments resulting in volatility in reported earnings.
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Negative public perception regarding our Company or industry could have an adverse effect on our operations, financial results or stock price.
−Removed: Negative public perception regarding our industry resulting from, among other things, operational incidents or concerns raised by advocacy groups, related to environmental, health, or community impacts has resulted in increased regulatory scrutiny, which has resulted in additional laws, regulations, guidelines and enforcement interpretations, at the federal or state level.
+Added: Negative public perception regarding our industry resulting from, among other things, operational incidents or concerns raised by advocacy groups, related to environmental, health, or community impacts has resulted in increased regulatory scrutiny, which has resulted in additional laws, regulations, guidelines and enforcement interpretations, at the federal and state level.
These actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens and an increased risk of litigation that may negatively impact our future financial results or our stock price.
−Removed: Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts.
+Added: Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the administrative process in the courts.
This could cause the permits CNX needs to conduct our operations to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business.
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While CNX has not incurred significant disruptions to its operations during the years ended December 31, 2022 and 2021 as a direct result of the COVID-19 pandemic, the continuation of the COVID-19 pandemic may materially and adversely affect, our business, operating and financial results and liquidity in the future.
−Removed: The severity, magnitude and duration of the ongoing COVID-19 outbreak and the efforts to reduce its spread remain uncertain but continues to be rapidly changing and hard to predict.
−Removed: While the full impact of this virus and the long-term worldwide reaction to it and impact from it remains unknown at this time, government reaction to the pandemic and restrictions and limitations applied by the government as a result, continued changes in the infection rate, travel restrictions, quarantines, or site closures as a result of the virus could, among other things, impact the ability of our employees and contractors to perform their duties, cause increased technology and security risk due to extended and company-wide telecommuting, lead to disruptions in our supply chain (including necessary contractors and materials), lead to a disruption in our resource acquisition or permitting activities and cause disruption in our relationship with our customers.
+Added: While the full impact of COVID-19 outbreak and the long-term worldwide reaction to it and impact from it remains unknown at this time, disruptions in our supply chain (including necessary contractors and materials) may lead to a disruption in our resource acquisition or permitting activities and may cause disruption in our relationship with our customers.
Additionally, the COVID-19 outbreak has significantly impacted economic activity and markets around the world, and COVID-19 or another similar outbreak could negatively impact our business in numerous ways, including, but not limited to, the following:
• our revenue may be reduced if the outbreak results in an economic downturn or recession, to the extent it leads to a prolonged decrease in the demand for natural gas and liquefied natural gas (LNG) and, to a lesser extent, NGLs and oil;
−Removed: • our operations may be disrupted or impaired, thus lowering our production level, if a significant portion of our employees or contractors are unable to work due to illness or if our field operations are suspended or temporarily shut-down or restricted due to additional control measures designed to contain the outbreak;
−Removed: • the operations of our midstream service providers, on whom CNX relies for the transmission, gathering and processing of a significant portion of our produced natural gas, NGLs, oil and condensate, may be disrupted or suspended in response to containing the outbreak, and/or the difficult economic environment may lead to
−Removed: the bankruptcy or closing of the facilities and infrastructure of our midstream service providers, which may result in substantial discounts in the prices CNX receives for our produced natural gas, NGLs, oil and condensate or result in the shut-in of producing wells or the delay or discontinuance of development plans for our properties.
−Removed: In addition, the COVID-19 pandemic has increased volatility and caused negative pressure in the capital and credit markets.
−Removed: As a result, CNX may experience difficulty accessing the capital or financing needed to fund our exploration and production operations, which have substantial capital requirements, or refinance our upcoming maturities on satisfactory terms or at all.
−Removed: CNX typically funds its capital expenditures with existing cash and cash generated by operations (which is subject to a number of variables, including many beyond our control) and, to the extent our capital expenditures exceed our cash resources, from borrowings under our revolving credit facility and other external sources of capital, we could be required to curtail our operations and the development of our properties, which in turn could lead to a decline in our reserves and production, and could adversely affect our business, results of operations and financial position.
+Added: • the operations of our midstream service providers, on whom CNX relies for the transmission, gathering and processing of a significant portion of our produced natural gas, NGLs, oil and condensate, may be disrupted or suspended in response to containing the outbreak, and/or the difficult economic environment may lead to the bankruptcy or closing of the facilities and infrastructure of our midstream service providers, which may result in substantial discounts in the prices CNX receives for our produced natural gas, NGLs, oil and condensate or result in the shut-in of producing wells or the delay or discontinuance of development plans for our properties.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks set forth in this Risk Factors section of this Form 10-K, such as those relating to our financial performance and debt obligations.
−Removed: The continued rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments that CNX is not able to predict, including the length of time that the pandemic continues, its effect on the demand for natural gas, LNG, NGLs, oil and condensate, the response of the overall economy and the financial markets as well as the effect of governmental actions taken in response to the pandemic.
+Added: We are unable to provide any prediction as to the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments, including its effect on the demand for natural gas, LNG, NGLs, oil and condensate, the response of the overall economy and the financial markets as well as the effect of governmental actions taken in response thereto.
Any of these outcomes could have a material adverse effect on our business, operations, financial results and liquidity.
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The disruption of capacity constraints in, or proximity to pipeline and processing systems could limit sales of our natural gas and NGLs and cash flows from operations, and any decrease in availability of pipelines or other midstream facilities could adversely affect our operations.
−Removed: Although CNX owns midstream facilities, we also gather, process and transport our natural gas to market by utilizing processing facilities and pipelines owned by others.
−Removed: If pipeline or processing facility capacity is limited or is unexpectedly disrupted for any reason, our sales of natural gas and/or NGLs could be reduced, which could negatively affect our profitability.
−Removed: If CNX cannot access processing facilities and pipeline transportation, we may have to reduce our production of natural gas, reducing our sales and revenues, and causing our unit costs to increase.
−Removed: If pipeline quality standards change or we cannot meet applicable standards, we might be required to install additional processing equipment which could increase our costs.
+Added: Although CNX owns midstream facilities, we also use third party facilities to gather, process and transport our natural gas to market.
+Added: Reductions, limitations or disruptions (including force majeure events) in pipeline, gathering, or processing facility capacity could force us to reduce our production, reduce our sales or transportation of natural gas and/or NGLs or purchase higher cost replacement gas, negatively affecting our profitability, and causing our unit costs to increase.
+Added: A significant portion of our natural gas is sold on or through two pipeline systems, Texas Eastern Transmission and Columbia Gas Transmission, which could experience capacity issues, operational disruptions and unexpected downtime, including from cyberattacks, with either no or little alternative transportation options available for our natural gas.
+Added: Further, if pipeline quality standards change or we cannot meet applicable standards, we might be required to install additional processing equipment which could increase our costs.
Pipelines could also curtail our flows until the natural gas delivered to their pipeline is in compliance with predetermined gas quality specifications.
Any reduction in our production of natural gas or increase in our costs could materially adversely affect our business, financial condition, results of operations and cash flows.
−Removed: Further, a significant portion of our natural gas is sold on or through two pipeline systems, Texas Eastern Transmission and Columbia Gas Transmission, which could experience capacity issues, operational disruptions and unexpected downtime, including from cyberattacks, with either no or little alternative transportation options available for our natural gas.
−Removed: Reductions in capacity on the pipelines, which have occurred in the past, may result in curtailments and reduce our production of natural gas.
−Removed: A reduction in capacity on any downstream pipelines could also reduce the demand for our natural gas, which would reduce the price CNX receives for our production.
−Removed: CNX has various third-party firm transportation, natural gas processing, gathering and other agreements in place, many of which have minimum volume delivery commitments that obligate us to pay fees on minimum volumes regardless of actual volume throughput.
−Removed: Reductions in our drilling program may result in insufficient production to utilize our full firm transportation and processing capacity, reducing our cash flow from operations, which may require us to reduce or delay our
−Removed: planned investments and capital expenditures or seek alternative means of financing, all of which may have a material adverse effect our business, financial condition, results of operations and cash flows.
+Added: CNX has various third-party firm transportation, processing, gathering and other agreements in place, many of which have minimum volume delivery commitments that obligate us to pay fixed demand charges or fees on minimum volumes regardless of actual volume throughput.
+Added: Reductions in our drilling program may result in insufficient production to fully utilize these arrangements or otherwise use our full firm transportation and processing capacity, reducing our cash flow from operations, which may require us to reduce or delay our planned investments and capital expenditures or seek alternative means of financing, all of which may have a material adverse effect our business, financial condition, results of operations and cash flows.
Our investment in midstream infrastructure development and maintenance programs is intended, among other items, to connect our wells to other existing gathering and transmission pipelines and can involve significant risks, including those relating to timing, cost overruns and operational efficiency.
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An operational issue at any of those stations would materially impact our production, cash flow and results of operation.
−Removed: Our midstream facilities connect to other pipelines or facilities owned and operated by unaffiliated third parties, the continuing operation of which is not within our control.
−Removed: These third-party pipelines and facilities may become unavailable because of testing, turnarounds, line repair, maintenance, changes to operating conditions, delivery or receipt parameters, unavailability of firm transportation, lack of operating capacity, force majeure events, regulatory requirements and curtailments of receipt or deliveries due to insufficient capacity or because of damage from severe weather conditions or other operational issues.
Uncertainties exist in the estimation of economic recovery of oil and natural gas reserves.
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Oil and natural gas reserves are economically recoverable when the price at which they are expected to be sold exceeds their expected cost of development and production.
−Removed: Reserves require estimates of underground accumulations of oil and natural gas, and the use of assumptions concerning natural gas and liquid hydrocarbon prices, production levels, recoverable reserve quantities and operating and development costs.
+Added: Estimating reserves requires the use of assumptions concerning natural gas and liquid hydrocarbon prices, production levels, recoverable reserve quantities and operating and development costs.
For example, a significant amount of our proved oil and natural gas reserves are identified as proved undeveloped reserves and may be more susceptible to positive and negative changes in reserve estimates than our proved developed reserves.
−Removed: A portion of the proved undeveloped reserves booked during the last ten years were due to the addition of undeveloped wells on our Shale acreage more than one offset location away from existing production through the use of reliable, industry standard applications.
Also, we make certain assumptions regarding natural gas and liquid hydrocarbon prices, production levels and operating and development costs that may prove to be incorrect.
Any significant variance from these assumptions to actual figures could greatly affect our estimates of our natural gas and natural gas liquid reserves, the economically recoverable quantities of natural gas and natural gas liquids attributable to any particular group of properties, the classifications of natural gas reserves based on risk of recovery and estimates of the future net cash flows.
−Removed: The PV-10 measure of pre-tax discounted future net cash flows and the standardized measure of after-tax discounted future net cash flows from our proved reserves included within this Annual Report on Form 10-K are not necessarily the same as the current market value of our estimated natural gas and liquid reserves.
−Removed: CNX bases the estimated discounted future net cash flows from our proved natural gas and natural gas liquid reserves on historical average prices and costs.
−Removed: However, actual future net cash flows from our proved and unproved natural gas and natural gas liquid properties may also be affected by factors such as:
+Added: The PV-10 measure of pre-tax discounted future net cash flows and the standardized measure of after-tax discounted future net cash flows from our proved reserves included within this Form 10-K are not necessarily the same as the current market value of our estimated natural gas and liquid reserves.
+Added: Actual future net cash flows from our proved and unproved natural gas and natural gas liquid properties may be affected by factors such as:
• geological conditions;
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If natural gas prices decline by $0.10 per Mcf, then the pre-tax present value using a 10% discount rate of our proved natural gas reserves as of December 31, 2022 would decrease from $14.5 billion to $14.3 billion.
−Removed: Developing, producing and operating natural gas wells is a high-risk activity, and is subject to operating risks and hazards that could increase expenses, decrease our production levels and expose us to losses or liabilities.
−Removed: Our financial results are materially dependent upon the success of our development program.
−Removed: The development of natural
−Removed: gas involves numerous risks, including the risk that an encountered well does not produce in sufficient quantities to make the well economically viable.
+Added: Developing, producing and operating natural gas wells is subject to operating risks and hazards that could increase expenses, decrease our production levels and expose us to losses or liabilities.
+Added: The development of natural gas involves numerous risks, including the risk that an encountered well does not produce in sufficient quantities to make the well economically viable.
The cost of drilling, completing and operating wells is substantial and uncertain, and our operations may be curtailed, delayed or canceled as a result of a variety of factors beyond our control.
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In addition, we use multi-well pads instead of single-well sites.
−Removed: The use of multi-well pad drilling increases some operational risks because problems affecting the pad, or a single well could adversely affect production from all of the wells on the pad.
+Added: The use of multi-well pad
+Added: drilling increases some operational risks because problems affecting the pad, or a single well could adversely affect production from all of the wells on the pad.
Pad development can also make our overall production, and therefore our revenue and cash flows, more volatile, because production from multiple wells on a pad will typically commence simultaneously.
1 unchanged sentence
The exploration, production, and transporting of natural gas involves numerous operational risks.
−Removed: The cost of developing and operating a shale gas well, a shallow oil and gas well or a coalbed methane (CBM) well is often uncertain, and a number of factors can delay, suspend, or prevent development operations, decrease production and/or increase the cost of our natural gas operations at particular sites for varying lengths of time.
−Removed: The operational factors that are most likely to negatively impact our operations include unexpected development and production conditions (including pressure or irregularities in geologic formations or wells, material and equipment failures, fires, ruptures, loss of well control, landslides, mine subsidence, explosions or other accidents and environmental concerns and adverse weather conditions), which conditions and risks may be amplified as we increase the vertical and horizontal length of drilling endeavors;
+Added: The cost of developing and operating a well is often uncertain, and a number of factors can delay, suspend, or prevent development operations, decrease production and/or increase the cost of our natural gas operations at particular sites for varying lengths of time, including unexpected development and production conditions (such as pressure or irregularities in geologic formations or wells, material and equipment failures, fires, ruptures, loss of well control, landslides, mine subsidence, explosions or other accidents and environmental concerns and adverse weather conditions), which conditions and risks may be amplified as we increase the vertical and horizontal length of drilling endeavors;
similar operational or design issues relating to pipelines, compressor stations, pump stations, related equipment and surrounding properties;
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Our identified development locations are scheduled over multiple future years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their actual development.
−Removed: Our management team has specifically identified and scheduled certain locations as an estimation of our future multi-year development activities on our existing acreage.
−Removed: These locations represent a significant part of our development strategy.
+Added: Our management team has specifically identified and scheduled certain locations as an estimation of our future multi-year development activities on our existing acreage which represent a significant part of our development strategy.
Our ability to develop these locations may be dependent on a number of factors, including natural gas, NGL and oil prices, the availability and cost of capital, drilling and production costs, obtaining required regulatory permits, the acquisition on acceptable terms of any leasehold interests we do not control but that are necessary to complete the drilling unit (including potentially through third-party swap transactions), availability of drilling services and equipment, drilling results, lease expirations for the failure to timely develop or otherwise, transportation constraints, regulatory and zoning approvals and other factors.
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Our capital projects require substantial capital expenditures and are subject to regulatory, environmental, political, legal and economic risks and if CNX fails to generate sufficient cash flow, obtain required capital or financing on satisfactory terms or respond to regulatory and political developments, our natural gas reserves may decline, and our operations and financial results may suffer.
−Removed: As part of our strategic determinations, CNX expects to continue to make substantial capital expenditures in the development and acquisition of natural gas reserves and maintenance, purchase or construction of midstream systems.
+Added: As part of our strategic determinations, CNX expects to continue to make substantial capital expenditures in the development and acquisition of natural gas reserves and the maintenance, purchase or construction of midstream systems.
If CNX is unable to make sufficient or effective capital expenditures, we will be unable to maintain and grow our business.
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If these projects are undertaken, they may not be completed on schedule, at the budgeted cost or at all.
−Removed: The construction of additions to our existing assets may require us to obtain new land rights and regulatory permits prior to constructing new pipelines or facilities, which may not be obtained in a timely fashion or in a way that allows us to connect new natural gas supplies to existing gathering pipelines or capitalize on other attractive expansion opportunities.
−Removed: It may also become more expensive to obtain new rights-of-way or to expand or renew existing rights-of-way.
−Removed: If the cost of renewing or obtaining new rights-of-way increases, cash flows could be adversely affected.
−Removed: Also, these midstream assets may not be able to attract enough throughput to achieve the expected investment return.
+Added: The construction of additions to our existing assets may require us to obtain new land rights and regulatory permits prior to constructing new pipelines or facilities, which may not be obtained in a timely, cost-effective fashion or in a way that allows us to connect new natural gas supplies to existing gathering pipelines or capitalize on other attractive expansion opportunities Also, these midstream assets may not be able to attract enough throughput to achieve the expected investment return.
Revenues may not increase immediately (or at all) upon the expenditure of funds on a particular project.
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CNX relies on third-party contractors to provide key services and equipment for our operations.
−Removed: CNX contracts with third
−Removed: parties for well services, related equipment and qualified experienced field personnel to drill wells, construct pipelines and conduct field operations.
+Added: CNX contracts with third parties for well services, related equipment and qualified experienced field personnel to drill and complete wells, construct pipelines and conduct field operations.
We also utilize third-party contractors to provide land acquisition and related services to support our land operational needs.
−Removed: The demand for these services, equipment and field personnel to drill wells, construct pipelines and conduct field operations and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with natural gas, NGL and oil prices, causing periodic shortages.
+Added: The demand for these services, equipment and personnel can fluctuate significantly, often in correlation with natural gas, NGL and oil prices, causing periodic shortages.
Weather may also play a role with respect to the relative availability of certain materials.
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In addition, accelerated levels of inflation may lead to price increases beyond CNX’s control that could lead to CNX incurring increased costs for contractors and/or materials.
−Removed: Accordingly, CNX cannot be assured that we will be able to obtain necessary services, drilling equipment and supplies in a timely manner or on satisfactory terms, and CNX may experience shortages of, or increases in the costs of, drilling equipment, crews and associated supplies, equipment and field services in the future.
−Removed: Shortages may lead to escalating prices, poor service and inefficient drilling operations and increase the possibility of accidents due to the hiring of less experienced personnel and overuse of equipment by contractors.
+Added: For example, fuel pricing and labor shortages have led to increased ground transportation costs.
+Added: Accordingly, CNX cannot be assured that we will be able to obtain necessary services, drilling and completions equipment and supplies in a timely manner or on satisfactory terms, and CNX may experience shortages of or quality assurance issues with, or increases in the costs of, drilling and completions equipment, crews and associated supplies, equipment and field services used in the support of our operations.
+Added: Shortages may lead to escalating prices, poor service, inefficient operations and increase the possibility of accidents due to the hiring of less experienced personnel and overuse of equipment by contractors.
A decrease in the availability of these services, equipment or personnel could lead to a decrease in our natural gas production levels, increase our costs of natural gas production, and decrease our anticipated profitability.
1 unchanged sentence
CNX attempts to mitigate the risks involved with increased natural gas production activity by entering into “take or pay” contracts with well service providers which commit them to provide field services to us at specified levels and commit us to pay for field services at specified levels even if we do not use those services.
−Removed: However, these types of contracts expose us to economic risk during a downturn in demand or during periods of oversupply.
+Added: However, these types of contracts expose us to
+Added: economic risk during a downturn in demand or during periods of oversupply.
Having to pay for services we do not use decreases our cash flow and increases our costs.
−Removed: In addition, the COVID-19 pandemic has materially and adversely impacted many businesses, industries, supply chains and economies.
+Added: In addition, the lingering effects of the COVID-19 pandemic have materially and adversely impacted many businesses, industries, supply chains and economies.
For further detail regarding the risks to our business resulting from COVID-19, see Risk Factor titled “ Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.
−Removed: If CNX cannot find adequate sources of water for our use or CNX is unable to dispose of or recycle water produced from our operations at a reasonable cost and within applicable environmental rules, our ability to produce natural gas economically and in sufficient quantities could be impaired .
+Added: If CNX cannot find adequate sources of water for our use or if CNX is unable to dispose of or recycle water produced from our operations at a reasonable cost and within applicable environmental rules, our ability to produce natural gas economically and in sufficient quantities could be impaired .
As part of our drilling and production in shale formations, CNX uses hydraulic fracturing processes that require access to adequate sources of water, which may not be available in proximity to our operations or at certain times of the year.
To ensure adequate water for our operations, CNX may be required to invest substantial amounts of capital in water pipelines which are used for relatively short periods of time.
−Removed: Increased regulation of these water pipelines could cause us to invest additional capital, alter our disposal or transportation method or affect our operations in other manners.
+Added: Increased regulation of these water pipelines could cause us to invest additional capital, alter our disposal or transportation method or negatively affect our operations.
Alternatively, CNX may be required to transport water by truck, and CNX may not be able to contract for sufficient water hauling trucks or drivers to meet our needs.
Further, our operations generate significant volumes of wastewater that must be treated, reused or disposed.
−Removed: This waste can be generated from various aspects of our operations, including from drilling fluids, completions activities and normal production over the life of the well, and are associated with all types of natural gas wells, including CBM wells and shale wells.
+Added: This waste can be generated from various aspects of our operations, including from drilling fluids, completions activities and normal production over the life of the well, and are associated with all types of natural gas wells.
A significant portion of this water can be recycled for use in other hydraulic fracturing operations.
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Our inability to obtain sufficient amounts of water with respect to our Shale operations or to dispose of or recycle water and other wastes produced from our Shale and our CBM operations in an economically efficient manner, could increase our costs and delay our operations, which will adversely impact our cash flow and results of operations.
−Removed: Failure to successfully replace our current natural gas, NGL and oil reserves through economic development of our existing
−Removed: or acquired assets or through acquisition of additional producing assets, would lead to a decline in our natural gas, NGL and oil production levels and reserves.
+Added: Failure to successfully replace our current natural gas, NGL and oil reserves through economic development of our existing or acquired assets or through acquisition of additional producing assets, would lead to a decline in our natural gas, NGL and oil production levels and reserves.
Producing natural gas, NGL and oil reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors.
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As is common in the oil and gas industry, it is our practice when CNX acquires natural gas leases or interests not to conduct a comprehensive chain of title examination to the mineral interest.
−Removed: Prior to the drilling of a well, however, it is the normal practice in our industry for the operator of the well to obtain a complete title review to ensure there are no obvious defects in title to the well.
+Added: Prior to the drilling of a well, however, it is the normal practice in our industry for the operator to obtain a complete title review to ensure there are no obvious defects in title to the underlying property interest.
As a result of such examinations, certain curative work may be required to correct defects in the marketability of the title and such curative work entails expense.
−Removed: Our inability to cure any title defects in our leases in a timely and cost-efficient manner may delay or prevent us from utilizing the associated mineral interest, which may adversely impact our ability in the future to increase production and reserves.
+Added: Our inability to cure any title defects in a timely and cost-efficient manner may delay or prevent us from utilizing the associated mineral interest, which may adversely impact our ability in the future to increase production and reserves.
The existence of a material title deficiency can render a lease worthless and can adversely affect our results of operations and financial position.
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Legal, Environmental and Regulatory Risks
−Removed: Climate change risk, legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our operating costs and reduce the value of our natural gas assets and such regulation, as well as uncertainty concerning such regulation and public policy pressures, that may arise, could adversely impact the market for natural gas, as well as for our securities.
+Added: Climate change risk, legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our operating costs and reduce the value of our natural gas assets.
+Added: Any such regulation that may be implemented, as well as uncertainty concerning such regulation and public policy pressures, could adversely impact the market for natural gas, as well as for our securities.
The issue of global climate change continues to attract considerable public and scientific attention, with underlying concern about the impacts of human activity, especially the emissions of greenhouse gases (“GHGs”) such as carbon dioxide (“CO2”) and methane into the environment and is increasingly the subject of civil litigation and regulatory focus.
−Removed: The EPA, under the Climate Action Plan, elected to regulate GHGs under the Clean Air Act (“CAA”) to limit emissions of CO2 from natural gas-fired power plants.
+Added: The regulatory focus has resulted in varying regulatory requirements between governmental administrations.
+Added: The EPA, in 2013, and under the Climate Action Plan, elected to regulate GHGs under the Clean Air Act (“CAA”) to limit emissions of CO2 from natural gas-fired power plants.
In April 2017, the EPA announced that it was initiating a review of the Clean Power Plan consistent with President Trump’s Executive Order 13783, and in October 2017 published a proposed rule to formally repeal the Clean Power Plan.
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The Affordable Clean Energy Rule was vacated by the United States Court of Appeals for the D.C.
−Removed: Circuit on the last day of the Trump administration in
−Removed: January 2021.
+Added: Circuit on the last day of the Trump administration in January 2021.
Accordingly, the Biden administration is taking a different direction than the Trump administration regarding these regulatory actions.
−Removed: For example, the new administration re-entered the United States in the Paris Climate Accord and may attempt to establish more stringent standards to update or replace the Affordable Clean Energy Rule.
−Removed: In addition, the EPA adopted a new Climate Adaptation Action Plan in October of 2021.
+Added: For example, the Biden administration re-entered the United States in the Paris Climate Accord, and the EPA adopted a new Climate Adaptation Action Plan in October of 2021.
The EPA has adopted regulations under existing provisions of the federal Clean Air Act that establish Prevention of Significant Deterioration, or PSD, construction and Title V operating permits for large stationary sources.
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Additional revisions were proposed in August 2019 and August 2020.
−Removed: As these proposed rules are adopted, changed, rescinded or modified, these rules may result in increased costs for permitting, equipping, and monitoring methane emissions or otherwise restrict operations or increase the costs thereof.
+Added: As these proposed rules and any replacements or updates thereto are adopted, changed, rescinded or modified, these rules may result in increased costs for permitting, equipping, and monitoring methane emissions or otherwise restrict operations or increase the costs thereof.
Additionally, some states have issued mandates to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and potential cap-and-trade programs.
−Removed: For example, Pennsylvania has taken steps to bring Pennsylvania into an eleven -state consortium of Northeastern and Mid-Atlantic States - the Regional Greenhouse Gas Initiative (RGGI) -- that set price and declining limits on CO2 emissions from power plants.
+Added: For example, Pennsylvania has taken steps to bring Pennsylvania into an eleven -state consortium of Northeastern and Mid-Atlantic States - the Regional Greenhouse Gas Initiative (RGGI) -- that sets price and declining limits on CO2 emissions from power plants.
In December 2021, the Pennsylvania Attorney General approved a proposed regulation which would allow Pennsylvania to join RGGI;
−Removed: however, the Pennsylvania General Assembly is pursuing a concurrent regulatory review resolution process likely to disapprove of the proposed regulation.
+Added: however, the Pennsylvania
+Added: General Assembly issued a concurrent regulatory review resolution process disapproving the proposed regulation.
+Added: The regulation is currently subject to challenges pending in Pennsylvania appellate courts.
Most of these types of programs require major sources of emissions or major producers of fuels to acquire and subsequently surrender emission allowances, with the number of allowances available being reduced each year until a target goal is achieved.
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Environmental, social and governance (ESG) goals and programs, which typically include extralegal targets related to environmental stewardship, social responsibility, and corporate governance, have become an increasing focus of investors and stakeholders across the industry.
−Removed: Finally, there are currently close to two dozen lawsuits filed on behalf of various states and municipalities seeking to hold producers of oil, natural gas and coal liable for the consequences of certain weather-related events, like rising sea levels and more frequent and severe flooding, storms and heatwaves, and seeks money damages for remedial measures aimed at eliminating or ameliorating damages caused by climate change.
+Added: Finally, there are currently close to two dozen lawsuits filed on behalf of various states and municipalities seeking to hold producers of oil, natural gas and coal liable for the consequences of certain weather-related events, like rising sea levels and more frequent and severe flooding, storms and heatwaves, and seeking money damages for remedial measures aimed at eliminating or ameliorating damages caused by climate change.
For further discussion of pending legal proceedings, see Note 20 – Commitments and Contingent Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K.
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There is no assurance that changes in or additions to regulations and public policies regarding enforcement and the protection of the environment will not have a significant impact on our operations and profitability.
−Removed: Our operations also pose risks of environmental liability due to leakage, migration, releases or spills from our operations to surface or subsurface soils, and surface water or groundwater.
−Removed: Certain environmental laws impose strict as well as joint and
−Removed: several liability for costs required to investigate, remediate and restore sites where regulated substances have been disposed, stored or released, as well as fines and penalties for such releases.
+Added: Our operations also pose risks of environmental liability due to leakage, migration, releases or spills from our operations to surface or subsurface soils, surface water or groundwater.
+Added: Certain environmental laws impose strict as well as joint and several liability for costs required to investigate, remediate and restore sites where regulated substances have been disposed, stored or released, as well as fines and penalties for such releases.
CNX may be required to remediate contaminated properties currently or formerly operated by us regardless of the cause of contamination or whether such contamination resulted from the conduct of others.
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On June 9, 2021, the EPA announced its intent to revise the rule again.
−Removed: On August 4, 2021, the EPA and ACOE announced a rulemaking process to revise the definition of “waters of the United States.” While CNX cannot at this time predict how this rule will be enforced by the new Biden administration, such rulemaking, its enforcement, and future revisions to, or replacement of, the rulemaking could lead to additional mitigation costs and severely limit CNX’s operations.
−Removed: The foregoing and other regulations applicable to the natural gas industry are under constant review for amendment or expansion at both the federal and state levels.
+Added: On August 4, 2021, the EPA and ACOE announced a rulemaking process to revise the definition of “waters of the United States.” On December 30, 2022, the EPA and ACOE announced a final rule for a “Revised Definition of ‘Waters of the United States’” which will be effective sixty days after publication in the Federal Register.
+Added: While CNX cannot at this time predict how this rule will be enforced by the new Biden administration, such
+Added: rulemaking, its enforcement, and future revisions to, or replacement of, the rulemaking could lead to additional mitigation costs and severely limit CNX’s operations.
+Added: The foregoing and other regulations applicable to the natural gas industry are under constant review for modification, amendment or expansion at both the federal and state levels.
Any future changes may increase the costs of producing natural gas and other hydrocarbons, which would adversely impact our cash flows and results of operations.
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The process involves the injection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production.
−Removed: The process is typically regulated by state oil and natural gas agencies.
+Added: The process is typically regulated by state environmental or oil and natural gas agencies.
The disposal of flowback and produced water and other wastes in underground injection disposal wells is regulated by the EPA under the federal Safe Drinking Water Act and by various states in which we conduct operations under counterpart state laws and regulations.
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Please read “Business - Regulation of Environmental and Occupational Safety and Health Matters” under Item 1 of Part I of this Form 10-K.
−Removed: Existing and future governmental laws, regulations and other legal requirements and judicial decisions that govern our business may increase our costs of doing business and may restrict our operations.
+Added: Existing and future governmental laws, regulations, other legal requirements and judicial decisions that govern our business may increase our costs of doing business and may restrict our operations.
There are numerous federal and state governmental regulations applicable to the natural gas industry that are not directly related to environmental regulation, many of which are under perpetual review for amendment, expansion, or modifications which may adversely affect, among other things, our ability to develop the resource, obtain and operate under permits, as well as pricing or marketing of natural gas production.
−Removed: For example, currently CNX’s gathering operations are exempt from regulation by the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act (NGA).
+Added: For example, currently CNX’s gathering operations are exempt from regulation by the FERC under the Natural Gas Act (NGA).
Although FERC has not made any formal determinations with respect to any of our gathering facilities, CNX believes that the natural gas pipelines in our gathering systems meet the traditional tests FERC has used to establish that a natural gas pipeline is a gathering pipeline not subject to FERC jurisdiction.
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The State of Ohio also moved to regulate natural gas gathering lines in a similar manner pursuant to Ohio Senate Bill 315 (SB315).
−Removed: SB315 expanded
−Removed: the Ohio PUC's authority over rural natural gas gathering lines.
+Added: SB315 expanded the Ohio PUC's authority over rural natural gas gathering lines.
These changes in interpretation and regulation affect our midstream activities, requiring changes in reporting, as well as increased costs.
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Further, the Biden administration has taken a different direction than the Trump administration regarding certain regulatory measures impacting air emissions or clean water standards.
−Removed: For example, the new administration re-entered the United States in the Paris Climate Accords and may attempt to establish more stringent standards to replace the Affordable Clean Energy Rule, which was vacated by the United States Court of Appeals for the D.C.
+Added: For example, the Biden administration re-entered the United States in the Paris Climate Accords and the EPA adopted a new Climate Adaptation Action Plan in October of 2021, and may attempt to establish more stringent standards to replace the Affordable Clean Energy Rule, which was vacated by the United States Court of Appeals for the D.C.
Circuit on the last day of the Trump administration in January 2021.
−Removed: For additional detail regarding the risks to our business resulting from governmental regulation, see Risk Factor titled, “Climate change risk, legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our operating costs and reduce the value of our natural gas assets and such regulation, as well as uncertainty concerning such regulation and public policy pressures that may arise, could adversely impact the market for natural gas, as well as for our securities.” See Note 20 - Commitments and Contingent Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of pending legal proceedings.
−Removed: CNX may incur significant costs and liabilities as a result of pipeline operations and/or increases in the regulation of natural gas gathering pipelines.
+Added: For additional detail regarding the risks to our business resulting from governmental regulation, see Risk Factor titled, “ Climate change risk, legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our operating costs and reduce the value of our natural gas assets.
+Added: Any such regulation that may be implemented, as well as uncertainty concerning
+Added: such regulation and public policy pressures, could adversely impact the market for natural gas, as well as for our securities ” ( See Note 20 – Commitments and Contingent Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of pending legal proceedings).
+Added: CNX may incur significant costs and liabilities as a result of pipeline operations and/or increases in the regulation of natural gas pipelines and gathering facilities.
The Pipeline and Hazardous Materials Safety Administration (PHMSA) has adopted safety, transportation and operational regulations applicable to pipeline operators.
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In October 2019, PHMSA issued a final rule, effective July 2020, regarding hazardous pipeline safety regulations that significantly extends the integrity management requirements to previously exempt pipelines and imposes additional obligations on hazardous liquid pipeline operators that are already subject to the integrity management requirements.
−Removed: PHMSA also issued a separate regulatory proposal in July 2015 that would impose pipeline incident prevention and response measures on natural gas and hazardous liquid pipeline operators.
In October 2019, PHMSA published a final rule that significantly modifies existing regulations related to reporting, impact, design, construction, maintenance, operations and integrity management of gas transmission and gathering pipelines.
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In November 2021, PHMSA published a final rule in the Federal Register with an effective date of May 15, 2022, expanding certain federal pipeline safety requirements to all onshore gas gathering pipelines.
−Removed: The adoption of these regulations, which may apply different and/or more comprehensive or stringent safety standards than CNX is currently subject to, could require us to install new or modified safety controls, pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require us to incur increased operational costs that could be significant.
+Added: The adoption of these regulations, which may apply different and/or more comprehensive or stringent safety standards than CNX has been subject to, could require us to install new or modified safety controls, pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require us to incur increased operational costs that could be significant.
While CNX cannot predict the outcome of legislative or regulatory initiatives, such legislative and regulatory changes could have a material effect on our cash flow.
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Any such changes could negatively affect our financial condition and results of operations.
−Removed: For instance, previous tax law legislation decreased the regular U.S.
−Removed: federal income tax rate, limited the ability of corporations to take certain interest deductions, increased the limitation on deductibility of executive compensation, and have eliminated a corporation’s ability to take deductions for income
−Removed: attributable to domestic production activities.
+Added: For example, previous tax law legislation decreased the regular U.S.
+Added: federal income tax rate, limited the ability of corporations to take certain interest deductions, increased the limitation on deductibility of executive compensation, and have eliminated a corporation’s ability to take deductions for income attributable to domestic production activities.
Any future tax law legislation could adversely impact our financial position, current and deferred federal and state income tax liabilities and cash flows.
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Additionally, any significant variance in our interpretation of current income tax laws, including as result of the release of any Treasury Regulations or other interpretive guidance or a challenge of one or more of our tax positions by the IRS or other tax authorities could affect our tax position.
−Removed: While CNX expects to be able to utilize our NOL carryforwards and generate deductions to offset our future taxable income, in the event that deductions are not generated as expected, one or more of our tax positions are successfully challenged by the IRS (in a tax audit or otherwise), or our NOL carryforwards are subject to future limitations, our future tax liability may be greater than expected.
+Added: While CNX expects to be able to utilize our NOL carryforwards and generate deductions to offset our future taxable income, in the event that deductions are not generated as expected, one or more of our tax positions are successfully challenged by the IRS (in a tax audit or otherwise), or our NOL
+Added: carryforwards are subject to future limitations, our future tax liability may be greater than expected.
CNX and its subsidiaries are subject to various legal proceedings and investigations, which may have an adverse effect on our business.
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Our current long-term debt obligations, and the terms of the agreements that govern that debt, including debt of our subsidiaries, and the risks associated therewith, could adversely affect our business, financial condition, liquidity and results of operations.
−Removed: As of December 31, 2021, CNX’s total long-term indebtedness was approximately $2.2 billion, excluding unamortized debt issuance costs, of which approximately (i) $500.0 million was under our 6.00% Senior Notes due 2029 (ii) $192.0 million was under our senior secured credit facility (the “Credit Facility”), (iii) $700.0 million was under our 7.25% Senior Notes due 2027 plus $6 million of unamortized bond premium, (iv) $345 million of 2.25% Senior Notes due May 2026 less $91 million of unamortized bond discount and issuance cost, (v) $400 million of 4.75% Senior Notes due April 2030 issued by our midstream business, less $5 million of unamortized bond discount (CNX is not a guarantor of these notes), and (vi) $185 million in outstanding borrowings under our midstream revolver.
−Removed: (CNX is not a guarantor of this revolving credit facility).
+Added: As of December 31, 2022, CNX’s total long-term indebtedness was approximately $2.2 billion, excluding unamortized debt issuance costs, of which approximately (i) $500 million was under our 7.375% Senior Notes due 2031 less $6 million of unamortized discount, (ii) $500 million of 6.00% Senior Notes due 2029, (iii) $400 million of 4.75% Senior Notes due 2030 issued by our midstream business, less $4 million of unamortized bond discount (CNX is not a guarantor of these notes), (iv) $350 million of 7.25% Senior Notes due 2027 plus $2 million of unamortized bond premium, (v) $331 million of 2.25% Convertible Senior Notes due 2026 less $7 million of unamortized discount and issuance cost, (vi) $154 million in outstanding borrowings under our midstream revolver (CNX is not a guarantor of this revolving credit facility), and (vii) no borrowings under our senior secured credit facility (the “Credit Facility”).
The degree to which CNX is leveraged could have important consequences, including, but not limited to:
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• limiting our ability to implement our business strategy.
−Removed: The one-month LIBOR rate may be used under our secured credit facilities.
−Removed: The transition from LIBOR to a replacement interest rate “benchmark” is ongoing, and the effect of this transition remains unclear.
−Removed: Originally, the discontinuation of LIBOR was expected to occur at the end of 2021, but on March 5, 2021, the ICE Benchmark Administration (“IBA”) published a feedback statement on its prior December 2020 consultation regarding its intention to cease publication of most tenors of USD LIBOR after June 30, 2023.
−Removed: Despite the extension, U.S.
−Removed: banking regulators have advised that most USD LIBOR originations should end by no later than December 31, 2021, and that new LIBOR originations prior to that date must provide for an alternative reference rate or a hardwired fallback.
−Removed: In accordance with the formal recommendation of the Alternative Reference Rates Committee (“ARRC”) issued on July 29, 2021, USD LIBOR is expected to be replaced with the Secured Overnight Financing Rate (“SOFR”), which is based on rates for overnight loans, collateralized by U.S.
−Removed: treasury securities, and is based on directly observable Treasury-backed repurchase transactions, which is a liquid market with daily volumes regularly in excess of $800 billion.
−Removed: The International Swaps and Derivatives Association, Inc.
−Removed: (“ISDA”) previously announced fallback language for USD LIBOR-referencing derivatives contracts that provides for SOFR as the primary replacement rate for USD LIBOR While many financial industry experts consider SOFR to be a reliable alternative to LIBOR, CNX cannot predict the effects of this transition, and our ability to borrow on favorable terms may be adversely affected.
−Removed: Our senior secured Credit Facility and the indentures governing our 7.25% Senior Notes due 2027 and 6.00% Senior Notes due 2029 limit the incurrence of additional indebtedness unless specified tests or exceptions are met, compliance with certain financial covenants on a quarterly basis, and impose a number of restrictions upon us, such as restrictions on granting liens on our assets, making investments, paying dividends, stock repurchases, selling assets and engaging in acquisitions.
+Added: Our senior secured Credit Facility and the indentures governing our 7.25% Senior Notes due 2027, 6.00% Senior Notes due 2029 and 7.375% Senior Notes due 2031 limit the incurrence of additional indebtedness unless specified tests or exceptions are met, subject our operations to compliance with certain financial covenants on a quarterly basis, and impose a number of restrictions upon us, such as restrictions on granting liens on our assets, making investments, paying dividends, stock repurchases, selling assets and engaging in acquisitions.
Failure to comply with these covenants could result in an event of default that, if not cured or waived, could materially adversely affect us.
−Removed: Further, CNXM’s existing $600 million revolving credit facility and CNXM’s $400 million of 4.75% Senior Notes, neither of which are guaranteed by CNX, subjects CNXM to similar financial and/or other restrictive covenants and other restrictions.
+Added: Further, CNX Midstream Partners LP’s (CNXM) existing $600 million revolving credit facility and CNXM’s $400 million of 4.75% Senior Notes, neither of which are guaranteed by CNX, subjects CNXM to similar financial and/or other restrictive covenants and other restrictions.
If our cash flows and capital resources are insufficient to fund our debt service obligations, including repayment of such obligations at maturity, CNX may be:
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In the absence of such operating results and resources, CNX could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service and other obligations;
−Removed: however, our existing debt documents restrict our ability to sell assets and the use of the proceeds from the sales, such that we may not be able to consummate those sales or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.
+Added: however, our existing debt documents restrict our ability to sell assets and the use of the proceeds from the sales, such that we may not be
+Added: able to consummate those sales or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.
Our borrowing base under our senior secured credit facility could decrease for a variety of reasons including lower natural gas prices, declines in natural gas proved reserves, asset sales and lending requirements or regulations.
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CNX may not be able to consummate those sales or to obtain the proceeds which CNX could realize from them, and those proceeds may not be adequate to meet any debt service obligations then due.
−Removed: The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on our reported financial results.
−Removed: Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest
−Removed: The effect of ASC 470-20 on the accounting for the Convertible Notes is that the equity component is required to be included in the Capital in Excess of Par Value section of Stockholders’ Equity on our Consolidated Balance Sheet at the issuance date and the value of the equity component would be treated as debt discount for purposes of accounting for the debt component of the Convertible Notes.
−Removed: As a result, CNX will be required to record non-cash interest expense through the amortization of the excess of the face amount over the carrying amount of the expected life of the Convertible Notes.
−Removed: CNX will report lower net income (or larger net losses) in our financial results because ASC 470-20 requires interest expense to include both the amortization of the debt discount and the instrument’s cash coupon interest rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the Convertible Notes.
−Removed: In addition, under certain circumstances, convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partly in cash may be accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of such Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such Convertible Notes exceeds their principal amount.
−Removed: Under the treasury stock method, for purposes of calculating diluted earnings per share, the transaction is accounted for by including in the denominator the number of shares of common stock that would be necessary to settle such excess, if CNX elected to settle such excess in shares.
−Removed: There is no assurance that the future accounting standards will continue to permit the use of the treasury stock method.
−Removed: If CNX is unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the Convertible Notes, then our diluted earnings per share could be adversely affected.
The capped call transactions may affect the value of the Convertible Notes and our common stock.
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Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions.
−Removed: If a counterparty becomes subject to insolvency proceedings, with respect to such option counterparty’s obligations under the relevant capped call transaction, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that counterparty.
+Added: If a counterparty becomes subject to insolvency proceedings, with respect to such counterparty’s obligations under the relevant capped call transaction, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that counterparty.
Our exposure will depend on many factors, but, generally, the increase in our exposure will be positively correlated to the increase in the market price and in the volatility of our common stock.
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The Convertible Notes may become convertible at the option of holders prior to their scheduled terms under certain circumstances.
−Removed: Any sales in the public market of the common
−Removed: stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
+Added: Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.
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Our future growth prospects are dependent upon our ability to identify optimal strategies for investing our capital resources to produce superior rates of return.
−Removed: In developing our business plan, we consider allocating capital and other resources to various aspects of our businesses including well development, reserve acquisitions, exploratory activity, corporate items (including share and debt repurchases) and other alternatives, including investments into new proprietary technologies and strategies surrounding the generation and monetization of environmental attributes from our operations, including but not limited to carbon credit offsets.
+Added: In developing our business plan, we consider allocating capital and other resources to various aspects of our businesses including well development, reserve acquisitions, exploratory activity, corporate items
+Added: (including share and debt repurchases) and other alternatives, including investments into new proprietary technologies and strategies surrounding the generation and monetization of environmental attributes from our operations, including but not limited to carbon credit offsets.
We also consider our likely sources of capital, including cash generated from operations and borrowings under our credit facilities.
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The repurchase program does not require us to acquire any specific number of shares.
−Removed: Our board of director’s determination to repurchase shares of our common stock will depend upon market conditions, applicable legal requirements, contractual obligations and other factors that the board of directors deems relevant.
+Added: Our board of directors determination to repurchase shares of our common stock will depend upon market conditions, applicable legal requirements, contractual obligations and other factors that the board of directors deems relevant.
Based on an evaluation of these factors, our board of directors may determine not to repurchase shares or to repurchase shares at reduced levels from those anticipated by our shareholders.
See Note 5 – Stock Repurchase in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion.
−Removed: CNX may operate a portion of our business with one or more joint venture partners or in circumstances where we are not the operator, which may restrict our operational and corporate flexibility;
−Removed: actions taken by the other partner or third-party operator may materially impact our financial position and results of operations;
−Removed: and we may not realize the benefits we expect to realize from a joint venture.
+Added: CNX may operate a portion of our business with one or more joint venture partners or in circumstances where CNX is not the operator, which may restrict our operational and corporate flexibility.
As is common in the natural gas industry, CNX may operate one or more of our properties with a joint venture partner, or contract with a third-party to control operations.
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In connection with the separation of our coal business, CONSOL Energy has agreed to indemnify us for certain liabilities, and we have agreed to indemnify CONSOL Energy for certain liabilities.
−Removed: If we are required to pay under these indemnities
−Removed: to CONSOL Energy, our financial results could be negatively impacted.
+Added: If we are required to pay under these indemnities to CONSOL Energy, our financial results could be negatively impacted.
The CONSOL Energy indemnity may not be sufficient to hold us harmless from the full amount of liabilities for which CONSOL Energy has been allocated responsibility, and CONSOL Energy may not be able to satisfy its indemnification obligations in the future.
13 unchanged sentences
Cyber-incidents targeting our systems, oil and natural gas industry systems and infrastructure, or the systems of our third-party service providers could materially adversely affect our business, financial condition or results of operations.
−Removed: Cyber-incidents, including cyber-attacks, may significantly affect us or the operations of our customers and business partners, as well as impact general economic conditions, consumer confidence and spending and market liquidity.
+Added: Cyber-incidents, including cyber-attacks, may significantly affect us, third party operators on whom we depend, or the operations of our customers and business partners, as well as impact general economic conditions, consumer confidence and spending and market liquidity.
Strategic targets, including energy-related assets, may be at greater risk of future incidents than other targets in the United States.
5 unchanged sentences
As dependence on digital technologies has increased the threat of cyber incidents, including deliberate attacks or unintentional events, have also increased.
−Removed: In addition, the risk of cyber-based attacks is heightened with many of our employees and contractors working and accessing our technology infrastructure remotely as a result of the COVID-19 pandemic.
A cyber-incident could include gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption, or result in denial-of-service on websites.
1 unchanged sentence
Our technologies, systems, networks, data centers and those of our business partners and suppliers may become the target of cyber-incidents or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of our business operations.
−Removed: In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.
+Added: In addition, certain cyber
+Added: incidents, such as surveillance, may remain undetected for an extended period.
Deliberate attacks on our assets, or security breaches in our systems or infrastructure, the systems or infrastructure of third-parties or off-premise service providers could lead to corruption or loss of our proprietary data and potentially sensitive data, delays in production or delivery, difficulty in completing and settling transactions, challenges in maintaining our books and records, environmental damage, communication interruptions, damage to our reputation, other operational disruptions and third-party liability, including the following:
4 unchanged sentences
• business interruptions could result in expensive remediation efforts, distraction of management, damage to our reputation, or a negative impact on the price of our stock.
−Removed: Our implementation of various internal and externally facing controls and processes, including appropriate internal risk assessment and internal policy implementation, incorporating a risk-based cyber security framework to monitor and mitigate security threats and other strategies to increase security for our information, facilities and infrastructure is costly and labor intensive.
+Added: Our implementation of various internal and external controls and processes, including appropriate internal risk assessment and internal policy implementation, incorporating a risk-based cyber security framework to monitor and mitigate security threats and other strategies to increase security for our information, facilities and infrastructure is costly and labor intensive.
Moreover, there can be no assurance that such measures will be sufficient to prevent security breaches or other cyber-incidents from occurring.
1 unchanged sentence
Cyber-attacks continue to evolve in frequency and complexity.
−Removed: While no industry is immune Industrial Networks have come under increased targeted attacks in the last year (examples, Colonial Pipeline and JBS Foods Group).
+Added: While no industry is immune, Industrial Networks have come under increased targeted attacks recently (examples, Colonial Pipeline and JBS Foods Group).
This has led to increased scrutiny by Cyber Insurance Carriers.
8 unchanged sentences
Terrorist activities could materially adversely affect our business and results of operations.
−Removed: Terrorist attacks, including eco-terrorism, and the threat of terrorist attacks, whether domestic or foreign, as well as military or other actions taken in response to these acts, could affect the energy industry, the environment and industry related economic conditions, including our operations and the operations of our customers, as well as general economic conditions, consumer confidence and spending and market liquidity.
+Added: Terrorist attacks, including eco-terrorism, the threat of terrorist attacks, whether domestic or foreign, as well as military or other actions taken in response to these acts, could affect the energy industry, the environment and industry related economic conditions, including our operations, the operations of our customers, as well as general economic conditions, consumer confidence, spending and market liquidity.
Strategic targets, including energy-related assets, may be at greater risk of future attacks than other targets in the United States.
5 unchanged sentences
Legal Proceedings
−Removed: The first two paragraphs of “Note 20 – Commitments and Contingent Liabilities” in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K are incorporated herein by reference.
+Added: The first three paragraphs of “Note 20 – Commitments and Contingent Liabilities” in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K are incorporated herein by reference.
Mine Safety Disclosures
1 unchanged sentence
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.