Thursday, CNX Gas Corporation (CXG), an explorer and producer of natural gas, reported a decline in second quarter earnings as revenues dropped primarily due to lower selling prices, despite a 20% increase in production.
Net income for the quarter attributable to CNX Gas shareholders slid to $33.0 million, or $0.22 per share, from $64.3 million, or $0.42 per share, in the corresponding period last year.
On average, nine analysts polled by Thomson Reuters expected the company to earn $0.29 per share for the quarter. Analysts' estimates typically exclude special items.
Results for the most recent quarter include a $6 million charge for dry hole and exploration costs. In addition, stock-based compensation expense for the three-month period increased by $4 million over the year-earlier quarter, and, short-term incentive compensation increased by $2 million compared to the year-ago quarter due to achieving higher production and other targeted factors.
Quarterly revenue declined to $161.6 million from $205.8 million in the year-ago quarter. Seven Street analysts expected the company to report revenue of $159.92 million for the quarter.
Production was 22.5 billion cubic feet, or Bcf, or 247.0 million cubic feet or MMcf per day, up 20% from 18.8 Bcf, or 206.5 MMcf per day, in the year-ago quarter.
The average sales price realized by the company for gas production declined to $6.71 per thousand cubic feet, or Mcf, from $9.63 per Mcf received in the year-ago period. Pre-tax unit margins declined to $3.14 per net Mcf from $5.94 per Mcf in the year-ago period.
CNX Gas drilled 55 vertical frac wells in its Virginia CBM Operations during the second quarter. CNX Gas expects to drill 175 wells in Virginia in 2009. In the Marcellus Shale, CNX Gas drilled, completed, and brought online its sixth, seventh, and eighth horizontal wells during the quarter.
For the six-month period, net income declined to $87.9 million or $0.58 per share from $114.2 million or $0.75 per share in the same period of the previous year. Revenue declined to $340 million from $366.4 million in the corresponding period last year.
The company also raised its 2009 production guidance by 2 Bcf to 89 Bcf. If achieved, CNX Gas will have produced 16% more than the 76.6 Bcf produced in 2008.
CNX Gas locked in the pricing on more of its production for 2009-2012 during the just-ended quarter, with a view to provide more revenue certainty over a greater portion of its production, especially for 2010.
For 2009, the company said it has hedged 47.5 Bcf at average hedge price of $9.10 per Mcf, and for 2010 the company has hedged 45.6 Bcf at $7.94 per Mcf. For 2011 and 2012, the company has hedged 11.3 Bcf and 15.1 Bcf respectively at prices of $6.89 and $6.89 per Mcf.
CXG closed Wednesday's regular trading session at $29.86.
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