PITTSBURGH, Feb. 17 /PRNewswire-FirstCall/ -- CNX Gas Corporation
(NYSE: CXG) has proved reserves of 1,422 billion cubic feet (Bcf)
as of December 31, 2008, or an increase of 6% from the 1,343 Bcf
reported at year-end 2007. Proved reserves would have increased by
8%, to 1,450 Bcf, if the year-earlier pricing had been used. An
additional 1,323 Bcf are categorized as probable or possible
reserves as of December 31, 2008, or an increase of 41% from the
941 Bcf probable or possible reserves reported at year-end 2007.
This means that total proved, probable, and possible reserves (also
known as "3P reserves") were 2,745 Bcf as of December 31, 2008.
This is a 20% increase in 3P reserves from the 2,284 Bcf reported
at year-end 2007. Additionally, CNX Gas updated its estimates of
net unrisked resource potential of the company's extensive Eastern
Shale position in a range from 4.7 trillion cubic feet (Tcf) to
12.6 Tcf. When combined with the 3P reserves, it means that total
recoverable reserves and resources could range from 7.4 Tcf to 15.3
Tcf. J. Brett Harvey, chairman and chief executive officer, said,
"CNX Gas continued to show meaningful growth in proved reserves in
2008. We also booked proved reserves for the first time from our
successful Chattanooga and Marcellus Shale exploration program.
"CNX Gas invested $290.8 million in drilling capital expenditures
in 2008," Mr. Harvey continued. "This yielded extensions and
discoveries of 182.7 Bcf, resulting in a finding cost of $1.59 per
Mcf. This figure, although impressive in and of itself, is even
more so when one considers that CNX Gas drilled 213 infill wells in
Virginia. These wells, which don't create offset locations, cost
$67 million." CNX Gas drills infill wells to accelerate the
monetization of its fields and improve its return on capital
employed. Additional reserves from infill locations are booked in
the year in which the company receives regulatory approval for
downspacing, not the year in which the wells are ultimately
drilled. The 182.7 Bcf from extensions and discoveries which were
booked during 2008, when divided by 2008 production of 76.6 Bcf,
means that the company replaced 238% of production in 2008. Of the
1,422 Bcf of proved reserves, 783 Bcf, or 55%, are categorized as
proved developed. At year-end 2007, 671 Bcf, or 51% were
categorized as proved developed. This is another measure of the
increased efficiency of capital employed. If CNX Gas achieves its
production guidance of 85 Bcf for 2009, it means that the company
has a reserves-to-production ratio, or R/P, of 16.7 years. This is
a reduction from 17.5 years in 2008, when CNX Gas produced 76.6 Bcf
from a starting proved reserve base of 1,343 Bcf. To put this into
perspective, in 2005 when CNX Gas became a public company, the R/P
ratio was over 21 years. The proved reserve estimates for both 2008
and 2007 were prepared by Data & Consulting Services Division
of Schlumberger Technology Corporation. The following table shows
the breakdown of reserves, in Bcf, from the company's current
development and exploration plays. Over 99 percent of the company's
proved reserves are gas: Proved Proved Total Total Developed
Undeveloped Proved Probable Possible 3P --------- -----------
------ -------- -------- -- Virginia Operations (CBM) 679 601 1,280
284 375 1,939 Mountaineer (CBM) 55 17 72 31 214 317 Nittany (CBM)
20 5 25 11 47 83 --- --- ----- --- --- ----- Total Appalachian CBM
754 623 1,377 326 636 2,339 Chattanooga Shale 4 7 11 9 23 43
Marcellus Shale 4 6 10 40 59 109 Other 21 3 24 2 228 254 --- ---
----- --- --- ----- Total 783 639 1,422 377 946 2,745 Definition:
Total 3P is a summation of total proved, probable, and possible
reserves. Schlumberger calculated that the future net cash flows of
the CNX Gas proved gas reserves have a present value of nearly $2.0
billion before income taxes, assuming a ten percent discount rate,
as of December 31, 2008. This compares with a value of nearly $2.3
billion at December 31, 2007. The decrease in value was largely
driven by lower prices, and was partially offset by a 6% increase
in proved reserves. As is customary, the values assume flat pricing
and constant unit costs. The December 31 price used in the 2008
reserve study was $6.23 per Mcf, including basis. In 2007, a $7.08
per Mcf price was used. Both prices exclude the effects of hedged
production. CNX Gas has also updated its estimated range of net
unrisked resource potential of the company's extensive Eastern
Shale position. Low High Acres (Bcf) (Bcf) ----- ----- -----
Chattanooga Shale 244,000 1,100 2,500 Huron Shale 203,000 450 1,100
Marcellus Shale 186,000 2,000 7,000 ------- ----- ----- Total
Appalachian Shale 633,000 3,550 10,600 New Albany Shale 337,000
1,100 2,000 ------- ----- ------ Total Eastern Shale 970,000 4,650
12,600 The range of net unrisked resource potential is based on
both internal and external sources. In the Marcellus Shale, no
value is assigned to the 79,000 acres that are in Ohio. And, the
range represents 1,100 horizontal locations, based on 80-acre
spacing, and 250 vertical locations, based on 40-acre spacing
within Pennsylvania, northern West Virginia, and upstate New York.
Similarly for the Huron acreage, the range shown is only for the
62,000 acres in eastern Kentucky. Seven hundred horizontal
locations are assumed, based on 80-acre spacing. CNX GAS
CORPORATION is an independent natural gas exploration, development,
production and gathering company operating in the Appalachian and
Illinois basins of the United States. Reconciliation of PV-10 to
Standardized Measure (as of December 31) 2008 2007 2006 Future cash
inflows $8,856,817 $9,509,665 $7,105,265 Future Production Costs
(3,525,901) (3,004,619) (2,568,731) Future Development Costs
(793,591) (636,436) (552,114) --------- --------- --------- Future
net cash flows (4,537,325) 5,868,610 3,984,420 10% discount factor
2,579,396 (3,581,183) (2,484,756) --------- --------- --------- PV
10% (Non-GAAP measure) 1,957,929 2,287,427 1,499,664 Undiscounted
Income Taxes 1,713,713 (2,259,415) (1,500,533) 10% discount factor
974,218 1,361,528 935,760 --------- --------- --------- Discounted
Income Taxes 739,495 (897,887) (564,773) Standardized GAAP measure
$1,218,434 $1,389,540 $934,891 CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS Various statements in this release,
including those that express a belief, expectation, or intention,
as well as those that are not statements of historical fact, are
forward-looking statements (as defined in Section 21E of the
Securities Exchange Act of 1934). These statements involve risks
and uncertainties that could cause actual results to differ
materially from projected results. Accordingly, investors should
not place undue reliance on forward-looking statements as a
prediction of actual results. We have based these forward-looking
statements on our current expectations and assumptions about future
events. While our management considers these expectations and
assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory and other
risks, contingencies and uncertainties, most of which are difficult
to predict and many of which are beyond our control. These risks,
contingencies and uncertainties relate to, among other matters, the
following: our business strategy; our financial position; our cash
flow and liquidity; declines in the prices we receive for our gas
affecting our operating results and cash flow; uncertainties in
estimating our gas reserves; replacing our gas reserves;
uncertainties in exploring for and producing gas; our inability to
obtain additional financing necessary in order to fund our
operations, capital expenditures and to meet our other obligations;
disruptions, capacity constraints in or other limitations on the
pipeline systems which deliver our gas; competition in the gas
industry; the availability of personnel and equipment; increased
costs; the effects of government regulation and permitting and
other legal requirements; legal uncertainties regarding the
ownership of the coalbed methane estate; costs associated with
perfecting title for gas rights in some of our properties; our need
to use unproven technologies to extract coalbed methane in some
properties; our relationships and arrangements with CONSOL Energy;
and other factors discussed under "Risk Factors" in the 10-K for
the year ended December 31, 2008. We are including this cautionary
statement in this release to make applicable and take advantage of
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by, or
on behalf, of us. CAUTIONARY STATEMENT CONCERNING 3P AND PROBABLE
AND POSSIBLE RESERVES AND RESOURCES The United States Securities
and Exchange Commission (SEC) permits oil and gas companies, in
their filings with the SEC, to disclose only proved reserves that a
company has demonstrated by actual production or conclusive
formation tests to be economically and legally producible under
existing economic and operating conditions. We use certain terms in
this presentation, such as "3P" and "probable" and "possible"
reserves and/or "resource potential" that the SEC's guidelines
strictly prohibit us from including in filings with the SEC. We
also caution you that the SEC views such "3P" and "probable" and
"possible" reserves and/or "resource potential" estimates as
inherently unreliable and these estimates may be misleading to
investors unless the investor is an expert in the gas industry. The
"3P" and "probable" and "possible" reserve data and/or "resource
potential" contained in this release is based on a summary review
of the title to coalbed methane and other gas rights we hold, as
well as a summary review of the title to the coal from which many
of our rights derive. As is customary in the gas industry, prior to
the commencement of gas drilling operations on our properties, we
conduct a thorough title examination and perform curative work with
respect to significant defects. We are typically responsible for
curing any title defects at our expense. This curative work may
include the acquisition of additional property rights in order to
perfect our ownership for development and production of the gas
estate. Contact: Dan Zajdel Vice President - Investor Relations
(724) 485-4169 http://www.cnxgas.com/ DATASOURCE: CNX Gas
Corporation CONTACT: Dan Zajdel, Vice President - Investor
Relations, +1-724-485-4169, Web Site: http://www.cnxgas.com/
Copyright