PITTSBURGH, Jan. 25 /PRNewswire-FirstCall/ -- CNX Gas Corporation
(NYSE: CXG), a leading Appalachian producer, has proved reserves of
1.9 trillion cubic feet (Tcf) as of December 31, 2009. This is an
increase of 0.5 Tcf, or 34%, from the 1.4 Tcf reported at year-end
2008. The proved developed reserves (PDP) and the proved
undeveloped reserves (PUD) both increased between 33-34%. CNX Gas
invested $159.2 million in drilling capital in 2009. This yielded
extensions and discoveries of 406.8 Bcf, resulting in a drill bit
finding cost of $0.39 per Mcf. The net impacts of revisions,
including pricing, and production yielded another 82.6 Bcf, meaning
that the total net change in reserves was 489.4 Bcf. The 406.8 Bcf
from extensions and discoveries which were booked during 2009, when
divided by 2009 production, means that the company replaced over
400% of its 2009 production. Total proved, probable, and possible
reserves (also known as "3P reserves") were 6.5 Tcf as of December
31, 2009. This is an increase of 3.8 Tcf, or 140%, in 3P reserves
from the 2.7 Tcf reported at year-end 2008. The company's 3P
reserves have been determined in accordance with the guidelines of
the Society of Petroleum Engineers Petroleum Resources Management
System (SPE-PRMS). "From 2005, when CNX Gas was formed, through
2009, proved reserves are up 83%, while annual production has
increased over 90%," commented J. Brett Harvey, chairman and chief
executive officer. "For CNX Gas to so quickly grow these key
metrics, while incurring almost no debt, is nothing short of
spectacular. I congratulate our team for their superb execution of
our plan." "With these results, I believe that CNX Gas could quite
possibly lead the industry in the efficient deployment of capital,"
continued Mr. Harvey. "No matter what happens with gas pricing, CNX
Gas is poised to continue adding to shareholder value." Of the
1,911 Bcf of proved reserves, 1,040 Bcf, or 54%, are categorized as
proved developed. At year-end 2008, 783 Bcf, or 55%, were
categorized as proved developed. The proved reserve estimate for
2009 was prepared by CNX Gas and audited by Netherland, Sewell
& Associates, Inc. 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) 859 645 1,504 183 260 1,947
Mountaineer (CBM) 74 13 87 34 210 331 Nittany (CBM) 26 23 49 1 53
103 --- --- --- --- --- --- Total Appalachian CBM 959 681 1,640 218
523 2,381 Chattanooga Shale 12 29 41 120 640 801 Marcellus Shale 39
157 196 1,001 2,090 3,287 Other 30 4 34 4 0 38 --- --- --- --- ---
--- Total 1,040 871 1,911 1,343 3,253 6,507 Definition: Total 3P is
a summation of total proved, probable, and possible reserves. The
estimates of reserves and future revenue have been prepared in
accordance with the definitions and guidelines of the SEC
Regulation S-X Rule 4-10(a). The future net cash flows of the CNX
Gas proved gas reserves have a present value of nearly $1.5 billion
before income taxes, assuming a ten percent discount rate, as of
December 31, 2009. This compares with a value of nearly $2.0
billion at December 31, 2008. The decrease in value was largely
driven by lower prices, although was partially offset by a 34%
increase in proved reserves. The values assume flat pricing and
constant unit costs. The average price used in the latest reserve
study was $4.19 per Mcf, versus $6.23 per Mcf used in 2008. Both
prices exclude the effects of hedged production. In Virginia CBM,
there are 1,512 identified PUD locations and another 1,528 in the
probable/possible categories. Mountaineer CBM has 25 identified PUD
locations and another 699 in the probable/possible categories.
Nittany CBM has 84 identified PUD locations and another 173 in the
probable/possible categories. Additionally, CNX Gas updated its
estimates of net unrisked resource potential of the company's
extensive eastern shale position in a range from 8.0 Tcf to 15.1
Tcf. When combined with the 3P reserves of 6.5 Tcf, it means that
total reserves and resources could range from 14.5 Tcf to 21.6 Tcf.
Note that all of the Chattanooga Shale is included in the 3P
analysis above; there is no remaining net unrisked Chattanooga
Shale resource. Shale Acreage with Resource Potential Net Low High
Acres (Bcf) (Bcf) ----- ----- ----- Huron Shale 224,000 450 1,100
Marcellus Shale 250,000 6,400 12,000 ------- ----- ------ Total
Appalachian Shale 474,000 6,850 13,100 New Albany Shale 338,000
1,100 2,000 ------- ----- ----- Total Shale 812,000 7,950 15,100
----------- ------- ----- ------ 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. Of the remaining 171,000 acres, 47,000 acres have 3P well
locations, leaving 124,000 acres with resource potential. Similarly
for the Huron acreage, the range shown is only for the 55,000 acres
in eastern Kentucky. Seven hundred horizontal locations are
assumed, based on 80-acre spacing. Reconciliation of PV-10 to
Standardized Measure (as of December 31) 2009 2008 2007 ---- ----
---- Future Cash Inflows $7,975,195 $8,856,817 $9,509,665 Future
Production Costs (3,123,532) (3,525,902) (3,004,619) Future
Development Costs (995,569) (793,592) (636,436) -------- --------
-------- Future Net Cash Flows 3,856,094 4,537,323 5,868,610 10%
Discount Factor (2,375,751) (2,579,396) (3,581,183) ----------
---------- ---------- PV 10% (Non-GAAP measure) 1,480,343 1,957,927
2,287,427 Undiscounted Income Taxes (1,465,075) (1,713,713)
(2,259,415) 10% Discount Factor 879,083 974,218 1,389,540 -------
------- --------- Discounted Income Taxes (548,005) (739,495)
(869,875) -------- -------- -------- Standardized GAAP measure
$894,351 $1,218,434 $1,389,540 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 RESOURCES The
United States Securities and Exchange Commission (SEC) permits oil
and gas companies, in their filings with the SEC, to disclose only
proved, probable and possible reserves that a company anticipates
as of a given date to be economically and legally producible and
deliverable by application of development projects to known
accumulations. We use certain terms in this presentation, such as
"resource potential" that the SEC's rules strictly prohibit us from
including in filings with the SEC. We also caution you that the SEC
views such "resource potential" estimates as inherently unreliable
and these estimates may be misleading to investors unless the
investor is an expert in the gas industry. Except with respect to
PDPs for which we perform comprehensive title review prior to
drilling, the reserve and resource data 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. Investor Contact: Dan
Zajdel (724) 485-4169 DATASOURCE: CNX Gas Corporation CONTACT:
Investors: Dan Zajdel, +1-724-485-4169 Web Site:
http://www.cnxgas.com/
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