cnx ceo comments
Posted: Thu Apr 28, 2022 12:54 pm
I think 2022 is turning out to be quite the proving ground that’s verifying certain realities and exposing certain flawed beliefs. And first, let's talk about natural gas supply and how that might be able to grow to respond to increase in energy demand needs both domestically, as well as in places like Europe. There's been a lot of talk about LNG and how U.S. natural gas can save the EU by replacing Russian natural gas and providing much needed energy security during a time of crisis.
And at the same time, we cannot lose sight of the energy supply challenges that we still have to overcome domestically. And certainly, I think the industry is doing what it can to increase supply. CNX is a great example where we expect production and capital expenditures for the year to be toward the higher end of our guidance range. Every little bit of this is going to help. But there are also some harsh realities that are quite ironic unfortunately. The domestic natural gas, oil and pipeline industries in the nation, it can't ramp up production anything close to the levels that the U.S. and EU is clamoring for anytime soon. And that's not because of industry unwillingness.
We are an industry or industries of doers after all, and it's not because of corporate greed or profiteering as some might allege. No, instead, it's simply and starkly because the policy is consciously and methodically looked to strangle infrastructure investments in the pipes, and in the processing and the power generation, and yes, in the LNG infrastructure, all of which are needed to meet the world's energy demand. They're everywhere, these policies I'm talking about, that one looks today.
Global policies, be it things like Paris Accord and the UN IPCC climate roadmap. You see them in national policies via weaponized regulatory regime and the administrative state. You see it in regional policies like [REGI], and some of these dysfunctional regional transmission organizations that are manipulating energy and electricity markets that are leading to really bad outcomes and consequences, like those that we've seen in Texas and California. And you also see them in state and local policies, such as de facto natural gas development or transmission or end use bands in places like New York and Boston.
And unfortunately, these policies have been extremely effective in achieving exactly what they were designed to do, which is to create energy scarcity, pent up prices, and not allow the most sensible supplies of natural gas and oil to reach the obvious demand centers. That's why Boston has to import LNG from thousands of miles afar, including Russia at times, instead of taking molecules from Pennsylvania 400 miles away via the pipeline. That's why U.S. politicians they end up pleading with dictators in Venezuela and OPEC to increase output. And most tragically, that's why the EU is energy dependent on Russia.
Now for our industry to solve problems and provide solutions, it unfortunately is going to take years. The domestic energy industry has been under attack and pendent for over a decade by these policies, and now will take nearly as long to correct that. And that's assuming policymakers wake up to the reality which is a big assumption as crazy as it sounds considering times like these where common sense tells us domestic energy have never been more vital. And the policies that are designed to stymie it, they've never been more harmful.
Now these policy concerns, they lead to my second observation. Despite the clear validation of domestic energy as an attractive and a deserving investment option, we believe access to the capital markets for our industry is going to continue to be more restricted. Now, it could be something like ESG investing on a rise, or it could be the Federal Reserve climate stress test on banks, or it could be SEC climate disclosures.
But to manage this risk, we believe the prudent course under our sustainable business model is to maintain a debt level and a maturity schedule and a liquidity level whereby we never need access to debt markets. And fortunately, we reached that point, our guidance and future free cash flow generation, when you couple it with our balance sheet metrics, it means we got the optionality to organically delever to be independent of the debt capital markets. For our industries, the CNX way needs to become the norm until policymakers and capital markets allow themselves to be mugged by the facts.
But my emotion in 2022, I have to tell you, as I said, it's that of sadness. Because much of what ails this nation and world did not have to be. Putin did not have to be enabled. Ukraine did not need to be destroyed. Americans didn't need their households to be robbed by that [beat] known as inflation. And our energy security and our grid reliability, whether it's Texas, California or Europe, none of them needed to be compromised. It all just happened. And it continues to run rampant, and it's going to get worse, potentially much worse.
The current state of our energy, industry and economy and our geopolitical standing, they are not healthy. And until the health of those improve, we're all going to pay the price. It's just a question as to what extent. This didn't have to be, how long shall we continue to tolerate it? The good news is the Appalachian region has the resources and the know how and the work ethic to be the fountainhead or the catalyst of the modern energy and manufacturing industries.
We can be a center for skilled labor job creation to help pave a path to middle class access to the region's underserved rural and urban communities. The only thing preventing this from happening is a collective willingness to embrace data and facts over politics and ideology. We should embrace the assets and the workforce and the energy in the Appalachian region. We utilize first in this region and then far beyond. It can make western Pennsylvania or Western Virginia or West Virginia, the true energy capitals of the world by developing and utilizing homegrown resources to build a local energy ecosystem that will cultivate and sustain the middle class for the next generation.
These natural gas based products, they're more environmentally friendly, lower costs. It will be sourced locally in the Appalachian region instead of faraway lands instead of extensive supply chain of carbon footprints. This is a realistic actionable solution for the Appalachian region that runs counter to other such efforts championed by establishment and organizations, or by those with ideological goals.
We can be a center for skilled labor job creation to help pave a path to middle class access to the region's underserved rural and urban communities. The only thing preventing this from happening is a collective willingness to embrace data and facts over politics and ideology. We should embrace the assets and the workforce and the energy in the Appalachian region. We utilize first in this region and then far beyond. It can make western Pennsylvania or Western Virginia or West Virginia, the true energy capitals of the world by developing and utilizing homegrown resources to build a local energy ecosystem that will cultivate and sustain the middle class for the next generation.
These natural gas based products, they're more environmentally friendly, lower costs. It will be sourced locally in the Appalachian region instead of faraway lands instead of extensive supply chain of carbon footprints. This is a realistic actionable solution for the Appalachian region that runs counter to other such efforts championed by establishment and organizations, or by those with ideological goals.
And at the same time, we cannot lose sight of the energy supply challenges that we still have to overcome domestically. And certainly, I think the industry is doing what it can to increase supply. CNX is a great example where we expect production and capital expenditures for the year to be toward the higher end of our guidance range. Every little bit of this is going to help. But there are also some harsh realities that are quite ironic unfortunately. The domestic natural gas, oil and pipeline industries in the nation, it can't ramp up production anything close to the levels that the U.S. and EU is clamoring for anytime soon. And that's not because of industry unwillingness.
We are an industry or industries of doers after all, and it's not because of corporate greed or profiteering as some might allege. No, instead, it's simply and starkly because the policy is consciously and methodically looked to strangle infrastructure investments in the pipes, and in the processing and the power generation, and yes, in the LNG infrastructure, all of which are needed to meet the world's energy demand. They're everywhere, these policies I'm talking about, that one looks today.
Global policies, be it things like Paris Accord and the UN IPCC climate roadmap. You see them in national policies via weaponized regulatory regime and the administrative state. You see it in regional policies like [REGI], and some of these dysfunctional regional transmission organizations that are manipulating energy and electricity markets that are leading to really bad outcomes and consequences, like those that we've seen in Texas and California. And you also see them in state and local policies, such as de facto natural gas development or transmission or end use bands in places like New York and Boston.
And unfortunately, these policies have been extremely effective in achieving exactly what they were designed to do, which is to create energy scarcity, pent up prices, and not allow the most sensible supplies of natural gas and oil to reach the obvious demand centers. That's why Boston has to import LNG from thousands of miles afar, including Russia at times, instead of taking molecules from Pennsylvania 400 miles away via the pipeline. That's why U.S. politicians they end up pleading with dictators in Venezuela and OPEC to increase output. And most tragically, that's why the EU is energy dependent on Russia.
Now for our industry to solve problems and provide solutions, it unfortunately is going to take years. The domestic energy industry has been under attack and pendent for over a decade by these policies, and now will take nearly as long to correct that. And that's assuming policymakers wake up to the reality which is a big assumption as crazy as it sounds considering times like these where common sense tells us domestic energy have never been more vital. And the policies that are designed to stymie it, they've never been more harmful.
Now these policy concerns, they lead to my second observation. Despite the clear validation of domestic energy as an attractive and a deserving investment option, we believe access to the capital markets for our industry is going to continue to be more restricted. Now, it could be something like ESG investing on a rise, or it could be the Federal Reserve climate stress test on banks, or it could be SEC climate disclosures.
But to manage this risk, we believe the prudent course under our sustainable business model is to maintain a debt level and a maturity schedule and a liquidity level whereby we never need access to debt markets. And fortunately, we reached that point, our guidance and future free cash flow generation, when you couple it with our balance sheet metrics, it means we got the optionality to organically delever to be independent of the debt capital markets. For our industries, the CNX way needs to become the norm until policymakers and capital markets allow themselves to be mugged by the facts.
But my emotion in 2022, I have to tell you, as I said, it's that of sadness. Because much of what ails this nation and world did not have to be. Putin did not have to be enabled. Ukraine did not need to be destroyed. Americans didn't need their households to be robbed by that [beat] known as inflation. And our energy security and our grid reliability, whether it's Texas, California or Europe, none of them needed to be compromised. It all just happened. And it continues to run rampant, and it's going to get worse, potentially much worse.
The current state of our energy, industry and economy and our geopolitical standing, they are not healthy. And until the health of those improve, we're all going to pay the price. It's just a question as to what extent. This didn't have to be, how long shall we continue to tolerate it? The good news is the Appalachian region has the resources and the know how and the work ethic to be the fountainhead or the catalyst of the modern energy and manufacturing industries.
We can be a center for skilled labor job creation to help pave a path to middle class access to the region's underserved rural and urban communities. The only thing preventing this from happening is a collective willingness to embrace data and facts over politics and ideology. We should embrace the assets and the workforce and the energy in the Appalachian region. We utilize first in this region and then far beyond. It can make western Pennsylvania or Western Virginia or West Virginia, the true energy capitals of the world by developing and utilizing homegrown resources to build a local energy ecosystem that will cultivate and sustain the middle class for the next generation.
These natural gas based products, they're more environmentally friendly, lower costs. It will be sourced locally in the Appalachian region instead of faraway lands instead of extensive supply chain of carbon footprints. This is a realistic actionable solution for the Appalachian region that runs counter to other such efforts championed by establishment and organizations, or by those with ideological goals.
We can be a center for skilled labor job creation to help pave a path to middle class access to the region's underserved rural and urban communities. The only thing preventing this from happening is a collective willingness to embrace data and facts over politics and ideology. We should embrace the assets and the workforce and the energy in the Appalachian region. We utilize first in this region and then far beyond. It can make western Pennsylvania or Western Virginia or West Virginia, the true energy capitals of the world by developing and utilizing homegrown resources to build a local energy ecosystem that will cultivate and sustain the middle class for the next generation.
These natural gas based products, they're more environmentally friendly, lower costs. It will be sourced locally in the Appalachian region instead of faraway lands instead of extensive supply chain of carbon footprints. This is a realistic actionable solution for the Appalachian region that runs counter to other such efforts championed by establishment and organizations, or by those with ideological goals.