CNX Gas Corporation has confirmed its 2008 production guidance of 72 billion cubic feet (Bcf), with the re-start this past weekend of longwall coal production at CONSOL Energy's Buchanan Mine.
Separately, CNX Gas hedged additional production for 2008, 2009, and 2010, as gas prices have risen substantially since the first of the year. CNX Gas now has 35.9 Bcf of its production hedged for 2008 at an average price of $8.84 per Mcf, 24.9 Bcf for 2009 at an average price of $9.02, and 5.6 Bcf for 2010 at an average price of $9.14. (These prices include Appalachian premiums.) Production above these hedged volumes will receive market pricing, which should include a premium to Henry Hub pricing due to the company's Appalachian location.
Roland Campanelli, vice president of marketing, said, "CNX Gas continues to utilize an opportunistic ladder hedging approach to lock-in future cash flows. Rather than try to estimate the top of a market, our strategy is to execute additional hedges as prices rise and to leave open a significant portion of our projected production book. This approach recognizes that no one can accurately predict what short term gas prices will do and that the only sure bet is price volatility. We believe this approach has placed us in a truly 'well-hedged' position for 2008 and beyond."
Nicholas J. DeIuliis, president and CEO stated, "With CONSOL's restart of the Buchanan coal mine and the recent increases in gas prices, CNX Gas is positioned in 2008 to deliver 25% production growth, full funding from operating cash flow of our $470 million capital program, free cash flow, and the highest margins in the industry. Our focus on asset development, coupled with our patience the past year regarding gas prices, has positioned us for a strong year."
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