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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's rates CNX's new notes B3

08 Sep 2020

New York, September 08, 2020 -- Moody's Investors Service, ("Moody's") assigned a B3 rating to CNX Resources Corporation's (CNX) proposed additional $200 million 7.250% senior unsecured notes due 2027. The outlook is negative. All other ratings of CNX are not affected.

"CNX is successfully managing its refinancing requirements and is positioning its operations to generate free cash flow and continue to reduce leverage," said Elena Nadtotchi, VP-Senior Credit Officer at Moody's.

Assignments:

..Issuer: CNX Resources Corporation

....Senior Unsecured Notes, Assigned B3 (LGD5)

RATINGS RATIONALE

The proposed senior unsecured notes are rated B3, two notches below the CFR level, given the significant size of the secured credit facility in the capital structure that has a priority claim and security over substantially all of the company's assets. The new notes will be rated at the same level and rank equally with CNX's existing senior unsecured notes and benefit from the same set of guarantees by operating subsidiaries.

CNX's B1 CFR is supported by its proactive management of liquidity, refinancing risks and commodity price risks. CNX maintains an extensive hedging program with minimal commodity price risk in 2020 and high coverage in 2021-22 and beyond. In response to declining natural gas prices, CNX reduced capital investment to keep production level flat in 2020-2021 and should generate sizable positive FCF, supported by its hedging revenues. Moody's expects CNX to maintain solid leverage metrics underpinned by its hedging arrangements. The B1 rating further reflects CNX's single basin concentration in Appalachia, subjecting its natural gas production to material basis differentials, that the company hedges.

CNX maintains adequate liquidity. The liquidity position is improving and is underpinned by Moody's expectation that the E&P business will generate sizable positive FCF in 2020-21 as it cut its capital investment and benefits from extensive hedging. Liquidity is also supported by its committed secured revolving credit facility that matures in April 2024 and which, as of June 2020, had a borrowing base of $1.9 billion. As of June 30, 2020, CNX reported $1.2 billion availability under its secured credit facility and full compliance under covenants. The facility includes two financial covenants (a maximum net leverage ratio of 4.0x and a minimum current ratio of 1x) and Moody's expects CNX to remain in compliance with covenants though 2021.

The terms of the facility also include the springing maturity clause bringing its maturity forward to January 2022, if more than $500 million of CNX's senior unsecured 2022 notes remain outstanding at that time. In 2020, CNX used its operating cash flows and executed a number of transactions to refinance its 2022 notes, including placing $345 million 2022 convertible notes. The proceeds of the new issuance and borrowings are expected to be used to redeem the remaining outstanding amounts under the 2022 notes. Going forward, Moody's expects CNX to use most of its FCF to reduce overall leverage.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

CNX's ratings may be upgraded if the company demonstrates replacement of reserves amid modest growth in production and broader recovery in natural gas sector and maintains solid leverage with RCF/debt above 30% and debt/production below $10,000/boe, with sustained solid profitability and capital returns, with LFCR maintained above 1.5x.

Deteriorating cash margins, capital returns and operating cash flow or a substantial increase in leverage with RCF/debt declining below 20% could result in a downgrade of the ratings.

CNX Resources Corporation is a sizable publicly traded independent exploration and production company operating in the Appalachian Basin. It controls substantial resources in Marcellus and Utica Shale.

The methodologies used in this rating were Independent Exploration and Production Industry published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1056808, and Midstream Energy published in December 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147839. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.3437130

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Elena Nadtotchi
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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​
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