Edited Transcript of CNNX earnings conference call or presentation 3-May-18 3:30pm GMT

So an active first quarter with GP consolidation and an [honor roll drop] as sole sponsor, new balance sheet built for the future and looking at those accomplishments, very exciting. Add to that a solid focus on execution and cost control within the quarter that really drove our financial results, you get even more excited and. But what we're most excited about today is what the deal with HG and CNX Resources is, what it represents that we closed yesterday and what that means for unitholders.

Before going into the details of that transaction, I want to sum up the transaction from the perspective of the CNX Midstream unitholder. The transaction is immediately accretive to CNX Midstream, which is great. But even more compelling is that with the transaction, CNX Midstream unitholders enjoy a number of far-ranging benefits. And the most significant ones, I just want to run through some of those for you. First, our 5-year 15% distribution growth is now covered by MWCs and minimum volume commitments. That creates an enviable low-risk multiyear growth plan. Second, 15% distribution growth horizon, it now stretches out for 6 years through 2023. Third, significant upside in distributable cash flow for these next 6 years. They [exist] above the MWCs and the MVC contributions based off of the sponsors' projected activity pace. CNX Midstream secures over 16,000 dedicated core-to-core Marcellus and Utica acres and have exciting stack pay potential. With this deal, we tally our first significant true third-party revenue stream opportunity with a line of MarkWest. And our sponsor increases its inventory of core-to-core Marcellus locations by over 30% after 2020 and that positions CNX Midstream to take advantage of the deeper opportunity set for sustained accretive growth in the out years.

And then, last but not least, we retained HG as a core critically important customer within the Anchor Systems in DevCo I. Frankly, we consider them more than a customer, we consider them a partner. And we got to know HG and Quantum quite well during the last number of months. And I can tell you that they share the values and the approach that we do at CNX Midstream when it comes to things like capital allocation and decision making, and I think that partnership is only going to grow into the future. I would not be surprised and will certainly welcome the opportunity to work with them throughout other opportunity sets within the Appalachian basin into the future.

So now what I'd like to do is maybe close on offering up the perspective of how management views CNX Midstream, how we approach the opportunity set that it represents for unitholders. On a higher level, we'd like to think that CNX Midstream is now developing as a differentiator story within the MLP space. And what does that mean to be a differentiator? We think it comes down to a small but critical group of traits.

First trait is being a good solid capital allocator. Both CNX and CNX Midstream pride themselves on being best-in-class capital allocators. So this is right up our alley. Everything we've done in a short period of time, whether it's the GP consolidation, the balance sheet rebuild, the Shirley-Pennsboro drop to the HG transaction that we completed yesterday, they've all been aimed at creating a platform for efficient future capital allocation. Second trait, being a solid capital allocator, that should correlate to strong returns on invested capital. And certainly the HG transaction provides us the opportunity to double down on the highest return investment options in the core-to-core in DevCo I fairways, while not having to chase lower IRR projects outside that fairway or in our DevCo II. Our capital efficiency and our internal rates of return, they've gone up as a result of yesterday's transaction and that's really good pair of things to see. Third trait, having a base growth plan that is self-funding from cash flows and existing balance sheet capacity, it doesn't require the issuance of equity. We've had that and we've got that now looking forward for the next 6 years with 15% distribution growth with DevCo I and core-to-core concentration and our balance sheet. So all those things together put us in a position to be able to do that in the coming years. And then the last trait: be transparent with disclosures to the owners and investors. Our Investor Day in March demonstrated that we are more than eager to articulate how we think about and see in this awesome business opportunity and how we're willing to provide all the necessary metrics over an extended time frame to allow for valuation of the investment opportunity that is CNX Midstream.

So CNX Midstream, we think, it checks all 4 of those traits, and being relatively new on this scene as a sole sponsor, hopefully we've got the ability to demonstrate over a short period of time the tangible actions that back this view up. We're very excited for the future of this great company.

And with that now, I'm going to turn things over to Don Rush, our CFO.

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Donald Rush, [4]

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Thank you, Nick, and good morning, everyone. Before I get into the details of the transaction, I just want to make the point that this deal was designed from the onset with both interests in mind, the MLP and the upstream sponsor. So it's just another benefit of the now fully aligned nature of the MLP, really allowing the parties to create win-win situations -- win-win deals that we expect to continue going forward.

Jumping to Slide 5. We've laid out some of the specific terms of the agreement and what each party has incoming and outgoing. So to summarize, CNX Midstream is getting an additional 52 committed wells in DevCo I, split between CNX and HG. The MLP also gets over 16,000 newly dedicated Utica acres in DevCo I. The high-pressure pipeline from MarkWest to Majorsville, Nick just mentioned, with a third-party already subscribed to it, $2 million in cash and an enhanced gas gathering agreements from both parties, allowing CNX Midstream to have more control over its systems.

To get these items, the MLP is selling its 5% interest in the DevCo II and Moundsville midstream assets as well as releasing about 18,000 net to the MLP acres from dedication.

I won't walk through all of the other terms, but there are a few highlights I'd like to point out. CNX is getting about [15,000] incremental acres in DevCo I, which adds to their already strong sponsor inventory I'll touch on later. And HG is gaining full control of their midstream development for its less developed upstream acres through the acreage release.

The maps on Slide 6 show the DevCos before and after the exchange agreement. The key point here is that CNX Midstream retains the dedication and the interest in the midstream assets that are still in the CNX areas. Also CNX Midstream now has a bigger foothold in CPA inside of DevCo I, with the addition of dedicated Utica acreage around the [Gott] and Aikens wells. And not to be forgotten, Wadestown, which resides in DevCo III, is a high potential area with a significant buildout planned in the coming years.

Slide 8 shows a more detailed version of the financial impact of the transaction. You might recognize this chart from our Analyst Day materials, but there are 2 important changes that Nick already mentioned earlier. First, as you can see, our 15% distributable cash flow targets have been significantly derisked. Our PDP's minimum well commitments and minimum volume commitments alone provide us with 5 years of 15% distribution growth. Second, this deal allows us to extend our 15% distribution target by another year through 2023, as Nick mentioned. It's worth noting that the 15% distribution growth coverage ratio through 2022, utilizing only our minimum commitments, is a healthy 1.15x. And on top of that, our new potential distributable cash flow forecast shows we could have a 1.5x average coverage ratio through 2023, up from the 1.2x we disclosed in March. And all this while we are still assuming no drops in our base plan, consistent with what we have stated previously.