Why Invest?

Why Invest in CNNX?

Our primary business objectives are to generate stable and predictable cash flows and increase our quarterly cash distribution per unit over time.   Our strategies to achieve these objectives are: 1) capitalizing on organic growth opportunities, 2) completing accretive acquisitions from CONE Gathering, 3) pursuing fixed-fee cash flows, and 4) attracting third-party volumes. We believe that we are well-positioned to execute our business strategies successfully because of the following competitive strengths:

  • Our relationship with CONSOL and Noble. Our Sponsors rely on us to provide substantially all of the midstream infrastructure and services necessary to support their continuing production growth in the Marcellus Shale. We believe our Sponsors will be incentivized to promote and support the successful execution of our business strategies. Particularly, we expect to realize benefits from the following:
    • Our significant dedicated acreage. Our Sponsors have dedicated to us approximately 496,000 net acres of their jointly owned Marcellus Shale acreage for an initial term of 20 years. In addition to our existing dedicated acreage, our gathering agreements provide that any additional acreage covering the Marcellus Shale that is jointly acquired by our Sponsors in a “dedication area” covering over 7,700 square miles in West Virginia and Pennsylvania will be automatically dedicated to us. Our Sponsors continue to identify and acquire additional acreage in their core operating areas in the Marcellus Shale, including farmouts of approximately 88,000 contiguous net acres in central West Virginia and a lease of approximately 9,000 contiguous net acres surrounding the Pittsburgh International Airport that are included in our dedicated acreage. We will also have the right of first offer to provide midstream services to our Sponsors on our ROFO acreage, which currently includes approximately 194,000 net acres of our Sponsors’ jointly owned Marcellus Shale acreage and any additional acreage covering the Marcellus Shale that is jointly acquired by our Sponsors in a “ROFO area” covering over 18,300 square miles in West Virginia and Pennsylvania. 
    • Our Sponsors’ planned production growth. Our Sponsors have achieved substantial production growth on our dedicated acreage since the formation of their upstream joint venture and we expect this growth to continue. Our expectation for future growth is based on our belief that our Sponsors will complete the drilling and development activities on our dedicated acreage reflected in their current drilling plan.
    • Our Sponsors’ exposure to a large resource of wet gas and condensate. Over the near term, our Sponsors expect their production mix in the Marcellus Shale to continue to shift towards higher margin wet gas production. As of June 30, 2014, approximately 38% of our Sponsors’ over 5,700 potential drilling locations (based on 86-acre spacing) on our dedicated acreage are in wet gas areas of the Marcellus Shale.
    • Our Sponsors’ upstream operational advantages. We believe that our Sponsors have several upstream operational advantages in the development of their Marcellus Shale acreage, including 1) CONSOL controls over 118,000 surface acres in the Marcellus Shale, which CONSOL and, by agreement, Noble can utilize for pad drilling, water lines, access roads and similar drilling and completion needs, 2) our Sponsors have the ability to coordinate their Marcellus Shale drilling and development with coal mining activity due to CONSOL’s mine operations in Pennsylvania and West Virginia and 3) CONSOL’s coal mining operations in Pennsylvania and West Virginia provide our Sponsors access to significant sources of water necessary for well completions.
    • Our Sponsors’ flexibility in developing their upstream acreage. Approximately 87% of our Sponsors’ upstream acreage is currently held by production, of which less than 13% of such acreage is subject to drilling obligations under a farmout agreement. As a result, our Sponsors have flexibility in developing their existing acreage. Our Sponsors can focus their drilling efforts in more concentrated ways, such as by utilizing multi-well pads and longer laterals. In addition, our Sponsors expect to accelerate production by drilling and completing both Marcellus Shale and Upper Devonian wells from the same well pads in certain areas, thereby increasing throughput on our gathering systems.
    • Our acquisition opportunities. Our Sponsors, through their indirect non-controlling ownership of 25% of our Anchor Systems and 95% of each of our Growth Systems and Additional Systems, hold a sizable ownership interest in our growing portfolio of midstream assets. We believe our Sponsors will be financially incentivized to offer us the opportunity to purchase additional interests in our midstream systems over time.
    • Our Sponsors’ access to committed processing and firm takeaway capacity. Our Sponsors have long-term contracts for an aggregate of approximately 700 MMcf/d of gas processing capacity in the Marcellus Shale and have secured in excess of 1,000 MMcf/d of long-haul firm transportation capacity or firm sales commitments for their Marcellus Shale production. We believe our Sponsors’ existing contractual commitments for Marcellus Shale processing capacity help minimize disruptions to their drilling and development plan that might otherwise exist as a result of insufficient outlets for growing production.
  • Stable cash flows underpinned by long-term, fixed-fee contracts with our Sponsors. We generate all of our revenue under long-term, fixed-fee gathering agreements that we have entered into with our Sponsors that have initial terms of 20 years and include substantial acreage dedications currently totaling approximately 496,000 net acres.
  • Financial flexibility. Given their retained ownership interests in our midstream systems, our Sponsors will be responsible for their proportionate share of the total capital expenditures associated with the ongoing build-out of those systems. In addition, at the closing of this offering, we expect to have no debt and an available borrowing capacity of $250 million under a new $250 million revolving credit facility. We believe that our ownership structure, our cash position following this offering, our available borrowing capacity and our ability to access the debt and equity capital markets will provide us with the financial flexibility to successfully execute our organic growth and acquisition strategies.
  • Experienced management and operating teams. Our executive management team has an average of over 15 years of experience in designing, acquiring, building, operating, financing and otherwise managing large-scale midstream and other energy assets. In addition, through our operational services agreement with CONSOL, we employ engineering, construction and operations teams that have significant experience in designing, constructing and operating large-scale midstream energy assets. CONSOL’s operational management team has over 80 years of combined experience designing, building and operating large-scale midstream and other energy assets.

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