CNX Gas (CXG) is an independent natural gas exploration and production company based in Pittsburgh with operations concentrated in the Appalachian basin, including many locations near my hometown in Western PA. The Company has increased its acreage position by 345% over the past three years to a total of 3.8 million acres through a mix of coalbed methane (CBM), unconventional shales, tight sands, and conventional deposits concentrated (63%) in the Appalachian basin. Proven reserves account for just 7% of the 3.8 million acres, with partially-assessed and un-assessed acres accounting for 46.5% each. The Company’s CBM assets alone are sufficient to achieve its 100 Bcf strategic goal by 2010 by simply tapping these reserves.

Upside to the 100 Bcf output goal by 2010 is possible through the Company’s shale assets, including 842,000 acres with an estimated production output estimate range of 1,316 – 5,165 Bcf based on current assessments. CNX Gas is a leader in the Eastern US shale – including 161,000 acres in PA, NY, WV, and OH in the Marcellus Shale with the distinct advantage of existing operations and infrastructure in this region. During 2007, CNX Gas enjoyed the second-lowest finding costs in the industry at just $1.25 per Mcf versus an estimated industry average of $3.00 per Mcf. The Company also enjoys the strongest balance sheet in the industry with negligible debt and the ability to fund the majority of its 2008 capital budget without drawing on its credit facility.

Another element to the CNX Gas story is the capture of coalbed methane gas, which is eligible for carbon credits on the Chicago Climate Exchange. The Company is the second-largest play on methane gas capture in the US behind Waste Management (WMI). As the only oil and gas company registered as an offset provider with the Chicago Climate Exchange, CNX Gas has already registered 8.4 million tons of carbon credits and expects future capacity to generate 2 – 3 million tons annually. As I have recently featured, these credits have commenced trading with a most recent print of $5.63 per ton – which values the Company’s existing portfolio of carbon credits at just under $50 million with another $10 - $15 million expected annually in new emission offsets.