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    Coterra Energy Inc (CTRA)

    Business Description

    Coterra Energy Inc. is an independent oil and gas company engaged in the development, exploration, and production of oil, natural gas, and natural gas liquids (NGLs) within the continental U.S. . The company operates in one segment, focusing on oil and natural gas development, exploration, and production, with its activities concentrated in areas conducive to multi-well, repeatable drilling programs . Coterra generates revenue from contracts to sell oil, natural gas, and NGLs produced from its interests in oil and gas properties . The company sells its production under both long-term and short-term sales contracts at market-sensitive prices to a diverse portfolio of customers, including industrial customers, local distribution companies, oil and gas marketers, major energy companies, pipeline companies, and power generation facilities .

    1. Oil Sales - Engages in the sale of oil produced from its interests in oil and gas properties, contributing significantly to the company's revenue.
    2. Natural Gas Sales - Involves the sale of natural gas, which is extracted and marketed to various customers, forming a substantial part of the company's business.
    3. Natural Gas Liquids (NGLs) Sales - Focuses on the sale of natural gas liquids, adding to the company's diverse energy product offerings.

    Q2 2024 Summary

    Initial Price$28.02April 1, 2024
    Final Price$26.54July 1, 2024
    Price Change$-1.48
    % Change-5.28%

    What went well

    • Coterra's successful execution of the Windham Row project in Culberson County is leading to significant cost savings of 10% to 15%, exceeding projections, and reaffirms their operational capabilities and reservoir quality.
    • The company is returning significant cash to shareholders, trending above 100% cash return of free cash flow in the first six months of the year, and considers their own shares a very attractive opportunity, likely continuing share buybacks.
    • Coterra's operational flexibility allows them to optimize capital allocation, curtail production when prices are low, and quickly ramp up activity when prices improve, maximizing efficiency and returns.

    What went wrong

    • CTRA is curtailing Marcellus production and delaying turn-in-lines due to low natural gas prices, which may negatively impact future production volumes.
    • The company is prepared to reduce drilling and completion activity in the Marcellus to zero if economic conditions do not improve, indicating potential significant declines in production.
    • Current gas prices make the Marcellus assets less competitive within CTRA's portfolio, leading to potential capital reallocation away from the region.

    Q&A Summary

    1. Cash Returns and Capital Allocation
      Q: Will you maintain over 100% cash returns this year?
      A: While we're trending above 100% cash return of free cash flow in the first six months , we're not pre-guiding for the rest of the year. We remain opportunistic and see our shares as a very attractive opportunity, likely continuing active buybacks.

    2. Oil Production Guidance and Outperformance
      Q: Will higher oil output affect your three-year outlook?
      A: We're ahead of our plan, and while we won't update our three-year guide until next year, we're well-positioned to meet or exceed it. We're not managing by production goals but focusing on returns and capital efficiency.

    3. Curtailing Gas Production and Flexibility
      Q: At what gas prices will you increase activity?
      A: We'd like to see NYMEX prices north of $3 for Lower Marcellus and mid-$3s for Upper Marcellus. We can move fairly quickly and are willing to adjust activity based on market conditions.

    4. Operational Efficiencies and Cost Savings
      Q: What have you learned from Windham Row?
      A: Our simul-frac performance is exceeding projections, leading to 10–15% cost savings. We're increasing wells in Windham Row and applying these efficiencies across other assets where possible.

    5. Anadarko Activity and Capital Allocation
      Q: Will you consider shifting capital to Anadarko?
      A: We're willing to allocate capital where returns are highest. If Anadarko offers better returns, it could receive more capital in 2025.

    6. Election Year Impact
      Q: How does the election year affect your outlook?
      A: We'll approach this constructively, recognizing pressures regardless of who wins. We're prepared to adapt and focus on making the country strong.

    7. Higher Cash Taxes
      Q: What's your long-term cash tax rate outlook?
      A: We're a full cash taxpayer this year due to changes in tax code. Deferred taxes will normalize over the next few years, but near-term we'll continue as a full cash taxpayer.

    8. Co-developing Harkey and Upper Wolfcamp
      Q: Any updates on codeveloping Harkey wells?
      A: We haven't completed Harkey wells yet . Based on data, we're defaulting to codeveloping Harkey and Upper Wolfcamp where possible.

    9. Marcellus Base Performance
      Q: What's driving better Marcellus base performance?
      A: Lower field pressures and an outperforming wellhead compression program are boosting base production.

    10. New Mexico Activity and "Chicken Season"
      Q: How is the second-half well mix changing?
      A: Activity shifts to New Mexico post-"chicken season" due to regulatory constraints. We're not strategically allocating stronger rock but planning based on operational considerations.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Natural Gas8224364815532,292538319320
    Oil6156266847422,667701774765
    NGL177129170168644173176186
    Crude Oil and Condensate--------
    Brokered Natural Gas--------
    Other256183281211824
    Gain on Derivative Instruments--------
    Total Revenue1,6391,1971,3561,4925,6841,4331,2871,359
    KPIs - Metric / PeriodFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Volume of WTI Oil Collars1,3509209201,840-2,7303,2202,024
    Weighted Avg Floor for WTI Oil Collars$70.00$65.00$65.00$65.00-$68.00$65.00$65.00
    Weighted Avg Ceiling for WTI Oil Collars$116.03$89.66$89.66$90.01-$91.37$87.17$87.01
    Volume of WTI Midland Oil Basis Swaps1,3509202,7601,840-2,7301,8201,840
    Weighted Avg Differential for WTI Midland Oil Basis Swaps$0.63$1.01$1.16$1.17-$1.16$1.24$1.11
    Natural Gas Collars Volume60.3 Bcf32,200,00020,240,00029,150,000-34.5 Bcf27,300,00036,800,000
    Net Wells Turned-In-Line48.239.145.740.0-33.049.835.5
    Equivalent Production635665670697-686669669
    Oil Production92.295.891.9104.7-102.5107.2112.3
    Natural Gas Production2,7572,9042,9032,970-2.96 Bcf/d2,7802,682
    NGL Volumes7.5 MMBbl85.094.597.8-90.298.8109.7
    Avg Realized Prices for Oil$74.09$72.17$80.74$77.21-$75.00$79.39$74.18
    Avg Realized Prices for Natural Gas$3.72$1.95$2.01$2.19-$2.10$1.40$1.41
    Avg Realized Prices for NGL$23.66$16.67$19.52$18.66-$21.09$19.53$18.42
    Depletion Expense$5.89$5.98$6.27$6.20-$6.39$6.80$7.19

    Executive Team

    NamePositionStart DateShort Bio
    Thomas E. JordenChairman, CEO, and PresidentOctober 1, 2021Thomas E. Jorden is the Chairman, CEO, and President of Coterra Energy Inc. He began his role following the merger with Cimarex. He was appointed Chairman on January 1, 2023 .
    Shannon E. Young IIIExecutive Vice President and CFOJuly 2023Shannon E. Young III is the Executive Vice President and CFO at Coterra Energy Inc. He joined in July 2023, previously serving as EVP and CFO of Talos Energy Inc. .
    Stephen P. BellExecutive Vice President, Business DevelopmentOctober 2021Stephen P. Bell serves as EVP of Business Development at Coterra Energy Inc. He was appointed following the merger with Cimarex, having previously held senior roles at Cimarex since 2002 .
    Andrea M. AlexanderSenior Vice President and CHROJuly 2023Andrea M. Alexander was appointed as SVP and CHRO at Coterra Energy Inc. in July 2023. She was previously Chief People Officer at Rent the Runway .
    Blake SirgoSenior Vice President, OperationsOctober 2022Blake Sirgo is the SVP of Operations at Coterra Energy. He was appointed in October 2022, having served as VP of Operations since October 2021 .
    Adam M. VelaSenior Vice President and General CounselAugust 2023Adam M. Vela is the SVP and General Counsel at Coterra Energy Inc. He was promoted to this role in August 2023, having been with Coterra and Cimarex since 2005 .
    Michael D. DeShazerVice President of Business UnitsOctober 2021Michael D. DeShazer was appointed as VP of Business Units at Coterra Energy Inc. following the merger with Cimarex in October 2021. He joined Cimarex in 2007 .
    Gary HlavinkaVice President, Marcellus Business UnitApril 2022Gary Hlavinka was appointed as VP of the Marcellus Business Unit in April 2022. He has been with Coterra since 1989, serving in various engineering and management roles .
    Todd M. RoemerVice President and Chief Accounting OfficerJuly 2019Todd M. Roemer has been serving as VP and Chief Accounting Officer at Coterra Energy Inc. since July 2019. He joined Coterra in 2010, previously working at PricewaterhouseCoopers LLP .
    Kevin W. SmithVice President and Chief Technology OfficerOctober 2021Kevin W. Smith was appointed as VP and CTO at Coterra Energy Inc. following the merger with Cimarex in October 2021. He began his career with Cimarex in 2007 .

    Questions to Ask Management

    1. Given that the giant row developments like Windham Row are unique to Culberson County due to your acreage position, how do you intend to achieve similar economies of scale and operational efficiencies in other areas of the Permian where you lack such contiguous acreage, particularly in the crowded New Mexico portion?

    2. Despite not having conclusive evidence about interference between the Harkey and Upper Wolfcamp formations, you've decided to default to codeveloping them; how do you justify this strategy, and what are the potential risks to recovery and returns if further data suggests independent development would have been more optimal?

    3. With the ongoing oversupply in natural gas markets and your decision to curtail Marcellus production, how do you balance short-term cash flow optimization with potential long-term impacts on your production profile and market share, especially if low prices persist?

    4. Considering your reluctance to overpay for additional acreage due to frothy market conditions and the acknowledgement that you don't have ample acreage anywhere, particularly in the Anadarko Basin, what is your strategy for maintaining or expanding your inventory without compromising on capital discipline?

    5. Given your ability to pivot operations across different regions in response to market conditions, how do you ensure that such shifts don't adversely affect your operational efficiency and execution excellence, especially when dealing with regions that have differing operational challenges and infrastructure?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateFebruary 2023
    End Date/DurationNo expiration date
    Total additional amount$2.0 billion
    Remaining authorization amount$1.2 billion (as of September 30, 2024)
    DetailsAuthorized repurchase of common stock

    Past Guidance

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Oil Production Guidance: Increased to between 105.5 and 108.5 MBo per day for 2024, up approximately 2.4% from May guidance .
      2. Natural Gas Production Guidance: Maintained at the midpoint for the full year 2024 .
      3. BOE Production Guidance: Increased by 5 MBoe per day at the midpoint from May for 2024 .
      4. Capital Expenditure Guidance: Full year incurred capital between $1.75 billion and $1.95 billion, 12% lower at the midpoint than 2023 .
      5. Per BOE Cost Guidance: No changes to 2024 per BOE cost guidance .
      6. Q3 2024 Production Guidance:
        • Total production: 620 to 650 MBoe per day.
        • Oil production: 107 to 111 MBo per day.
        • Natural gas production: 2.5 to 2.63 Bcf per day .
      7. Q3 2024 Capital Expenditure Guidance: Expected total incurred capital between $450 million and $530 million .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      1. Full Year 2024 Capital Guidance: Incurred capital between $1.75 billion and $1.95 billion, 12% lower at the midpoint than 2023 .
      2. Full Year 2024 Oil Production Guidance: Increased by 2.5 MBo per day to between 102 and 107 MBo per day .
      3. Full Year 2024 BOE and Natural Gas Production Guidance: No changes .
      4. Q2 2024 Production Guidance:
        • Total production: 625 to 655 MBoe per day.
        • Oil production: 103 to 107 MBo per day.
        • Natural gas production: 2.6 to 2.7 Bcf per day .
      5. Q2 2024 Capital Expenditure Guidance: Total incurred capital between $470 million and $550 million .
      6. Unit Cost Guidance: Total unit costs between $7.45 to $9.55 per BOE .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      1. Q1 2024 Production Guidance:
        • Total production: 660 to 690 MBOE per day.
        • Oil production: 95 to 99 MBO per day.
        • Natural gas production: 2.85 to 2.95 Bcf per day .
      2. Full Year 2024 Production Guidance:
        • Total production: 635 to 675 MBOE per day.
        • Oil production: 99 to 105 MBO per day, 6% higher at the midpoint than 2023 .
      3. Capital Expenditure Guidance:
        • Q1 2024: $460 million to $540 million .
        • Full Year 2024: $1.75 billion to $1.95 billion, 12% lower at the midpoint than 2023 .
      4. Natural Gas Production Guidance for 2024: 2.65 to 2.8 Bcf per day, 5.5% lower at the midpoint than 2023 .
      5. 3-Year Outlook (2024-2026):
        • Average annual CapEx: $1.75 billion to $1.95 billion.
        • Expected annual growth: Low single digits for BOE and 5% plus for oil growth .
      6. Shareholder Returns: Base dividend for Q4 2023: $0.21 per share, increasing the annual base dividend by 5% to $0.84 per share .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information from the Q3 2024 earnings call for Coterra Energy (CTRA). Therefore, I cannot provide the guidance metrics from that specific earnings call.

    Latest news

    Recent developments and announcements about CTRA.

    Legal & Compliance

      Legal Proceedings

      ·
      Dec 31, 2024, 11:26 AM

      Summary of the Legal Matter Involving Coterra Energy Inc.

      Key Parties Involved:

      • Coterra Energy Inc.: The purchaser parent in the transaction.
      • Cimarex Energy Co.: The purchaser in the transaction.
      • Franklin Mountain Energy Holdings, LP (FMEH), Franklin Mountain Energy Holdings 2, LP (FMEH2), and Franklin Mountain GP2, LLC (FMGP2): The sellers in the transaction.
      • Sandia Minerals, LLC: A New Mexico limited liability company whose interests are part of the transaction.

      Nature of the Proceedings: Coterra Energy Inc. entered into a Membership Interest Purchase Agreement with Franklin Mountain Energy Holdings and its affiliates, which was later amended on December 28, 2024. The amendment included approximately 1,650 net royalty acres owned by Sandia Minerals, LLC, which were previously excluded from the transaction. The amendment also increased the cash consideration by $43 million, bringing the total cash consideration to $1,543,000,000, along with 40,894,925 shares of Coterra Energy Inc. common stock as part of the purchase price.

      Potential Financial or Operational Consequences:

      • Financial Impact: The transaction involves a significant cash outlay of $1,543,000,000 and the issuance of a substantial number of shares, which could impact Coterra's financial statements and shareholder equity.
      • Operational Impact: The inclusion of Sandia Minerals' assets could enhance Coterra's asset base and operational capabilities, particularly in the area of mineral rights and royalty interests.

      This transaction is part of Coterra's strategic efforts to expand its asset portfolio and enhance its operational capabilities in the energy sector.

    Financial Actions

      Debt Issuance

      ·
      Dec 17, 2024, 10:11 PM

      Coterra Energy Inc. has recently created a direct financial obligation by closing a registered public offering of $750,000,000 aggregate principal amount of its 5.40% senior notes due 2035 and $750,000,000 aggregate principal amount of its 5.90% senior notes due 2055 on December 17, 2024. These notes are senior unsecured obligations, ranking senior in right of payment to all future subordinated indebtedness and equally with all existing and future senior indebtedness that is not subordinated. However, they are structurally subordinated to all indebtedness of the company's subsidiaries and effectively subordinated to any future secured indebtedness to the extent of the value of the collateral securing such indebtedness .

      Potential Effects on Financial Health:

      • Balance Sheet Impact: The issuance of these notes increases the company's liabilities by $1.5 billion, which could affect leverage ratios and interest coverage metrics.
      • Interest Obligations: The company will incur interest expenses at rates of 5.40% and 5.90% per annum, which will impact cash flows and profitability.
      • Risk Considerations: The notes are unsecured, which may pose a risk if the company faces financial difficulties, as secured creditors would have priority claims on assets.

      This financial obligation could potentially affect Coterra Energy's financial health by increasing its debt burden and interest obligations, which may impact its ability to finance future operations or investments without additional capital .

      Debt Issuance

      ·
      Dec 16, 2024, 11:36 AM

      Coterra Energy Inc. (CTRA) has recently entered into a significant financial arrangement that creates a direct financial obligation. On December 10, 2024, the company entered into a term loan credit agreement with Toronto Dominion (Texas) LLC and other lenders, amounting to $1.0 billion. This agreement includes a $500 million Tranche A term loan and a $500 million Tranche B term loan. The Tranche A loan will be used for the Franklin Mountain Acquisition, while the Tranche B loan will fund the Avant Acquisition .

      Potential Effects on Financial Health

      • Balance Sheet Impact: The addition of $1.0 billion in term loans will increase the company's liabilities, affecting its leverage ratios and potentially its credit rating, depending on how the funds are utilized and the company's ability to generate returns from the acquisitions.
      • Interest Obligations: The loans bear interest at rates tied to the company's credit rating, with margins ranging from 0 to 187.5 basis points over the term SOFR rate, which could lead to significant interest expenses .
      • Maturity and Repayment: The Tranche A loan matures two years after its funding date, and the Tranche B loan matures three years after its funding date, which will require the company to manage its cash flows effectively to meet these obligations .

      This financial obligation is crucial for stakeholders to monitor as it will have a direct impact on Coterra Energy's financial statements and overall financial health.