Q2 2024 Earnings Summary
- 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.
- 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.
-
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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.
Research analysts covering Coterra Energy.