Company Overview - Coterra Energy (CTRA) shares have increased by approximately 11% over the past month, outperforming the S&P 500 [1] - The most recent earnings report is essential for understanding the key drivers behind this performance [1] Earnings Estimates - Estimates for Coterra Energy have trended downward in the past month, with a consensus estimate shift of -9.9% [2] - The overall direction and magnitude of estimate revisions indicate a downward shift, leading to a Zacks Rank of 3 (Hold) for the stock [4] VGM Scores - Coterra Energy has a Growth Score of B, but it is lagging in Momentum Score with an F [3] - The stock has a Value Score of B, placing it in the second quintile for this investment strategy, resulting in an aggregate VGM Score of B [3] Industry Performance - Coterra Energy is part of the Zacks Oil and Gas - Exploration and Production - United States industry [5] - Magnolia Oil & Gas Corp (MGY), a peer in the same industry, has seen a gain of 7.8% over the past month [5] - Magnolia Oil & Gas Corp reported revenues of $350.3 million for the last quarter, reflecting a year-over-year increase of +9.7% [6] - Magnolia's EPS for the same period was $0.55, compared to $0.49 a year ago, but it is expected to post earnings of $0.39 per share for the current quarter, indicating a year-over-year decline of -30.4% [6] - The Zacks Consensus Estimate for Magnolia has changed by -8.3% over the last 30 days, resulting in a Zacks Rank of 5 (Strong Sell) for the company [7]

Industry Overview - The U.S. Energy Department reported a lower-than-expected increase in natural gas supplies, with stockpiles rising by 110 billion cubic feet (Bcf) for the week ended May 9, compared to analysts' expectations of 111 Bcf [2] - Total natural gas stocks reached 2,255 Bcf, which is 375 Bcf (14.3%) below the 2024 level but 57 Bcf (2.6%) higher than the five-year average [3] - Natural gas futures fell about 12% during the week, ending at $3.343/MMBtu, the lowest in two weeks, due to mild weather leading to subdued demand [4] Company Focus - **Expand Energy (EXE)**: The largest natural gas producer in the U.S. after the Chesapeake-Southwestern merger, with significant assets in the Haynesville and Marcellus basins. The Zacks Consensus Estimate for its 2025 earnings per share indicates a 458.2% year-over-year surge, with an 18.7% increase in estimates over the past 60 days [7][8] - **Coterra Energy (CTRA)**: An independent upstream operator with a focus on natural gas, owning approximately 183,000 net acres in the Marcellus Shale. The expected earnings per share growth rate for Coterra is 20.3% over three to five years, compared to the industry's 17.8% [9][10] - **Excelerate Energy (EE)**: Specializes in LNG infrastructure and services, representing 20% of the global Floating Storage Regasification Units (FSRUs) fleet. The Zacks Consensus Estimate for its 2025 earnings per share indicates a 10.2% year-over-year growth [11][12]

Group 1 - The sell side is currently engaged in a competitive analysis of the Energy sector, with Bank of America upgrading the sector to a buy rating [1] - The upgrade is based on the observation that while increased drilling activity may negatively impact oil-producing companies, the dividends offered by these companies remain robust and attractive to potential shareholders [1]

Group 1 - Coterra Energy (CTRA) reported Q1 2025 results with production approximately 2% above its guidance midpoint for the quarter [2] - The strong production results contributed to an increase in full-year production expectations by around 0.7% [2] Group 2 - The analyst Aaron Chow has over 15 years of analytical experience and is recognized as a top-rated analyst on TipRanks [3] - Aaron Chow co-founded a mobile gaming company that was acquired by PENN Entertainment and has designed economic models for mobile apps with over 30 million combined installs [3]

Core Viewpoint - Coterra Energy Inc. reported strong operational performance in Q1 2025, with adjusted earnings per share of 78 cents, surpassing estimates and the previous year's performance, despite missing revenue expectations due to weaker oil prices. Financial Performance - Adjusted earnings per share for Q1 2025 were 78 cents, beating the Zacks Consensus Estimate of 76 cents and up from 50 cents in the year-ago quarter [1] - Operating revenues were $1.9 billion, missing estimates by $37 million but significantly higher than $1.4 billion from the previous year [2] - Cash flow from operations increased by 33.6% to $1.1 billion, with free cash flow for the quarter amounting to $663 million [13] Production and Pricing - Average daily production rose 8.8% to 746.8 thousand barrels of oil equivalent (Mboe), exceeding the Zacks Consensus Estimate of 740 Mboe [7] - Oil production increased 37.8% to 141.2 thousand barrels (MBbl) per day, although it missed the estimate of 144 MBbl [8] - Average realized crude oil price was $69.73 per barrel, down 7.2% from $75.16 a year ago, slightly missing the estimate of $70 [9] Shareholder Returns - The board declared a quarterly dividend of 22 cents per share, representing a 3.4% annualized yield [3] - Total shareholder returns for the quarter reached $192 million, including $168 million in dividends and $24 million in share repurchases [5] - The company repurchased 0.9 million shares for $24 million at an average price of $27.54 per share [4] Debt Management - Coterra is focused on debt reduction, repaying approximately $250 million during the quarter and planning to retire $750 million in term loans maturing in 2027 and 2028 [6][5] - As of March 31, 2025, the company had $186 million in cash and cash equivalents and a total liquidity of about $2.2 billion [14] Guidance - For Q2 2025, Coterra expects total equivalent production between 710 to 760 thousand barrels of oil equivalent per day [16] - The company has lowered its full-year 2025 capital expenditures range to $2-$2.3 billion [15] - Estimated discretionary cash flow for 2025 is approximately $4.3 billion, with free cash flow around $2.1 billion based on commodity price assumptions [17]

Financial Performance - Net income increased by $164 million from $352 million in 2024 to $516 million in 2025, representing a 46.5% increase[88] - Net cash provided by operating activities rose by $288 million, from $856 million in 2024 to $1.1 billion in 2025, a 33.6% increase[88] - Total operating revenues for the first quarter of 2025 were $1,904 million, a 33% increase from $1,433 million in 2024[123] - Natural gas revenues rose by $360 million, primarily due to a 64% increase in average sales price to $3.28 per Mcf[128] - Total dividends declared for Q1 2025 were $170 million, compared to $160 million in Q1 2024[110] Production Metrics - Equivalent production increased by 4.8 MMBoe, from 62.4 MMBoe in 2024 to 67.2 MMBoe in 2025, a 7.7% increase[88] - Oil production increased by 3.4 MMBbl, from 9.3 MMBbl in 2024 to 12.7 MMBbl in 2025, a 36.6% increase[88] - Oil production increased by 37% to 12.7 million barrels in Q1 2025 from 9.3 million barrels in Q1 2024[126] - The average daily production of oil increased by 38% to 141.2 MBbl in Q1 2025 compared to 102.5 MBbl in Q1 2024[126] Capital Expenditures - Total capital expenditures increased to $552 million in 2025 from $450 million in 2024, a 22.8% increase[88] - Capital expenditures for the first quarter of 2025 totaled $599 million, up from $456 million in the same period of 2024[113] - The company expects a full year capital program in the range of $2.0 billion to $2.3 billion for 2025[95] - The company expects its full-year 2025 capital program to be approximately $2.0 billion to $2.3 billion[114] Acquisitions and Dividends - The company closed two acquisitions in January 2025 for a total consideration of $3.2 billion in cash and stock[88] - The quarterly base dividend was increased from $0.21 per share to $0.22 per share in February 2025[88] Operating Expenses - Operating expenses for Q1 2025 totaled $1,202 million, a 21% increase from $992 million in Q1 2024[133] - Direct operations expenses rose to $216 million, up 38% from $156 million in Q1 2024, primarily due to higher production levels and costs in the Permian Basin[134] - Gathering, processing, and transportation costs increased by $32 million, driven by higher production and transportation rates in the Permian and Anadarko Basins[136] - Taxes other than income rose by $22 million to $96 million, with production taxes increasing due to higher production volumes in the Permian and Anadarko Basins[138] - Depreciation, depletion, and amortization (DD&A) expenses increased by $74 million to $506 million, primarily due to a higher depletion rate and increased production[139] - General and administrative expenses increased by $17 million to $92 million, largely due to acquisition and transition costs associated with the FME and Avant acquisitions[142] Debt and Interest - As of March 31, 2025, the company had total debt of $4.3 billion, with $3.5 billion under fixed-rate debt instruments[159] - Interest expense surged by $34 million to $53 million, mainly due to new debt issued to fund the FME and Avant acquisitions[144] - A hypothetical 100 basis point increase in the average interest rate under the term loan would increase interest expense by approximately $2 million for the three months ended March 31, 2025[161] - The fair value of the company's long-term debt as of March 31, 2025, was estimated at $4.159 billion[164] Commodity Price Volatility - The company anticipates continued volatility in commodity prices and may utilize derivative instruments to hedge a portion of its production[151] - The company has a significant portion of its expected oil and natural gas production for 2025 and beyond currently unhedged and exposed to price volatility[155] Derivative Instruments - The company has outstanding oil collars covering 5.0 MMBbls, or 40% of oil production, at a weighted-average price of $69.12 per Bbl[156] - Natural gas collars covered 55.5 Mcf, or 20% of natural gas production, at a weighted-average price of $3.68 per MMBtu[157] - The company entered into financial commodity derivatives in April 2025, including NYMEX gas collars with a volume of 9,150,000 MMBtu and a weighted average ceiling of $5.21 per MMBtu[155] - Oil swaps covered 1.7 MMBbls, or 13% of oil production, at a weighted-average price of $69.18 per Bbl[156] - The company has not incurred any losses related to non-performance risk of counterparties in its derivative contracts[158]

Financial Data and Key Metrics Changes - Cotera Energy reported pre-hedge revenues of $2 billion, up from $1.4 billion in the previous quarter, with a significant increase in natural gas price realizations contributing to this growth [21] - The company generated net income of $516 million or $0.68 per share, and adjusted net income of $608 million or $0.80 per share [21] - Discretionary cash flow for the quarter was $1.135 billion, significantly up from $776 million in the prior quarter, while free cash flow was $663 million after cash capital expenditures [22] Business Line Data and Key Metrics Changes - Oil production was approximately 2% above the midpoint of guidance, while natural gas production exceeded the high end of guidance [20] - The company reported net turn-in lines of 37 in the Permian, below the guidance midpoint of 40, and zero in the Marcellus as expected [20] - The full-year production guidance remains unchanged despite a slight reduction in capital expenditures [18][24] Market Data and Key Metrics Changes - The company is experiencing a modest pullback in activity in the Permian Basin while incrementally adding activity in the Marcellus Shale, resulting in a projected $100 million reduction in 2025 CapEx [11][12] - Natural gas production is expected to average between 2.725 and 2.875 Bcf per day, delivering over 1 Tcf of gas on an annualized basis [27] Company Strategy and Development Direction - Cotera Energy emphasizes flexibility in capital allocation, describing its approach as a "guided missile" that can adapt to changing market conditions [13] - The company is committed to debt reduction, particularly focusing on a $1 billion term loan executed in conjunction with recent acquisitions [14][30] - The strategic focus includes optimizing investment allocation while lowering capital expenditure by $100 million for 2025, maintaining a strong balance sheet to navigate market volatility [24][30] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns regarding the oil outlook but maintained a constructive view on natural gas, indicating a cautious approach to capital spending [11][62] - The company is prepared for potential market volatility and is optimistic about the long-term performance of its diverse asset portfolio [39] - Management highlighted the importance of maintaining a fortress balance sheet to protect shareholder returns and capitalize on market opportunities [30] Other Important Information - The company announced a quarterly dividend of $0.22 per share, maintaining one of the highest yielding base dividends in the industry at over 3.4% [29] - The Windom Row project included 73 total wells, with strong performance from Wolfcamp wells, while Harkey wells faced mechanical issues that are being addressed [14][15] Q&A Session Summary Question: Clarification on Harkey shale issues - Management confirmed that the issues were related to cementing and are considered temporary, with remediation steps underway [42][46] Question: Impact on future development plans - Management reassured that the three-year growth plan remains intact and does not foresee significant changes due to the current issues [45][46] Question: Production guidance and ramp-up expectations - Management indicated that the production guidance does not rely on the return of Harkey volumes, with expectations for substantial sequential production increases in the latter half of the year [78][79] Question: Prioritization between buybacks and debt reduction - Management emphasized that debt repayment will be the priority in 2025, while buybacks will be opportunistic and back-end weighted [64][65] Question: Update on Barbara Row development - Management confirmed that Harkey wells have been removed from the current frac schedule, with a focus on Wolfcamp completions [67][68] Question: Natural gas priorities and macro view - Management expressed optimism about the Marcellus program and its growth potential, supported by favorable market conditions [72][73]

Coterra Energy (CTRA) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Speaker0 Thank you for standing by. My name is Kaila, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Cotera Energy First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Dan Guffey, VP of Finance, Investor Relations a ...

Coterra Energy (CTRA) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Company Participants Daniel Guffey - Vice President of Finance, Planning & Analysis and Investor RelationsThomas Jorden - CEO, President & ChairmanShane Young - EVP & CFOBlake Sirgo - Senior Vice President of OperationsBetty Jiang - Managing DirectorMichael Deshazer - Senior Vice President of Business UnitsJosh Silverstein - Managing DirectorMatthew Portillo - Partner & Head of ResearchDerrick Whitfield - Managing DirectorKevin MacCurdy - ...

Group 1 - The core viewpoint of the articles indicates that major U.S. shale oil companies are reducing capital expenditures in response to a significant drop in oil prices, which has raised concerns about the peak production levels of U.S. shale oil [1][2][5] - Diamondback Energy announced a reduction in its 2025 capital budget by $400 million, bringing it to a range of $3.8 billion to $4.2 billion [1] - Coterra Energy plans to cut its 2025 capital expenditures to $2 billion to $2.3 billion, down from a previous estimate of $2.1 billion to $2.4 billion [2] Group 2 - The energy research group Enverus suggests that if the recent forecasts from these shale oil giants hold true, U.S. shale oil production is expected to decline for the remainder of this year and into 2026, potentially allowing OPEC+ to regain market share [2] - Following OPEC+'s announcement to increase production by 411,000 barrels per day in June, concerns have grown regarding the potential for further production increases unless a reduction agreement is reached among member countries [2] - The price of Brent crude oil has fallen to its lowest level in four years, dropping below $60 per barrel, while WTI crude oil is nearing $57 per barrel, creating a challenging environment for U.S. shale oil producers [2][5] Group 3 - In response to the low oil prices, Diamondback Energy plans to reduce the number of drilling rigs by 10% by the end of June and further decrease in the third quarter [5] - Coterra Energy intends to reduce its drilling rigs in the Permian Basin from 10 to 7 in the second half of the year [5] - Analysts warn that many U.S. shale oil producers may struggle to remain profitable at oil prices below $60 per barrel, particularly in aging basins, which could lead to further drilling halts, rig reductions, and layoffs [5]