Coterra(CTRA)2024-08-02 16:05Financial Data and Key Metrics - Q2 2024 total production averaged 669 MBoepd, with oil at 107.2 MBopd and natural gas at 2.78 Bcf per day, exceeding guidance [12] - Q2 2024 pre-hedge revenues were 220 million (272 million (8.35 per BOE, within the annual guidance range of 9.55 per BOE [14] - Q2 2024 free cash flow was 295 million returned to shareholders (120% of free cash flow) [14][17] Business Line Performance - Permian: 23 net wells brought online in Q2 2024, in line with guidance [12] - Marcellus: 12 previously deferred wells brought online in June, contributing negligible volumes [12] - Anadarko: 15 net wells turned in line, above the high end of guidance [13] - Marcellus curtailment: 275 million cubic feet per day net curtailed in August and September due to low pricing [15] Market Performance - Natural gas prices dropped 42% between Q1 and Q2 2024, but revenue only declined 12% due to a balanced revenue stream and geographic diversity [3][4] - U S natural gas production rebounded to over 102 Bcf per day, primarily from the Marcellus and Permian basins [4] - Northeast storage is trending at or near the five-year max, with downward pressure on natural gas prices expected to continue [5] Strategic Direction and Industry Competition - The company is focusing on disciplined capital allocation, prioritizing the most profitable programs and maintaining flexibility to pivot between basins [7][8] - The company is exploring M&A opportunities but emphasizes the importance of acquiring quality assets at reasonable prices [9][10] - The company is committed to operational excellence, emissions reduction, and sustainability [11] Management Commentary on Operating Environment and Future Outlook - The company remains bullish on natural gas long-term but acknowledges near-term oversupply and price pressures [5][6] - The company is prepared to respond to market signals and adjust production and capital allocation as needed [6][15] - The company expects a materially better natural gas market with increasing LNG exports and growing natural gas power demand [6] Other Important Information - The company released its 2024 sustainability report, highlighting progress in emissions reduction and operational excellence [11] - The company increased its 2024 oil production guidance to 105 5 to 108 5 MBopd, up 2 4% from May guidance [16] - The company reiterated its 2024 capital expenditure guidance of 1 95 billion, 12% lower than 2023 [16] Q&A Session Summary Question: Learnings from Windham Row and cost savings - The company has seen strong simul-frac performance, leading to increased wells and cost savings of 10% to 15% in Culberson County [26][27][29] - The company plans to apply these learnings to other projects where feasible [28] Question: Shareholder returns and buyback strategy - The company has returned over 100% of free cash flow in the first half of 2024 and remains opportunistic with buybacks [31][32] Question: Three-year outlook and oil production growth - The company is well-positioned to meet or exceed its three-year outlook, with strong capital efficiency and operational performance [34][35][37] Question: Operational flexibility and gas price sensitivity - The company can quickly adjust production and capital allocation based on market conditions, with a focus on netbacks above $1 for Marcellus drilling [45][46] Question: Anadarko development and potential acreage additions - The company sees strong returns in the Anadarko and is open to adding assets if they create value [48] Question: Election year considerations - The company is monitoring the political environment but remains focused on operational excellence and value creation [50][51] Question: Cash tax rate outlook - The company expects to be a full cash tax payer in 2024, with deferred taxes expected to normalize over time [52] Question: Marcellus base performance and drilling activity - The company has seen strong base production in the Marcellus due to wellhead compression and lower field pressures [55] - There is no minimum level of activity required to maintain momentum in the Marcellus [56] Question: Permian oil guidance and capital efficiency - The company has seen significant efficiency gains in the Permian, driven by faster drilling and simul-frac performance [57][58] Question: Harkey well development and Marcellus curtailments - The company has not yet completed any Harkey wells but expects strong performance based on calibration [62] - The 275 million cubic feet per day curtailment represents the portion of the portfolio exposed to in-basin pricing [63] Question: Multi-section developments and operational flexibility - Large-scale multi-section developments like Windham Row are unique to Culberson County due to the contiguous acreage [65][66] - The company has worked to maintain vendor flexibility, allowing for rapid adjustments to capital allocation [75][76] Question: Marcellus turn-in line delays and Anadarko results - The company has not changed its approach to delaying turn-in lines in the Marcellus, with recent results reinforcing the strategy [78] - Efficiency gains in the Permian have also benefited the Anadarko and Marcellus operations [79]