Coterra Energy (CTRA) Update - Nov 20

[dan_s]

Our updated profile on Coterra Energy and my updated forecast/valuation model have been posted to the EPG website. It is one of the large-cap upstream companies in our High Yield Income Portfolio. It is a "Gasser", but revenues from oil sales are going up.

This one is for those of you that want a "Safe Way" to add more exposure to natural gas.
> Coterra has a Rock-Solid balance sheet and no near-term debt problems.
> The Company's 2023 production mix is approximately 86% natural gas & NGLs, but they are now ramping up oil production. They are going to report a BIG increase in oil production from Q3 to Q4 because they are completing more oil wells in the Permian Basin.
> They have decades of high-quality drilling inventory in three of the best oil & gas basins in the U.S.
> Coterra is profitable and on-track to generate over $1.2 billion in free cash flow in 2023 despite this year's low natural gas prices.
> If Henry Hub natural gas prices average $3.25/MMBtu in 2024, free cash flow should increase to $1.8 billion.

This year, Coterra's "Shareholder Return Program" is focused more on stock buybacks than dividends. Based on my forecast, their quarterly dividend (currently just $0.20/share) should double in 2H 2024. In 2022, the Company's "Base + Variable" dividends totaled $2.73/share.