Coterra Energy (CTRA) Q1 Results - May 2

[dan_s]

HOUSTON, May 2, 2022 /PRNewswire/ -- Coterra Energy Inc. (NYSE: CTRA) ("Coterra" or the "Company") today reported first-quarter 2022 financial and operating results. On October 1, 2021, Coterra announced that the merger involving the Company, which was formerly named Cabot Oil & Gas Corporation ("Cabot"), and Cimarex Energy Co. ("Cimarex"), was completed (the "Merger"). Referenced results for the three months ended March 31, 2021 reflect only legacy Cabot. Referenced results for the three months ended March 31, 2022 reflect the combined Company.

Thomas E. Jorden, Chief Executive Officer and President, commented, "The combination of solid execution in our program and robust commodity prices resulted in an outstanding quarter for the company. We are pleased to deliver another meaningful dividend to our owners in addition to executing on the first phase of our share repurchase program. With strong cash flow generation, superb asset performance, and balanced commodity exposure, Coterra is fulfilling the promise that led to our formation."

First-Quarter 2022 Highlights

Net income for first-quarter 2022 totaled $608 million, or $0.75 per share; adjusted net income (non-GAAP) for first-quarter 2022, excluding non-recurring items, was $818 million, or $1.01 per share. < Adjusted Net Income beat my forecast of $558 million, or 0.71/share.

Generated cash flow from operating activities of $1,322 million.

Discretionary cash flow totaled $1,232 million (non-GAAP). < Compares to my operating cash flow forecast of $1,089 million.

Generated free cash flow of $961 million (non-GAAP).

Total equivalent production of 630 MBoepd, at the high-end of guidance. < Beat my forecast of $621 MBoepd.

Shareholder Return Highlights

Total quarterly shareholder return equal to $0.83 per share, including $0.60 per share quarterly dividend (payable in May) and $0.23 per share of buybacks (executed in first quarter). The total return equals 50 percent of first-quarter 2022 cash flow from operating activities and 69 percent of free cash flow (non-GAAP). < Annualized cash dividend of $2.40 = annualized yield of ~8.3%. Cash dividends should be going up each quarter.

On May 2, 2022, Coterra's Board of Directors (the "Board") approved a total quarterly dividend equal to $0.60 per share ($0.15 base, $0.45 variable), and will be paid on May 25, 2022 to holders of record on May 13, 2022.

Executed on $1.25 billion share repurchase program, repurchased 7.6 million shares at a total cost of $184 million, all of which settled during first-quarter 2022. The average repurchase price during the quarter was $24.16 per share.

Activity Outlook

Maintaining full-year 2022 capital investment guidance of $1,400 to $1,500 million, which is less than 30 percent of projected cash flow from operating activities at recent strip prices.

Maintaining full-year 2022 production and cost guidance.

Thomas E. Jorden, commented, "Coterra is positioned to deliver on its 2022 plan. We remain focused on capital discipline, execution, and maximizing return on capital. Adhering to that disciplined approach, we are reiterating our full-year 2022 capital and production guidance. At the recent commodity strip, the Company's full-year 2022 free cash flow is estimated to approach $4.5 billion."

Jorden added, "We also remain focused on shareholder returns. Based on results during the quarter, we returned 69 percent of our first-quarter free cash flow, which includes 50 percent in the form of cash dividends and 19 percent in the form of share buybacks. We remain committed to returning 50 percent plus of free cash flow via base plus variable dividends, supplemented by share buybacks and potential future debt reduction."
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It looks like their 2022 production will be at the high end of their guidance of 635,000 Boepd. I will update my forecast/valuation model tomorrow morning. Prior to this outstanding Q1 results, my valuation was $38.00/share.

[dan_s]

From our friends at Stifel

Coterra Energy Inc. (CTRA, $28.92, Buy; Target $46.00)
1Q Beats, 2022 FCF Guide 34% above Street - Michael S. Scialla
We view the release as positive. The positives included: i) 1Q22 FCF beat consensus by 20% as CFPS was 6% above and capex was 4% below; ii) 2022 FCF guidance was 34% above consensus; iii) CTRA returned 69% of FCF in the form of a base+variable dividend and buybacks. The negatives included: i) 2Q22 production guidance was 1% below consensus; ii) 2022 Permian well cost guidance increased 3% although the 2022 budget remained unchanged. In summary, 2022 FCF guidance of ~$4.5B was significantly above Street expectations and implies ample headroom to expand a $1.25B buyback authorization following a well-rounded 1Q beat. While some may push back on management's decision to add ~$450MM to the balance sheet during the quarter, the company is well positioned to expand a return of capital program that currently includes an implied 2022 dividend yield of ~9%.

I will be moving CTRA to our High Yield Income Portfolio.

My valuation was $38 pre-release, but will probably move close to $46 this afternoon.