Coterra Energy (CTRA) Valuation Update - June 20

[dan_s]

Note from TPH&Co Equity Research 6-20-2025

I have updated my forecast/valuation model for CTRA using the TPH production estimates below and my recently updated oil & gas price deck. My current valuation increases by $2 to $38 per share. With additional free cash flow, I expect CTRA to accelerate their stock buybacks, which would increase my valuation. I show CTRA as a "Gasser" because their 2H 2025 production looks like it will be 62.5% natural gas, 15.0% NGLs and 22.5% crude oil.

TipRanks: "In the last 3 months, 18 ranked analysts set 12-month price targets for CTRA. The average price target among the analysts is $33.24." < The 18 price targets range from $28 to $38. With the recent spikes up in both crude oil and natural gas prices, if CTRA does report Q2 results that beat their previous guidance and they increase their full year production guidance, it is a good bet that most of the Wall Street Gang will be increasing their price targets.

CTRA Update
Company set to beat and raise on lowered Street estimates
Sector: Upstream | Ticker: CTRA | Recommendation: Buy | Target: $29 | Close: $26.75 | Market Cap: $20.4B | Analyst: Matt Portillo

Over the past two weeks of marketing across North America, CTRA was one of the most topical names on the road as clients wanted to dig into our latest thoughts following development issues in the Harkey that drove a significant revision to Q2'25 estimates. While we will need a few more weeks to refine production figures based on state data for Q2'25, we feel confident the company is now set on a path to beat and raise production guidance against consensus estimates in 2H'25.

Part of this dynamic has been driven by meaningful revisions to sell side expectations, who for the last few quarters had hugged the higher end of guidance given strong outperformance from CTRA over the past two years, and are now at the midpoint of the FY guide following execution issues in 1H'25.

For our part, we believe the remediation work on the Harkey may be having success and that alone could help estimates as management conservatively removed all production associated with wells impacted in their 2025 guide (~5mbopd of production for Q2'25). Additionally, the Q2 heavy TIL schedule (45-65 net wells in the Permian, TPHe model 52) and replacement of Harkey wells with Wolfcamp locations are set to drive a meaningful bump in production into Q3'25. Our updated model sees Q2'25 oil production at 156mbopd vs. 147-157mbopd guide (Street 155mbopd), Q3 oil at 174mbopd (Street 168mbopd) and Q4 oil at 179mbopd (Street 173mbopd) with 2H'25 TILs in the Permian of total ~70 net wells. < This forecast beats my oil production forecasts for all three quarters in 2025.

On the gas front, we are expecting another strong quarter for production as volumes in the Northeast on our system scrapes remain strong placing total corporate gas production during Q2'25 at 2.845Bcfe/d (guide 2.7-2.85Bcfe/d).

Higher crude prices could help bolster shareholder returns near term, as prior to this huge move in spot prices, 2025 was a transition year for CTRA and management prioritized $1B of debt reduction and the base dividend (~3.4% yield). With the move higher in 2026 strip, the equity is now trading at ~13.5% FCF to equity yield (12.3% FCF to EV).

[dan_s]

If natural gas prices do average $4.90/MMBtu in 2026 (EIA's current forecast), I think CTRA will go back to paying "Fixed + Variable" dividends next year that could be over $2.50/year. They were $2.73 in 2022 when Coterra's realized gas price averaged $4.89/mcf.

All of Coterra's natural gas hedges are collars that have ceiling of $4.82 to $5.72 in 2025 and $5.21 to $6.62 in 2026.

If they do go back to paying higher dividends and continue their stock buyback program, CTRA should move back into the high $30s. In 2022 the share price spiked to $35.70. Today the company is larger, with production about 125,000 Boepd higher.

If HH natural gas does go over $5.00 in Q4 (my forecast), CTRA will be getting a lot of attention from the Wall Street Gang. Piper Sandler and Raymond James have price targets of $36 and $38.

At the time of this post CTRA was trading at $26.91. IMO it is a Strong Buy up to $30.

[Petroleum economist]

June 24 (Reuters) -
U.S. oil and gas producer Coterra Energy (CTRA.N), will hold its rig count steady at nine in the Permian Basin, CEO Tom Jorden said Tuesday, reversing earlier plans to scale back activity as the company grows more confident in the outlook for oil prices.
"I've seen these periods of my career where when oil markets wobble, they don't glide gently down to their low, they kind of wobble for a while, and then they suddenly collapse," Jorden said at the J.P. Morgan Energy, Power & Renewables Conference.

Previously In their Q1 results press release from the 5th of May Coterra said"
"After closing our recent acquisitions in January, we exited the first quarter with 13 rigs in the Permian. Our original plan called for ten rigs in the second half of 2025, but we now plan to operate seven rigs in the second half of the year.

The rig count in H2 thus will be not ten, not seven, but nine rigs.

[dan_s]

CTRA closed at $29.95 on June 26.

Coterra Energy Inc. (NYSE:CTRA) received a boost recently after Raymond James analyst John Freeman raised the stock’s price target from $33 to $38, while maintaining an ‘Outperform’ rating on its shares.

The development follows Coterra’s performance in the first quarter of 2025, which saw production levels at the upper end of expectations and capital expenditure surpassing estimates. However, the company is pausing development in the Eastern Culberson Harkey to address wellbore cement issues caused by elevated water volumes.

Additionally, Piper Sandler maintained an ‘Overweight’ rating on Coterra Energy Inc. (NYSE:CTRA), with a price target of $36. The analyst highlighted the company’s enhanced reinvestment opportunities following its recent acquisitions in the New Mexico Delaware Basin.

The share price of Coterra Energy Inc. (NYSE:CTRA) has grown by 10% over the last month.

Coterra Energy Inc. (NYSE:CTRA) is a premier, diversified energy company that engages in the exploration, development, and production of oil, natural gas, and NGLs in the United States.