Coterra Energy (CTRA) Q3 Results - Nov 3

[dan_s]

Coterra Energy Inc. (NYSE: CTRA) ("Coterra" or the "Company") today reported third-quarter 2021 financial and operating results. On October 1, 2021, Coterra announced that the merger involving the Company, which previously was named Cabot Oil & Gas Corporation ("Cabot"), and Cimarex Energy Co. ("Cimarex") was completed. Results discussed within this release represent Coterra or legacy Cabot and exclude amounts related to legacy Cimarex, unless otherwise specified.

Net income for third-quarter 2021 totaled $62.7 million, or $0.16 per share. Adjusted net income (non-GAAP) for third-quarter 2021, excluding certain infrequent and non-cash items, was $207.0 million, or $0.52 per share.

Highlights

On November 3, 2021, Coterra's board approved the previously announced 14 percent increase to its annual base common stock dividend to $0.50 per share and an acceleration of its first variable dividend by one quarter. The approved base plus variable quarterly dividend equals $0.30 per share ($0.125 base, $0.175 variable), based on combined legacy Cabot and Cimarex free cash flow for third-quarter 2021, and will be paid on November 24, 2021 to holders of record on November 15, 2021.

On October 4, 2021, Coterra's board declared a special cash dividend of $0.50 per share; paid to shareholders on October 22, 2021.

Legacy Cabot generated net cash provided by operating activities of $245.2 million in third-quarter 2021.

Discretionary cash flow from legacy Cabot for third-quarter 2021 totaled $308.8 million (non-GAAP), inclusive of merger-related costs.

Combined Cabot and Cimarex free cash flow generation totaled $387.3 million (non-GAAP) in the period, inclusive of merger-related costs totaling $100.1 million.

See "Supplemental Non-GAAP Financial Measures" below for descriptions of the above non-GAAP measures as well as reconciliations of these measures to the associated GAAP measures.

Thomas E. Jorden, Chief Executive Officer and President, commented, "Today is just a first look at the power of Coterra's assets, financial strength, and commitment to peer-leading shareholder returns. Our strong operational performance in the third quarter can be attributed to our employees, who worked diligently to execute on both legacy company plans."

"Given the strong combined free cash flow generation in the third quarter, the improvement in commodity prices, and our disciplined capital allocation, we are confident in accelerating our first variable dividend by one quarter. We are proud to begin delivering competitive returns to our shareholders."

For third-quarter 2021, Legacy Cabot reported net cash provided by operating activities of $245.2 million. Discretionary cash flow (non-GAAP), inclusive of merger-related costs, was $308.8 million and free cash flow (non-GAAP) for third-quarter 2021 totaled $124.7 million, inclusive of merger-related costs.

Legacy Cabot incurred a total of $170.9 million of capital expenditures in third-quarter 2021, including $163.9 million of drilling and completion capital.

Legacy Cimarex's incurred capital expenditures in third-quarter 2021, excluding capitalized expenses, totaled $165.5 million and included $159.4 million in drilling and completion capital. Free cash flow generated by legacy Cimarex was $262.6 million (non-GAAP), inclusive of merger-related costs.

The combined free cash flow generated in third-quarter 2021 totaled $387.3 million (non-GAAP), and included $100.1 million of merger-related expenses.

[dan_s]

Outlook

The Company is providing fourth-quarter 2021 guidance which fully incorporates legacy Cimarex operations. Coterra expects fourth-quarter 2021 total equivalent production to average 665 to 690 MBoepd. Gas production for the total company is expected to average between 3,060 and 3,150 MMcfpd. Oil production is expected to average 86 to 90 MBopd, the midpoint representing 30 percent year-over-year growth from legacy Cimarex's fourth-quarter 2020 oil production of 67.8 MBopd. < My valuation of CTRA is based on full year 2022 production of 700,000 Boepd inculding 92,000 BO per day.

Coterra is currently running five rigs and two completion crews in the Permian Basin and two rigs and two completion crews in the Marcellus Shale. Coterra plans to average four completion crews during the fourth quarter of 2021, and expects to incur between $245 and $275 million of capital expenditures.

Additional guidance can be found in the 3Q21 Earnings presentation posted this morning on the "Events & Presentations" page under the "Investors" section of the Company's website at www.coterra.com. Coterra intends to provide a detailed 2022 outlook in early 2022.

My valuation of CTRA is $32 and likely to go higher when I update the model this weekend

[Wlssmail@aol.com]

Dan,
I listened to the cc. Ctra is covered by a lot of
analysts. Is Ctra getting any upgrades? Thanks

[Wlssmail@aol.com]

Dan,

What do you anticipate the yield for Crta
will be in 2023?
10%?
Is it unhedged for Ng?

Why hold a mineral play when you get a comparable yield
Plus growth from Ctra ?

Please reply

[dan_s]

Today and this weekend I will be updating all of the Sweet 16 forecast/valuation models. Coterra is near the top of the list.

Your questions about the minerals companies.
> Their share prices can go up too.
> Minerals companies have less risk because they have none of the liabilities that the working interest holders do.
> Minerals companies pay out a variable dividend, so payouts could go a lot higher if oil goes over $100/bbl.