Coterra Energy (CTRA) Update - Nov 6

[dan_s]

I have updated my forecast/valuation model for Coterra. It will be posted to the EPG website home page late today.

CTRA closed at $21.58 on Nov. 5
My updated valuation is $32.00, which is the same as what it was in my October newsletter.

The merger with Cimarex closed on October 1st, so Q4 will be the first full quarter post-merger.
Based on Conterra's fresh guidance, Q4 operating cash flow should be over $1.1 Billion with production of 665,000 to 690,000 Boepd. < This compares to their capex forecast of $245 to $275 million for Q4. This company is going to generate a lot of free cash flow from operations and pay high dividends.

My guess is that Q4 production will be near the high end of their guidance since this management team understands the importance of "under-estimating and over-delivering" when it comes to guidance.
My valuation of $32 is just 5.5 X my operating cash flow per share forecast for 2022, which is based on modest production growth to 700,000 Boepd in 2022.
If their full-year guidance for 2022 confirms my model assumptions, a more reasonable valuation is 6X CFPS.

Coterra is a "gasser". Production mix is approximately 74% natural gas, 13% NGLs and 13% crude oil. All of the oil comes from Cimarex.