Energy Prospectus

Is getting hammered

In connection with the Merger, we have continued to evaluate and refine our process for assessing the estimated proved reserves of our legacy Cimarex and Cabot operations. Based on the analysis to date, as of September 30, 2022, we anticipate our total company proved reserves will decrease by approximately 15-20 percent year over year at December 31, 2022. This decrease in proved reserves is driven by a downward revision to prior estimates of approximately 32-36 percent for our Marcellus Shale properties, partially offset by an upward revision of approximately 8-12 percent for our Permian and Anadarko properties. Approximately a quarter of the estimated total revision volume in the Marcellus Shale is related to the SEC 5-year rule for proved undeveloped reserves (PUDs) due to the timing of capital investments, changes around well spacing, and location optimization within the Marcellus Region. Factors that may impact the size of the total adjustment include commodity prices, well performance, operating expenses and the completion of the annual PUD reserves process, which will be incorporated as of year-end 2022. The expected net downward revision of prior estimates did not have a material impact on our Condensed Consolidated Financial Statements as of and for the period ended September 30, 2022 and is not expected to have a material impact on our 2022 and go-forward Consolidated Financial Statements.

Mr. Jorden commented, "The revision noted above spans the 50-year life of these wells and is not material to our financials, nor to the go-forward economics of the Marcellus play. These revisions are not expected to have any significant impact on our near-term cash flows or capital allocation. After accounting for these adjustments to our estimated total proved reserves, we expect our year-end 2022 standardized measure of future net cash flows to increase significantly from year-end 2021, driven by higher commodity prices."

Dan, what do you think

Note from Raymond James
John Freeman, CFA (RJA) / Outperform 2 | $36.00 target

3Q22 quick take: Shareholder returns the highlight, while capex bumped again. CTRA
reported production volumes of 641 mboe/d. beating RJ/Street estimates by 3%. This time
gas and NGL volumes were the main drivers, with NGLs beating RJ/Street by 11%/12%
respectively. EPS of $1.48 beat by 3% while EBITDA of $1,874 was in-line with Street and beat
RJ by 2%. Capex came in at $460M, in-line with Street, while full year guidance was pushed
to $1.7B (in-line with RJ, while above Street at $1.65B). The updated capex guidance now
sits at the high end of previously provided guidance of $1.6-1.7B. Shareholder returns were
strong once again as CTRA declared a $0.68/share quarterly dividend (RJe $0.69/share) and
returned $0.32/share via buybacks. The $1.00/share return represents 74% of FCF. The total
annualized yield of the dividend plus buyback is an impressive 13%.

It got beat up due to reserve revisions

total company proved reserves will decrease by approximately 15-20 percent year over year at December 31, 2022. This decrease in proved reserves is driven by a downward revision to prior estimates of approximately 32-36 percent for our Marcellus Shale properties

No one expected this, I wonder if others have the same problem HUUUUGE

I read the adjustment to be at least partially the result of new plans for reserve development being outside of the SEC 5 year window which have need reevaluated in terms of the consolidated reserves. With the current takeaway issues in Marcellus I do not take it as a huge negative. Just a spook in a highly volatile market. The physical reserves are still intact waiting for better day to produce. Maybe one day soon (think 2024+) they will be tapped to heat New England in the winters.

Yes, the proved reserve decline is just because Coterra will slow down their drilling program. SEC rules only count as Proved (P1) wells that will be completed within five years. The gas in the ground has not changed.

Marcellus/Utica pipeline access is limited until we elect smarter people.