Coterra Energy (CTRA) Update - Sept 17

[dan_s]

We will be publishing an updated profile on Coterra Energy on Monday morning.

Cotarra is a large-cap "gasser" in our High Yield Income Portfolio with ~650,000 Boepd of current production. From a production standpoint, they tapped the brakes this year to focus on low single digit growth, compared to 38.6% year-over-year production growth in 2022. This year's drilling program is focused more on oil production growth. They should exit 2023 with more than 92,500 BOPD of oil production, which is mostly unhedged.

The Company generates a lot of free cash flow that is used to fund a variable dividend program and a stock buyback program. During 2022 their variable dividends totaled $2.73/share. This year's dividends should total ~$0.95/share based on my forecast, primarily due to much lower realized natural gas and NGL prices. They do continue to buyback common stock.

Free cash flow should be approximately $1.2 billion this year, ramping up to $1.5 billion in 2024 if HH natural gas prices average $3.25/mcf.

I am increasing my current valuation by $2.50 to $31.50/share, based more on Coterra's long-term potential than current dividend yield. This one is a "Growth & Income Stock", owned by a lot of mutual funds.

CTRA closed on September 15th at $27.92.

TipRanks: "In the last 3 months, 10 ranked analysts set 12-month price targets for CTRA. The average price target among the analysts is $33.09." < The Wall Street Gang will go "Ga Ga" over this company when natural gas prices rebound.