Coterra Energy (CTRA) Q4 Results - Feb 23

[dan_s]

Coterra is a large-cap upstream company in our High Yield Income Portfolio.

Fourth-Quarter 2023 Highlights

Net Income (GAAP) totaled $416 million, or $0.55 per share. Adjusted Net Income (non-GAAP) was $387 million, or $0.52 per share. < A solid quarter, but below my forecast of $414 million Net Income.

Cash Flow From Operating Activities (GAAP) totaled $760 million. Discretionary Cash Flow (non-GAAP) totaled $881 million. < Beat my forecast of $860 million Adjusted Operating Cash Flow.

Cash paid for capital expenditures for drilling, completion and other fixed asset additions (GAAP) totaled $468 million. Incurred capital expenditures for drilling, completion and other fixed asset additions (non-GAAP) totaled $457 million, below the low end of our guidance range of $460 to $530 million.

Free Cash Flow (non-GAAP) totaled $413 million. < Better than I expected.

Unit operating cost (reflecting costs from direct operations, transportation, production taxes, and G&A) totaled $8.41 per BOE (barrel of oil equivalent), within our annual guidance range set at $7.30-$9.40 per BOE.

Total equivalent production of 697 MBoepd (thousand barrels of oil equivalent per day), exceeded the high end of guidance (645 to 680 MBoepd), driven by improved cycle times and strong well performance. < My Q4 production forecast was 665,000 Boepd.

Oil production averaged 104.7 MBopd (thousand barrels of oil per day), exceeding the high end of guidance (98 - 102 MBopd). < This is good news. Coterra's drilling program is now focused on more oil-prone areas.

Natural gas production averaged 2,970 MMcfpd (million cubic feet per day), exceeding the high end of guidance (2,780 to 2,900 MMcfpd).

Natural Gas Liquids (NGLs) production averaged 97.8 MBoepd.

Realized average prices:

Oil was $77.10 per barrel (Bbl), excluding the effect of commodity derivatives, and $77.21 per Bbl, including the effect of commodity derivatives.

Natural Gas was $2.03 per Mcf (thousand cubic feet), excluding the effect of commodity derivatives, and $2.19 per Mcf, including the effect of commodity derivatives.

NGLs were $18.66 per BOE.

2024 Outlook

Estimate Discretionary Cash Flow (non-GAAP) of approximately $3.15 billion and Free Cash Flow (non-GAAP) of approximately $1.3 billion, at approximately flat $75/bbl and $2.50/mmbtu pricing. < My 2024 forecasts are now based on $2.00 ngas in Q1 and Q2, $2.50 in Q3 and $2.75 in Q4.

Expect 2024 incurred capital expenditures (non-GAAP) of $1.75 - $1.95 billion

Mid-point down approximately $250 million relative to 2023, primarily due to lower Marcellus spending and lower service cost expectations.

Modestly increasing Permian and Anadarko capital expenditures.

Total Marcellus drilling and completion capital expenditures estimated to be approximately $350 - 400 million, down approximately 55% or approximately $460 million year-over-year at the mid-point. As a result, Marcellus volumes are expected to be down 6% year-over-year.

Expect 2024 total equivalent production of 635-675 MBoepd, down approximately 2% year-over-year at the mid-point; oil production of 99-105 MBopd, up approximately 6% year-over-year at the mid-point; and natural gas production of 2,650 - 2,800 MMcfpd, down approximately 6% year-over-year at the mid-point.

Expect 1Q24 total equivalent production of 660 to 690 MBoepd, oil production of 95 to 99 MBopd, natural gas production of 2,850 to 2,950 MMcfpd, and capital expenditures of $460 to $540 million.

I am updating my forecast model for CTRA now.