Energy Prospectus

HOUSTON--(BUSINESS WIRE)-- Coterra Energy Inc. (NYSE: CTRA) (“Coterra” or the “Company”) today reported first-quarter 2025 financial and operating results and declared a quarterly dividend of $0.22 per share. Additionally, the Company provided second-quarter production and capital guidance and updated full-year 2025 guidance.

Tom Jorden, Chairman, CEO and President of Coterra, noted, "The company's top-tier balance sheet, diversified portfolio of high-quality oil and natural gas-focused assets and low reinvestment rate position Coterra to prosper throughout cyclical commodity price environments."

"As our industry faces macroeconomic uncertainty and oil price headwinds, we believe it is prudent to reduce oil-directed activity at this time. As such, we are lowering Permian investment in 2025 and now expect to average seven Permian rigs during the second half of the year, down 30% from our original guidance of ten. As planned, we added two natural gas-focused rigs in the Marcellus in April and may keep this activity running for the balance of 2025. These decisions to reduce and reallocate capital bolster free cash flow in 2025, allow for a conservative investment ratio at lower commodity prices, and allow us to maintain our oil production guidance while slightly increasing our natural gas and BOE volumes for 2025. Additionally, these actions support free cash flow upside over the medium and long-term while generating attractive full-cycle returns in each of our operating regions in the current environment."

Mr. Jorden continued, "Due to the short-term nature of our service contracts and limited marketing commitments, Coterra maintains significant flexibility to adjust our capital investment and maintains a series of activity off-ramps in 2025 that could further reduce activity and investment should fundamentals warrant. The Company remains committed to further reducing debt in 2025 to ensure we maintain one of the best balance sheets in our industry."

First-Quarter 2025 Highlights

> Net Income (GAAP) totaled $516 million, or $0.68 per share. Adjusted Net Income (non-GAAP) was $608 million, or $0.80 per share. < Adjusted Net Income BEAT MY FORECAST of $416 million, $0.54 per share.
> Cash Flow From Operating Activities (GAAP) totaled $1,144 million. Discretionary Cash Flow (non-GAAP) totaled $1,135 million. < BEAT MY FORECAST of $1,018 million, $1.33 per share.
> Free Cash Flow (non-GAAP) totaled $663 million.
> Cash paid for capital expenditures for drilling, completion and other fixed asset additions (GAAP) totaled $472 million. Incurred capital expenditures from drilling, completion and other fixed asset additions (non-GAAP) totaled $552 million, in the lower half of our guidance range of $525 to $625 million.
> Unit operating cost (reflecting costs from direct operations, transportation, production taxes and G&A) totaled $9.97 per Boe.
> Total equivalent production of 747 MBoepd (thousand barrels of oil equivalent per day), near the high-end of guidance (710 to 750 MBoepd). < BEAT MY PRODUCTION FORECAST of 730,000 Boepd.
> Oil production averaged 141.2 MBopd (thousand barrels of oil per day), approximately 2% above the midpoint of our guidance range (134 to 144 MBopd). < BEAT MY OIL PRODUCTION FORECAST of 138,700 bpd.
> Natural gas production averaged 3,044 MMcfpd (million cubic feet of gas per day), exceeding the high end of guidance (2,850 to 3,000 MMcfpd).
NGLs production averaged 98.3 MBopd.

Realized average prices:
> Oil was $69.73 per Bbl (barrel), excluding the effect of commodity derivatives, and $69.30 per Bbl, including the effect of commodity derivatives.
> Natural Gas was $3.28 per Mcf (thousand cubic feet), excluding the effect of commodity derivatives, and $3.21 per Mcf, including the effect of commodity derivatives.
> NGLs were $23.23 per Bbl. < WAY ABOVE MY FORECAST.

Closed the Franklin Mountain Energy and Avant Natural Resources acquisitions in late January.

Key Takeaways & Updates

> For the first quarter of 2025, total barrels of oil equivalent (BOE) production, natural gas production, and oil production were all above the midpoint of guidance, and capital expenditures (non-GAAP) were below the midpoint of guidance.
> Raising BOE and natural gas production guidance at the midpoint and maintaining full-year 2025 oil production midpoint guidance.
> Lowering 2025 capital budget range to $2.0 to $2.3 billion, driven by less oil-directed activity partially offset by higher natural gas-directed activity.
> The Company's reinvestment rate (non-GAAP), which is capital expenditures (non-GAAP) as a percentage of Discretionary Cash Flow, at recent strip prices, is expected to remain conservative at approximately 50% in 2025.

> Reducing 2025 Permian activity to seven rigs from our original plan of ten rigs during the second half of 2025 and reducing total Permian capital by approximately $150 million.
> Added two Marcellus rigs in April, as planned. We now expect to keep both rigs running into the second half of 2025, adding an incremental $50 million of capital to our 2025 Marcellus program. We also maintain an option to keep the second rig running through year-end, which could add an incremental $50 million of capital in the year. We expect to make this decision during the third quarter.

> Expected 2025 Free Cash Flow to total $2.1 billion, at recent strip prices, which we expect will be used to fund our dividend, reduce debt and execute share repurchases.

First-quarter 2025 direct shareholder returns totaled approximately 30% of Free Cash Flow (non-GAAP), which included our declared dividend of $0.22, or approximately $168 million, and $24 million of share repurchases (cash basis, excluding 1% excise tax). Additionally, the Company repaid $250 million of term loans bringing total returns to 67% of Free Cash Flow (non-GAAP). In 2025, Coterra remains committed to reducing leverage and executing opportunistic share repurchases.
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Bottomline: Strong Quarter and I like the decision to focus more D&C activity on natural gas.

Shareholder Return Highlights

Common Dividend: On May 5, 2025, Coterra's Board of Directors (the "Board") approved a quarterly dividend of $0.22 per share, equating to a 3.4% annualized yield, based on the Company's $25.67 closing share price on May 2, 2025. The dividend will be paid on May 29, 2025 to holders of record on May 15, 2025.

Share Repurchases: During the quarter, the Company repurchased 0.9 million shares for $24 million at a weighted-average price of approximately $27.54 per share, leaving $1.1 billion remaining as of March 31, 2025 on its $2.0 billion share repurchase authorization.

Shareholder Return:During the quarter, direct shareholder returns amounted to approximately $192 million, comprised of approximately $168 million of declared dividends and $24 million of share repurchases. The Company also repaid $250 million of debt during the quarter.

Reiterate Shareholder Return Strategy: Coterra expects to return 50% or greater of annual Free Cash Flow (non-GAAP) to shareholders through the cycles via its base dividend and share repurchases. However, in 2025, after payment of its base dividend, the Company is prioritizing debt reduction as it looks to retire the outstanding $750 million term loans, which mature in 2027 and 2028.

Guidance Updates

Lowered 2025 capital expenditures range (non-GAAP) to $2.0 to $2.3 billion, down from $2.1 to $2.4 billion.

After closing our recent acquisitions in January, we exited the first quarter with 13 rigs in the Permian. Our original plan called for ten rigs in the second half of 2025, but we now plan to operate seven rigs in the second half of the year.

Announcing second-quarter 2025 total equivalent production of 710 to 760 MBoepd, oil production of 147 to 157 MBopd, natural gas production of 2,700 to 2,850 MMcfpd, and capital expenditures (non-GAAP) of $575 to $650 million.

Estimate 2025 Discretionary Cash Flow (non-GAAP) of approximately $4.3 billion and 2025 Free Cash Flow (non-GAAP) of approximately $2.1 billion, at approximately $63 per bbl WTI and $3.70 per mmbtu (metric million British thermal unit) annual average NYMEX assumptions.

For more details on annual and second quarter 2025 guidance, see 2025 Guidance Section in the tables below.

Strong Financial Position

In conjunction with the closing of the Franklin Mountain Energy and Avant Natural Resources acquisitions in late January, Coterra issued $1.0 billion of new debt through its term loan agreements. Subsequently, Coterra paid down $250 million of the term loans prior to the end of the first quarter, leaving $750 million of term loan debt outstanding.

As of March 31, 2025, Coterra had total debt outstanding of $4.25 billion (principal balance).

The Company exited the quarter with cash and cash equivalents of $186 million, and no debt outstanding under its $2.0 billion revolving credit facility, resulting in total liquidity of approximately $2.19 billion. Coterra's Net Debt to trailing twelve-month Adjusted Pro Forma EBITDAX ratio (non-GAAP) at March 31, 2025 was 0.9x, pro forma the Franklin and Avant acquisitions. The Company remains committed to near-term debt reduction.

Similar to Dan, Coterra (747 K BoE/d) beat in Q1 my production expectation (725 K BoE/d)
Despite this Coterra fell short of my Q1 profit expectation. This has two reasons:

Operating costs
• The operating costs has gone up with 15% within a year from $ 8.66/BoE (Q1 2024) to $ 9.96/BoE (Q1 2025).
• I tend to base my prediction on the average of the previous twelve month, so I was too low.
• The guidance of Coterra is very wide – from $ 7.90-10.70/BoE and gas to meet.
• The reason why the operating cost are going up so much are a bit unclear to me.

Realized gas prices
• The Q1 realized gas price of $ 3.21/MM Btu was a bit disappointing.
• The gap to the Henry Hub gas price increases with $ 0.80/MM Btu over the last twelve months.
• Part of the widening gap is due to the extreme rise in the Henry Hub in Q1, which I have not yet seen reflected by any company in their Q1 results,
• However also part of the widening gap is Coterra specific.
• The reason for the widening gap to Henry Hub is not yet clear to me.

See page 6 of the press release: Coterra produces a lot of natural in the Permian Basin where natural gas prices are much lower than the gas price they are getting in Appalachia.