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Coterra(CTRA) - 2024 Q3 - Earnings Call Transcript
CTRACoterra(CTRA)2024-11-01 15:49
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Financial Data and Key Metrics Changes - Coterra Energy reported total production averaging 669 MBoepd per day, with oil averaging 112.3 MBo per day and natural gas averaging 2.68 Bcf per day, all slightly above guidance [16][18] - Net income for the quarter was 252millionor252 million or 0.34 per share, with adjusted net income of 233millionor233 million or 0.32 per share [18] - Total unit costs during the quarter were 8.73perBOE,nearthemidpointoftheannualguidancerangeof8.73 per BOE, near the midpoint of the annual guidance range of 7.45 to 9.55perBOE[18]−Discretionarycashflowforthequarterwas9.55 per BOE [18] - Discretionary cash flow for the quarter was 670 million, and free cash flow was 277millionaftercashcapitalexpendituresof277 million after cash capital expenditures of 393 million [20] - The company ended the quarter with a net debt to LTM EBITDA ratio of 0.3 times and approximately 2.8billionofliquidity[20]BusinessLineDataandKeyMetricsChanges−InthePermian,Coterrabroughtonline24netwells,including16NetBoneSpringwellsand8netWindhamRowwells[17]−IntheAnadarko,fivenetwellswerebroughtonlineintheliquids−richarea,whilesevennetwellswerebroughtonlineintheMarcellus[17]−Thecompanyincreaseditsfull−year2024oilproductionguidancetobetween107and108MBoepd,upapproximately0.52.8 billion of liquidity [20] Business Line Data and Key Metrics Changes - In the Permian, Coterra brought online 24 net wells, including 16 Net Bone Spring wells and 8 net Windham Row wells [17] - In the Anadarko, five net wells were brought online in the liquids-rich area, while seven net wells were brought online in the Marcellus [17] - The company increased its full-year 2024 oil production guidance to between 107 and 108 MBoepd, up approximately 0.5% from previous guidance [23] Market Data and Key Metrics Changes - Coterra remains constructive on natural gas markets, anticipating a tighter supply-demand picture in 2025 due to growing LNG exports and increased electrical generation demand [10][11] - The company has curtailed and shut in volumes in the Marcellus until natural gas prices improve significantly [10][41] Company Strategy and Development Direction - Coterra emphasizes disciplined capital allocation over production goals, focusing on top-tier operational teams and asset quality [12][14] - The company is exploring opportunities to diversify its natural gas marketing portfolio through LNG sales agreements, enhancing price exposure to international markets [11][30] - Coterra plans to maintain flexibility in capital allocation while pursuing organic oil growth [5][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the oil markets and indicated that they are prepared to adjust capital allocation based on market conditions [46][49] - The company is optimistic about the long-term gas markets but is currently cautious due to oversupply [10][43] - Management highlighted the importance of operational efficiency and continuous improvement as key drivers of future performance [66][67] Other Important Information - Coterra repurchased 4.3 million shares for 111 million during the quarter, returning 265milliontoshareholders,whichis96265 million to shareholders, which is 96% of free cash flow [25][26] - The company announced a base dividend of 0.21 per share for the third quarter, annualizing to $0.84 per share [25] Q&A Session All Questions and Answers Question: Why would Coterra not continue to simul-frac in 2025? - Management indicated that they are monitoring oil markets and want to maintain flexibility for potential recovery in gas markets [46] Question: How does Coterra view capital allocation across its assets? - Management explained that they estimate cash flow based on commodity prices and activity, maintaining a return of capital commitment [49] Question: How do returns from the Harkey Shale compare to the upper Wolfcamp? - Management stated that the Harkey is outstanding but slightly less than the upper Wolfcamp, with strong results from both intervals [55] Question: What are the implications of potential setback rules in New Mexico? - Management believes the concerns are overblown and does not expect significant regulatory changes that would impact operations [58][60] Question: What are the drivers of capital efficiency improvements? - Management noted that two-thirds of the efficiency gains are from operational timing, with the remainder from productivity improvements [65][66] Question: How does Coterra manage curtailments in the Marcellus? - Management stated that curtailments are managed on a field level, considering all gas volumes equally once capital is spent [104]