Coterra Energy Inc. · NYSE:CTRA
Coterra Energy — Q2 2024 Earnings Presentation
36 slides from Coterra Energy's earnings presentation, Aug 2, 2024
Slide 1: 2Q24 Earnings Presentation
2Q24 Earnings Presentation August 1, 2024
Slide 2: Disclaimer
Disclaimer Cautionary Statement Regarding Forward-Looking Information This presentation contains certain forward-looking statements within the meaning of federal securities laws. Forward-looking statements are not statements of historical fact and reflect Coterra's current views about future events.
Slide 3: Differentiated by Operational Excellence & Capital Discipline
Differentiated by Operational Excellence & Capital Discipline Advantaged Assets Operate Responsibly Disciplined Investment Return Value and Operations • Published Sustainability Report • Expect to reinvest 50-70% of • Committed to sustainably in August 2024 cash flow at mid-cycle prices growing base
Slide 4: High-Quality, Long-Life, Diversified Asset Portfolio
High-Quality, Long-Life, Diversified Asset Portfolio 2Q24 Commodity Splits natural gas oil NGL Multi-Basin Portfolio provides commodity 15% diversification and capital ANADARKO allocation optionality ~182,000 net acres 2Q24: 8 mbbld oil 16% MARCELLUS Production 6:1 21 mboepd NGLs 179 mmcfd Top-Tier
Slide 5: Long Runway of High-Quality Inventory
Long Runway of High-Quality Inventory Benchmark price assumptions of $75/bbl and $3.75/mmbtu ~$27 billion of Economic Capex Opportunities Implied Inventory Duration1 estimated capex by PVI10 bucket: estimated capex by formation: Ranges can fluctuate based on assumptions around well spacing, cost lev
Slide 6: Executing on our Strategy
Executing on our Strategy 2Q24 Beat 2Q24 oil +2% | gas +5% | BOE +5% 2024 oil guidance +2% & Raise Beat vs midpoint of 2Q24 guidance Raised 2024 oil production guidance +2% at the midpoint vs May guidance and +5% at the midpoint vs February guidance Expect 2024 oil +11% Capex Down & $1.75-1.95 billi
Slide 7: 3-Year Outlook: Optionality Across Diversified Portfolio
3-Year Outlook: Optionality Across Diversified Portfolio Expect 0-5% annual growth on total equivalent production and 5%+ annual growth on oil production Oil production Gas production Total equivalent production mbbld bcfd mboed 140 3,500 900 800 120 3,000 $1.75-1.95 2,884 700 billion 105.5- 2,675-
Slide 8: Committed to Capital Discipline & Free Cash Flow Generation
Committed to Capital Discipline & Free Cash Flow Generation Expect to reinvest ~50-70% of cash flow at mid-cycle prices $ billions on y-axis | benchmark prices on x-axis capex as % of DCF $6 70% 66% 61% 60% $5 Maintained capital discipline & generated substantial FCF 55% beyond the base dividend, pr
Slide 9: Committed to Returning Value
Committed to Returning Value $ billions | Percentages shown are shareholder returns as percentage of FCF 2023 FCF $1.3bn 2024e FCF $1.3bn see appendix for commodity price assumptions • Uncommitted excess FCF 23% 32% available for buybacks and cash build uncommitted cash build $0.3 • Returned 77% of
Slide 10: Prioritizing Financial Flexibility
Prioritizing Financial Flexibility 6.0x History of Conservative Net Leverage Liquidity & Debt Maturity Profile WTI HH $mm and average rates 3000 0.07 5.0x $100 $8.00 $94 $90 $7.00 $6.64 0.06 $80 $78 $80 2500 $6.00 $70 $68 5.6% 4.0x $65 $5.00 $60 $57 $50 $4.00 Revolver 0.05 $3.91 $1,500 availability
Slide 11: Permian Asset Overview – 2024 Operational Outlook
Permian Asset Overview – 2024 Operational Outlook $1,000 million Mid-point D&C CapEx -11% from 2023 guidance of $1,200/ft 9,540' $1,065 80-90 Avg. Lateral Avg. Well Cost Net Wells Length1 per Foot1 Online 1) Of operated wells expected to come online within the year. Average lateral length * average
Slide 12: Permian Asset Overview
Permian Asset Overview Targeting Prolific Wolfcamp & Bone Spring Expect 2024 program to be ~50% Texas & ~50% New Mexico 2024e net wells online Coterra Acreage Wolfcamp Bone Spring Wolfcamp Bone Spring Harkey 3 2 8 1 4 14 4 2 2 8 8 1 6 7 4 4 4 3 1Q24 2Q24 2H24 1Q24 2Q24 2H24 1Q24 2Q24 2H24 1Q24 2Q24
Slide 13: Top-Tier Delaware Producer
Top-Tier Delaware Producer Delaware Productivity Cumulative Oil per Lateral Foot 45 Productivity will differ from year to year, depending on project selection & 40 other operational decisions 35 Generally, our Permian program will be ~2/3 Texas and ~1/3 New 30 Mexico due to our large, contiguous pos
Slide 14: Windham Row Project
Windham Row Project 57-well project across 6 drilling spacing units with 7-10 wells per section in Upper Wolfcamp & 3-4 wells per section in Harkey Harkey1 Upper Wolfcamp1 Current status of Drilling Completing Drill-Out Production Online simul-ops2 Row projects allow for concentrated activity & simu
Slide 15: Expect 5-15% Cost Savings on Windham Row
Expect 5-15% Cost Savings on Windham Row Average Culberson Well Cost Centralized pad operations $ per foot • Reduces mobilization time for rigs & frac crews • Maximizes pump hours per day with faster transition time between wells • Minimizes infrastructure needed from well to facility $19 $43 $25 Re
Slide 16: Marcellus Asset Overview – 2024 Operational Outlook
Marcellus Asset Overview – 2024 Operational Outlook 2024e Net Wells Online The 12 TILs deferred in 1Q24 came $375 million online briefly in June Expect 0-7 TILs in late 3Q24 13-19 Mid-point D&C CapEx 14 9 11,500’ $980 Avg. Lateral Avg. Well Length for Upper1 Cost per Foot1 37-43 Net Wells 9,500' $1,
Slide 17: Marcellus Asset Overview
Marcellus Asset Overview Susquehanna County acreage leverages highly productive Lower 2024 activity YoY Marcellus Coterra Acreage • In response to weak near-term natural gas macro, lowered 2024e Marcellus D&C capex by >55% at the mid-point, year-over-year • Still have flexibility to increase capital
Slide 18: Top-Tier Marcellus Producer
Top-Tier Marcellus Producer Marcellus Productivity Cumulative mcfe per Lateral Foot 1,200 Peer-leading productivity driven by premier acreage 1,000 90% Lower & 10% Upper1 position, in Northeast Pennsylvania 800 Productivity expected to trend downward slightly with 55% Lower & 45% Upper1 introduction
Slide 19: Anadarko Asset Overview – 2024 Operational Outlook
Anadarko Asset Overview – 2024 Operational Outlook 2024e Net Wells Online Downdip Lonerock Updip non-op $290 million Primarily 15 Mid-point D&C CapEx 3Q24 3 4 1-7 implied remaining TILs for 4Q24 2Q24 4 9,630' $1,300 21-27 2Q24 Avg. Lateral Avg. Well Cost Net Wells 5 Length1 per Foot1 Online 4 1Q24 2
Slide 20: Anadarko Asset Overview
Anadarko Asset Overview Increasingly important basin located near Major 2024 Anadarko projects industrial & LNG export demand Nearly doubled D&C spend year-over-year, driven by competitive returns on recent projects Coterra Acreage Woodford Meramec Project Estimated 60-month production Online Well c
Slide 21: Recent Anadarko Projects are Outperforming Legacy Offsets
Recent Anadarko Projects are Outperforming Legacy Offsets Wider spacing driving improved productivity & higher returns Days Online vs Cumulative boe per Lateral Foot Lonerock (mixed gas & oil) Downdip (gas & NGL weighted) Carel/Elder legacy offset wells Miller Trust legacy offset wells 80 160 70 140
Slide 22: Recent Anadarko Projects are Outperforming Legacy Offsets
Recent Anadarko Projects are Outperforming Legacy Offsets Wider spacing driving improved productivity & higher returns Days Online vs Cumulative boe per Lateral Foot Updip (oil weighted) Operational improvements made over time Leota/Clark legacy offset wells 2014-2018 vintage Current estimates 70 We
Slide 23: Executive Compensation Tied to Emissions Reduction Metrics
Executive Compensation Tied to Emissions Reduction Metrics 20% of total short-term incentive potential Climate Targets Greenhouse Gas Emissions Intensity In 2024, four climate metrics were included in Coterra’s executive short-term incentive targets. MT CO2e / Gross Mboe Produced These four targets
Slide 24: Emissions Reductions Efforts
Emissions Reductions Efforts • Electrifying compressors, fracs, & drilling rigs • Utilizing Vapor Recovery Units to maximize Greenhouse typically reduces net Scope 1 + Scope 2 emissions Flared revenue and minimize flaring Gas from those sources by 25-45%, depending on the Emissions • Centralizing fl
Slide 25: Upstream Greenhouse Gas Intensity vs. Peers & Industry
Upstream Greenhouse Gas Intensity vs. Peers & Industry GHG Intensity (MT CO2e / Gross Mboe) We analyze our upstream emissions on a standalone basis to compare our performance against our peers1, as our peer group has varying levels of operations within the upstream and midstream segments. The follow
Slide 26: Appendix
COTERRA Appendix
Slide 27: Expect ~5% Deflation in 2024
Expect ~5% Deflation in 2024 % of 2023 well leading-edge cost indicators implied 2024 costs vs. 2023 cost, on average seeing cost relief in recent recent cost indicators imply drilling rig 5% -10% well costs on some big-ticket 4.5% ~5% overall reduction in items average well cost steel (OCTG) 10% -1
Slide 28: Diversified Gas Marketing Portfolio
Diversified Gas Marketing Portfolio 2024 Estimated Natural Gas Sales Markets 2021-2023 Natural Gas Price Realization Range1 % of Henry Hub1 Zone 6 NNY (premium to in-basin) 20% 2021-2023 range for total company 2024 total company 2024 Marcellus 95% 95% in-basin 19% Marcellus NYMEX 13% NYMEX pricing
Slide 29: Sell Primarily at Midland
Sell Primarily at Midland 2024 Estimated Oil Sales Markets Strong Oil Price Realizations % of WTI1 Midland Cushing 98% 100% 98% ~10% 98% Almost all of our oil volumes are sold at Midland pricing, which has traded closely against WTI in recent years due to Permian’s sufficient oil takeaway & proximit
Slide 30: Remaining 2024 Hedge Position
Remaining 2024 Hedge Position Remaining 2024e gas volumes >30% hedged Remaining 2024e oil volumes >30% hedged $2.75/MMBtu & $4.23/MMBtu ~$65/bbl & ~$87/bbl weighted average floor & ceiling price weighted average floor & ceiling price financial hedges 16% hedged 32% 2,582 mmcfd physical 109 mbod hedg
Slide 31: Guidance & Actuals
Guidance & Actuals 2023 Actual 2024 Guidance (May) Updated 2024 Guidance 2Q24 Guidance 2Q24 Actual 3Q24 Guidance Implied 4Q24 Guidance Low Mid High Low Mid High Low Mid High Low Mid High Low Mid High Total Production (mboed) 667 635 - 655 - 675 645 - 660 - 675 625 - 640 - 655 669 620 - 635 - 650 605
Slide 32: Expected 2024 Operational Cadence
Expected 2024 Operational Cadence Subject to change Rig Activity spot work / not full-time in the quarter Crew Activity spot work / not full-time in the quarter 1Q24 2Q24 3Q24e 4Q24e 1Q24 2Q24 3Q24e 4Q24e Permian 8 full-year rigs Permian 2 full-year crews Anadarko 1 partial-year crew Marcellus 1 par
Slide 33: Production Profile
Production Profile 105 600 2,350 Permian 100 500 Marcellus 2,300 95 90 400 2,250 85 300 2,200 80 75 200 2,150 70 100 2,100 65 60 - 2,050 2Q23A 3Q23A 4Q23A 1Q24A 2Q24A Oil mbbld 90 87 97 97 100 2,000 NGL mboed 65 75 77 70 78 2Q23A 3Q23A 4Q23A 1Q24A 2Q24A Gas mmcfd (right axis) 407 446 482 487 485 Gas
Slide 34: Expense Guidance & Actuals
Expense Guidance & Actuals 2023 Actual 2024 Guidance 1Q24 Actual 2Q24 Actual $ per boe, unless noted: Lease operating expense + workovers + region office $2.31 $2.15 - $2.50 - $2.85 $2.50 $2.62 Gathering, processing, & transportation $4.00 $3.50 $4.00 - $4.50 $4.00 $3.99 Taxes other than income $1.1
Slide 35: Non-GAAP Reconciliations & Definitions
Non-GAAP Reconciliations & Definitions Supplemental Non-GAAP Financial Measures (Unaudited): We report our financial results in accordance with Three Months Ended: 30-Jun Twelve Months Ended: Dec 31 Dec 31 accounting principles generally accepted in the United States (GAAP). However, we believe cert
Slide 36: Non-GAAP Reconciliations & Definitions
Non-GAAP Reconciliations & Definitions EBITDAX Twelve Months Ended: June 30 December 31 ($ in millions) 2024 2023 2022 2021 2020 2019 2018 EBITDAX is defined as net income plus interest expense, other expense, income tax expense and benefit, Coterra Combined Cabot + Cimarex depreciation, depletion,