Coterra Energy Inc. · NYSE:CTRA
Coterra Energy — Q4 2023 Earnings Presentation
35 slides from Coterra Energy's earnings presentation, Feb 23, 2024
Slide 1: 4Q23 Earnings Presentation
4Q23 Earnings Presentation February 22, 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: Key Takeaways & Updates
Key Takeaways & Updates 2023 Beat on 4Q23: +3% | +3% | +2% 2023: +3% | +5% | +1% Production Beat on BOE | oil | gas production vs high-end of 4Q23 Beat on BOE | oil | gas production vs high-end of initial 2023 guidance while capex came in below the low-end of guidance guidance while capex came in at
Slide 4: Key Messages from the Quarter & the Year
Key Messages from the Quarter & the Year 4Q23 2023 Beat on 4Q23 & 2023 production Oil guidance 98.0 - 102.0 November guid. 94.5 - 95.5 guidance while meeting capex mbod guidance actual 104.7 actual 96.2 Generated $3.4 billion of DCF and Gas guidance 2,780 - 2,900 November guid. 2,840 - 2,870 $1.3 bi
Slide 5: Lower Capex Driven by Deflation & Lower Marcellus Spend
Lower Capex Driven by Deflation & Lower Marcellus Spend Capex $ in millions $2,104 expect $1.75-1.95 billion $104 capex over next 3 years other capex $187 $1,850 Anadarko D&C $151 $435 $155 other capex $185 $130 Anadarko D&C $290 Marcellus D&C $834 continue to expect oil to gas price ratio >20:1; ch
Slide 6: 3-Year Outlook: Modest Production Growth, Driven by Permian Oil
3-Year Outlook: Modest Production Growth, Driven by Permian Oil Expect 0-5% CAGR on total equivalent production and 5%+ CAGR on oil production Oil production Gas production Total equivalent production mbbld bcfd total Marcellus mboed $1.75-1.95 billion 107+ • Expected average capex 102.0 2.9 range f
Slide 7: 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 November 2023 cash flow at mid-cycle prices growing ba
Slide 8: High-Quality, Long-Life, Diversified Asset Portfolio
High-Quality, Long-Life, Diversified Asset Portfolio 4Q23 Commodity Splits natural gas oil NGL Multi-Basin Portfolio provides commodity 14% diversification and capital ANADARKO allocation optionality ~182,000 net acres MARCELLUS 14% 2024: 1-2 rigs & 0-1 crews Production 6:1 ~186,000 net acres 4Q23:
Slide 9: 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 10: Committed to Capital Discipline & Free Cash Flow Generation
Committed to Capital Discipline & Free Cash Flow Generation Generally expect to reinvest 50-70% of cash flow at 2024e FCF Sensitivity mid-cycle prices $ billions on y-axis | benchmark prices on x-axis capex as % of DCF 2024e FCF base dividends $6 80% $1.9 70% 70% $5 61% 60% $4 $1.3 49% 50% $3 40% DC
Slide 11: 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% 49% available for buybacks, cash build base dividend (1) cash build, $575mm debt $0.3 •
Slide 12: Prioritizing Financial Flexibility
Prioritizing Financial Flexibility 0x History of Conservative Net Leverage Liquidity & Debt Maturity Profile Cimarex Cabot Coterra WTI HH $3,000 $mm and weighted average rates 5.0 0x 00 $8.00 90 $94 $7.00 80 $6.64 $78 $6.00 $2,500 70 $68 0x $65 $5.00 $2,456 60 $57 4.5 50 $3.91 $4.00 4.4% 40 $2,000 $
Slide 13: Permian Asset Overview
Permian Asset Overview Targeting Prolific Wolfcamp & Bone Spring Notable Permian Projects Coterra Acreage Wolfcamp Bone Spring Larger-scale projects are driving capital efficiency by • Focusing on concentrated areas & reducing mobilization time for drilling & completion services • Spreading faciliti
Slide 14: Permian Asset Overview – 2024 Operational Outlook
Permian Asset Overview – 2024 Operational Outlook 2024e Net Wells Online $945mm - $1,055mm Wolfcamp Bone Spring Harkey CHART TBU 44% D&C CapEx 37% -10% from previous guidance of $1,200/ft 9,500' $1,075 75-90 10% 9% Avg. Lateral Avg. Well Cost Net Wells Length1 per Foot1 Online Eddy Lea Culberson Ree
Slide 15: 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 Mexico due to our large, contiguous positi
Slide 16: Row Developments Increasing Efficiencies
Row Developments Increasing Efficiencies Windham Row is a 51-well project across 6 drilling spacing units with 7-10 wells per section Upper Wolfcamp1 Services occurring simultaneously down the row Production Drilling Completing Drill-Out (“mowing the lawn”): Online Expect major row projects every 12
Slide 17: Expect 5-15% Cost Savings on Windham Row
Expect 5-15% Cost Savings on Windham Row CTRA 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 $
Slide 18: Marcellus Asset Overview
Marcellus Asset Overview Susquehanna County Acreage Leverages Highly Lowering 2024 Activity Productive 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 19: Marcellus Asset Overview – 2024 Operational Outlook
Marcellus Asset Overview – 2024 Operational Outlook 2024e Net Wells Online $350mm - $400mm D&C CapEx Up from ~20% in 2022 Upper 24% Lower 76% 9,100' 10,900' $1,100 37-43 Avg. Lateral Avg. Lateral Avg. Well Cost Net Wells Length for Lower Length for Upper per Foot Online 19
Slide 20: Top-Tier Marcellus Producer
Top-Tier Marcellus Producer Marcellus Productivity Cumulative mcfe per Lateral Foot 1,200 Peer-leading productivity driven by premier acreage 90% Lower & position, in Northeast Pennsylvania 1,000 10% Upper1 Productivity expected to trend downward slightly 800 55% Lower & with introduction of Upper M
Slide 21: Anadarko Asset Overview
Anadarko Asset Overview Increasingly important basin located near Investing more in the Anadarko, driven by strong returns industrial & LNG export demand 2024e D&C capex nearly 2x 2023 spend Coterra Acreage Woodford Meramec Carel Elder Project | Woodford Lonerock • 4.9 net (5 gross) wells online Aug
Slide 22: Anadarko Asset Overview – 2024 Operational Outlook
Anadarko Asset Overview – 2024 Operational Outlook 2024e Net Wells Online 2024e Net Wells Online $270mm - $310mm 43% CHART TBU D&C CapEx 21% 19% 17% 9,600' $1,300 20-25 Avg. Lateral Avg. Well Cost Net Wells Length1 per Foot1 Online Updip Downdip Lonerock non-op 1 Of operated wells. 22
Slide 23: Recent Anadarko Projects Outperforming Legacy Offsets
Recent Anadarko Projects Outperforming Legacy Offsets, Driving Capital Efficiency & Higher Returns Days Online vs Cumulative boe per Lateral Foot Lonerock (mixed gas & oil) Downdip (gas & NGL weighted) Updip (oil weighted) Carel/Elder legacy offset wells Miller Trust legacy offset wells Leota/Clark
Slide 24: Managing Emissions
Managing Emissions Upstream Peer Greenhouse Gas Intensity Comparison We analyze our upstream emissions on a standalone basis to compare our performance against our peers,1 as our peer group has varying levels of operations within the upstream and midstream segments. The following data is derived fro
Slide 25: Managing Emissions
Managing Emissions Executive compensation tied to emissions reduction metrics; 15% of total short-term incentive potential Climate Targets (TCFD: Metrics and Targets - c; SASB: EM-EP-1 10a.3) Greenhouse Gas Emissions Intensity In 2023, three climate metrics were included in Coterra’s executive short
Slide 26: Emissions Reductions Efforts
Emissions Reductions Efforts • Electrifying compressors, fracs, & drilling rigs typically reduces net Scope 1 + Scope 2 emissions from those sources by 25-45%, depending Greenhouse on the technology being electrified Gas Emissions • Exited 2023 with 16 midstream electric compressors (up from 4 in 20
Slide 27: Appendix
COTERRA Appendix
Slide 28: 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 29: Diversified Gas Marketing Portfolio
Diversified Gas Marketing Portfolio 2024 Estimated Natural Gas Sales Markets 2021-2023 Natural Gas Price Realization Range1 % of Henry Hub1 premium to in-basin Transco Non New York & 95% Gas price realizations differ quarter-to-quarter due to seasonality, 28% power and can vary year-to-year with shi
Slide 30: 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 31: 2024 Hedge Position
2024 Hedge Position 2024e gas volumes ~30% hedged 2024e oil volumes >30% hedged $2.80/MMBtu & $4.31/MMBtu ~$66/bbl & ~$89/bbl weighted average floor & ceiling price weighted average floor & ceiling price financial hedges 15% hedged 32% physical hedges 2,725 mmcfd 14% 102.0 mbod mid-point of 2024e ga
Slide 32: Guidance & Actuals
Guidance & Actuals 2023 Guidance 2023 Actual 2024 Guidance 4Q23 Guidance 4Q23 Actual 1Q24 Guidance Low Mid High Total Production (mboed) 655 - 665 667 635 - 655 - 675 645 - 680 697 660 - 675 - 690 Gas (mmcfd) 2,840 - 2,870 2,884 2,650 - 2,725 - 2,800 2,780 - 2,900 2,970 2,850 - 2,900 - 2,950 Oil (mb
Slide 33: Expense Guidance & Actuals
Expense Guidance & Actuals 2023 Guidance 2023 Actual 2024 Guidance 4Q23 Actual $ per boe, unless noted: Lease operating expense + workovers + region office $1.75 - $2.25 $2.31 $2.15 - $2.50 - $2.85 $2.51 Gathering, processing, & transportation $3.50 - $4.50 $4.00 $3.50 - $4.00 - $4.50 $3.83 Taxes ot
Slide 34: Non-GAAP Reconciliations & Definitions
Non-GAAP Reconciliations & Definitions Supplemental Non-GAAP Financial Measures (Unaudited): We report our financial results in accordance with Three Months Ended: 31-Dec Twelve Months Ended: Dec 31 Dec 31 accounting principles generally accepted in the United States (GAAP). However, we believe cert
Slide 35: Non-GAAP Reconciliations & Definitions
Non-GAAP Reconciliations & Definitions Twelve Months Ended: December 31 ($ in millions) 2023 2022 2021 2020 2019 2018 EBITDAX Net income $ 1,625 $ 4,065 $ 1,158 $ 201 $ 681 $ 557 Plus (less): EBITDAX is defined as net income plus interest expense, other expense, income tax expense and benefit, Inter