Coterra Energy Inc. · NYSE:CTRA
Coterra Energy — Q1 2024 Earnings Presentation
37 slides from Coterra Energy's earnings presentation, May 3, 2024
Slide 1: 1Q24 Earnings Presentation
1Q24 Earnings Presentation May 2, 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 • Expect to publish Sustainability • Expect to reinvest 50-70% of • Committed to sustainably Report in August 2024 cash flow at mid-cycle prices grow
Slide 4: High-Quality, Long-Life, Diversified Asset Portfolio
High-Quality, Long-Life, Diversified Asset Portfolio 1Q24 Commodity Splits natural gas oil NGL Multi-Basin Portfolio provides commodity 13% diversification and capital ANADARKO allocation optionality ~182,000 net acres 15% 1Q24: 5 mbbld oil Production 6:1 20 mboepd NGLs MARCELLUS 156 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 1Q24 Oil Beat 1Q24 oil +4% 2024 oil guidance +2.5% & Raise Beat vs high-end of 1Q24 guidance Raised 2024 oil production guidance +2.5% at the midpoint Returning Value 90% of 1Q24 FCF 50%+ of annual FCF to Shareholders Returned to shareholders via Return to shareholders via
Slide 7: 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 8: 3-Year Outlook: Modest Production Growth, Driven by Permian Oil
3-Year Outlook: Modest Production Growth, Driven by Permian Oil 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 total Marcellus 722 688 $1.75-1.95 115 667 110 655 655 655 105 2
Slide 9: 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 80% 71% 70% $5 Maintained capital discipline & generated substantial FCF 61% 60% beyond the base dividend, $4
Slide 10: 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% available for buybacks and cash build cash build $0.3 • Returned 77% of FCF to 41% 46% 4
Slide 11: Prioritizing Financial Flexibility
Prioritizing Financial Flexibility .0x History of Conservative Net Leverage 3500 Liquidity & Debt Maturity Profile 0.07 .0x WTI HH $mm and average rates 00 $8.00 3000 0.06 $94 90 $7.00 5.6% 80 $6.64 $78 $77 $6.00 .0x 70 $68 2500 0.05 $65 $5.00 60 $57 Revolver $1,500 50 $3.91 $4.00 availability 4.4%
Slide 12: Permian Asset Overview – 2024 Operational Outlook
Permian Asset Overview – 2024 Operational Outlook 2024e Net Wells Online 1Q24 $945mm - $1,055mm Wolfcamp Bone Spring Harkey 4 D&C CapEx 4 6 4 4 Culberson Lea Eddy -10% from 2023 Remaining 9M24e guidance of $1,200/ft Wolfcamp Bone Spring Harkey 9,750' $1,075 75-90 42% 38% Avg. Lateral Avg. Well Cost
Slide 13: Permian Asset Overview
Permian Asset Overview Targeting Prolific Wolfcamp & Bone Spring Notable Permian Projects Coterra Acreage Wolfcamp Bone Spring 1 Culberson | Mint Julep Row | Wolfcamp | 7.5 wps • 11.4 net (23 gross) wells came online throughout 2023 • Large simul-ops project; production in-line with expectations 2 C
Slide 14: 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 15: Row Developments Increasing Efficiencies
Row Developments Increasing Efficiencies Windham Row is a 54-well project across 6 drilling spacing units with 7-10 wells per section in Upper Wolfcamp & 4 wells per section in Harkey Harkey Upper Wolfcamp1 Services occurring simultaneously down the row Production Drilling Completing Drill-Out (“mow
Slide 16: 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 17: Marcellus Asset Overview – 2024 Operational Outlook
Marcellus Asset Overview – 2024 Operational Outlook 2024e Net Wells Online $350mm - $400mm Upper Lower 25-31 D&C CapEx 11,300’ $1,000 Avg. Lateral 1H24 Avg. Well Downward trend half due Length for Upper Cost per Foot to service cost reductions and half due to more activity vs 1H24 37-43 9 Net Wells
Slide 18: Marcellus Asset Overview
Marcellus Asset Overview Susquehanna County acreage leverages highly Lower 2024 activity YoY 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: 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 & 1,000 position, in Northeast Pennsylvania 10% Upper1 55% Lower & Productivity expected to trend downward slightly with 800 45% Upper1 introduction
Slide 20: Anadarko Asset Overview – 2024 Operational Outlook
Anadarko Asset Overview – 2024 Operational Outlook 2024e Net Wells Online 2024e Net Wells Online $270mm - $310mm 43% Primarily CHART TBU D&C CapEx 3Q24 21% 19% 17% 2Q24 9,900' $1,300 20-25 2Q24 Avg. Lateral Avg. Well Cost Net Wells Length1 per Foot1 Online Updip Downdip Lonerock non-op 1) Of operate
Slide 21: 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 Expected Project Estimated 60-month production Well
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 Lonerock (mixed gas & oil) Downdip (gas & NGL weighted) Carel/Elder legacy offset wells Miller Trust legacy offset wells 80 160 70 140
Slide 23: 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 24: 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 25: 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 26: 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 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 34% Transco Non New York & power 95% Gas price realizations differ quarter-to-quarter due to seasonality, 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: Remaining 2024 Hedge Position
Remaining 2024 Hedge Position Remaining 2024e gas volumes ~30% hedged Remaining 2024e oil volumes >30% hedged $2.73/MMBtu & $4.01/MMBtu ~$66/bbl & ~$88/bbl weighted average floor & ceiling price weighted average floor & ceiling price financial hedges 15% hedged 33% physical 2,647 mmcfd hedges 105.0
Slide 32: Guidance & Actuals
Guidance & Actuals 2023 Actual 2024 Guidance (February) Updated 2024 Guidance 1Q24 Guidance 1Q24 Actual 2Q24 Guidance Implied 2H24 Guidance Low Mid High Low Mid High Low Mid High Low Mid High Low Mid High Total Production (mboed) 667 635 - 655 - 675 660 - 675 - 690 686 625 - 640 - 655 615 - 647 - 67
Slide 33: 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 3Q24 4Q24 1Q24 2Q24 3Q24 4Q24 Permian 8 full-year rigs Permian 2 full-year crews 1 partial-year crew Anadarko 1 partial-year crew
Slide 34: Production Profile
Production Profile 100 500 2,400 Permian Marcellus 480 90 460 2,300 80 440 70 420 2,200 60 400 1Q23A 2Q23A 3Q23A 4Q23A 1Q24A Oil mbbld 84 90 87 97 97 2,100 NGL mboed 64 65 75 77 70 1Q23A 2Q23A 3Q23A 4Q23A 1Q24A Gas mmcfd (right axis) 427 407 446 482 487 Gas mmcfd 2,134 2,323 2,286 2,305 2,311 25 250
Slide 35: Expense Guidance & Actuals
Expense Guidance & Actuals 2023 Actual 2024 Guidance 1Q24 Actual $ per boe, unless noted: Lease operating expense + workovers + region office $2.31 $2.15 - $2.50 - $2.85 $2.50 Gathering, processing, & transportation $4.00 $3.50 $4.00 - $4.50 $4.00 Taxes other than income $1.16 $1.00 $1.10 - $1.20 $1
Slide 36: Non-GAAP Reconciliations & Definitions
Non-GAAP Reconciliations & Definitions Supplemental Non-GAAP Financial Measures (Unaudited): We report our financial results in accordance with Three Months Ended: 31-Mar Twelve Months Ended: Dec 31 Dec 31 accounting principles generally accepted in the United States (GAAP). However, we believe cert
Slide 37: Non-GAAP Reconciliations & Definitions
Non-GAAP Reconciliations & Definitions EBITDAX Twelve Months Ended: March 31 December 31 ($ 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,