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Coterra Energy Reports Second-Quarter 2022 Results, Announces Quarterly Dividend and Provides Update on Share Repurchase Program

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Cision

HOUSTON, Aug. 2, 2022 /PRNewswire/ -- Coterra Energy Inc. (NYSE: CTRA) ("Coterra" or the "Company") today reported second-quarter 2022 financial and operating results. On October 1, 2021, Coterra announced that the merger involving the Company, which was formerly named Cabot Oil & Gas Corporation ("Cabot"), and Cimarex Energy Co. ("Cimarex"), was completed (the "Merger"). Referenced results for the six months ended June 30, 2021 reflect only legacy Cabot. Referenced results for the six months ended June 30, 2022 reflect the combined Company.

Thomas E. Jorden, Chief Executive Officer and President, commented, "Coterra delivered another strong quarter as we remain focused on capital efficiency, operational execution, and shareholder returns through our base dividend, variable dividend, share repurchase program, and debt reduction. I am excited by the progress our new organization has made less than a year after the Merger, and we are eager to build on our track record of execution."

Second-Quarter 2022 Highlights

  • Net income for second-quarter 2022 totaled $1,229 million, or $1.53 per share; adjusted net income (non-GAAP) for second-quarter 2022, excluding non-recurring items, was $1,083 million, or $1.35 per share.

  • Generated cash flow from operating activities of $879 million.

  • Discretionary cash flow totaled $1,493 million (non-GAAP).

  • Generated free cash flow of $1,019 million (non-GAAP).

  • Total equivalent production of 632 MBoepd (thousand barrels of oil equivalent per day), exceeding the high-end of guidance.

Shareholder Return Highlights

  • On August 2, 2022, Coterra's Board of Directors (the "Board") approved a total quarterly dividend equal to $0.65 per share ($0.15 base, $0.50 variable), which will be paid on August 25, 2022 to holders of record on August 15, 2022.

  • Total quarterly shareholder return of $1.03 per share includes $0.65 per share quarterly dividend (payable in August 2022) and $0.38 per share of repurchases (settled in second-quarter). The total return equals 92 percent of second-quarter 2022 cash flow from operating activities, or 80 percent of free cash flow (non-GAAP).

  • Repurchased 11.0 million shares during the second-quarter 2022, at a cost of $303 million and an average price of $27.51 per share. Since late February 2022, the Company has repurchased 18.6 million shares for a total cost of $487 million. At June 30, 2022, the Company had $763 million remaining on its original $1.25 billion share repurchase authorization.

Activity Outlook and Guidance Update

Jorden, commented, "Coterra remains focused on maximizing capital efficiency and return on capital. While inflation has driven 2022 capital costs up 20 to 25 percent year-over-year, we are still projecting all-in returns that markedly exceed our historical results. We remain committed to capital discipline and our updated guidance continues to assume we will invest less than 30 percent of our 2022 projected cash flow from operations. At the recent commodity strip, we expect to generate free cash flow of approximately $4.5 billion in 2022."

Jorden added, "We are pleased to announce that we will return 80 percent of our second-quarter 2022 free cash flow to shareholders, which includes 50 percent in the form of cash dividends and 30 percent in the form of share repurchases. We remain committed to returning 50 percent plus of free cash flow via base plus variable dividends, supplemented by share repurchases, and potential future debt reduction."

  • Increasing 2022 capital investment guidance:

  • Increasing full-year 2022 production guidance:

  • Unit Cost ($/Boe) and Expense Update:

  • No change to full-year 2022 turn-in-line guidance

Coterra is currently running six rigs and two completion crews in the Permian Basin and three rigs and one completion crew in the Marcellus.

Production volumes in third-quarter 2022 are expected to average between 610 and 630 MBoepd, with oil volumes estimated to average between 85.5 and 88.5 MBopd. Natural gas volumes in third-quarter are projected to average between 2,725 and 2,775 MMcfpd.

See "Supplemental non-GAAP Financial Measures" below for descriptions of the above non-GAAP measures as well as reconciliations of these measures to the associated GAAP measures.

Second-Quarter 2022 Summary

Second-quarter 2022 total equivalent production averaged 632 MBoepd, exceeding the high-end of guidance. Oil production averaged 88.2 MBopd and natural gas production averaged 2,790 MMcfpd, both exceeding the high-end of guidance.

Coterra's average realized prices for oil, natural gas and natural gas liquids (NGLs) for second-quarter 2022, excluding the effect of commodity derivatives, were $109.23 per barrel (Bbl), $5.78 per thousand cubic feet (Mcf), and $39.17 per Bbl, respectively. Including the effect of commodity derivatives, average realized prices for oil and natural gas for second-quarter 2022 were $92.78 per Bbl and $5.15 per Mcf, respectively.

For second-quarter 2022, Coterra reported cash flow from operating activities of $879 million. Second-quarter 2022 discretionary cash flow (non-GAAP) was $1,493 million and free cash flow (non-GAAP) totaled $1,019 million, both of which are inclusive of $14 million of merger-related/severance costs.

Coterra incurred a total of $472 million of capital expenditures in second-quarter 2022, including $437 million of drilling and completion capital.

Year-to-date 2022 Summary Highlights

  • Net income for first-half 2022 totaled $1,837 million, or $2.28 per share; adjusted net income (non-GAAP) for the same period, excluding non-recurring items, was $1,902 million, or $2.36 per share.

  • Generated cash flow from operating activities of $2,201 million.

  • Discretionary cash flow totaled $2,725 million (non-GAAP).

  • Generated free cash flow of $1,980 million (non-GAAP).

  • Total return to shareholders based on first-half 2022 performance is $1.86 per share, which includes $1.25 per share of cash dividends and $0.61 per share of stock repurchases.

Strong Financial Position

Coterra maintains a strong financial position with investment-grade credit ratings and substantial liquidity. As of June 30, 2022, Coterra had total long-term debt of $3.1 billion with a principal amount of $2.9 billion. The Company exited the quarter with a cash balance of $1.1 billion and no debt outstanding under its revolving credit facility. Coterra's net debt to Adjusted EBITDAX ratio (non-GAAP) at June 30, 2022 was 0.4x.

Delivering Returns to Shareholders

Based on second-quarter 2022 free cash flow (non-GAAP), Coterra's Board today declared a quarterly base plus variable dividend of $0.65 per share. The base plus variable dividend reflects a $0.15 per share base component and a variable component of $0.50 per share, on the Company's common stock. The combined base plus variable dividend represents 92 percent of cash flow from operating activities in second-quarter 2022, or 80 percent of free cash flow (non-GAAP). The combined base and variable dividend is payable on August 25, 2022, to shareholders of record as of the close of business on August 15, 2022.

Coterra repurchased 11.0 million shares in the second quarter at a cost of $303 million, which implies an additional 34 percent return of second-quarter 2022 cash flow from operating activities, or 30 percent of free cash flow (non-GAAP), to shareholders. The average repurchase price in second-quarter 2022 was $27.51 per share. Coterra entered third-quarter 2022 with an outstanding share repurchase authorization of $763 million. The Company entered the third quarter with a Rule 10b5-1 plan in place and will provide details of share repurchase activity in the quarter with its third-quarter 2022 financial and operating results.

The timing and volume of share repurchases under this authorization will be determined by management, at its discretion. Management expects its share repurchase program to be driven by relative and intrinsic value opportunities. The share repurchase program is supplemental to the Company's base plus variable dividend strategy.

During the quarter, we retired 21,900 shares of Cimarex preferred stock ($39 million), which totaled 78 percent of the 28,158 outstanding shares of Cimarex preferred stock ($50 million) on our balance sheet as of March 31, 2022. This retirement was the result of the voluntary conversion by certain holders of the Cimarex preferred stock into 0.8 million shares of our common stock and $10 million in cash pursuant to the terms of the Cimarex preferred stock.

Additionally, on August 1, 2022, we retired $124 million principal debt, comprising $25 million of 5.59% notes, $37 million of 6.69% notes, and $62 million of 5.80% notes.

Committed to Sustainability and ESG Leadership

Coterra believes that environmental, social and governance (ESG) performance and practices are foundational to its success. We intend to publish the first Coterra Energy Sustainability Report during fourth-quarter 2022. For more information regarding the 2022 ESG short-term incentive targets for executive management, please see the Company's most recent presentation, which can be accessed on the "Events & Presentations" page under the "Investors" section of the Company's website at www.coterra.com.

Second-Quarter 2022 Conference Call

Coterra will host a conference call tomorrow, Wednesday, August 3, 2022, at 9:00 AM CT (10:00 AM ET), to discuss second-quarter 2022 financial and operating results.

Conference Call Information
Date: Wednesday, August 3, 2022
Time: 10:00 AM ET / 9:00 AM CT
Dial-in (for callers in the U.S. and Canada): (888) 550-5424
International dial-in: (646) 960-0819
Conference ID: 3813676

The live audio webcast and related earnings presentation can be accessed on the "Events & Presentations" page under the "Investors" section of the Company's website at www.coterra.com. The webcast will be archived and available at the same location after the conclusion of the live event.

About Coterra Energy

Coterra is a premier exploration and production company based in Houston, Texas with focused operations in the Permian Basin, Marcellus Shale and Anadarko Basin. We strive to be a leading producer, delivering returns with a commitment to sustainability leadership. Learn more about us at www.coterra.com.

Cautionary Statement Regarding Forward-Looking Information

This press release 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. Such forward-looking statements include, but are not limited to, statements about returns to shareholders, enhanced shareholder value, future financial and operating performance and goals and commitment to sustainability and ESG leadership, strategic pursuits and goals, including with respect to the publication of Coterra's first Sustainability Report, and other statements that are not historical facts contained in this press release. The words "expect," "project," "estimate," "believe," "anticipate," "intend," "budget," "plan," "predict," "potential," "possible," "may," "should," "could," "would," "will," "strategy," "outlook" and similar expressions are also intended to identify forward-looking statements. We can provide no assurance that the forward-looking statements contained in this press release will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, without limitation, the risk that the combined businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the Merger may not be fully realized or may take longer to realize than expected; the volatility in commodity prices for crude oil and natural gas; cost increases; supply chain disruptions; the effect of future regulatory or legislative actions, including the risk of new restrictions with respect to well spacing, hydraulic fracturing, natural gas flaring, seismicity, produced water disposal, or other oil and natural gas development activities; disruption from the Merger making it more difficult to maintain relationships with customers, employees or suppliers; the diversion of management time on integration-related issues; the potential effects of further developments to the long-term impact of the COVID-19 pandemic and variants thereof on Coterra's business, financial condition and results of operations; actions by, or disputes among or between, the Organization of Petroleum Exporting Countries and other producer countries; market factors; market prices (including geographic basis differentials) of oil and natural gas; impacts of inflation; labor shortages and economic disruption (including as a result of the pandemic or geopolitical disruptions such as the war in Ukraine); the presence or recoverability of estimated reserves; the ability to replace reserves; environmental risks; drilling and operating risks; exploration and development risks; competition; the ability of management to execute its plans to meet its goals; and other risks inherent in Coterra's businesses. In addition, the declaration and payment of any future dividends, whether regular base quarterly dividends, variable dividends or special dividends, will depend on Coterra's financial results, cash requirements, future prospects and other factors deemed relevant by Coterra's Board. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to Coterra's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other filings with the SEC, which are available on Coterra's website at www.coterra.com.

Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Except to the extent required by applicable law, Coterra does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Operational Data

The tables below provide a summary of production volumes, price realizations and operational activity by region and units costs for the Company for the periods indicated:


Quarter Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021

PRODUCTION VOLUMES








Marcellus Shale








Natural gas (Bcf)

199.8


200.6


403.7


406.4

Equivalent production (MMBoe)

33.3


33.4


67.3


67.7

Daily equivalent production (MBoepd)

366.0


367.5


371.7


374.2









Permian Basin








Natural gas (Bcf)

38.9



76.4


Oil (MMBbl)

7.5



14.4


NGL (MMBbl)

5.6



10.4


Equivalent production (MMBoe)

19.6



37.5


Daily equivalent production (MBoepd)

215.0



207.4










Anadarko Basin








Natural gas (Bcf)

15.0



30.0


Oil (MMBbl)

0.5



1.1


NGL (MMBbl)

1.6



3.2


Equivalent production (MMBoe)

4.6



9.3


Daily equivalent production (MBoepd)

50.4



51.2










Total Company








Natural gas (Bcf)

253.9


200.6


510.3


406.4

Oil (MMBbl)

8.0



15.5


NGL (MMBbl)

7.2



13.6


Equivalent production (MMBoe)

57.5


33.4


114.2


67.7

Daily equivalent production (MBoepd)

631.7


367.5


630.8


374.2









AVERAGE SALES PRICE (excluding hedges)







Marcellus Shale








Natural gas ($/Mcf)

$ 5.54


$ 2.05


$ 4.90


$ 2.18









Permian Basin








Natural gas ($/Mcf)

$ 6.51


$ —


$ 5.51


$ —

Oil ($/Bbl)

$ 109.25


$ —


$ 101.67


$ —

NGL ($/Bbl)

$ 38.23


$ —


$ 37.70


$ —









Anadarko Basin








Natural gas ($/Mcf)

$ 7.09


$ —


$ 5.98


$ —

Oil ($/Bbl)

$ 108.74


$ —


$ 100.90


$ —

NGL ($/Bbl)

$ 42.47


$ —


$ 41.32


$ —









Total Company








Natural gas ($/Mcf)

$ 5.78


$ 2.05


$ 5.05


$ 2.18

Oil ($/Bbl)

$ 109.23


$ —


$ 101.62


$ —

NGL ($/Bbl)

$ 39.17


$ —


$ 38.55


$ —


















Quarter Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021

AVERAGE SALES PRICE (including hedges)








Total Company








Natural gas ($/Mcf)

$ 5.15


$ 2.05


$ 4.66


$ 2.18

Oil ($/Bbl)

$ 92.78


$ —


$ 84.76


$ —

NGL ($/Bbl)

$ 39.17


$ —


$ 38.55


$ —


















Quarter Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021

WELLS DRILLED(1)








Gross wells








Marcellus Shale

20


28


42


56

Permian Basin

43



72


Anadarko Basin

10



13



73


28


127


56









Net wells








Marcellus Shale

20.0


28.0


42.0


53.1

Permian Basin

21.8



39.8


Anadarko Basin

5.1



6.5



46.9


28.0


88.3


53.1









WELLS COMPLETED(1)