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Coterra Energy Inc., First Quarter 2023 Results

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   |    Monday,May 08,2023

Coterra Energy Inc., announced first quarter 2023 results.


  • Net Income (GAAP) totaled $677 million, or $0.88 per share. Adjusted Net Income (non-GAAP) was $661 million, or $0.87 per share.
  • Cash Flow From Operating Activities (GAAP) totaled $1,494 million. Discretionary Cash Flow (non-GAAP) totaled $1,039 million.
  • Cash capital expenditures for drilling, completion and other fixed asset additions (GAAP) totaled $483 million. Accrued capital expenditures totaled $569 million, in line with our 1H23-weighted capital program.
  • Free Cash Flow (non-GAAP) equaled $556 million.
  • Total equivalent production of 635 MBoepd (thousand barrels of oil equivalent per day), exceeded the high-end of guidance, driven by strong well performance and improved cycle times. Oil production averaged 92.2 MBopd (thousand barrels of oil per day), exceeding the high-end of guidance. Natural gas production averaged 2,757 MMcfpd (million cubic feet per day), exceeding the high-end of guidance.
  • Realized average prices:
    • Oil: $74.03 per barrel (Bbl), excluding the effect of commodity derivatives, and $74.09 per Bbl of oil, including the effect of commodity derivatives
    • Natural Gas: $3.31 per thousand cubic feet (Mcf), excluding the effect of commodity derivatives, and $3.72 per Mcf of natural gas, including the effect of commodity derivatives
    • Natural Gas Liquids (NGLs): $23.66 per barrel of natural gas liquids
Coterra Energy reported first-quarter 2023 financial and operating results.
Thomas E. Jorden, Chairman, Chief Executive Officer and President, commented: "Coterra delivered strong first quarter results, driven by solid execution, and is well positioned to meet or exceed 2023 guidance. Our operating teams continue to generate competitive returns across each of our three regions. Coterra's portfolio, with its equal weighting to both liquids and natural gas, provides numerous benefits to our Company and shareholders by delivering a more consistent cash flow profile through commodity price cycles. As we look ahead, Coterra will remain disciplined and focused on value creation through consistent, profitable growth."

First-Quarter 2023 Shareholder Return Highlights

Jorden noted, "Based on first quarter results, Coterra will return $420 million to shareholders, which equals 76% of the company's Free Cash Flow. The return will include $152 million from our recently increased base dividend ($0.20 per quarter, $0.80 annum) and $268 million via share buybacks. We reiterate our commitment to return 50%+ of Free Cash Flow to shareholders, with an emphasis on the base dividend and buybacks, in the near-term."

  • On May 3, 2023, Coterra's Board of Directors (the "Board") approved a quarterly base dividend of $0.20 per share, which will be paid on June 9, 2023 to holders of record on May 26, 2023.
  • During the quarter, the Company repurchased 11 million shares for $268 million, averaging $24.36 per share and leaving $1,732 million remaining on the $2.0 billion share repurchase authorization as of March 31, 2023.

Guidance Update and Activity Outlook:

2023 cash flow guidance updates include:

  • Estimate full-year 2023 Discretionary Cash Flow of approximately $3.6 billion, at recent strip prices
  • 2023 capital budget remains unchanged at $2.0-2.2 billion (accrued); see potential for 2H23 deflation
  • Estimate 2023 Free Cash Flow of approximately $1.6 billion at recent strip prices
  • 2023 oil production range increasing by 1.0 MBopd, to 87.0-93.0 MBopd

2023 cash unit cost mid-point remains unchanged at $7.35-$9.55/Boe, with a few updates listed below:

  • LOE updated to $1.75-$2.25/Boe, with the high-end of the range up by $0.25/Boe, driven primarily by a reclassification of expenses from G&A to LOE
  • Production tax expense updated to $1.20-$1.50/Boe, with both ends of the range shifting downward by $0.10/Boe
  • Exploration expense updated to $0.05-$0.15/Boe, with the low-end of the range down by $0.05/Boe

Second-quarter 2023 production and capital guidance:

  • Production volumes are expected to average between 620 and 650 MBoepd, with oil estimated between 88.5 and 91.5 MBopd and natural gas volumes estimated between 2,750 and 2,850 MMcfpd.
  • Expect capital expenditures (accrued) during 2Q23 between $510 - $570 million.

Coterra is currently running six rigs and two completion crews in the Permian Basin, two rigs in the Anadarko Basin, and three rigs and two completion crew in the Marcellus. The Company plans to drop to 2 rigs and 1 crew in the Marcellus during 2Q23, as expected in our original plan.

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.

Strong Financial Position

Coterra maintains a strong financial position with an investment-grade credit rating and approximately $2.5 billion of liquidity. As of March 31, 2023, Coterra had total long-term debt of $2.2 billion with a principal amount of $2.1 billion. The Company exited the quarter with a cash balance of $973 million, no debt outstanding under its new $1.5 billion five-year revolving credit facility, and no near-term debt maturities. Coterra's net debt to Adjusted EBITDAX ratio (non-GAAP) at March 31, 2023 was 0.2x.

Committed to Sustainability and ESG Leadership

Coterra is committed to environmental stewardship, sustainable practices, and strong corporate governance. The Company's sustainability report can be found under "A Sustainable Future" on Coterra plans to publish its 2023 Sustainability Report in the fourth-quarter of 2023.

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