Latest News and Analysis
Deals and Transactions
Track Drilling (Rigs by operator) | Completions (Frac Spreads)

Rig Count | Quarterly / Earnings Reports | Second Quarter (2Q) Update | Financial Results | Capital Markets | Capital Expenditure | Capex Increase

Coterra Energy Second Quarter 2022 Results

emailEmail    |    printPrint    |    bookmarkBookmark
   |    Thursday,August 04,2022

Coterra Energy Inc. 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 Corp., and Cimarex Energy Co., was completed. 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.
    • Natural gas production averaged 2,790 MMcfpd (million cubic feet per day), exceeding the high-end of guidance.
    • Oil production averaged 88.2 MBopd (thousand barrels of oil 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).
    • Total quarterly dividend of $0.65 per share ($0.15 base, $0.50 variable) represents a return of 58 percent of second-quarter 2022 cash flow from operating activities, or 50 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.
    • Share repurchases represent an incremental 34 percent return of second-quarter 2022 cash flow from operating activities, or 30 percent of free cash flow (non-GAAP), to shareholders.

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:
    • Our revised 2022 capital program is expected to be $1,600 to $1,700 million, 10 percent above the high-end of our initial guidance range. The increase is due to inflation and a modest increase in activity. The incremental activity capital is being driven by our intention to keep a third rig in the Marcellus during the second half of 2022, increases relating to facilities capital, and a modest uptick in non-operated activity. Our new capital guidance assumes we will invest less than 30 percent of our 2022 projected cash flow from operating activities, at recent strip prices.
  • Increasing full-year 2022 production guidance:
    • Total Equivalent Production (MBoepd): 615 to 635, up one percent at the midpoint from 600 to 635 MBoepd
    • Oil (MBopd): 85.5 to 87.5, up four percent at the midpoint from 81.0 to 86.0 MBopd
    • Natural Gas (MMcfpd): 2,750 to 2,825, up one percent at the midpoint from 2,680 to 2,850 MMcfpd
  • Unit Cost ($/Boe) and Expense Update:
    • Lease operating expense, gathering, processing and transportation, and general and administrative guidance remains unchanged
    • Taxes other than income: $1.45 to $1.75 (from $1.20 to $1.50), driven by higher commodity prices
    • Deferred Income Tax Ratio: 15 percent to 25 percent (from 20 percent to 30 percent), driven by higher commodity prices
  • 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.

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.


Related Categories :

Second Quarter (2Q) Update   

More    Second Quarter (2Q) Update News

Mid-Continent News >>>


Mid-Continent - Anadarko Basin News >>>