Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coterra Energy Inc (CTRA, Financial) delivered strong financial results and robust return of capital to shareholders in Q2 2024.
- Production guidance was exceeded across all three streams: oil, natural gas, and natural gas liquids.
- The company demonstrated capital efficiency, coming in on the low end of their capital guidance range.
- Coterra Energy Inc (CTRA) has a balanced revenue stream and geographic and geologic diversity, providing market flexibility.
- The company has a strong balance sheet with cash and short-term investments standing at $1.32 billion.
Negative Points
- Realized natural gas prices dropped by 42% between Q1 and Q2 2024, impacting revenue.
- The gas market is currently oversupplied, leading to downward pressure on natural gas prices.
- Coterra Energy Inc (CTRA) has decided to curtail production in the Marcellus region due to low expected in-basin pricing.
- The company is exploring the option of delaying upcoming Marcellus turn-in lines and curtailing planned drilling and completion activity.
- Despite strong performance, the company faces challenges in maintaining production levels without making poor investment decisions.
Q & A Highlights
Q: As you have progressed through the Windham Row project and increased wells and simul-frac, any specific learnings that will be incorporated into your program going forward?
A: Blake Sirgo, Senior Vice President - Operations: Our simul-frac performance is meeting or exceeding projections, and we have achieved the same efficiency as our zipper transition times. This will be used more in Culberson County due to contiguous acreage and high well count per pad. We are also looking to apply this in other parts of the basin where feasible.
Q: How should we think about your cash return strategy for the rest of the year given the weak gas macro?
A: Thomas Jorden, CEO: We remain opportunistic and do not box ourselves in with rules. We look for market disconnects and will continue to see our shares as an attractive opportunity. Shannon Young, CFO: Even without further buybacks, our base dividend would get us to about 68-70% return for the full year.
Q: Can you provide an update on your three-year outlook given the strong performance in 2024?
A: Thomas Jorden, CEO: We will update our three-year guide once a year. It is a snapshot of what we think our assets and organization can deliver based on current conditions. We are well-positioned to meet or exceed the plan we laid out in February.
Q: How do you view the impact of the upcoming election on your business?
A: Thomas Jorden, CEO: We approach this constructively and believe that pressures will be different depending on the election outcome. We have faith that politicians will temper electioneering with the reality of managing the economy, employment, and energy security.
Q: What are your thoughts on the better performance of the Marcellus base and the potential for a base level of drilling activity in 2025?
A: Blake Sirgo, Senior Vice President - Operations: Lower field pressures and a wellhead compression program have helped the base production. We have no specific level of activity to maintain momentum and will make decisions based on economics and value.
Q: Could you discuss the potential for reallocating capital from the Marcellus to the Anadarko in 2025?
A: Thomas Jorden, CEO: Hypothetically, yes. We are prepared to pivot capital to the highest productive use, depending on lease, vendor, and marketing commitments.
Q: How did you arrive at the specific volume of Marcellus curtailments, and could this number expand?
A: Blake Sirgo, Senior Vice President - Operations: The 275 million cubic feet per day net represents the part of our portfolio exposed to in-basin pricing. We are prepared to increase curtailments if needed, based on market conditions.
Q: Are there any plans to launch multi-section developments like Windham Row in other operating areas?
A: Blake Sirgo, Senior Vice President - Operations: Giant rows like Windham Row are unique to Culberson County due to our acreage position. However, we chase economies of scale across our entire program, including in New Mexico where we have multiple benches to exploit.
Q: What have you learned from delaying turn-in lines after completion in the Marcellus?
A: Blake Sirgo, Senior Vice President - Operations: The wells performed well after being shut-in longer than ever before. This reinforces our ability to keep wells shut-in longer if needed.
Q: Can you provide more details on the strong performance in the Anadarko and its impact on your capital efficiency?
A: Blake Sirgo, Senior Vice President - Operations: The same cycle time improvements and efficiencies seen in the Permian are also occurring in the Anadarko and Marcellus. This has contributed to our strong performance and increased capital efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
