Coterra Energy Inc. Q4 FY2023 earnings call

• Coterra had an excellent fourth quarter, with results above guidance on oil, natural gas, and Boe, and below capital guide. Full year 2023 saw 5% Boe growth and 10% oil growth while hitting capital guide midpoint.
• 2024 capital projected between $1.75 billion and $1.95 billion, with reduction in Marcellus investments by over $400 million, and increase in Permian and Anadarko Basins.
• Operational excellence emphasized, with focus on safety, efficiency, and continuous improvement.
• Shareholder return program includes $0.21 per share base dividend for Q4, increasing annual base dividend to $0.84 per share, and share repurchases in 2023.

Fourth quarter total production averaged 697 MBoe per day, with oil averaging 104.7 MBoe per day and natural gas averaging 2.97 Bcf per day. All production streams came in above the high end of guidance. For full year 2023, Coterra finished with 5% year-over-year growth in Boe and 10% year-over-year growth in oil volumes. For 2024, total production is projected to average between 635 MBoe per day and 675 MBoe per day, oil between 99 MBoe per day and 105 MBoe per day (6% higher at midpoint than 2023), and natural gas between 2.65 Bcf per day and 2.8 Bcf per day (approximately 5.5% lower at midpoint than 2023).

• 2024 capital between $1.75B - $1.95B, 12% lower at midpoint than 2023.
• 2024-2026 outlook: average annual CapEx $1.75B - $1.95B, expected to generate low-single digit Boe growth and over 5% oil growth.
• First quarter 2024 production expected to average 660-690 MBoe per day, capital between $460M - $540M.

• Commodity price fluctuations, particularly affecting natural gas prices.
• Market conditions impacting gas demand and pricing.
• Operational challenges in adjusting to changing basin conditions, such as in the Marcellus.

Q: Nitin Kumar asked about capital allocation in Anadarko vs Marcellus.

A: Tom Jorden said Anadarko has great returns and repeatability, so increased allocation with expectation of larger outside operated call on capital there.

Q: Arun Jayaram asked about Permian productivity in 2024.

A: Blake Sirgo said 2024 is expected to fall within historical bands for strong productivity.

Q: Unidentified Analyst asked about Marcellus FCF break even and hub price for activity shift.

A: Tom Jorden said they look at receive price and would like price close to or above $3 with sustained oil-to-gas ratio of 20:1.

Q: Neal Dingmann asked about Boe CAGR assumptions.

A: Tom Jorden said they don't project future advancements in advance, production is output of good capital allocation.

Q: Michael Scialla asked about return of capital.

A: Shane Young said they were cautious on buybacks due to market timing and increased base dividend responsibly.

Q: Kevin MacCurdy asked about 3-year outlook and gas market impact.

A: Tom Jorden said capital allocation isn't static, would react to significant gas market recovery.

Q: Ati Modak asked about gas market macro and efficiency gains.

A: Shane Young said gas market is challenging, and they don't bake in incremental efficiency gains into projections.

Q: Charles Meade asked about Marcellus CapEx decrement vs activity.

A: Tom Jorden said much of 2024 CapEx is setting up 2025, annual snapshot incomplete due to multiyear project cycles.