Coterra Energy Inc. (NYSE:CTRA) is a premier exploration and production company that has cemented its position as a leading player in the North American energy landscape. With a diverse portfolio of high-quality assets, a relentless focus on operational excellence, and a steadfast commitment to shareholder returns, Coterra is poised to deliver exceptional value for investors over the long term.
Business Overview and History
Coterra Energy traces its roots back to the formation of Cabot Oil & Gas Corporation in 1989, which became a publicly traded company in 1990. Cabot Oil & Gas established itself as a leading exploration and production company, focusing its operations in the Marcellus Shale region of Pennsylvania. In 2002, Cabot Oil & Gas merged with Key Production Company, Inc., expanding its asset base and operational footprint. Over the next two decades, Cabot Oil & Gas continued to grow through successful drilling programs and strategic acquisitions, becoming known for its innovative technical approaches and ability to extract natural gas from challenging shale formations.
In 2021, Cabot Oil & Gas merged with Cimarex Energy Co., creating the current Coterra Energy entity. This merger brought together complementary asset bases and operational expertise across multiple basins, including the Permian, Anadarko, and Marcellus. Since the merger, Coterra Energy has continued to focus on operational excellence, cost discipline, and prudent capital allocation. The company has leveraged its portfolio of high-quality assets, strong balance sheet, and experienced management team to navigate the challenges of a volatile commodity price environment. Coterra has also prioritized environmental stewardship, safety, and community engagement as core elements of its business strategy.
Today, Coterra operates in three core basins – the Permian Basin in Texas and New Mexico, the Marcellus Shale in Pennsylvania, and the Anadarko Basin in Oklahoma. The company's diverse asset base, which includes a mix of oil, natural gas, and natural gas liquids (NGLs), provides it with the flexibility to navigate shifting market dynamics and capitalize on a wide range of opportunities.
In 2024, Coterra reported total production of 247.6 million barrels of oil equivalent (BOE), with oil accounting for 39% of the mix, natural gas for 52%, and NGLs for the remaining 9%. The company's production has been consistently strong, with a five-year compound annual growth rate (CAGR) of 4.8% for oil, 0.3% for natural gas, and 8.9% for NGLs.
Financial Performance and Shareholder Returns
Financials
Coterra's financial performance has been equally impressive, with the company generating robust cash flows and maintaining a strong balance sheet. In 2024, the company reported net income of $1.12 billion, or $1.50 per diluted share, on revenues of $5.46 billion. The company's operating cash flow for the year was $2.79 billion, while free cash flow reached $1.02 billion.
For the fourth quarter of 2024, Coterra reported revenue of $1.40 billion, representing a 6% year-over-year increase driven by higher oil and NGL volumes, partially offset by lower natural gas prices. Net income for the quarter stood at $297 million, with quarterly free cash flow of $351 million.
The upstream oil and gas industry has seen a compound annual growth rate (CAGR) of 5-10% over the past 3 years, driven by increased demand and relatively stable commodity prices. Coterra's performance aligns with these industry trends, showcasing its ability to capitalize on favorable market conditions.
Liquidity
Coterra's commitment to shareholder returns is exemplified by its dividend and share repurchase programs. In 2024, the company increased its annual base dividend by 5% to $0.88 per share, representing a yield of over 3% at the current share price. Additionally, Coterra repurchased 17 million shares for $464 million, underscoring its belief in the long-term value of the business.
As of December 31, 2024, Coterra's debt-to-equity ratio was 0.28, reflecting a strong balance sheet. The company had $2.04 billion in cash and cash equivalents and $2.00 billion in available borrowing capacity under its $2.00 billion revolving credit facility. Coterra's current ratio stood at 2.92 and its quick ratio at 2.88, indicating robust short-term liquidity.
Total debt increased to $3.54 billion as of December 31, 2024, up from $2.16 billion at the end of 2023, primarily due to the issuance of $1.50 billion in senior notes to partially fund the FME and Avant acquisitions that closed in January 2025.
Operational Highlights and Strategic Initiatives
Coterra's operational performance has been a key driver of its success. In 2024, the company exceeded the high end of its production guidance for both oil and natural gas, while keeping capital expenditures near the low end of its guidance range. This reflects the company's relentless focus on operational efficiency and capital discipline.
One of Coterra's notable achievements in 2024 was the completion of its Wyndham Row development in the Permian Basin, a 57-well project that was delivered ahead of schedule and under budget. The company's ability to execute large-scale, capital-efficient projects like Wyndham Row is a testament to its technical expertise and project management capabilities.
In January 2025, Coterra further bolstered its Permian Basin position with the successful completion of the Franklin Mountain Energy and Avant acquisitions. These strategic transactions added approximately 49,000 net acres and 290 producing wells to Coterra's portfolio, strengthening its foothold in the prolific Delaware Basin.
Looking ahead, Coterra has outlined a robust three-year plan that targets 5% or greater annual oil production growth and 0-5% total BOE growth, while maintaining a disciplined capital investment program of $2.1 billion to $2.4 billion per year. This balanced approach is designed to deliver sustainable, profitable growth for shareholders.
Performance by Geographic Markets
Coterra's operations are concentrated in three core areas: the Permian Basin, the Marcellus Shale, and the Anadarko Basin. In 2024, these regions contributed significantly to the company's overall production:
1. Permian Basin: Accounting for 39% of Coterra's total equivalent production, the Permian Basin is a key driver of the company's oil production. In 2024, net oil production from this region averaged 101,000 barrels per day, representing 93% of Coterra's total oil production. The company invested $1.06 billion in drilling and completion capital in the Permian Basin during 2024, operating nine drilling rigs and three completion crews at year-end.
2. Marcellus Shale: This region accounted for 52% of Coterra's total equivalent production in 2024, with net natural gas production averaging 2.1 billion cubic feet per day, representing 75% of the company's total natural gas production. Coterra invested $304 million in drilling and completion capital in the Marcellus Shale during 2024.
3. Anadarko Basin: Contributing 9% of Coterra's total equivalent production in 2024, the Anadarko Basin remains an important part of the company's portfolio. Coterra invested $289 million in drilling and completion capital in this region during 2024, operating one drilling rig at year-end.
Guidance and Future Outlook
Coterra's performance in 2024 exceeded expectations, with production levels surpassing the high end of guidance for both oil and natural gas, while capital expenditures remained near the low end of guidance. Total equivalent production for 2024 reached 677 MBOE per day, beating the high end of initial guidance, with oil production exceeding initial guidance by about 4% and growing organically by 13% year-over-year.
For the first quarter of 2025, Coterra expects total production to average between 710 and 750 MBOE per day, with oil production between 134 and 140 MBO per day and natural gas production between 2.85 and 3 BCF per day.
For the full year 2025, the company anticipates incurred capital to be between $2.1 and $2.4 billion, with total production expected to average 710-770 MBOE per day. Oil production is projected to be between 152 and 168 MBO per day, representing a 47% increase year-over-year at the midpoint. Natural gas production is expected to remain relatively flat year-over-year, ranging between 2.675 and 2.875 BCF per day.
Coterra's updated three-year outlook for 2025-2027 aims to deliver 5% or greater oil volume growth and 0-5% per BOE growth by investing between $2.1 and $2.4 billion of capital per year. This guidance underscores the company's commitment to disciplined growth and operational efficiency.
Risks and Challenges
As with any energy company, Coterra faces a range of risks and challenges that require careful management. These include commodity price volatility, regulatory changes, and potential operational disruptions. The company's geographic diversification and production mix helps mitigate some of these risks, but it remains vigilant in identifying and addressing emerging threats.
Additionally, the energy industry as a whole is navigating the transition towards a lower-carbon future, which presents both opportunities and challenges for Coterra. The company is actively exploring ways to reduce its environmental footprint, including investing in emissions-reducing technologies and exploring renewable energy solutions.
Conclusion
Coterra Energy's impressive track record, diversified asset base, and commitment to shareholder value creation make it a compelling investment opportunity in the oil and gas sector. With a strong management team, a focus on operational excellence, and a prudent approach to capital allocation, Coterra is well-positioned to capitalize on the industry's evolving landscape and deliver sustained growth and returns for its shareholders over the long term.
The company's robust financial performance, strategic acquisitions, and clear guidance for future growth demonstrate its ability to navigate the complex energy market successfully. As Coterra continues to optimize its operations across its core basins and maintain a disciplined approach to capital expenditure, it is poised to remain a leader in the upstream oil and gas industry for years to come.