Coterra Energy Inc. (NYSE: CTRA) (“Coterra” or the “Company”)
today reported third-quarter 2023 financial and operating results.
Additionally, the Company declared a quarterly dividend of $0.20
per share, provided fourth-quarter production and capital guidance,
and updated full-year 2023 guidance.
Key Takeaways & Updates
- 3Q23 production beat and full-year 2023 production guidance
raise driven by faster cycle times and strong well
productivity
- 2023 accrued capital expenditure (non-GAAP) guidance remains
unchanged; continue to trend 1-2% above the mid-point
- On track to well exceed shareholder return threshold of 50% of
Free Cash Flow (non-GAAP) for the year
- Published 2023 Sustainability Report, available on the ESG
section of our website
- Joined the United Nations Environment Programme’s Oil & Gas
Methane Partnership 2.0 (OGMP 2.0), a framework dedicated to
achieving reliable methane emission measurement, reporting, and
mitigation
Third-Quarter 2023 Highlights
- Net Income (GAAP) totaled $323 million, or $0.43 per share.
Adjusted Net Income (non-GAAP) was $373 million, or $0.50 per
share.
- Cash Flow From Operating Activities (GAAP) totaled $758
million. Discretionary Cash Flow (non-GAAP) totaled $796
million.
- Capital expenditures for drilling, completion and other fixed
asset additions (GAAP) totaled $546 million. Accrued capital
expenditures from drilling, completion and other fixed asset
additions (non-GAAP) totaled $542 million, near the low end of our
guidance range of $540 - $610 million, due primarily to delayed
infrastructure spend and non-operated activity that we expect to
move into 4Q23.
- Free Cash Flow (non-GAAP) totaled $250 million.
Unit operating cost (reflecting costs from direct operations and
G&A) totaled $7.99 per BOE (barrel of oil equivalent), within
our annual guidance range of $7.30-$9.40 per BOE.
- Total equivalent production of 670 MBoepd (thousand barrels of
oil equivalent per day), exceeded the high end of guidance (655
MBoepd), driven by improved cycle times and strong well performance
in all three of our regions.
- Oil production averaged 91.9 MBopd (thousand barrels of oil per
day), exceeding the high end of guidance (91.0 MBopd).
- Natural gas production averaged 2,903 MMcfpd (million cubic
feet per day), exceeding the high end of guidance (2,875
MMcfpd).
- Natural Gas Liquids (NGLs) production averaged 94.5
MBoepd.
- Realized average prices:
- Oil: $80.80 per Bbl (barrel), excluding the effect of commodity
derivatives, and $80.74 per Bbl, including the effect of commodity
derivatives
- Natural Gas: $1.80 per Mcf (thousand cubic feet), excluding the
effect of commodity derivatives, and $2.01 per Mcf, including the
effect of commodity derivatives
- Natural Gas Liquids (NGLs): $19.52 per BOE
Shareholder Return Highlights
- Common Dividend: On November 6, 2023, Coterra's Board of
Directors (the "Board") approved a quarterly base dividend of $0.20
per share, which will be paid on November 30, 2023 to holders of
record on November 16, 2023.
- Share Repurchases: During the quarter, the Company
repurchased 2.2 million shares for $60 million at an average price
of $27.05 per share, leaving $1.6 billion remaining on the $2.0
billion share repurchase authorization as of September 30, 2023.
Since implementing the share repurchase authorization in early
2022, the Company has repurchased 64 million shares for $1.6
billion, at an average price of $25.72 per share.
- Total Shareholder Return: During the quarter, total
shareholder return amounted to $211 million, comprised of $151
million of declared dividends and $60 million of share repurchases,
representing 84% of Free Cash Flow (non-GAAP). Year-to-date, total
shareholder return amounted to $839 million, composed of $454
million of declared dividends and $385 million of share
repurchases, representing 91% of Free Cash Flow (non-GAAP).
- Reiterate Shareholder Return Strategy: Coterra is
committed to returning 50%+ of annual Free Cash Flow (non-GAAP) to
shareholders through its $0.80/share annual dividend and share
repurchases. Based on the share repurchases executed through the
third quarter and expected declared dividends for the year, Coterra
is on track to return at least 80% of forecasted 2023 Free Cash
Flow (non-GAAP).
Guidance Update and Activity Outlook:
- Increasing full-year 2023 production guidance to the following:
- Total production of 655-665 MBoepd; mid-point +3% from prior
guidance
- Oil production of 94.5-95.5 MBopd; mid-point +3% from prior
guidance
- Natural gas production of 2,840-2,870 MMcfpd; mid-point +1%
from prior guidance
- Estimated 2023 accrued capital expenditures (non-GAAP) remains
unchanged at $2.0 - $2.2 billion; still trending 1-2% above
mid-point
- Estimate 2023 Discretionary Cash Flow (non-GAAP) of
approximately $3.5 billion, at recent strip prices
- Estimate 2023 Free Cash Flow (non-GAAP) of approximately $1.3
billion, at recent strip prices
Fourth-quarter 2023 production and capital guidance:
- Total production of 645-680 MBoepd; mid-point -1% sequentially
and +5% year-over-year
- Oil production of 98-102 MBopd; mid-point +9% sequentially and
+10% year-over-year
- Natural gas production of 2,780-2,900 MMcfpd; mid-point -2%
sequentially and +2% year-over-year
- Expected accrued capital expenditures (non-GAAP) of $460 – $530
million
Coterra is currently running seven rigs and two completion crews
in the Permian Basin, one rig in the Anadarko Basin, and two rigs
and one completion crew in the Marcellus. We recently added a
seventh rig in the Permian Basin, a few months ahead of schedule.
This was driven by a recent decision to simul-frac and de-risk the
timing of our largest 2024 project, the Windham Row in Culberson
County. Simul-fracing has the potential to decrease dollar per foot
on this project by up to 5%, bringing the project’s total estimated
cost savings to 5-15% versus our current Culberson County
average.
Strong Financial Position The Company exited the quarter
with a cash balance of $847 million and no debt outstanding under
its $1.5 billion five-year revolving credit facility, for total
liquidity of approximately $2.3 billion. Additionally, Coterra
maintains a strong financial position with an investment-grade
credit rating. As of September 30, 2023, Coterra had total debt
outstanding of $2.2 billion, comprised of $1.6 billion long-term
debt and $575 million short-term debt due September 2024. Coterra's
total debt to trailing twelve-month net income ratio at September
30, 2023 was 1.0x, while net debt to trailing twelve months
Adjusted EBITDAX ratio (non-GAAP) at September 30, 2023 was
0.3x.
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.
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 "ESG" on www.coterra.com. Coterra published its
2023 Sustainability Report on November 6, 2023.
Third-Quarter 2023 Conference Call Coterra will host a
conference call tomorrow, Tuesday, November 7, 2023, at 9:00 AM CT
(10:00 AM ET), to discuss third-quarter 2023 financial and
operating results.
Conference Call Information Date: November 7, 2023 Time: 9:00 AM
CT / 10:00 AM ET Dial-in (for callers in the U.S. and Canada):
(888) 550-5424 International dial-in: (646) 960-0819 Conference ID:
3813676
The live audio webcast and related earnings presentation can be
accessed on the "Events & Presentations" page under the
"Investors" section of the Company's website at www.coterra.com.
The webcast will be archived and available at the same location
after the conclusion of the live event.
About Coterra Energy Coterra is a premier exploration and
production company based in Houston, Texas with focused operations
in the Permian Basin, Marcellus Shale, and Anadarko Basin. We
strive to be a leading energy producer, delivering sustainable
returns through the efficient and responsible development of our
diversified asset base. Learn more about us at www.coterra.com.
Cautionary Statement Regarding Forward-Looking
Information
This press release contains certain forward-looking statements
within the meaning of federal securities laws. Forward-looking
statements are not statements of historical fact and reflect
Coterra's current views about future events. Such forward-looking
statements include, but are not limited to, statements about
returns to shareholders, enhanced shareholder value, reserves
estimates, future financial and operating performance and goals and
commitment to sustainability and ESG leadership, strategic pursuits
and goals, including with respect to the publication of Coterra's
first Sustainability Report, and other statements that are not
historical facts contained in this press release. The words
"expect," "project," "estimate," "believe," "anticipate," "intend,"
"budget," "plan," "predict," "potential," "possible," "may,"
"should," "could," "would," "will," "strategy," "outlook" and
similar expressions are also intended to identify forward-looking
statements. We can provide no assurance that the forward-looking
statements contained in this press release will occur as projected
and actual results may differ materially from those projected.
Forward-looking statements are based on current expectations,
estimates and assumptions that involve a number of risks and
uncertainties that could cause actual results to differ materially
from those projected. These risks and uncertainties include,
without limitation, the risk that the combined businesses will not
be integrated successfully; the risk that the cost savings and any
other synergies from the Merger involving Cimarex Energy Co. (the
"Merger") may not be fully realized or may take longer to realize
than expected; the volatility in commodity prices for crude oil and
natural gas; cost increases; supply chain disruptions; the effect
of future regulatory or legislative actions, including the risk of
new restrictions with respect to well spacing, hydraulic
fracturing, natural gas flaring, seismicity, produced water
disposal, or other oil and natural gas development activities;
disruption from the Merger making it more difficult to maintain
relationships with customers, employees or suppliers; the diversion
of management time on integration-related issues; the impact of
public health crises, including pandemics (such as the coronavirus
pandemic) and epidemics and any related governmental policies or
actions on Coterra’s business, financial condition and results of
operations; actions by, or disputes among or between, the
Organization of Petroleum Exporting Countries and other producer
countries; market factors; market prices (including geographic
basis differentials) of oil and natural gas; impacts of inflation;
labor shortages and economic disruption (including as a result of
the pandemic or geopolitical disruptions such as the war in
Ukraine); determination of reserves estimates, adjustments or
revisions, including factors impacting such determination such as
commodity prices, well performance, operating expenses and
completion of Coterra's annual PUD reserves process, as well as the
impact on our financial statements resulting therefrom; the
presence or recoverability of estimated reserves; the ability to
replace reserves; environmental risks; drilling and operating
risks; exploration and development risks; competition; the ability
of management to execute its plans to meet its goals; and other
risks inherent in Coterra's businesses. In addition, the
declaration and payment of any future dividends, whether regular
base quarterly dividends, variable dividends or special dividends,
will depend on Coterra's financial results, cash requirements,
future prospects and other factors deemed relevant by Coterra's
Board. While the list of factors presented here is considered
representative, no such list should be considered to be a complete
statement of all potential risks and uncertainties. Should one or
more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated. For additional information about
other factors that could cause actual results to differ materially
from those described in the forward-looking statements, please
refer to Coterra's annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and other filings with the
SEC, which are available on Coterra's website at
www.coterra.com.
Forward-looking statements are based on the estimates and
opinions of management at the time the statements are made. Except
to the extent required by applicable law, Coterra does not
undertake any obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements that speak only
as of the date hereof.
Operational Data
The tables below provide a summary of production volumes, price
realizations and operational activity by region and units costs for
the Company for the periods indicated:
Quarter Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
PRODUCTION VOLUMES
Marcellus Shale
Natural gas (Mmcf/day)
2,286.4
2,214.6
2,248.5
2,224.9
Daily equivalent production (MBoepd)
381.1
369.1
374.7
370.8
Permian Basin
Natural gas (Mmcf/day)
446.4
411.1
426.9
418.3
Oil (MBbl/day)
86.6
82.6
86.9
80.6
NGL (MBbl/day)
75.4
65.2
68.3
60.2
Daily equivalent production (MBoepd)
236.3
216.4
226.3
210.5
Anadarko Basin
Natural gas (Mmcf/day)
168.3
179.8
178.8
170.4
Oil (MBbl/day)
5.2
5.2
6.4
5.7
NGL (MBbl/day)
19.1
20.4
19.3
18.6
Daily equivalent production (MBoepd)
52.3
55.5
55.5
52.7
Total Company
Natural gas (Mmcf/day)
2,903.2
2,807.0
2,855.3
2,815.2
Oil (MBbl/day)
91.9
87.9
93.3
86.4
NGL (MBbl/day)
94.5
85.7
87.7
78.8
Daily equivalent production (MBoepd)
670.3
641.2
656.9
634.4
AVERAGE SALES PRICE (excluding
hedges)
Marcellus Shale
Natural gas ($/Mcf)
$
1.80
$
6.20
$
2.39
$
5.33
Permian Basin
Natural gas ($/Mcf)
$
1.58
$
6.63
$
1.31
$
5.88
Oil ($/Bbl)
$
80.84
$
93.40
$
75.50
$
98.81
NGL ($/Bbl)
$
18.56
$
31.84
$
18.75
$
35.56
Anadarko Basin
Natural gas ($/Mcf)
$
2.37
$
7.78
$
2.39
$
6.62
Oil ($/Bbl)
$
80.35
$
92.60
$
76.15
$
93.38
NGL ($/Bbl)
$
23.30
$
35.81
$
23.95
$
39.28
Total Company
Natural gas ($/Mcf)
$
1.80
$
6.37
$
2.23
$
5.49
Oil ($/Bbl)
$
80.80
$
93.35
$
75.54
$
98.78
NGL ($/Bbl)
$
19.52
$
32.78
$
19.90
$
36.44
Quarter Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
AVERAGE SALES PRICE (including
hedges)
Total Company
Natural gas ($/Mcf)
$
2.01
$
5.58
$
2.53
$
4.97
Oil ($/Bbl)
$
80.74
$
86.37
$
75.64
$
85.31
NGL ($/Bbl)
$
19.52
$
32.78
$
19.90
$
36.44
Quarter Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
WELLS DRILLED(1)
Gross wells
Marcellus Shale
17
24
53
66
Permian Basin
43
46
115
118
Anadarko Basin
13
9
30
22
73
79
198
206
Net wells
Marcellus Shale
17.0
24.0
53.0
66.0
Permian Basin
25.6
19.2
63.5
59.0
Anadarko Basin
7.9
2.3
16.3
8.8
50.5
45.5
132.8
133.8
TURN IN LINES
Gross wells
Marcellus Shale
14
27
59
57
Permian Basin
43
38
122
105
Anadarko Basin
9
7
16
15
66
72
197
177
Net wells
Marcellus Shale
14.0
25.0
59.0
52.1
Permian Basin
24.7
18.0
66.9
47.8
Anadarko Basin
7.0
2.7
7.1
2.8
45.7
45.7
133.0
102.7
Quarter Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
AVERAGE UNIT COSTS ($/Boe)(2)
Direct operations
$
2.22
$
1.99
$
2.24
$
1.93
Transportation, processing and
gathering
3.81
4.33
4.07
4.19
Taxes other than income
1.00
1.72
1.18
1.59
General and administrative (excluding
stock-based compensation, severance expense and merger-related
expense)
0.96
1.14
0.89
0.99
Unit Operating Cost
$
7.99
$
9.18
$
8.38
$
8.70
Depreciation, depletion and
amortization
6.82
7.16
6.61
6.91
Exploration
0.08
0.17
0.08
0.13
Stock-based compensation
0.35
0.44
0.25
0.40
Merger-related expense
—
0.02
—
0.04
Severance expense
(0.02
)
0.20
0.06
0.29
Interest expense
0.12
0.29
0.10
0.34
$
15.32
$
17.45
$
15.46
$
16.83
____________________________________________________
(1)
Wells drilled represents wells drilled to total depth during the
period. Wells completed includes wells completed during the period,
regardless of when they were drilled.
(2)
Total unit costs may differ from the sum of the individual costs
due to rounding.
Derivatives Information
As of September 30, 2023, the Company had the following
outstanding financial commodity derivatives:
2023
2024
Natural Gas
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
NYMEX collars
Volume (MMBtu)
29,150,000
18,200,000
20,020,000
20,240,000
6,820,000
Weighted average floor ($/MMBtu)
$
4.03
$
3.00
$
2.75
$
2.75
$
2.75
Weighted average ceiling ($/MMBtu)
$
6.61
$
5.56
$
4.09
$
4.09
$
4.09
Waha Collars
Volume (MMBtu)
8,280,000
—
—
—
—
Weighted average floor ($/MMBtu)
$
3.03
$
—
$
—
$
—
$
—
Weighted average ceiling ($/
$
5.39
$
—
$
—
$
—
$
—
2023
2024
Oil
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
WTI oil collars
Volume (MBbl)
2,760
1,820
1,820
920
920
Weighted average floor ($/Bbl)
$
70.00
$
67.50
$
67.50
$
65.00
$
65.00
Weighted average ceiling ($/Bbl)
$
91.09
$
91.02
$
91.02
$
89.93
$
89.93
WTI Midland oil basis swaps
Volume (MBbl)
2,760
1,820
1,820
920
920
Weighted average differential ($/Bbl)
$
1.11
$
1.16
1.16
$
1.16
$
1.16
In October 2023, the Company entered into the following
financial commodity derivatives:
2024
Natural Gas
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
NYMEX collars
Volume (MMBtu)
17,290,000
15,470,000
15,640,000
5,270,000
Weighted average floor ($/MMBtu)
$
3.00
$
2.75
$
2.75
$
2.75
Weighted average ceiling ($/MMBtu)
$
5.19
$
4.17
$
4.17
$
4.17
2024
Oil
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
WTI oil collars
Volume (MBbl)
910
910
920
920
Weighted average floor ($/Bbl)
$
69.00
$
69.00
$
65.00
$
65.00
Weighted average ceiling ($/Bbl)
$
92.09
$
92.09
$
90.09
$
90.09
WTI oil roll differential swaps
Volume
910
910
920
920
Weighted average price ($/Bbl)
$
1.17
$
1.17
$
1.17
$
1.17
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (Unaudited)
Quarter Ended September
30,
Nine Months Ended
September 30,
(In millions,
except per share amounts)
2023
2022
2023
2022
OPERATING REVENUES
Natural gas
$
481
$
1,644
$
1,739
$
4,223
Oil
684
755
1,925
2,330
NGL
170
259
476
784
Gain (loss) on derivative instruments
3
(156
)
129
(613
)
Other
18
18
49
47
1,356
2,520
4,318
6,771
OPERATING EXPENSES
Direct operations
137
118
401
334
Transportation, processing and
gathering
235
255
729
726
Taxes other than income
62
102
211
276
Exploration
5
10
14
23
Depreciation, depletion and
amortization
421
422
1,185
1,196
General and administrative (excluding
stock-based compensation, severance expense and merger-related
expense)
59
68
159
173
Stock-based compensation(1)
21
26
44
70
Merger-related expense
—
1
—
7
Severance expense
(1
)
12
10
51
939
1,014
2,753
2,856
Gain (loss) on sale of assets
7
—
12
(1
)
INCOME FROM OPERATIONS
424
1,506
1,577
3,914
Interest expense
17
20
50
63
Interest income
(10
)
(3
)
(32
)
(4
)
Gain on debt extinguishment
—
(26
)
—
(26
)
Income before income taxes
417
1,515
1,559
3,881
Income tax expense
94
319
350
848
NET INCOME
$
323
$
1,196
$
1,209
$
3,033
Earnings per share - Basic
$
0.43
$
1.51
$
1.59
$
3.78
Weighted-average common shares
outstanding
753
792
757
801
____________________________________________________
(1)
Includes the impact of our performance share awards and
restricted stock.
CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited)
(In
millions)
September 30,
2023
December 31,
2022
ASSETS
Current assets
$
1,713
$
2,211
Properties and equipment, net (successful
efforts method)
17,928
17,479
Other assets
460
464
$
20,101
$
20,154
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities
$
1,065
$
1,193
Current portion of long-term debt
575
—
Long-term debt, net (excluding current
maturities)
1,592
2,181
Deferred income taxes
3,358
3,339
Other long term liabilities
714
771
Cimarex redeemable preferred stock
8
11
Stockholders’ equity
12,789
12,659
$
20,101
$
20,154
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (Unaudited)
Quarter Ended
September 30,
Nine Months Ended
September 30,
(In
millions)
2023
2022
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income
$
323
$
1,196
$
1,209
$
3,033
Depreciation, depletion and
amortization
421
422
1,185
1,196
Deferred income tax expense
(8
)
27
19
128
(Gain) loss on sale of assets
(7
)
—
(12
)
1
(Gain) loss on derivative instruments
(3
)
156
(129
)
613
Net cash received (paid) in settlement of
derivative instruments
55
(259
)
238
(723
)
Stock-based compensation and other
18
24
43
62
Income charges not requiring cash
(3
)
(42
)
(13
)
(61
)
Changes in assets and liabilities
(38
)
247
358
(277
)
Net cash provided by operating
activities
758
1,771
2,898
3,972
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures for drilling,
completion and other fixed asset additions
(546
)
(458
)
(1,621
)
(1,199
)
Capital expenditures for leasehold and
property acquisitions
(2
)
(2
)
(8
)
(6
)
Proceeds from sale of assets
7
18
40
22
Net cash used in investing activities
(541
)
(442
)
(1,589
)
(1,183
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net borrowings (repayments) of debt
—
(830
)
—
(830
)
Repayment of finance leases
(1
)
(1
)
(4
)
(4
)
Common stock repurchases
(60
)
(253
)
(385
)
(740
)
Dividends paid
(151
)
(519
)
(739
)
(1,459
)
Tax withholding on vesting of stock
awards
—
(8
)
(1
)
(15
)
Capitalized debt issuance costs
—
—
(7
)
—
Cash received for stock option
exercises
1
1
1
11
Cash paid for conversion of redeemable
preferred stock
—
—
(1
)
(10
)
Net cash used in financing activities
(211
)
(1,610
)
(1,136
)
(3,047
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
$
6
$
(281
)
$
173
$
(258
)
Supplemental Non-GAAP Financial Measures
(Unaudited)
We report our financial results in accordance with accounting
principles generally accepted in the United States (GAAP). However,
we believe certain non-GAAP performance measures may provide
financial statement users with additional meaningful comparisons
between current results and results of prior periods. In addition,
we believe these measures are used by analysts and others in the
valuation, rating and investment recommendations of companies
within the oil and natural gas exploration and production industry.
See the reconciliations below that compare GAAP financial measures
to non-GAAP financial measures for the periods indicated.
We have also included herein certain forward-looking non-GAAP
financial measures, including estimated Discretionary Cash Flow,
estimated Free Cash Flow and estimated accrued capital
expenditures. Due to the forward-looking nature of these non-GAAP
financial measures, we cannot reliably predict certain of the
necessary components of the most directly comparable
forward-looking GAAP measures, such as future impairments and
future changes in capital. Accordingly, we are unable to present a
quantitative reconciliation of such forward-looking non-GAAP
financial measures to their most directly comparable
forward-looking GAAP financial measures. Reconciling items in
future periods could be significant.
Reconciliation of Net Income to Adjusted Net
Income and Adjusted Earnings Per Share
Adjusted Net Income and Adjusted Earnings per Share are
presented based on our management's belief that these non-GAAP
measures enable a user of financial information to understand the
impact of identified adjustments on reported results. Adjusted Net
Income is defined as net income plus gain and loss on sale of
assets, non-cash gain and loss on derivative instruments,
stock-based compensation expense, severance expense, merger-related
expenses and tax effect on selected items. Adjusted Earnings per
Share is defined as Adjusted Net Income divided by weighted-average
common shares outstanding. Additionally, we believe these measures
provide beneficial comparisons to similarly adjusted measurements
of prior periods and use these measures for that purpose. Adjusted
Net Income and Adjusted Earnings per Share are not measures of
financial performance under GAAP and should not be considered as
alternatives to net income and earnings per share, as defined by
GAAP.
Quarter Ended
September 30,
Nine Months Ended
September 30,
(In millions,
except per share amounts)
2023
2022
2023
2022
As reported - net income
$
323
$
1,196
$
1,209
$
3,033
Reversal of selected items:
(Gain) loss on sale of assets
(7
)
—
(12
)
1
(Gain) loss on derivative
instruments(1)
52
(103
)
109
(110
)
Stock-based compensation expense
21
26
44
70
Gain on debt extinguishment
—
(26
)
—
(26
)
Merger-related expense
—
1
—
7
Severance expense
(1
)
12
10
51
Tax effect on selected items
(15
)
20
(34
)
2
Adjusted net income
$
373
$
1,126
$
1,326
$
3,028
As reported - earnings per share
$
0.43
$
1.51
$
1.59
$
3.78
Per share impact of selected items
0.07
(0.09
)
0.16
—
Adjusted earnings per share
$
0.50
$
1.42
$
1.75
$
3.78
Weighted-average common shares
outstanding
753
792
757
801
____________________________________________________
(1)
This amount represents the non-cash
mark-to-market changes of our commodity derivative instruments
recorded in Gain (loss) on derivative instruments in the Condensed
Consolidated Statement of Operations.
Reconciliation of Discretionary Cash Flow
and Free Cash Flow
Discretionary Cash Flow is defined as cash flow from operating
activities excluding changes in assets and liabilities.
Discretionary Cash Flow is widely accepted as a financial indicator
of an oil and gas company’s ability to generate available cash to
internally fund exploration and development activities, return
capital to shareholders through dividends and share repurchases,
and service debt and is used by our management for that purpose.
Discretionary Cash Flow is presented based on our management’s
belief that this non-GAAP measure is useful information to
investors when comparing our cash flows with the cash flows of
other companies that use the full cost method of accounting for oil
and gas producing activities or have different financing and
capital structures or tax rates. Discretionary Cash Flow is not a
measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operating
activities or net income, as defined by GAAP, or as a measure of
liquidity.
Free Cash Flow is defined as Discretionary Cash Flow less cash
paid for capital expenditures. Free Cash Flow is an indicator of a
company’s ability to generate cash flow after spending the money
required to maintain or expand its asset base, and is used by our
management for that purpose. Free Cash Flow is presented based on
our management’s belief that this non-GAAP measure is useful
information to investors when comparing our cash flows with the
cash flows of other companies. Free Cash Flow is not a measure of
financial performance under GAAP and should not be considered as an
alternative to cash flows from operating activities or net income,
as defined by GAAP, or as a measure of liquidity.
Quarter Ended
September 30,
Nine Months Ended
September 30,
(In
millions)
2023
2022
2023
2022
Cash flow from operating activities
$
758
$
1,771
$
2,898
$
3,972
Changes in assets and liabilities
38
(247
)
(358
)
277
Discretionary cash flow
796
1,524
2,540
4,249
Cash paid for capital expenditures for
drilling, completion and other fixed asset additions
(546
)
(458
)
(1,621
)
(1,199
)
Free cash flow
$
250
$
1,066
$
919
$
3,050
Reconciliation of Accrued Capital
Expenditures
Accrued capital expenditures is defined as capital expenditures
for drilling, completion and other fixed asset additions less
changes in accrued capital costs.
Quarter Ended
September 30,
Nine Months Ended
September 30,
(In
millions)
2023
2022
2023
2022
Cash paid for capital expenditures for
drilling, completion and other fixed asset additions
$
546
$
458
$
1,621
$
1,199
Change in accrued capital costs
(4
)
(4
)
26
49
Capital expenditures for drilling,
completion and other fixed asset additions
$
542
454
$
1,647
$
1,248
Reconciliation of Adjusted EBITDAX
Adjusted EBITDAX is defined as net income plus interest expense,
other expense, income tax expense, depreciation, depletion, and
amortization (including impairments), exploration expense, gain and
loss on sale of assets, non-cash gain and loss on derivative
instruments, stock-based compensation expense, severance expense
and merger-related expense. Adjusted EBITDAX is presented on our
management’s belief that this non-GAAP measure is useful
information to investors when evaluating our ability to internally
fund exploration and development activities and to service or incur
debt without regard to financial or capital structure. Our
management uses Adjusted EBITDAX for that purpose. Adjusted EBITDAX
is not a measure of financial performance under GAAP and should not
be considered as an alternative to cash flows from operating
activities or net income, as defined by GAAP, or as a measure of
liquidity.
Quarter Ended
September 30,
Nine Months Ended
September 30,
(In
millions)
2023
2022
2023
2022
Net income
$
323
$
1,196
$
1,209
$
3,033
Plus (less):
Interest expense
17
20
50
63
Interest income
(10
)
(3
)
(32
)
(4
)
Gain on debt extinguishment
—
(26
)
—
(26
)
Income tax expense
94
319
350
848
Depreciation, depletion and
amortization
421
422
1,185
1,196
Exploration
5
10
14
23
(Gain) loss on sale of assets
(7
)
—
(12
)
1
Non-cash (gain) loss on derivative
instruments
52
(103
)
109
(110
)
Merger-related expense
—
1
—
7
Severance expense
(1
)
12
10
51
Stock-based compensation
21
26
44
70
Adjusted EBITDAX
$
915
$
1,874
$
2,927
$
5,152
Trailing Twelve Months
Ended
(In
millions)
September 30,
2023
December 31,
2022
Net income
$
2,241
$
4,065
Plus (less):
Interest expense
69
80
Interest income
(41
)
(10
)
Gain on debt extinguishment
(2
)
(28
)
Other expense
(2
)
(2
)
Income tax expense
606
1,104
Depreciation, depletion and
amortization
1,624
1,635
Exploration
20
29
(Gain) loss on sale of assets
(12
)
1
Non-cash (gain) loss on derivative
instruments
(79
)
(299
)
Merger-related expense
—
7
Severance expense
20
62
Stock-based compensation
60
86
Adjusted EBITDAX (trailing twelve
months)
$
4,504
$
6,730
Reconciliation of Net Debt
The total debt to total capitalization ratio is calculated by
dividing total debt by the sum of total debt and total
stockholders’ equity. This ratio is a measurement which is
presented in our annual and interim filings and our management
believes this ratio is useful to investors in assessing our
leverage. Net Debt is calculated by subtracting cash and cash
equivalents from total debt. The Net Debt to Adjusted
Capitalization ratio is calculated by dividing Net Debt by the sum
of Net Debt and total stockholders’ equity. Net Debt and the Net
Debt to Adjusted Capitalization ratio are non-GAAP measures which
our management believes are also useful to investors when assessing
our leverage since we have the ability to and may decide to use a
portion of our cash and cash equivalents to retire debt. Our
management uses these measures for that purpose. Additionally, as
our planned expenditures are not expected to result in additional
debt, our management believes it is appropriate to apply cash and
cash equivalents to reduce debt in calculating the Net Debt to
Adjusted Capitalization ratio.
(In
millions)
September 30,
2023
December 31,
2022
Current portion of long-term debt
$
575
$
—
Long-term debt, net
1,592
2,181
Total debt
2,167
2,181
Stockholders’ equity
12,789
12,659
Total capitalization
$
14,956
$
14,840
Total debt
$
2,167
$
2,181
Less: Cash and cash equivalents
(847
)
(673
)
Net debt
$
1,320
$
1,508
Net debt
$
1,320
$
1,508
Stockholders’ equity
12,789
12,659
Total adjusted capitalization
$
14,109
$
14,167
Total debt to total capitalization
ratio
14.5
%
14.7
%
Less: Impact of cash and cash
equivalents
5.1
%
4.1
%
Net debt to adjusted capitalization
ratio
9.4
%
10.6
%
Reconciliation of Net Debt to Adjusted
EBITDAX
Total debt to net income is defined as total debt divided by net
income. Net debt to Adjusted EBITDAX is defined as net debt divided
by trailing twelve month Adjusted EBITDAX. Net debt to Adjusted
EBITDAX is a non-GAAP measure which our management believes is
useful to investors when assessing our credit position and
leverage.
(In
millions)
September 30,
2023
December 31,
2022
Total debt
$
2,167
$
2,181
Net income
2,241
4,065
Total debt to net income ratio
1.0 x
0.5 x
Net debt
$
1,320
$
1,508
Adjusted EBITDAX (Trailing twelve
months)
4,504
6,730
Net debt to Adjusted EBITDAX
0.3 x
0.2 x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231106868481/en/
Investor Contact Daniel Guffey - Vice President of
Finance, Planning & Analysis and Investor Relations
281.589.4875
Hannah Stuckey - Investor Relations Manager
281.589.4983
Coterra Energy (NYSE:CTRA)
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