Coterra Energy Inc. (NYSE: CTRA) (“Coterra” or the
“Company”) today reported second-quarter 2023 financial and
operating results. Thomas E. Jorden, Chairman, Chief Executive
Officer and President, commented, “Coterra continues to demonstrate
outstanding operational execution, with a notable production beat
this quarter driven primarily by strong well performance. As such
we are increasing our 2023 BOE and natural gas production guidance
by 2% and our oil guidance by 3%, at the mid-point. Coterra remains
committed to maximizing shareholder value through consistent,
profitable growth.”
Second-Quarter 2023 Highlights
- Net Income (GAAP) totaled $209 million, or $0.28 per share.
Adjusted Net Income (non-GAAP) was $291 million, or $0.39 per
share.
- Cash Flow From Operating Activities (GAAP) totaled $646
million. Discretionary Cash Flow (non-GAAP) totaled $705
million.
- Cash capital expenditures for drilling, completion and other
fixed asset additions (GAAP) totaled $592 million. Accrued capital
expenditures from drilling, completion and other fixed asset
additions (non-GAAP) totaled $537 million, within our guidance
range of $510 - $570 million.
- Free Cash Flow (non-GAAP) totaled $113 million.
- Unit operating cost totaled $8.27 per BOE (barrel of oil
equivalent), within our annual guidance range of $7.30-$9.40 per
BOE.
- Total equivalent production of 665 MBoepd (thousand barrels of
oil equivalent per day), exceeded the high-end of guidance (650
MBoepd), driven by strong well performance and improved cycle times
in all three of our regions.
- Oil production averaged 95.8 MBopd (thousand barrels of oil per
day), exceeding the high-end of guidance (91.5 MBopd).
- Natural gas production averaged 2,904 MMcfpd (million cubic
feet per day), exceeding the high-end of guidance (2,850
MMcfpd).
- Natural Gas Liquids (NGLs) production averaged 85.0
MBoepd.
- Realized average prices:
- Oil: $71.88 per Bbl (barrel), excluding the effect of commodity
derivatives, and $72.17 per Bbl, including the effect of commodity
derivatives
- Natural Gas: $1.65 per Mcf (thousand cubic feet), excluding the
effect of commodity derivatives, and $1.95 per Mcf, including the
effect of commodity derivatives
- Natural Gas Liquids (NGLs): $16.67 per BOE (barrel of oil
equivalent)
Shareholder Return Highlights
Jorden noted, "Given that commodity prices were down more than
30% quarter-over-quarter, Coterra will return 184% of 2Q23 Free
Cash Flow to shareholders, which is significantly above our minimum
50% return commitment, as our cash position has afforded us the
luxury to transact counter-cyclically on share repurchases."
- Common Dividend: On August 7, 2023, Coterra's Board of
Directors (the "Board") approved a quarterly base dividend of $0.20
per share, which will be paid on August 31, 2023 to holders of
record on August 17, 2023.
- Share Repurchases: During the quarter, the Company
repurchased 2.4 million shares for $57 million at an average price
of $23.55 per share, leaving $1.7 billion remaining on the $2.0
billion share repurchase authorization as of June 30, 2023.
- Total Shareholder Return: During the quarter, total
shareholder return amounted to $208 million, comprised of $151
million of declared dividends and $57 million of share repurchases,
representing 184% of Free Cash Flow. Year-to-date, total
shareholder return amounted to $628 million, comprised of $303
million of declared dividends and $325 million of share
repurchases, representing 94% of Free Cash Flow.
- Reiterate Shareholder Return Strategy: Coterra remains
committed to returning 50%+ of Free Cash Flow to shareholders
through its $0.80/share annual dividend and share repurchases.
Based on the share repurchases executed to date and expected
declared dividends for the year, Coterra is on track to return at
least 75% of currently forecasted Free Cash Flow.
Guidance Update and Activity Outlook:
- Increasing full-year 2023 production guidance to the following:
- Total production volumes of 630-655 MBoepd; mid-point +2% from
prior guidance
- Oil production of 91.0-94.0 MBopd; mid-point +3% from prior
guidance
- Natural gas production of 2,750-2,900 MMcfpd; mid-point +2%
from prior guidance
- 2023 capital budget (accrual basis) remains unchanged at $2.0 -
$2.2 billion
- Estimate 2023 Discretionary Cash Flow of approximately $3.4
billion, at recent strip prices
- Estimate 2023 Free Cash Flow of approximately $1.2 billion, at
recent strip prices
Third-quarter 2023 production and capital guidance:
- Total production volumes of 625-655 MBoepd
- Oil production of 88.0-91.0 MBopd
- Natural gas production of 2,775-2,875 MMcfpd
- Expect capital expenditures (accrual basis) of $540 – $610
million
Coterra is currently running six rigs and three completion crews
in the Permian Basin, one rig and one completion crew in the
Anadarko Basin, and two rigs and one completion crew in the
Marcellus.
Strong Financial Position
Coterra maintains a strong financial position with an
investment-grade credit rating and approximately $2.3 billion of
liquidity. As of June 30, 2023, Coterra had total long-term debt of
$2.2 billion with a principal amount of $2.1 billion. The company
exited the quarter with a cash balance of $841 million, no debt
outstanding under its $1.5 billion five-year revolving credit
facility, and no near-term debt maturities. Coterra's net debt to
trailing twelve months Adjusted EBITDAX ratio (non-GAAP) at June
30, 2023 was 0.2x.
- Year-to-date 2023 Summary Highlights
- Net Income (GAAP) totaled $886 million, or $1.16 per share.
Adjusted Net Income (non-GAAP) totaled $953 million, or $1.25 per
share.
- Cash Flow From Operating Activities of $2,140 million.
Discretionary Cash Flow (non-GAAP) totaled $1,744 million.
- Cash capital expenditures for drilling, completion and other
fixed asset additions (GAAP) totaled $1,075 million. Accrued
capital expenditures for drilling, completion and other fixed asset
additions (non-GAAP) totaled $1,105 million.
- Free Cash Flow equaled $669 million (non-GAAP).
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 "A Sustainable Future" on
www.coterra.com. Coterra plans to publish its 2023 Sustainability
Report in the fourth quarter of 2023.
Second-Quarter 2023 Conference Call
Coterra will host a conference call tomorrow, Tuesday, August 8,
2023, at 9:00 AM CT (10:00 AM ET), to discuss second-quarter 2023
financial and operating results.
Conference Call Information
Date: August 8, 2023
Time: 10:00 AM ET / 9:00 AM CT
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 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 potential effects of further developments to the
long-term impact of the COVID-19 pandemic and variants thereof 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
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
PRODUCTION VOLUMES
Marcellus Shale
Natural gas (Bcf)
211.4
199.8
403.5
403.7
Equivalent production (MMBoe)
35.2
33.3
67.2
67.3
Daily equivalent production (MBoepd)
387.1
366.0
371.5
371.7
Permian Basin
Natural gas (Bcf)
37.0
38.9
75.5
76.4
Oil (MMBbl)
8.1
7.5
15.7
14.4
NGL (MMBbl)
5.9
5.6
11.7
10.4
Equivalent production (MMBoe)
20.2
19.6
40.0
37.5
Daily equivalent production (MBoepd)
222.9
215.0
221.2
207.4
Anadarko Basin
Natural gas (Bcf)
15.8
15.0
33.3
30.0
Oil (MMBbl)
0.6
0.5
1.3
1.1
NGL (MMBbl)
1.8
1.6
3.5
3.2
Equivalent production (MMBoe)
4.9
4.6
10.3
9.3
Daily equivalent production (MBoepd)
54.7
50.4
57.1
51.2
Total Company
Natural gas (Bcf)
264.3
253.9
512.4
510.3
Oil (MMBbl)
8.7
8.0
17.0
15.5
NGL (MMBbl)
7.7
7.2
15.2
13.6
Equivalent production (MMBoe)
60.5
57.5
117.7
114.2
Daily equivalent production (MBoepd)
664.9
631.7
650.1
630.8
AVERAGE SALES PRICE (excluding
hedges)
Marcellus Shale
Natural gas ($/Mcf)
$
1.78
$
5.54
$
2.70
$
4.90
Permian Basin
Natural gas ($/Mcf)
$
0.92
$
6.51
$
1.16
$
5.51
Oil ($/Bbl)
$
71.71
$
109.25
$
72.80
$
101.67
NGL ($/Bbl)
$
15.36
$
38.23
$
18.85
$
37.70
Anadarko Basin
Natural gas ($/Mcf)
$
1.57
$
7.09
$
2.40
$
5.98
Oil ($/Bbl)
$
74.32
$
108.74
$
74.56
$
100.90
NGL ($/Bbl)
$
21.02
$
42.47
$
24.27
$
41.32
Total Company
Natural gas ($/Mcf)
$
1.65
$
5.78
$
2.46
$
5.05
Oil ($/Bbl)
$
71.88
$
109.23
$
72.93
$
101.62
NGL ($/Bbl)
$
16.67
$
39.17
$
20.11
$
38.55
Quarter Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
AVERAGE SALES PRICE (including
hedges)
Total Company
Natural gas ($/Mcf)
$
1.95
$
5.15
$
2.81
$
4.66
Oil ($/Bbl)
$
72.17
$
92.78
$
73.11
$
84.76
NGL ($/Bbl)
$
16.67
$
39.17
$
20.11
$
38.55
Quarter Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
WELLS DRILLED(1)
Gross wells
Marcellus Shale
16
20
36
42
Permian Basin
33
43
72
72
Anadarko Basin
11
10
17
13
60
73
125
127
Net wells
Marcellus Shale
16.0
20.0
36.0
42.0
Permian Basin
21.3
21.8
37.9
39.8
Anadarko Basin
5.1
5.1
8.4
6.5
42.4
46.9
82.3
88.3
TURN IN LINES
Gross wells
Marcellus Shale
20
18
45
30
Permian Basin
34
36
79
67
Anadarko Basin
3
1
7
8
57
55
131
105
Net wells
Marcellus Shale
20.0
18.0
45.0
27.1
Permian Basin
19.1
13.9
42.2
29.8
Anadarko Basin
—
0.1
0.1
0.1
39.1
32.0
87.3
57.0
Quarter Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
AVERAGE UNIT COSTS ($/Boe)(2)
Direct operations
$
2.16
$
2.03
$
2.24
$
1.90
Transportation, processing and
gathering
4.27
4.13
4.20
4.12
Taxes other than income
1.05
1.72
1.27
1.53
General and administrative (excluding
stock-based compensation, severance expense and merger-related
expense)
0.79
0.92
0.85
0.92
Unit Operating Cost
$
8.27
$
8.80
$
8.56
$
8.47
Depreciation, depletion and
amortization
6.54
7.21
6.50
6.78
Exploration
0.09
0.12
0.08
0.11
Stock-based compensation
0.11
0.36
0.19
0.39
Merger-related expense
—
—
—
0.06
Severance expense
0.05
0.24
0.09
0.34
Interest expense
0.09
0.36
0.09
0.37
$
15.15
$
17.09
$
15.51
$
16.52
_______________________________________________________________________________
(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 June 30, 2023, the Company had the
following outstanding financial commodity derivatives:
2023
Natural Gas
Third Quarter
Fourth Quarter
Waha gas collars
Volume (MMBtu)
8,280,000
8,280,000
Weighted average floor ($/MMBtu)
$
3.03
$
3.03
Weighted average ceiling ($/MMBtu)
$
5.39
$
5.39
NYMEX collars
Volume (MMBtu)
32,200,000
29,150,000
Weighted average floor ($/MMBtu)
$
4.07
$
4.03
Weighted average ceiling ($/MMBtu)
$
6.78
$
6.61
2023
Oil
Third Quarter
Fourth Quarter
WTI oil collars
Volume (MBbl)
920
920
Weighted average floor ($/Bbl)
$
65.00
$
65.00
Weighted average ceiling ($/Bbl)
$
89.66
$
89.66
WTI Midland oil basis swaps
Volume (MBbl)
920
920
Weighted average differential ($/Bbl)
$
1.01
$
1.01
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (Unaudited)
Quarter Ended June 30,
Six Months Ended June
30,
(In millions,
except per share amounts)
2023
2022
2023
2022
OPERATING REVENUES
Natural gas
$
436
$
1,468
$
1,258
$
2,579
Oil
626
876
1,241
1,575
NGL
129
280
306
525
Gain (loss) on derivative instruments
(12
)
(66
)
126
(457
)
Other
6
14
31
29
1,185
2,572
2,962
4,251
OPERATING EXPENSES
Direct operations
130
116
264
216
Transportation, processing and
gathering
258
238
494
471
Taxes other than income
63
98
149
174
Exploration
5
7
9
13
Depreciation, depletion and
amortization
395
414
764
774
General and administrative (excluding
stock-based compensation, severance expense and merger-related
expense)
48
52
100
104
Stock-based compensation(1)
7
21
23
44
Merger-related expense
—
—
—
7
Severance expense
3
14
11
39
909
960
1,814
1,842
Gain (loss) on sale of assets
—
(3
)
5
(1
)
INCOME FROM OPERATIONS
276
1,609
1,153
2,408
Interest expense
16
22
33
43
Interest income
(10
)
(1
)
(22
)
(1
)
Income before income taxes
270
1,588
1,142
2,366
Income tax expense
61
359
256
529
NET INCOME
$
209
$
1,229
$
886
$
1,837
Earnings per share - Basic
$
0.28
$
1.53
$
1.16
$
2.28
Weighted-average common shares
outstanding
755
803
760
806
_______________________________________________________________________________
(1)
Includes the impact of our performance
share awards and restricted stock.
CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited)
(In
millions)
June 30, 2023
December 31,
2022
ASSETS
Current assets
$
1,640
$
2,211
Properties and equipment, net (successful
efforts method)
17,801
17,479
Other assets
438
464
$
19,879
$
20,154
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities
$
941
$
1,193
Long-term debt, net (excluding current
maturities)
2,171
2,181
Deferred income taxes
3,367
3,339
Other long term liabilities
733
771
Cimarex redeemable preferred stock
8
11
Stockholders’ equity
12,659
12,659
$
19,879
$
20,154
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (Unaudited)
Quarter Ended June 30,
Six Months Ended June
30,
(In millions)
2023
2022
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income
$
209
$
1,229
$
886
$
1,837
Depreciation, depletion and
amortization
395
414
764
774
Deferred income tax expense
4
65
27
101
(Gain) loss on sale of assets
—
3
(5
)
1
(Gain) loss on derivative instruments
12
66
(126
)
457
Net cash received (paid) in settlement of
derivative instruments
84
(293
)
184
(464
)
Stock-based compensation and other
7
18
24
38
Income charges not requiring cash
(6
)
(9
)
(10
)
(19
)
Changes in assets and liabilities
(59
)
(614
)
396
(524
)
Net cash provided by operating
activities
646
879
2,140
2,201
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures for drilling,
completion and other fixed asset additions
(592
)
(471
)
(1,075
)
(741
)
Capital expenditures for leasehold and
property acquisitions
(5
)
(3
)
(6
)
(4
)
Proceeds from sale of assets
28
2
33
4
Net cash used in investing activities
(569
)
(472
)
(1,048
)
(741
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of finance leases
(1
)
(1
)
(3
)
(3
)
Common stock repurchases
(57
)
(303
)
(325
)
(487
)
Dividends paid
(152
)
(484
)
(588
)
(940
)
Tax withholding on vesting of stock
awards
—
(1
)
(1
)
(7
)
Capitalized debt issuance costs
—
—
(7
)
—
Cash received for stock option
exercises
—
4
—
10
Cash paid for conversion of redeemable
preferred stock
—
(10
)
(1
)
(10
)
Net cash used in financing activities
(210
)
(795
)
(925
)
(1,437
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
$
(133
)
$
(388
)
$
167
$
23
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. 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.
Present Value Index (PVI10) is often used by management as a
return-on-investment metric and defined as the estimated net
present value (using a 10% discount rate) of the future net cash
flows from such reserves (for which we utilize certain assumptions
regarding future commodity prices and operating costs), adding back
our direct net costs incurred in drilling and adding back our
completing, constructing facilities, and flowing back such wells,
and then dividing that sum by our direct net costs incurred in
drilling, completing, constructing facilities, and flowing back
such wells.
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 June 30,
Six Months Ended June
30,
(In millions,
except per share amounts)
2023
2022
2023
2022
As reported - net income
$
209
$
1,229
$
886
$
1,837
Reversal of selected items:
(Gain) loss on sale of assets
—
3
(5
)
1
(Gain) loss on derivative
instruments(1)
96
(227
)
58
(7
)
Stock-based compensation expense
7
21
23
44
Merger-related expense
—
—
—
7
Severance expense
3
14
11
39
Tax effect on selected items
(24
)
43
(20
)
(19
)
Adjusted net income
$
291
$
1,083
$
953
$
1,902
As reported - earnings per share
$
0.28
$
1.53
$
1.16
$
2.28
Per share impact of selected items
0.11
(0.18
)
0.09
0.08
Adjusted earnings per share
$
0.39
$
1.35
$
1.25
$
2.36
Weighted-average common shares
outstanding
755
803
760
806
_______________________________________________________________________________
(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 June 30,
Six Months Ended June
30,
(In
millions)
2023
2022
2023
2022
Cash flow from operating activities
$
646
$
879
$
2,140
$
2,201
Changes in assets and liabilities
59
614
(396
)
524
Discretionary cash flow
705
1,493
1,744
2,725
Cash paid for capital expenditures for
drilling, completion and other fixed asset additions
(592
)
(471
)
(1,075
)
(741
)
Free cash flow
$
113
$
1,022
$
669
$
1,984
Capital Expenditures
Quarter Ended June 30,
Six Months Ended June
30,
(In
millions)
2023
2022
2023
2022
Cash paid for capital expenditures for
drilling, completion and other fixed asset additions
$
592
$
471
$
1,075
$
741
Change in accrued capital costs
(55
)
(2
)
30
53
Capital expenditures for drilling,
completion and other fixed asset additions
$
537
$
469
$
1,105
$
794
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 June 30,
Six Months Ended June
30,
(In
millions)
2023
2022
2023
2022
Net income
$
209
$
1,229
$
886
$
1,837
Plus (less):
Interest expense, net
6
21
11
42
Income tax expense
61
359
256
529
Depreciation, depletion and
amortization
395
414
764
774
Exploration
5
7
9
13
(Gain) loss on sale of assets
—
3
(5
)
1
Non-cash (gain) loss on derivative
instruments
96
(227
)
58
(7
)
Merger-related expense
—
—
—
7
Severance expense
3
14
11
39
Stock-based compensation
7
21
23
44
Adjusted EBITDAX
$
782
$
1,841
$
2,013
$
3,279
Trailing Twelve Months
Ended
(In
millions)
June 30, 2023
December 31,
2022
Net income
$
3,114
$
4,065
Plus (less):
Interest expense, net
39
70
Loss on debt extinguishment
(28
)
(28
)
Other expense
(2
)
(2
)
Income tax expense
831
1,104
Depreciation, depletion and
amortization
1,625
1,635
Exploration
25
29
(Gain) loss on sale of assets
(5
)
1
Non-cash (gain) loss on derivative
instruments
(234
)
(299
)
Merger-related expense
1
7
Severance expense
33
62
Stock-based compensation
65
86
Adjusted EBITDAX (trailing twelve
months)
$
5,464
$
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)
June 30, 2023
December 31,
2022
Long-term debt, net
2,171
2,181
Stockholders’ equity
12,659
12,659
Total capitalization
$
14,830
$
14,840
Total debt
$
2,171
$
2,181
Less: Cash and cash equivalents
(841
)
(673
)
Net debt
$
1,330
$
1,508
Net debt
$
1,330
$
1,508
Stockholders’ equity
12,659
12,659
Total adjusted capitalization
$
13,989
$
14,167
Total debt to total capitalization
ratio
14.6
%
14.7
%
Less: Impact of cash and cash
equivalents
5.1
%
4.1
%
Net debt to adjusted capitalization
ratio
9.5
%
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)
June 30, 2023
December 31,
2022
Total debt
$
2,171
$
2,181
Net income
3,114
4,065
Total debt to net income ratio
0.7 x
0.5 x
Net debt
$
1,330
$
1,508
Adjusted EBITDAX (Trailing twelve
months)
5,464
6,730
Net debt to Adjusted EBITDAX
0.2 x
0.2 x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807424652/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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Coterra Energy (NYSE:CTRA)
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