Coterra Energy Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : I just want to start off on Harkey just round out this point. It sounds like you feel like you've gotten through it. So can you just give us a level set of how much conviction you have that you work through this issue, the timeline? And when do you see production really being at optimal level? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 2:00PM, CTRA.N - Q2 2025 Coterra Energy Inc Earnings Call

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Yes. And then just the $100 million of activity that you add to the Marcellus and the rig add. Can you talk about that there's been a big debate in the investment community about whether we're overproducing with some of these scrapes kind of around 108 Bs right now, which is probably oneto 2 Bs higher than most of us thought we would be. Does this feel like the optimal time to be leaning into the gas program? And how do you think about the risk of if the leaders are adding supply before the demand and inventory signals are there?

Question: Arun Jayaram - JPMorgan Chase & Co - Analyst : I was wondering if you could talk a little bit about the trajectory of your oil growth expectations in the back half of the year? Obviously, you've given a third quarter guide. By our math, you'd have to average about 172,000 barrels in the second half to hit the midpoint of your oil guide of 160,000. Given Blake's commentary on consistent activity levels, talk to us about confidence level at the midpoint and how you expect to kind of achieve that fourth quarter run rate which would assume kind of an oil trajectory approaching 180,000 barrels a day. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 2:00PM, CTRA.N - Q2 2025 Coterra Energy Inc Earnings Call

Question: Arun Jayaram - JPMorgan Chase & Co - Analyst : Fair enough. And my follow-up question is Tom thoughts on -- you announced that you believe that you have a new wellbore design, which has fixed maybe some of the issues you experienced in the Harkey in the 1Q conference call. But do you have enough confidence now to codevelop the zones in Culberson County?

Question: Doug Leggate - Wolfe Research - Analyst : DouTom, I wonder if I could ask a kind of a high-level question. Forgive me for this, you're a leader in the industry, and I think your perspective on this could be worth everybody listening to. And it's really that -- the industry often justifies at the individual company level, drilling wells on the basis of wellhead returns, because it's the right thing for the company, but collectively, the industry ends up the ( slowing price ). So it's another way of asking why -- I mean you have the option to not spend out $100 million in the Marcellus. Is this a desire to maintain production because the risk, obviously, for the commodity, as it as Neil pointed out, production has been surprising on the upside, and the biggest part of that has been the Marcellus. So I guess I'm asking if you might be part of the problem on the commodity. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 2:00PM, CTRA.N - Q2 2025 Coterra Energy Inc Earnings Call

Question: Doug Leggate - Wolfe Research - Analyst : I appreciate the answer. And Tom, I was going to go in a different direction, but I'm going to -- actually don't mind, I'm going to ask a follow-up on this because another aspect of having that low cost of supply and a stellar balance sheet, frankly, is that some of your large pure-play gas peers have used that as a crux for managing their tills, almost like seasonally managing their production, shutting in production in the trough, bringing it on into winter and so on. So I guess my question is, is that a consideration for your gas strategy, if not, why not?

Question: Betty Jiang - Barclays Services Corp - Analyst : Shane, I wanted to ask about cash taxes. Thank you for the color you provided earlier. Can you just give us a bit more detail around why the 2025 cash taxes is going down more? And then moving forward, you gave the range of 70% to 90%. How should we be thinking about that range over time?

Question: Betty Jiang - Barclays Services Corp - Analyst : So this 80%, can we use that for the next -- going forward, that three, five years?

Question: Betty Jiang - Barclays Services Corp - Analyst : My follow-up is on the buyback with the incremental free cash flow now the business is generating, should we expect once the term loan is paid off, you will start accelerating on the buyback again? And could we see it going back to that 100% cash return level towards later this year and into next year?

Question: Nitin Kumar - Mizuho Securities USA LLC - Analyst : Tom, I want to maybe follow up to Arun's question. You have a pretty strong ramp-up in oil volumes for the rest of this year. Historically, just given your focus on bigger projects, a big ramp-up has been followed by maybe a little bit weaker or decline but you're also adding activity or at least retaining activity this year without increasing your guidance. So I'm not asking for guidance for 2026, but how do you see the trajectory sort of beyond fourth quarter? Do you expect a bit more ratable oil volumes in 2026?

Question: Nitin Kumar - Mizuho Securities USA LLC - Analyst : My follow-up is on the gas marketing side, and maybe, Blake, looking at slide 18, I think 31% or so of your current gas volumes are sold in basin across the threeoperating areas, and you mentioned the LNG contracts and you mentioned -- you announced this power deal. So on our math, it's roughly 8% or 9% of your total corporate gas volumes. Should we expect that these new volumes will be really met by sort of a reallocation of in-basin? And Part B is as you think about the longer-term mix for your gas marketing portfolio, is there an advantage of keeping some molecules priced in basin as well?

Question: Scott Gruber - Citigroup Inc - Analyst : A lot of discussion on the gas strategy. I wanted to come back to the oil strategy, there's been some comments around preference for operational consistency. If we do see the macro shift again in oil dips back to the high 50s, would the preference be to maintain those 9 rigs in the Permian for that operational consistency. And I assume there's been some good benefit from lower service costs? Or would you look to pivot back to a lower rig count?

Question: Scott Gruber - Citigroup Inc - Analyst : I appreciate that. And then coming back to the Harkey wells, the new well design you made on the incremental Harkey wells on Windham Row, how much of that cost? And you mentioned that the water issue doesn't appear to be an issue across the broader Culberson County. But are you thinking about applying that well design -- the new enhanced well design across Culberson out of an abundance of caution? Or is that not really necessary?

Question: Kalei Akamine - Bank of America - Analyst : This first question is on use of cash. You kind of touched on this in your opening remarks that the term loan is a big near-term priority. The argument for a more aggressive buyback, however, is that your share price is currently at a discount and that you don't have a balance sheet problem, you're actually in really good shape. So why not shift priorities and focus more on the buyback?

Question: Kalei Akamine - Bank of America - Analyst : I appreciate that perspective. My second question is on federal lease sales in New Mexico. Following the big day for bill, I think those lease sales tend to become more frequent. How do you think about using those lease sales to add to your position? Do you see it becoming a more material part of your capital budget going forward?

Question: David Deckelbau - TD Cowen - Analyst : Just was curious on just how you're thinking about the Mid-Con in terms of demand and capital over the next couple of years, particularly just given the movement to more 3 milers this year. How quickly can like a 3-miler program become part of the Mid-Con go forward?

Question: David Deckelbau - TD Cowen - Analyst : Appreciate the color there, Michael. And maybe just Blake, on the remaining Harkey wells or the 22 that are dewatering, do you guys have an anticipated timeline on how long these wells would take to dewater before looking to go back and remediate and return to sales?

Question: Derek Whitfield - Texas Capital - Analyst : Congrats on your update. With my first question, I wanted to lean in on the power gen opportunity for Coterra and the success you've experienced in achieving power sales agreements. As this has been an elusive seat for many of your Permian peers, how would you characterize what's leading to your success and how you're positioning Coterra as a partner?

Question: Derek Whitfield - Texas Capital - Analyst : Great. And then for my follow-up, I wanted to focus on the Anadarko. While capital costs are down 18% per foot year-over-year, Anadarko D&C is the highest among your 3 assets. If we were to think about a greater capital allocation and/or longer wells in general, how much further could you compress costs if you were to lean into that asset given the constructive gas backdrop we have?

Question: Matt Portillo - Tudor Pickering Holt & Co Securities LLC - Analyst : You've had some phenomenal success in results in the Dimock box. I was just curious if you might be able to provide some color on how many additional locations do you see in the area and maybe timing of development for those pads moving forward?

Question: Matt Portillo - Tudor Pickering Holt & Co Securities LLC - Analyst : That's great. And then maybe just a follow-up on the Northeast. I was curious if you might be able to talk about your views specifically in Northeast PA on the opportunity set around power demand growth. A lot of your peers in the Southwest PA have provided context in terms of their opportunity set. And then in addition to that, I was curious if you might be able to talk about your updated views on infrastructure opportunities in the region and the ability to potentially market gas further away from the field.

Question: Philip Jungwirth - BMO Capital Markets - Analyst : Can you expand more on the comment about delineation of zones across the Avant acreage, what you've derisked to date or could by year-end? And then how does this compare to the acquisition underwriting on the upper end of locations?

Question: Philip Jungwirth - BMO Capital Markets - Analyst : Okay. Great. And then maybe more specifically on Appalachia marketing. Williams did discuss a new agreement for Northeast Supply Enhancement, which we add $400 million a day to North Jersey and New York markets, more indirectly, but would you see this benefiting Coterra? And then would something like this make constitution less attractive from a producer standpoint?

Question: Paul Cheng - Scotia Bank - Analyst : Two quick questions. First, based on the comment that you guys made earlier is that means that Anadarko could be an area of interest for M&A?

Question: Paul Cheng - Scotia Bank - Analyst : And Tom, on the -- it looked like that you guys like value the power netback contracts. Is there a target in terms of percent of your gas volume, you would like to be in that type of contracts or that you think higher is better? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 2:00PM, CTRA.N - Q2 2025 Coterra Energy Inc Earnings Call

Question: Leo Mariani - Roth Capital Partners LLC - Analyst : I wanted to see if you can provide a little bit more color on the Franklin Mountain and Avant acquisitions here. It's made earlier comments, they've been kind of fully integrated. Can you speak and maybe quantify some of the recent results. You talked about testing some other zones there, which sounds encouraging. But can you kind of provide a little bit more of an update on how results have maybe trended on the wells versus the prior operator and how costs have trended versus the prior operator?