Coterra Energy Inc Q4 2024 Earnings Call Transcript

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

Question: Arun Jayaram - JPMorgan Chase & Co - Analyst : My first question is I was wondering if you could discuss some of the key lessons learned from the Windham Row, including the interplay between the Wolfcamp and the Harkey programs and just some of the key learnings from that program as you look forward to a couple more projects within Culberson this year, the Barbara Row and the Bowler Row?

Question: Arun Jayaram - JPMorgan Chase & Co - Analyst : Okay. And my follow-up, there's some kind of nuances around the 2025 guide that we've gotten some questions on. Could you talk a little bit about maybe what's happening in 1Q on a sequential basis. But the broader comment was that it appears that you're kind of maintaining your guidance that you provided in November, but with one less month called production from the acquired assets, am I reading into that right? Is there just some -- you're basically maintaining that production guide. But with less days, call it, on the acquired assets. Just wanted to clarify that comment.

Question: Neil Mehta - Goldman Sachs - Analyst : A couple of gas related questions in the Marcellus. It looks like you're going to be restarting two rigs in April. And so just can you walk through your thought process of what's changed from November. And you talked about potentially increasing capital here in the Marcellus in the second half if conditions warrant. Can you talk about what are the milestones and goals post you're watching to say the market has given you a signal to accelerate that activity.

Question: Neil Mehta - Goldman Sachs - Analyst : That's great. And then you talk about the 5% growth for oil on an organic basis and then less of that on a BOE basis. And so you've been active in the market here over the last five years. Just what's your perspective post Franklin Mountain, some of the other bolt-ons. Do you do you feel like you have enough to say grace over or do you expect to continue to be active from an acquisition perspective on the go forward?

Question: Nitin Kumar - Mizuho Securities - Analyst : I want to follow up on the gas side to start with. You highlighted some really strong momentum in terms of capital efficiencies in the Marcellus, but even including the potential $150 million of acceleration later this year, you're still well below what you describe as your maintenance spend of about $450 million. So -- and you're only doing about 10 to 15 wells, which is a third of what you did last year. So when do you expect to get to sort of a run rate in the Marcellus where you're holding somewhere about two Bcf a day flat?

Question: Nitin Kumar - Mizuho Securities - Analyst : Shane, speaking of the the deck, I noticed slide 19, you talked a little bit about your power and midstream infrastructure in the Permian. Some of your peers and partners have talked about power generation and supplying power for data centers out of the Permian you have some capacity. Is this an area where you are looking at opportunities? And maybe give us a lay of the land in terms of risk and opportunities there that you're seeing?

Question: Neal Dingmann - Truist Securities - Analyst : Guys, my first question, just on the continued operational efficiency improvement. Like in the slide, you clearly are demonstrating the upside you're seeing here. I'm just wondering maybe for Blake. Just -- like are you seeing this -- maybe talk about potential further opportunities, both in the Permian and are you expecting the same sort of upside in the Marcellus as well?

Question: Neal Dingmann - Truist Securities - Analyst : Great details. And then just a second on maybe the upcoming return of your Marcellus activity, I'm specifically wondering, will the focus continue to be primarily on lower Marcellus or you be able to co-develop several of the areas focused on both the lower and the upper.

Question: David Deckelbaum - TD Cowen - Analyst : Tom, I was just curious if you talk about the Marcellus program a little bit more for '25. The lateral lengths are obviously significantly longer this year especially in the upper Marcellus. Should we think about that as the go-forward plan in future years? And I guess, how did you guys sort of approach that development plan versus perhaps like cannibalize or weighing that as a cannibalization of inventory? Or is this is just the most optimum kind of [PVOI]?

Question: David Deckelbaum - TD Cowen - Analyst : I appreciate that. And I guess I just wanted to clarify just the remarks just as a lot of the Marcellus activity appears to be more back half weighted. I guess, how much of that sort of overall budget should we think of as being kind of contingent on continued strength in the gas curve?

Question: Derrick Whitefield - Texas Capital - Analyst : I wanted to focus on the gas market with my first question. Regarding the three year outlook, there's clearly a lot of optionality built into your growth outlook. And while you're returning activity to the Marcellus and highlighting the potential to further add activity it would seem the macro environment we're seeing now is perhaps the most constructive one we've seen in well over a decade. With the understanding, there's capital tension between the Permian and gas assets. Would you expect both the Anadarko and Marcellus to return to growth over the next three years if the gas market plays out as the strip indicates?

Question: Derrick Whitefield - Texas Capital - Analyst : Makes sense. And going back to slide 19 for my follow-up. There's been a lot of discussion on downstream partnerships to support the build-out of data centers. And as you guys have highlighted, Could you perhaps speak to where those conversations are for you and what basins and what role you'd like to play in that arena more broadly?

Question: Josh Silverstein - UBS Financial - Analyst : Just sticking on the gas theme. If you did want to ramp gas volumes further, could you do it in the Marcellus? Or is that tapped out from a capacity standpoint and you'd have to start adding CapEx to the Anadarko?

Question: Josh Silverstein - UBS Financial - Analyst : Got it. And then, Shane, you mentioned the $1 billion debt reduction for this year. Is the buyback on hold until that's complete? Or will you do some buybacks during this process as well and then ramp the buyback after the $1 billion is achieved?

Question: Scott Gruber Gruber - Citigroup Inc - Analyst : I want to come back to the growth capital allocation, just given the macro backdrop. So if gas does stay constructive, let's say it's $4 along the curve and oil is kind of flattish at 70%. How would you allocate growth dollars between the Marcellus and the Anadarko in that environment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 3:00PM, CTRA.N - Q4 2024 Coterra Energy Inc Earnings Call

Question: Scott Gruber Gruber - Citigroup Inc - Analyst : Got it. And then turning to development costs. and looking across your Delaware position, Culberson obviously leads the pack with the road developments and all the infrastructure you have in place there with your partner. But as we count it becomes a bigger percentage of your activity set, can you talk about the path to close the cost gap. As you think about that three year plan, can we see that cost gap close materially?

Question: Kalei Akamine - BofA Securities - Analyst : For my first question, can you talk about your unit OpEx guide? It seems to be moving up meaningfully year-over-year. I just want to understand what's driving that. Is that the new Permian assets? And if so, do you see a pathway here to grind it down?

Question: Kalei Akamine - BofA Securities - Analyst : Got it. That makes sense. Blake, on your oil guide for 2025, $152 million to $168 million. The high end appears to imply Permian oil jumping significantly in the second half of this year. I know your thoughts on where Permian oil can exit the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 3:00PM, CTRA.N - Q4 2024 Coterra Energy Inc Earnings Call

Question: Matt Portillo - Tudor, Pickering, Holt & Co. Securities - Analyst : Just circling back around on the gas assets. Tom, I think two quarters ago, you talked about the Upper Marcellus threshold from a return perspective, meeting kind of mid-three hurdle to allocate capital to the asset. Obviously, strips well above that today. But I was just curious, from a longer-term perspective, with the increased lateral length and the lower well costs that you guys have been able to achieve. Where do you think that new threshold is for the upper Marcellus specifically?

Question: Matt Portillo - Tudor, Pickering, Holt & Co. Securities - Analyst : Great. And then just as a follow-up for the Marcellus from one of the prior questions. With the two rigs that you guys have running starting in April, if you were to hold those in place, is there any color you might be able to provide in terms of how many wells you could drill for the remainder of this year? And then any incremental color you might be able to provide on the split between the upper and lower Marcellus program for that drilling program this year?

Question: John Abbott - Wolfe Research - Analyst : I'm on for Doug Leggett. Maybe just a couple of quick ones here. You just did the acquisitions -- any thought on the impact to future cash taxes at this point in time? Maybe that goes to you there, Shane?

Question: John Abbott - Wolfe Research - Analyst : I appreciate it. And just quickly for the second question here, I mean you continue to see strong efficiencies here. given you've given us your updated three year guide. When you sort of look at the Permian asset, so you have about 15 years of inventory. The inventory at the fund is always better than the back. At what point do you think looking out to the future that you could see a potential change in capital intensity at this point given the efficiencies that you've achieved?

Question: Leo Mariani - ROTH Capital Partners - Analyst : Wanted to continue to focus a little bit here on the Marcellus. I think you guys made some comments in your prepared remarks here that you guys were able to drill Dimmit again for the first time in a while. I know that's been kind of opened up a bit there. I was hoping you could basically help us out by kind of quantifying roughly kind of how much runway is there in Dimmit. I don't know if you want to talk about it in terms of wells or years to drill with, say, a one rig program or something?

Question: Leo Mariani - ROTH Capital Partners - Analyst : Okay. And then just a follow-up here on the gas side. Just wanted to get a high-level sense. I know you guys said that you're obviously going to approach this with a little bit of caution have been hand fakes on gas over the years. But kind of at today's price is, call it, $4 Henry Hub and $70 WTI. How do the returns compare in your kind of traditional Permian program versus the lower Marcellus today?

Question: Paul Cheng - Scotiabank - Analyst : I have to apologize. I'm in the airport. So there's a little bit noise in the background. Tom and Blake in Marcellus, even if the economic is good, given the resource and you think that you have about 12 years of the inventory. What should we assume the maximum production that you could expect?

Question: Paul Cheng - Scotiabank - Analyst : Great. And also that, can you give us some idea that for -- by quarter, how's the were coming on stream and also the CapEx is going to trend look like? Are they going to be real I know that in Marcela, you're going to start to waiting by April. But should we assume that subsequently, that is just going to be valuable and also help in the permit.