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Coterra Energy Reports First-Quarter 2024 Results, Announces Quarterly Dividend, and Updates 2024 Outlook

Coterra Energy Inc. (NYSE: CTRA) (“Coterra” or the “Company”) today reported first-quarter 2024 financial and operating results and declared a quarterly dividend of $0.21 per share. Additionally, the Company provided second-quarter production and capital guidance and updated full-year 2024 guidance.

Key Takeaways & Updates

  • For the first quarter of 2024, total barrels of oil equivalent (BOE) production beat the mid-point and oil production beat the high-end of guidance, and incurred capital expenditures (non-GAAP) came in below the low-end of guidance.
  • Increasing full-year 2024 oil guidance 2.5% from initial guidance, driven by strong well performance and faster cycle times. Maintaining full-year 2024 BOE and incurred capital expenditure (non-GAAP) guidance.
  • For the first quarter of 2024, shareholder returns totaled approximately 90% of Free Cash Flow (non-GAAP), inclusive of our quarterly base dividend and $150 million of share repurchases during the quarter (cash basis, excluding 1% excise tax). The Company remains committed to returning 50% or greater of its annual Free Cash Flow (non-GAAP) to shareholders.
  • Issued $500 million aggregate principal amount of senior unsecured notes due 2034, with a coupon of 5.60% per annum. Coterra intends to use the net proceeds from the offering, together with cash on hand, to fund the repayment of the $575 million outstanding principal amount, and any other amounts due thereon, of its 3.67% Series L Senior Notes due September 18, 2024.

Tom Jorden, Chairman, CEO and President of Coterra, noted, "Coterra continues to deliver outstanding operational and financial results driven by the company's high-quality asset portfolio and top-tier operating team. Coterra continues to fire on all cylinders, and shifting our near-term capital program to focus on oil and liquids-rich plays remains prudent. However, the Company maintains optionality to take advantage of a structural change in the natural gas macro as LNG exports grow and electricity demand increases. One of our core principles at Coterra is maintaining flexibility and our low-cost, diversified asset portfolio provides ample opportunity to generate consistent, profitable growth through the cycles."

First-Quarter 2024 Highlights

  • Net Income (GAAP) totaled $352 million, or $0.47 per share. Adjusted Net Income (non-GAAP) was $383 million, or $0.51 per share.
  • Cash Flow From Operating Activities (GAAP) totaled $856 million. Discretionary Cash Flow (non-GAAP) totaled $797 million.
  • Cash paid for capital expenditures for drilling, completion and other fixed asset additions (GAAP) totaled $457 million. Incurred capital expenditures from drilling, completion and other fixed asset additions (non-GAAP) totaled $450 million, below the low end of our guidance range of $460 to $540 million, due to timing.
  • Free Cash Flow (non-GAAP) totaled $340 million.
  • Unit operating cost (reflecting costs from direct operations, transportation, production taxes and G&A) totaled $8.68 per BOE, within our annual guidance range of $7.45 to $9.55 per BOE.
  • Total equivalent production of 686 MBoepd (thousand barrels of oil equivalent per day), was near the high end of guidance (660 to 690 MBoepd), driven by improved cycle times and strong well performance in all three of our regions.
    • Oil production averaged 102.5 MBopd (thousand barrels of oil per day), exceeding the high end of guidance (95 to 99 MBopd).
    • Natural gas production averaged 2,960 MMcfpd (million cubic feet per day), exceeding the high end of guidance (2,850 to 2,950 MMcfpd).
    • NGLs production averaged 90.2 MBoepd.
  • Realized average prices:
    • Oil was $75.16 per Bbl (barrel), excluding the effect of commodity derivatives, and $75.00 per Bbl, including the effect of commodity derivatives
    • Natural Gas was $2.00 per Mcf (thousand cubic feet), excluding the effect of commodity derivatives, and $2.10 per Mcf, including the effect of commodity derivatives
    • NGLs were $21.09 per Bbl

Shareholder Return Highlights

  • Common Dividend: On May 1, 2024, Coterra's Board of Directors (the "Board") approved a quarterly base dividend of $0.21 per share, equating to a 3.1% annualized yield, based on the Company's $26.91 closing share price on May 1, 2024. The dividend will be paid on May 30, 2024 to holders of record on May 16, 2024.
  • Share Repurchases: During the quarter, the Company repurchased 5.6 million shares for $150 million (cash basis, excluding 1% excise tax) at a weighted-average price of approximately $26.94 per share, leaving $1.4 billion remaining as of March 31, 2024 on its $2.0 billion share repurchase authorization.
  • Total Shareholder Return: During the quarter, total shareholder returns amounted to $307 million, comprised of $157 million of declared dividends and $150 million of share repurchases (cash basis, excluding 1% excise tax).
  • Reiterate Shareholder Return Strategy: Coterra is committed to returning 50% or greater of annual Free Cash Flow (non-GAAP) to shareholders through its $0.84 per share annual dividend and share repurchases.

Guidance Updates:

  • Reiterating 2024 incurred capital expenditures (non-GAAP) of $1.75 to $1.95 billion.
  • Increasing 2024 oil production guidance to 102 to 107 MBopd, up 2.5% at the mid-point versus prior guidance.
  • Expect second-quarter 2024 total equivalent production of 625 to 655 MBoepd, oil production of 103 to 107 MBopd, natural gas production of 2,600 to 2,700 MMcfpd, and incurred capital expenditures (non-GAAP) of $470 to $550 million.
  • Estimate 2024 Discretionary Cash Flow (non-GAAP) of approximately $3.1 billion and 2024 Free Cash Flow (non-GAAP) of approximately $1.3 billion, at $79/bbl WTI and $2.35/mmbtu average NYMEX assumptions.
  • For more details on annual and second quarter 2024 guidance, see 2024 Guidance Section in the tables below.

Strong Financial Position

During the quarter, Coterra issued new $500 million senior unsecured notes due 2034. As of March 31, 2024, Coterra had total debt outstanding of $2.651 billion, of which $575 million is due in September 2024. The Company exited the quarter with a cash and cash equivalents of $1.289 billion, $250 million in short-term investments, and no debt outstanding under its $1.5 billion revolving credit facility, resulting in total liquidity of approximately $3.039 billion. Coterra intends to use the net proceeds from the recent debt offering, together with cash on hand, to fund the repayment of the $575 million notes due September 18, 2024. Coterra's net debt to trailing twelve-month EBITDAX ratio (non-GAAP) at March 31, 2024 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.

First-Quarter 2024 Conference Call

Coterra will host a conference call tomorrow, Friday, May 3, 2024, at 8:00 AM CT (9:00 AM ET), to discuss first-quarter 2024 financial and operating results.

Conference Call Information

Date: May 3, 2024

Time: 8:00 AM CT / 9:00 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 operations focused 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 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", "guide" 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 volatility in commodity prices for crude oil and natural gas; cost increases; the effect of future regulatory or legislative actions; 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 or conflict in the Middle East); 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 reports 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:

 

Three Months Ended

March 31,

 

2024

 

2023

PRODUCTION VOLUMES

 

 

 

Marcellus Shale

 

 

 

Natural gas (Mmcf/day)

 

2,310.8

 

 

2,134.4

Daily equivalent production (MBoepd)

 

385.1

 

 

355.7

 

 

 

 

Permian Basin

 

 

 

Natural gas (Mmcf/day)

 

486.7

 

 

427.2

Oil (MBbl/day)

 

97.0

 

 

84.3

NGL (MBbl/day)

 

70.1

 

 

64.1

Daily equivalent production (MBoepd)

 

248.2

 

 

219.6

 

 

 

 

Anadarko Basin

 

 

 

Natural gas (Mmcf/day)

 

161.2

 

 

194.3

Oil (MBbl/day)

 

5.5

 

 

7.9

NGL (MBbl/day)

 

20.1

 

 

19.3

Daily equivalent production (MBoepd)

 

52.4

 

 

59.6

 

 

 

 

Total Company

 

 

 

Natural gas (Mmcf/day)

 

2,960.1

 

 

2,756.6

Oil (MBbl/day)

 

102.5

 

 

92.2

NGL (MBbl/day)

 

90.2

 

 

83.4

Daily equivalent production (MBoepd)

 

686.1

 

 

635.0

 

 

 

 

AVERAGE SALES PRICE (excluding hedges)

 

 

 

Marcellus Shale

 

 

 

Natural gas ($/Mcf)

$

2.20

 

$

3.71

 

 

 

 

Permian Basin

 

 

 

Natural gas ($/Mcf)

$

1.02

 

$

1.40

Oil ($/Bbl)

$

75.18

 

$

73.96

NGL ($/Bbl)

$

20.53

 

$

22.46

 

 

 

 

Anadarko Basin

 

 

 

Natural gas ($/Mcf)

$

2.10

 

$

3.14

Oil ($/Bbl)

$

74.78

 

$

74.75

NGL ($/Bbl)

$

23.05

 

$

27.63

 

 

 

 

Total Company

 

 

 

Natural gas ($/Mcf)

$

2.00

 

$

3.31

Oil ($/Bbl)

$

75.16

 

$

74.03

NGL ($/Bbl)

$

21.09

 

$

23.66

 

Three Months Ended

March 31,

 

2024

 

2023

AVERAGE SALES PRICE (including hedges)

 

 

 

Total Company

 

 

 

Natural gas ($/Mcf)

$

2.10

 

$

3.72

Oil ($/Bbl)

$

75.00

 

$

74.09

NGL ($/Bbl)

$

21.09

 

$

23.66

 

Three Months Ended

March 31,

 

2024

 

2023

WELLS DRILLED(1)

 

 

 

Gross wells

 

 

 

Marcellus Shale

 

14

 

 

20

Permian Basin

 

48

 

 

39

Anadarko Basin

 

8

 

 

6

 

 

70

 

 

65

 

 

 

 

Net wells

 

 

 

Marcellus Shale

 

13.0

 

 

20.0

Permian Basin

 

23.2

 

 

16.6

Anadarko Basin

 

6.7

 

 

3.3

 

 

42.9

 

 

39.9

 

 

 

 

TURN IN LINES

 

 

 

Gross wells

 

 

 

Marcellus Shale

 

11

 

 

25

Permian Basin

 

42

 

 

45

Anadarko Basin

 

5

 

 

4

 

 

58

 

 

74

 

 

 

 

Net wells

 

 

 

Marcellus Shale

 

11.0

 

 

25.0

Permian Basin

 

21.9

 

 

23.1

Anadarko Basin

 

0.1

 

 

0.1

 

 

33.0

 

 

48.2

 

 

 

 

AVERAGE RIG COUNTS

 

 

 

Marcellus Shale

 

2.0

 

 

3.0

Permian Basin

 

8.0

 

 

6.0

Anadarko Basin

 

2.0

 

 

1.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

2024

 

2023

AVERAGE UNIT COSTS ($/Boe)(2)

 

 

 

Direct operations

$

2.50

 

$

2.34

Gathering, processing and transportation

 

4.00

 

 

4.13

Taxes other than income

 

1.19

 

 

1.50

General and administrative (excluding stock-based compensation and severance expense)

 

0.99

 

 

0.93

Unit Operating Cost

$

8.68

 

$

8.90

Depreciation, depletion and amortization

 

6.92

 

 

6.45

Exploration

 

0.07

 

 

0.07

Stock-based compensation

 

0.22

 

 

0.28

Severance expense

 

 

 

0.12

Interest expense, net

 

0.06

 

 

0.09

 

$

15.94

 

$

15.91

_______________________________________________________________________________

(1)

Wells drilled represents wells drilled to total depth during the period.

(2)

Total unit costs may differ from the sum of the individual costs due to rounding.

Derivatives Information

As of March 31, 2024, the Company had the following outstanding financial commodity derivatives:

 

 

2024

Natural Gas

 

Second Quarter

 

Third Quarter

 

Fourth Quarter

NYMEX collars

 

 

 

 

 

 

Volume (MMBtu)

 

 

44,590,000

 

 

45,080,000

 

 

16,690,000

Weighted average floor ($/MMBtu)

 

$

2.70

 

$

2.75

 

$

2.75

Weighted average ceiling ($/MMBtu)

 

$

3.87

 

$

3.94

 

$

4.23

 

 

2025

Natural Gas

 

First Quarter

 

Second Quarter

 

Third Quarter

 

Fourth Quarter

NYMEX collars

 

 

 

 

 

 

 

 

Volume (MMBtu)

 

 

9,000,000

 

 

9,100,000

 

 

9,200,000

 

 

9,200,000

Weighted average floor ($/MMBtu)

 

$

3.25

 

$

3.25

 

$

3.25

 

$

3.25

Weighted average ceiling ($/MMBtu)

 

$

4.79

 

$

4.79

 

$

4.79

 

$

4.79

 

 

2024

Oil

 

Second Quarter

 

Third Quarter

 

Fourth Quarter

WTI oil collars

 

 

 

 

 

 

Volume (MBbl)

 

 

3,185

 

 

2,760

 

 

2,760

Weighted average floor ($/Bbl)

 

$

67.57

 

$

65.00

 

$

65.00

Weighted average ceiling ($/Bbl)

 

$

90.47

 

$

87.17

 

$

87.17

 

 

 

 

 

 

 

WTI Midland oil basis swaps

 

 

 

 

 

 

Volume (MBbl)

 

 

3,185

 

 

2,760

 

 

2,760

Weighted average differential ($/Bbl)

 

$

1.15

 

$

1.14

 

$

1.14

In April 2024, the Company entered into the following financial commodity derivatives:

 

 

2024

Oil

 

Second Quarter

 

Third Quarter

 

Fourth Quarter

WTI oil collars

 

 

 

 

 

 

Volume (MBbl)

 

 

 

 

460

 

 

460

Weighted average floor ($/Bbl)

 

$

 

$

65.00

 

$

65.00

Weighted average ceiling ($/Bbl)

 

$

 

$

86.02

 

$

86.02

 

 

2025

Oil

 

First Quarter

 

Second Quarter

 

Third Quarter

 

Fourth Quarter

WTI oil collars

 

 

 

 

 

 

 

 

Volume (MBbl)

 

 

900

 

 

910

 

 

 

 

Weighted average floor ($/Bbl)

 

$

65.00

 

$

65.00

 

$

 

$

Weighted average ceiling ($/Bbl)

 

$

84.21

 

$

84.21

 

$

 

$

 
 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

 

 

Three Months Ended

March 31,

(In millions, except per share amounts)

2024

 

2023

OPERATING REVENUES

 

 

 

Natural gas

$

538

 

 

$

822

 

Oil

 

701

 

 

 

615

 

NGL

 

173

 

 

 

177

 

Gain on derivative instruments

 

 

 

 

138

 

Other

 

21

 

 

 

25

 

 

 

1,433

 

 

 

1,777

 

OPERATING EXPENSES

 

 

 

Direct operations

 

156

 

 

 

134

 

Gathering, processing and transportation

 

250

 

 

 

236

 

Taxes other than income

 

74

 

 

 

86

 

Exploration

 

5

 

 

 

4

 

Depreciation, depletion and amortization

 

432

 

 

 

369

 

General and administrative (excluding stock-based compensation and severance expense)

 

62

 

 

 

53

 

Stock-based compensation

 

13

 

 

 

16

 

Severance expense

 

 

 

 

7

 

 

 

992

 

 

 

905

 

(Loss) gain on sale of assets

 

(1

)

 

 

5

 

INCOME FROM OPERATIONS

 

440

 

 

 

877

 

Interest expense

 

19

 

 

 

17

 

Interest income

 

(16

)

 

 

(12

)

Income before income taxes

 

437

 

 

 

872

 

Income tax expense

 

85

 

 

 

195

 

NET INCOME

$

352

 

 

$

677

 

Earnings per share - Basic

$

0.47

 

 

$

0.88

 

Weighted-average common shares outstanding

 

750

 

 

 

764

 

 

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

 

(In millions)

March 31,

2024

 

December 31,

2023

ASSETS

 

 

 

Cash and cash equivalents

$

1,289

 

$

956

Short-term investments

250

-

Current assets

 

1,011

 

 

1,059

Properties and equipment, net (successful efforts method)

 

17,959

 

 

17,933

Other assets

 

444

 

 

467

 

$

20,953

 

$

20,415

 

 

 

 

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities

$

1,134

 

$

1,085

Current portion of long-term debt

 

575

 

 

575

Long-term debt, net (excluding current maturities)

 

2,076

 

 

1,586

Deferred income taxes

 

3,391

 

 

3,413

Other long term liabilities

 

680

 

 

709

Cimarex redeemable preferred stock

 

8

 

 

8

Stockholders’ equity

 

13,089

 

 

13,039

 

$

20,953

 

$

20,415

 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

 

 

Three Months Ended

March 31,

(In millions)

2024

 

2023

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net income

$

352

 

 

$

677

 

Depreciation, depletion and amortization

 

432

 

 

 

369

 

Deferred income tax expense

 

(22

)

 

 

23

 

(Gain) loss on sale of assets

 

1

 

 

 

(5

)

Gain on derivative instruments

 

 

 

 

(138

)

Net cash received in settlement of derivative instruments

 

26

 

 

 

100

 

Stock-based compensation and other

 

12

 

 

 

17

 

Income charges not requiring cash

 

(4

)

 

 

(4

)

Changes in assets and liabilities

 

59

 

 

 

455

 

Net cash provided by operating activities

 

856

 

 

 

1,494

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Capital expenditures for drilling, completion and other fixed asset additions

 

(457

)

 

 

(483

)

Capital expenditures for leasehold and property acquisitions

 

(1

)

 

 

(1

)

Purchases of short-term investments

 

(250

)

 

 

 

Proceeds from sale of assets

 

 

 

 

5

 

Net cash used in investing activities

 

(708

)

 

 

(479

)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Net proceeds from debt

 

499

 

 

 

 

Repayment of finance leases

 

(1

)

 

 

(2

)

Common stock repurchases

 

(150

)

 

 

(268

)

Dividends paid

 

(158

)

 

 

(436

)

Tax withholding on vesting of stock awards

 

 

 

 

(1

)

Capitalized debt issuance costs

 

(5

)

 

 

(7

)

Cash paid for conversion of redeemable preferred stock

 

 

 

 

(1

)

Net cash provided by (used in) financing activities

 

185

 

 

 

(715

)

Net increase in cash, cash equivalents and restricted cash

$

333

 

 

$

300

 

 

Reconciliation of Incurred Capital Expenditures

Incurred capital expenditures is defined as capital expenditures for drilling, completion and other fixed asset additions less changes in accrued capital costs.

 

Three Months Ended

March 31,

(In millions)

2024

 

2023

Cash paid for capital expenditures for drilling, completion and other fixed asset additions (GAAP)

$

457

 

 

$

483

Change in accrued capital costs

 

(7

)

 

 

85

Incurred capital expenditures for drilling, completion and other fixed asset additions (non-GAAP)

$

450

 

 

$

568

 

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 changes in assets and liabilities (including future impairments) and cash paid for certain capital expenditures. 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, 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.

 

Three Months Ended

March 31,

(In millions, except per share amounts)

2024

 

2023

As reported - net income

$

352

 

 

$

677

 

Reversal of selected items:

 

 

 

(Gain) loss on sale of assets

 

1

 

 

 

(5

)

(Gain) loss on derivative instruments(1)

 

26

 

 

 

(38

)

Stock-based compensation expense

 

13

 

 

 

16

 

Severance expense

 

 

 

 

7

 

Tax effect on selected items

 

(9

)

 

 

4

 

Adjusted net income

$

383

 

 

$

661

 

As reported - earnings per share

$

0.47

 

 

$

0.88

 

Per share impact of selected items

 

0.04

 

 

 

(0.01

)

Adjusted earnings per share

$

0.51

 

 

$

0.87

 

Weighted-average common shares outstanding

 

750

 

 

 

764

 

_______________________________________________________________________________

(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.

 

Three Months Ended

March 31,

(In millions)

2024

 

2023

Cash flow from operating activities

$

856

 

 

$

1,494

 

Changes in assets and liabilities

 

(59

)

 

 

(455

)

Discretionary cash flow

 

797

 

 

 

1,039

 

Cash paid for capital expenditures for drilling, completion and other fixed asset additions

 

(457

)

 

 

(483

)

Free cash flow

$

340

 

 

$

556

 

Reconciliation of Adjusted EBITDAX

Adjusted EBITDAX is defined as net income plus interest expense, interest income, 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, and severance 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.

 

Three Months Ended

March 31,

(In millions)

2024

 

2023

Net income

$

352

 

 

$

677

 

Plus (less):

 

 

 

Interest expense

 

19

 

 

 

17

 

Interest income

 

(16

)

 

 

(12

)

Income tax expense

 

85

 

 

 

195

 

Depreciation, depletion and amortization

 

432

 

 

 

369

 

Exploration

 

5

 

 

 

4

 

(Gain) loss on sale of assets

 

1

 

 

 

(5

)

Non-cash (gain) loss on derivative instruments

 

26

 

 

 

(38

)

Severance expense

 

 

 

 

7

 

Stock-based compensation

 

13

 

 

 

16

 

Adjusted EBITDAX

$

917

 

 

$

1,230

 

 

Trailing Twelve Months Ended

(In millions)

March 31,

2024

 

December 31,

2023

Net income

$

1,300

 

 

$

1,625

 

Plus (less):

 

 

 

Interest expense

 

75

 

 

 

73

 

Interest income

 

(51

)

 

 

(47

)

Income tax expense

 

393

 

 

 

503

 

Depreciation, depletion and amortization

 

1,704

 

 

 

1,641

 

Exploration

 

21

 

 

 

20

 

(Gain) loss on sale of assets

 

(6

)

 

 

(12

)

Non-cash loss on derivative instruments

 

119

 

 

 

54

 

Severance expense

 

4

 

 

 

12

 

Stock-based compensation

 

56

 

 

 

59

 

Adjusted EBITDAX (trailing twelve months)

$

3,615

 

 

$

3,928

 

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 and short-term investments 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 and short-term investments 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 and short-term investments to reduce debt in calculating the Net Debt to Adjusted Capitalization ratio.

(In millions)

March 31,

2024

 

December 31,

2023

Current portion of long-term debt

$

575

 

 

$

575

 

Long-term debt, net

 

2,076

 

 

 

1,586

 

Total debt

 

2,651

 

 

 

2,161

 

Stockholders’ equity

 

13,089

 

 

 

13,039

 

Total capitalization

$

15,740

 

 

$

15,200

 

 

 

 

 

Total debt

$

2,651

 

 

$

2,161

 

Less: Cash and cash equivalents

 

(1,289

)

 

 

(956

)

Less: Short-term investments

 

(250

)

 

 

 

Net debt

$

1,112

 

 

$

1,205

 

 

 

 

 

Net debt

$

1,112

 

 

$

1,205

 

Stockholders’ equity

 

13,089

 

 

 

13,039

 

Total adjusted capitalization

$

14,201

 

 

$

14,244

 

 

 

 

 

Total debt to total capitalization ratio

 

16.8

%

 

 

14.2

%

Less: Impact of cash and cash equivalents

 

9.0

%

 

 

5.7

%

Net debt to adjusted capitalization ratio

 

7.8

%

 

 

8.5

%

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)

March 31,

2024

 

December 31,

2023

Total debt

$

2,651

 

$

2,161

Net income

 

1,300

 

 

1,625

Total debt to net income ratio

2.0 x

 

1.3 x

 

 

 

 

Net debt (as defined above)

$

1,112

 

$

1,205

Adjusted EBITDAX (Trailing twelve months)

 

3,615

 

 

3,928

Net debt to Adjusted EBITDAX

0.3 x

 

0.3 x

2024 Guidance

The tables below present full-year and second quarter 2024 guidance.

 

 

Full Year Guidance

 

 

2024 Guidance (February)

 

Updated 2024 Guidance

 

 

Low Mid High

 

Low Mid High

Total Equivalent Production (MBoed)

 

635 - 655 - 675

 

 

Gas (Mmcf/day)

 

2,650 - 2,725 - 2,800

 

 

Oil (MBbl/day)

 

99.0 - 102.0 - 105.0

 

102.0 - 104.5 - 107.0

 

 

 

 

 

Net wells turned in line

 

 

 

 

Marcellus Shale

 

37 - 40 - 43

 

 

Permian Basin

 

75 - 83 - 90

 

 

Anadarko Basin

 

20 - 23 - 25

 

 

 

 

 

 

 

Incurred capital expenditures ($ in millions)

 

 

 

 

Total Company

 

$1,750 - $1,850 - $1,950

 

 

Drilling and completion

 

 

 

 

Marcellus Shale

 

$350- $375 -$400

 

 

Permian Basin

 

$945 - $1,000 - $1,055

 

 

Anadarko Basin

 

$270 - $290 - $320

 

 

Midstream, saltwater disposal and infrastructure

 

$185 - $185 - $185

 

 

 

 

 

 

 

Commodity price assumptions:

 

 

 

 

WTI ($ per bbl)

 

$75

 

$79

Henry Hub ($ per mmbtu)

 

$2.51

 

$2.35

 

 

 

 

 

Cash Flow & Investment ($ in billions)

 

 

 

 

Discretionary Cash Flow

 

$3.1

 

$3.1

Incurred Capital Expenditures

 

$1.75 - $1.85 - $1.95

 

 

Free Cash Flow (DCF - cash capex)

 

$1.3

 

$1.3

 

 

 

 

 

$ per boe, unless noted:

 

 

 

 

Lease operating expense + workovers + region office

 

$2.15 - $2.50 - $2.85

 

 

Gathering, processing, & transportation

 

$3.50 - $4.00 - $4.50

 

 

Taxes other than income

 

$1.00 - $1.10 - $1.20

 

 

General & administrative (1)

 

$0.80 - $0.90 - $1.00

 

 

Unit Operating Cost

 

$7.45 - $8.50 - $9.55

 

 

 

 

 

 

 

_______________________________________________________________________________

(1)

Excludes stock-based compensation and severance expense

 

Quarterly Guidance

 

 

First Quarter 2024 Guidance

 

First Quarter 2024 Actual

 

Second Quarter 2024 Guidance

 

 

Low Mid High

 

 

 

Low Mid High

Total Equivalent Production (MBoed)

 

660 - 675 - 690

 

686

 

625 - 640 - 655

Gas (Mmcf/day)

 

2,850 - 2,900 - 2,950

 

2,960

 

2,600 - 2,650 - 2,700

Oil (MBbl/day)

 

95.0 - 97.0 - 99.0

 

102.5

 

103.0 - 105.0 - 107.0

 

 

 

 

 

 

 

Net wells turned in line

 

 

 

 

 

 

Marcellus Shale

 

20 - 23 - 26

 

11

 

0 - 0 - 0

Permian Basin

 

15 - 21 - 27

 

23

 

15 - 23 - 30

Anadarko Basin

 

0 - 0 - 0

 

0

 

7 - 10 - 13

 

 

 

 

 

 

 

Incurred capital expenditures ($ in millions)

 

 

 

 

 

 

Total Company

 

$460 - $500 - $540

 

$450

 

$470 - $510 - $550

Drilling and completion

 

 

 

 

 

 

Marcellus Shale

 

 

 

$130

 

 

Permian Basin

 

 

 

$209

 

 

Anadarko Basin

 

 

 

$73

 

 

Midstream, saltwater disposal and infrastructure

 

 

 

$38

 

 

 

 

 

 

 

 

 

Commodity price assumptions:

 

 

 

 

 

 

WTI ($ per bbl)

 

$75

 

$77

 

$82

Henry Hub ($ per mmbtu)

 

$2.55

 

$2.25

 

$1.76

 

 

 

 

 

 

 

 

Contacts

Investor Contact

Daniel Guffey - Vice President of Finance, IR & Treasury

281.589.4875

Hannah Stuckey - Investor Relations Manager

281.589.4983

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