Coterra Announces Accretive Permian Basin Acquisitions
Highlights
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Creating an additional oil-weighted focus area in
New Mexico , with acreage adjacent to our existing footprint - Highly accretive: >15% accretive to estimated 2025-2027 per share Discretionary Cash Flow and Free Cash Flow, and accretive to Net Asset Value per share
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Disciplined 2025 framework, with expected pro forma reinvestment rate of approximately 50%. Pro forma production expected to be 150-to-170 mbod and 720-to-760 mboed with a total capital budget anticipated at
$2,100 -to-$2,400 million -
Deep pro forma inventory, with over 15 years of runway in the
Permian Basin -
Expect to maintain top-tier balance sheet and liquidity, with estimated year-end 2025 Net Leverage Ratio of 0.6x, which is expected to remain below 1.0x, even in a
$55 /bbl and$2.50 /MMBtu commodity price environment -
Estimate corporate breakeven prices, with Free Cash Flow after the base dividend, to be below
$50 /bbl WTI and$2.50 /MMBtu Henry Hub - Remain committed to minimum 50%+ return of annual Free Cash Flow to shareholders through base dividends and buybacks
Acquisition Details: Adding scale in
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Acquisition valued at 3.8x estimated 4Q24 annualized EBITDAX and approximately 13% estimated 2025 Free Cash Flow yield at
$70 /bbl WTI and$3.00 /MMBtu Henry Hub price assumptions -
Coring up position in the northern
Delaware Basin with approximately 49,000 net highly contiguous acres concentrated inLea County, New Mexico , creating a new approximately 83,000 net acre focus area within the Coterra portfolio -
Assets to be acquired include 400-550 net Permian locations, primarily targeting Bone Spring, Harkey, Avalon and the emerging oily
Lower Wolfcamp/Penn Shale . Assets to be acquired are expected to generate 1.8x PVI10 on average, at$70 /bbl WTI and$3.00 /MMBtu NYMEX price assumptions.-
Increases Coterra’s
New Mexico net locations by approximately 75%, and Coterra’s Permian net locations by approximately 25% - Average lateral length of 9,500 feet
- Acquiring approximately 125 miles of pipeline and other infrastructure, which is expected to enhance netbacks and economics across existing acreage and the new focus area
- Multiple horizons and contiguous drilling spacing units help maximize wells per pad, reduce facilities and infrastructure costs
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Increases Coterra’s
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Estimate 2025 capital expenditures of
$400 -to-$500 million , 2025 oil production of 40-to-50 mbopd, and total equivalent production of 60-to-70 mboed for the acquired assets
2025 Pro Forma Coterra Outlook
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Expect to reinvest approximately 50% of Discretionary Cash Flow in 2025 assuming
$70 /bbl WTI and$3.00 /MMBtu Henry Hub - Estimate 2025 oil production of 150-to-170 mbod, an increase of approximately 49% compared to estimated 2024 mid-point of oil guidance. Standalone Coterra assets are expected to generate 5-10% growth in 2025.
- Total equivalent production of 720-760 mboed, an increase of approximately 11% compared to estimated 2024 mid-point of total equivalent production guidance.
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Expect oil revenue mix of approximately 55-to-60% based on estimated 2025 production and assuming
$70 /bbl WTI and$3.00 /MMBtu Henry Hub -
Estimate
$2,100 -to-$2,400 million of capital expenditures in 2025, approximately 75% weighted to thePermian Basin
Financing Details
Coterra will fund the acquisitions with
Advisors
TPH&Co, the energy business of Perella Weinberg Partners, and
Both acquisitions are subject to customary closing conditions and are expected to close in the first quarter of 2025 with an effective date of
Conference Call Information
Management will host a live conference call to discuss the acquisitions.
Date:
Time:
Conference ID: 8994034
To access the live webcast, visit the “Events & Presentations” page under the “Investors” section of the Company’s website at www.coterra.com. The replay will be archived and available at the same location after the conclusion of the live event.
About
Coterra is a premier exploration and production company based in
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 the closing of the acquisitions, the anticipated indebtedness to be incurred in connection with the acquisitions, the performance of the assets to be acquired, returns to shareholders, growth rates, enhanced shareholder value, reserves estimates (both of Coterra and for the reserves to be acquired), future financial and operating performance and goals and commitment to sustainability and ESG leadership, strategic pursuits and goals, 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: our ability to integrate the assets to be acquired into our operations and to implement our capital plan with respect to such assets; the volatility in commodity prices for crude oil and natural gas; cost increases; the effect of future regulatory or legislative actions; actions by, or disputes among or between, the
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.
Supplemental Non-GAAP Financial Measures (Unaudited)
We report our financial results in accordance with accounting principles generally accepted in
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.
Capital expenditures is defined as cash capital expenditures for drilling, completion and other fixed asset additions less changes in accrued capital costs.
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 produced 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 flow from operating activities or net income, as defined by GAAP, or as a measure of liquidity.
EBITDAX is defined as net income plus interest expense, other expense, income tax expense and benefit, depreciation, depletion, and amortization (including impairments), exploration expense, gain and loss on sale of assets, non-cash gain and loss on derivative instruments, earnings and loss on equity method investments, equity method investment distributions, stock-based compensation expense and merger-related costs. 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 EBITDAX for that purpose. 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.
Net Debt and Net Debt to EBITDAX (or Net Leverage)
Net Debt is calculated by subtracting cash and cash equivalents from total debt. Net Debt is a 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 this measure for that purpose.
Other Defined Terms
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.
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