The opening paragraph introduces the participants of Coterra Energy's First Quarter 2025 Earnings Call, including key executives like Tom Jorden, Shane Young, and Blake Sirgo. The call will cover forward-looking statements and non-GAAP financial measures, with detailed reconciliations available on their website. Tom Jorden highlighted Coterra's excellent first quarter, noting high oil and natural gas production, low capital expenditure, strong financial results, substantial return of free cash to shareholders, and the retirement of $250 million in term loans. Additionally, Coterra completed the acquisitions of Franklin Mountain and Avant and is working on integrating these assets into their operations.

The paragraph discusses Coterra's strategic adjustments in response to market volatility, emphasizing their operational efficiencies and strong performance. Despite uncertainty in commodity markets, tariffs, and potential recession, Coterra remains resilient due to its diversified revenue, low-cost supply, and financial discipline. The company demonstrates its ability to generate significant free cash flow, returns, and modest growth while maintaining a strong balance sheet. In reaction to concerns about oil markets, Coterra is reducing activity in the Permian Basin and increasing it in the Marcellus Shale, leading to a projected $100 million reduction in their 2025 CapEx.

The paragraph outlines Coterra's strategic plans and adaptability in response to changing market conditions. The company is prepared to adjust its capital expenditures, with a net $100 million reduction planned for 2025. This includes reducing investment in the Permian by $150 million and increasing investment in the Marcellus by $50 million. Additional cuts in the Permian are possible if oil prices drop further. The company's flexible approach, likened to a guided missile, allows for adjustments to achieve optimal outcomes amidst an unpredictable environment. Coterra is committed to reducing debt, including a $1 billion term loan associated with a recent acquisition. Additionally, the successful completion of the Windham Row project, featuring 73 wells, has yielded excellent results, particularly in the Wolfcamp wells.

The paragraph discusses the observation of abnormally high water production in some Harkey wells, specifically in the eastern portion of Culberson County. The issue is attributed to a mechanical problem near the wellbore, not a reservoir, spacing, or co-development issue, and remediation efforts are underway. Harkey development in the affected area is paused until the issue is resolved, expected by the second quarter. The company is focusing on its productive Wolfcamp area in the meantime, which will unexpectedly enhance capital efficiency. Overall production forecasts remain unchanged, with a slight decrease in the capital guide. The company emphasizes a focus on long-term value creation through disciplined decision-making.

In the first quarter, Coterra reported strong financial results, with asset acquisitions from Franklin Mountain and Avant contributing positively. Oil production exceeded guidance expectations, and natural gas production was particularly strong, leading to increased revenue and cash flow. Free hedge revenues rose to $2 billion, with a significant portion coming from natural gas. The company achieved net income of $516 million and adjusted net income of $608 million. Capital expenditures were below expected levels, resulting in discretionary cash flow of $1.135 billion and free cash flow of $663 million. Looking ahead, the second quarter is expected to benefit from a full quarter's impact of these acquisitions.

In the second quarter of 2025, production is expected to average between 710 and 760 MBoe per day, with oil at 147-157 MBoe per day and natural gas at 2.7-2.85 Bcf per day. Adjustments, including project deferments and a shift to Upper Wolfcamp development, will reduce oil production by 5,000 barrels per day compared to February expectations. Despite these changes, the annual oil production midpoint guidance remains unchanged. The second quarter will see the highest capital expenditures, at $575-$650 million, due to increased sales. For 2025, capital spending has been reduced by over 4% to between $2 billion and $2.3 billion. A second rig will be maintained in the Marcellus, potentially adding $50 million to expenses. Due to lower crude prices, $150 million in Permian activity is reduced. The company has flexibility for further investment adjustments to potentially lower overall expenses within the guidance range.

In 2025, the company plans to maintain its oil production targets while increasing its production forecasts for natural gas, emphasizing capital efficiency. They expect daily production of 720 to 770 MBoe and foresee significant quarterly increases in oil production. Natural gas is projected to reach over 1 Tcf annually, benefiting from higher prices. The recent acquisition in the Permian has a minor impact on overall 2025 production levels. The company's diverse commodity mix and strategic investments allow it to sustain cash flow and commit to a 50% reinvestment rate across various price scenarios. Over the next three years, the company remains confident in achieving consistent growth, with planned capital investments supporting 5% oil growth and 0.5% BOE growth annually.

The paragraph outlines Coterra's financial and operational performance strategies. The company is focused on increasing capital efficiency and flexibility to adapt to market changes while ensuring shareholder returns and deleveraging objectives. They announced a $0.22 per share dividend, highlighting its strong yield. In the first quarter, they repaid $250 million of term loans and ended with $2.2 billion in total liquidity. They aim to repay a $1 billion term loan by 2025 and plan to weight share repurchases towards the latter half of that year. Coterra seeks to achieve a net debt-to-EBITDA ratio of 0.5x, maintaining a robust balance sheet to capitalize on market opportunities and safeguard returns. The company's high-quality quarterly results across all business units indicate a strong start to 2025, with expectations of increased oil production, free cash flow, and rapid deleveraging for the remainder of the year.

In the first quarter of 2025, the company successfully integrated its new Delaware assets into its Permian operations, achieving increased efficiencies and improved productivity. The D&C team reduced costs and optimized well spacing and frac design. Despite market headwinds leading to reduced rig activity and CapEx in the Permian, efforts to minimize downtime resulted in decreased flared volumes. Mechanical issues in Culberson County affected production on some Harkey wells, due to inadequate cement preventing proper reservoir pressure drawdown. A workover program is in place to address these issues, showing promising early results.

The paragraph outlines a remediation campaign focused on the Upper Wolfcamp wells, particularly in Windham Row, where productivity has exceeded expectations, contributing to maintaining the full-year 2025 oil guide and improved capital efficiency. Future developments will continue to prioritize Upper Wolfcamp, with no changes expected in spacing or productivity. The company is also enhancing its natural gas operations in the Marcellus with increased investments due to favorable market conditions, expecting improved capital efficiency with a reduction in costs per foot for 2025. Overall, the efforts aim to boost production and optimize capital expenditure in the coming years.

The paragraph discusses Coterra's improved cost structure, attributing it to a 4-mile lateral program and reduced costs in drilling, completion, and water transfer. The company plans to utilize a frac crew in 2025 to complete several projects by winter 2025/2026. In the Anadarko region, Coterra is executing a strong 2025 program with competitive costs and 3-mile projects, benefiting from well performance and a favorable gas market. A major natural gas development is underway, with results expected later in the year. Coterra emphasizes its ability to adapt to market conditions, focusing on new assets in the Permian and adjusting activities in response to crude market pressures, while capitalizing on natural gas trends. The company aims to create long-term shareholder value. Lastly, Tom Jorden invites questions from Doug Leggate, who inquires about a cementing issue related to the Harkey shale and its impact on inventory depth for future development plans.

The paragraph discusses a company's response to a recent operational issue affecting their 3-year oil growth plan, which remains unchanged. The problem is attributed to a local mechanical issue related to shallow saltwater disposal in eastern Culberson County. The company collected data and paused operations to understand and address the issue, identifying it as potentially resolvable with revised pipe design and cementing strategies. Despite the unexpected challenge, they remain optimistic about their long-term inventory and operational plans.

The paragraph discusses a company's efforts to address issues with specific wells, emphasizing that it is not a widespread problem as many wells are functioning well. The team is actively working on solutions, considering different cement jobs and wellbore designs. When asked about the future impact on development plans, particularly concerning Wolfcamp and Harkey, Tom Jorden expresses confidence that the issue will be resolved shortly, allowing a return to normal operations. He highlights that the problem is mechanical, not strategic, and that the pause is temporary to develop a more prudent approach to well development. Blake Sirgo supports Tom's statement, emphasizing the need to adjust their mechanical processes for optimal solutions.

The paragraph discusses the execution of a Wolfcamp program, highlighting past success in the Upper Wolfcamp and Windham Row and expectations for continued strong performance. It mentions slightly better capital efficiency due to this productivity. The focus is on solving the Harkey issue and possibly returning to the original program. Betty Jiang inquires about production guidance, noting a significant ramp-up from the second quarter to the fourth quarter. Shane Young confirms this, explaining that substantial increases in production are expected throughout the year, with the third and fourth quarters being particularly strong. Additionally, Nithin Kumar asks about broader industry activity in response to current uncertainties, referencing a shift in drilling strategies.

Tom Jorden expresses the view that the current volatile environment, influenced by the new administration's policies, is likely to persist for some time. He acknowledges the administration's efforts to keep oil prices low to boost the economy, despite challenges like tariffs and global conflicts, particularly involving OPEC and the Middle East. Jorden notes that while there is hope for resolving these issues and avoiding a recession, Coterra is taking a cautious approach by adjusting its strategies and focusing on attractive gas opportunities. In response to a question from Nitin Kumar, Jorden reiterates that the company is prepared for the situation to continue and has adapted its capital program accordingly.

In the paragraph, the first part addresses a question about cash returns and priorities between buybacks and debt reduction if commodity prices weaken. Shane Young emphasizes the company's plan, initially rolled out in February, to maintain flexibility despite price changes, with a focus on debt repayment in 2025. He highlights the company's commitment to low leverage, which has allowed significant cash flow returns to shareholders in prior years. The second part involves Arun Jayaram's inquiry about the status of the Barba Row development program, particularly related to Harkey wells. Michael Deshazer confirms that 20 Wolfcamp wells are planned, with 2 Harkey wells completed and 6 more in progress, promising updates as developments unfold.

The paragraph discusses a conversation primarily between Tom Jorden and Arun Jayaram regarding adjustments to a 3-year oil production program given changes in rig count and capital expenditure (CapEx) in the Permian Basin. Tom Jorden explains that despite reducing CapEx by $150 million and adjusting operations, the company can still achieve its goals of 5% oil volume growth and 0% to 5% BOE growth annually over the next three years. Neil Mehta from Goldman Sachs then shifts the conversation to natural gas, inquiring about the company's plans in the Marcellus and how they align with the overall market outlook for gas. Tom Jorden highlights that the company currently produces just under 3 Bcf/day of natural gas.

The paragraph discusses the company's positive outlook on natural gas, highlighting an increase in prices that boosts cash flow and enhances resilience. The company has improved its operations in the Marcellus with a redesigned program that is more efficient and cost-effective, resulting in a better growth profile. They are optimistic about the economic and reservoir performance of their natural gas assets in the Marcellus and Anadarko regions. When asked about inventory depth and potential gas mergers and acquisitions (M&A), Tom Jorden responds that while they always seek opportunities, they currently have about a dozen years of inventory at the current production rate, indicating a stable position. However, they remain open to strategic opportunities in both oil and gas to ensure long-term sustainability.

The paragraph discusses a conversation between David Deckelbaum from TD Cowen and company representatives, Shane Young and Tom Jorden, regarding production forecasts. Shane clarifies that the company's guidance does not include a return of 5,000 barrels per day in the third and fourth quarters from the Harkey wells. Nonetheless, Tom expresses optimism about resolving issues and recovering those volumes. The company has a conservative plan but expects significant production growth in the year's second half. David also inquires about the flexibility of the company's asset base and the current oil-to-gas price ratio, with the company maintaining a 50% reinvestment rate in capital expenditures.

The discussion revolves around the company's approach to decision-making in the context of fluctuating oil and gas prices. Tom Jorden emphasizes the company's flexibility in reallocating investments between oil and gas assets based on market conditions to benefit shareholders. He points out that, despite potential future declines in oil prices, the company can still achieve decent returns by investing in oil assets. However, they remain prepared to adjust strategies to align with market changes. Additionally, there's a query about the timeline for restoring Harkey production volumes through cement remediation, which Tom Jorden is expected to address.

In this paragraph, Tom Jorden discusses the company's strategy in response to fluctuating oil prices. They are considering maintaining investments in their oil assets, particularly in the Permian, despite current low oil prices in the high-50s to low-60s range. The company is cautiously pausing some of its oil programs as a precaution, anticipating the possibility of further price declines. They remain conservative in their approach due to various global factors like OPEC's decisions and trade conditions that could impact the market. Meanwhile, they are channeling some of their capital expenditures to the Marcellus region.

In the paragraph, Tom Jorden discusses the lack of significant limitations on further capital investment, particularly in relation to the Constitution Pipeline, which originates in Northeast Pennsylvania and serves the New England market. The company is monitoring the situation closely and might commit to long-term delivery if the pipeline project advances, viewing it as a growth opportunity in the Marcellus area. Josh Silverstein inquires about power pricing, and Blake Sirgo responds, noting the company's current successful deals in the Marcellus. The firm is seeking additional opportunities, particularly in Greenfield projects that offer long-term power pricing benefits, with considerations in the Marcellus and the Permian regions.

The paragraph is from a conversation during a financial call, where participants discuss energy production and drilling issues. The market is recognizing the potential of the Waha region for energy generation. Kalei Akamine from Bank of America asks about the productivity of wells in the Harkey area compared to the Wolfcamp formation, noting water issues. Tom Jorden responds, affirming confidence in solving the problem, which he believes is mechanical and not related to reservoir or spacing issues. They have evidence supporting this, and the company is focused on achieving results and communicating progress. Akamine also inquires about future production expectations. Tom Jorden expresses optimism for growth and Shane Young agrees, indicating confidence in their 3-year plan for asset growth.

The paragraph discusses the company's plans and expectations for maintaining oil production levels. Tom Jorden reaffirms their commitment to a 3-year plan despite potential changes discussed in a call. Matt Portillo asks about the necessary maintenance capital to keep oil volumes stable, focusing on the period around 2025 when production is expected to be in the mid-170,000 barrels per day range. Michael Deshazer explains that the current capital levels could be reduced if the goal is to maintain rather than grow oil production. The company anticipates oil growth from the Anadarko and Permian regions, while the Marcellus capital is not involved in oil growth since it doesn't produce oil. Deshazer estimates maintaining 2025 production levels would require approximately $15 billion to $16 billion between the Anadarko and Permian operations.

In the article paragraph, Matt Portillo and others discuss a multiyear plan to maintain flat capital and the flexibility of their programs, particularly in the Anadarko and Permian basins. Tom Jorden explains that they continuously high-grade their development based on the oil-to-gas ratio and natural gas liquids, highlighting the significance of revenue from these sources in certain projects. Derrick Whitfield asks about the impact of the oil-to-gas ratio on development plans in the Delaware Basin, particularly in Culberson. Tom Jorden responds that while Culberson is gassier, this is beneficial for operating costs and productivity, indicating that their development strategy in Delaware remains unchanged, although a stronger Waha price could influence this.

In the article's paragraph 26, the discussion revolves around the flexibility of capital investment in the Permian region and contingency planning in response to potential declines in oil prices. Tom Jorden mentions $50 as a significant tipping point for activity. Kevin MacCurdy inquires about the impact of rate reductions on the DUC (drilled but uncompleted) inventory as they approach the end of 2025 and how it will be managed operationally into 2026. Michael Deshazer responds that while a decrease to 7 rigs may pose challenges to maintaining a third frac crew consistently, the current frac market has enough capacity to handle these operations. Operational planning considers both the quantity and configuration of DUCs for flexibility, with an emphasis on hitting optimal pricing periods.

In the article paragraph, Kevin MacCurdy asks about the company's plans for using free cash flow, specifically whether they will pay off a term loan before buying back shares or do both concurrently. Tom Jorden responds that the company intends to continue both activities in parallel, without necessarily prioritizing one over the other. He states that the timing and amount of buybacks depend on various factors and assures that the buyback program will continue. Jorden explains that historically, the company has been able to maintain a high shareholder return due to low leverage and emphasizes the importance of early note repayment for long-term shareholder return stability. At the end of the call, Jorden expresses pride in the company's response to current challenges and optimism about their plans and performance.

The conference call has ended, and participants can now disconnect.

This summary was generated with AI and may contain some inaccuracies.