{"id":65512,"date":"2023-09-26T04:52:02","date_gmt":"2023-09-26T08:52:02","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/coterra-energy-a-little-too-gassy-for-my-liking-nysectra\/"},"modified":"2023-09-26T04:52:08","modified_gmt":"2023-09-26T08:52:08","slug":"coterra-energy-a-little-too-gassy-for-my-liking-nysectra","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=65512","title":{"rendered":"Coterra Energy: A Little Too Gassy For My Liking (NYSE:CTRA)"},"content":{"rendered":"
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Introduction<\/h2>\n

Houston-based Coterra Energy (<\/strong>CTRA<\/strong>)<\/strong> released its second quarter 2023 results on May 4, 2023.<\/p>\n

Note: I have followed CTRA quarterly since October 2017 (Cabot Oil). This new article updates my article published on June 12, 2023.<\/p>\n

Coterra Energy is struggling with a bearish trend in natural gas prices, even if they are now up slightly from their low in May. On the other hand, oil prices have risen significantly from their lows in July.<\/p>\n

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CTRA 1-Year Chart Brent versus NG Prices (Fun Trading StockCharts)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

1 – Presentation<\/h4>\n

The company’s production is primarily natural gas, representing 72.9%<\/strong> of the total output, leaving only 15.4%<\/strong> for oil.<\/p>\n

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CTRA Q2’23 Production per Segment (Fun Trading)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Thus, the company is highly sensitive to the price of natural gas, which is a weakness that should be considered seriously before investing in the stock long-term. On the other hand, CTRA is a US oil & gas producer.<\/span><\/p>\n

The company exclusively produces Oil, NGL, and natural gas from three US basins (Marcellus<\/strong>, Permian<\/strong>, and Anadarko<\/strong>).<\/p>\n

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CTRA Map Assets Presentation (CTRA Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

2 – Stock performance<\/strong><\/h4>\n

I cover Coterra Energy and Chesapeake Energy (CHK) in this segment. Both companies dropped significantly from their high in 2022. CTRA outperformed CHK on a one-year basis and is now up nearly 1% YoY<\/strong>.<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

3 – Investment Thesis<\/h4>\n

Coterra Energy reported a weak second-quarter revenue due to lower commodity prices. The company’s top-tier assets and solid balance sheet are a plus, but the stock is prone to wild swings due to its high gas production, reaching 72.9%<\/strong> of the total input in Q2’23, increasing the risk of hiccups along the way.<\/p>\n

The issue with gas-oriented E&P like Coterra Energy is their revenues’ unpredictability and high volatility, which strongly affect free cash flow and dividends.<\/p>\n

A look at history shows that the Natural Gas segment is periodically rocked by periods of busts and limited successes, which makes an investment in this segment quite risky.<\/p>\n

CEO Tom Jorden said in the conference call:<\/p>\n

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With top-tier assets, a pristine balance sheet and few contractual service commitments, we have tremendous flexibility for 2024 and beyond. Now as ever, our mission is to generate consistent profitable growth. Having outstanding oil and natural gas assets with a low cost of supply<\/p>\n<\/blockquote>\n

Thus, I recommend a long-term CTRA position combined with active short-term trading that I increase to 60%<\/strong> to take advantage of the sector’s weakness and increase overall risks as natural gas prices are still below $3.<\/p>\n

Coterra Energy CEO Tom Jorden said in the conference call:<\/p>\n

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We had an excellent quarter driven by production beats on oil, natural gas and natural gas liquids. Volumes on all 3 commodities exceeded the high end of our guidance. Our production beat was primarily driven by well productivity that exceeded our expectations. This was true in the Marcellus, Anadarko and the Permian.<\/p>\n<\/blockquote>\n

Coterra Energy – Balance Sheet History ending Q2’23: The Raw Numbers<\/h2>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
COG<\/strong><\/td>\nQ2’22<\/strong><\/td>\nQ3’22<\/strong><\/td>\nQ4’22<\/strong><\/td>\nQ1’23<\/strong><\/td>\nQ2’23<\/strong><\/td>\n<\/tr>\n
Total Revenues in $ Million<\/td>\n2,572<\/td>\n2,520<\/td>\n2,280<\/td>\n1,777<\/td>\n1,185<\/td>\n<\/tr>\n
Net Income in $ Million<\/td>\n1,229<\/td>\n1,196<\/td>\n1,632<\/td>\n677<\/td>\n209<\/td>\n<\/tr>\n
EBITDA $ Million<\/td>\n2,023<\/td>\n1,965<\/td>\n1,754<\/td>\n1,255<\/td>\n684<\/td>\n<\/tr>\n
EPS diluted in $\/share<\/td>\n1.52<\/td>\n1.50<\/td>\n1.32<\/td>\n0.88<\/td>\n0.27<\/td>\n<\/tr>\n
Cash from operations in $ Million<\/td>\n879<\/td>\n1,771<\/td>\n1,484<\/td>\n1,494<\/td>\n646<\/td>\n<\/tr>\n
Capital Expenditure in $ Million<\/td>\n474<\/td>\n460<\/td>\n505<\/td>\n484<\/td>\n597<\/td>\n<\/tr>\n
Free Cash Flow in $ Million<\/td>\n405<\/td>\n1,311<\/td>\n979<\/td>\n1,010<\/td>\n49<\/td>\n<\/tr>\n
Cash and cash equivalent $ Million<\/td>\n1,059<\/td>\n778<\/td>\n673<\/td>\n973<\/td>\n841<\/td>\n<\/tr>\n
Total Debt (incl. current) In $ Million<\/td>\n3,105<\/td>\n2,282<\/td>\n2,181<\/td>\n2,176<\/td>\n2,171<\/td>\n<\/tr>\n
Dividend per share in $ per share<\/td>\n0.65 ($0.15 + $0.50)<\/td>\n0.68 ($0.15 + $0.53)<\/td>\n0.57 ($0.37 + $0.20)<\/td>\n0.20<\/td>\n0.20<\/td>\n<\/tr>\n
The share outstanding diluted in Million<\/td>\n808<\/td>\n797<\/td>\n781<\/td>\n768<\/td>\n760<\/td>\n<\/tr>\n
Gas Production<\/strong><\/td>\nQ2’22<\/strong><\/td>\nQ3’22<\/strong><\/td>\nQ4’22<\/strong><\/td>\nQ1’23<\/strong><\/td>\nQ2’23<\/strong><\/td>\n<\/tr>\n
Gas Equivalent Production in K Boepd<\/td>\n631.7<\/td>\n641.2<\/td>\n631.7<\/td>\n634.9<\/td>\n664.8<\/td>\n<\/tr>\n
NG price per Mcf<\/td>\n5.78<\/td>\n6.37<\/td>\n4.87<\/td>\n3.31<\/td>\n1.65<\/td>\n<\/tr>\n<\/table>\n

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