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  • Coterra Q4 2024 Earnings Call Summary [Marcellus Focus]

Coterra Q4 2024 Earnings Call Summary [Marcellus Focus]

Management Comments and Q&A Notes

February 25, 2025

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Tone: Positive – Strong operational performance, exceeding production guidance, while maintaining flexibility in natural gas investments, particularly in Marcellus.

Key Business Updates

  • Q4 Performance:

    • Production exceeded high-end guidance.

    • Capex at the low end of guidance with strong capital efficiency.

    • $297M net income ($0.40/share); adjusted net income: $358M ($0.49/share).

    • Free Cash Flow (FCF): $351M after capex.

  • 2025 Strategy:

    • Consistent, capital-efficient development across Permian, Anadarko, and Marcellus.

    • $2.1 - $2.4 billion capex, prioritizing efficiency and flexible reallocation.

    • Potential acceleration of Marcellus gas drilling if market conditions warrant.

  • Market Outlook:

    • Gas prices improving (strong winter demand, lower storage, increasing LNG exports).

    • 2025 Marcellus capex could increase by $50M to capture early 2026 winter pricing.

Marcellus-Specific Commentary & Strategy

  • Q4 2024:

    • Natural gas production: 2.85 - 3.0 Bcf/d.

  • Q1 2025 Guidance:

    • Natural gas: 2.85 - 3.0 Bcf/d.

  • Full-Year 2025 Outlook:

    • Natural gas: 2.675 - 2.875 Bcf/d (~1 Tcf annually).

    • Flat year-over-year (YoY) at midpoint.

Key Quote:

"We have the flexibility, if warranted, to increase our investment later in the year while staying within our guidance range. This additional capital will allow us to bring on incremental volumes next winter and stabilize our Marcellus production volume levels."

2) Comments on Marcellus Curtailments / Shut-ins

  • Marcellus shut-ins were fully restored in December 2024.

  • Coterra halted all drilling in Marcellus in August 2024 due to weak gas prices but restructured costs to lower breakeven and restart drilling in April 2025.

Key Quote:

"Additionally, we brought back all of our curtailed volumes in the Marcellus in early December."

"In August 2024, when facing depressed in-basin pricing, we dropped all rigs in the Marcellus. We challenged our Marcellus team to attack our cost structure and improve our capital efficiency to help us restore activity."

3) Turned In-Line (TIL) Wells & Development Plan

  • Q4 2024:

    • Several new Marcellus wells came online in December at high productivity levels.

  • 2025 Plan:

    • Restarting 2 rigs in April; could scale up later in 2025.

    • TIL timing will be spread across the year to capture seasonally higher gas prices.

    • Marcellus wells will feature longer laterals (+60%), reducing breakeven costs.

"We are seeing some of the most capital-efficient projects in Marcellus history, thanks to reengineering our plans. Lateral lengths are up 60% compared to prior designs, helping reduce costs per well and maximize output."

"Our current plan calls for two rigs starting back up in April, as well as distributed frac activity throughout the year. We also have on-ramps to increase activity throughout 2025 should gas markets continue to firm up."

4) Marcellus Cost Structure & Breakeven Improvements

  • Coterra significantly reduced Marcellus well costs to $800 per foot, a record low.

  • Structural changes:

    • Reengineered projects to longer laterals → ~60% increase in lateral length.

    • Lower service costs → improved efficiency.

    • Improved water-handling strategy → reduced logistical expenses.

    • Well design optimization → better EURs per foot drilled.

Key Quote:

"The teams delivered by providing us with a highly efficient plan in 2025 that is anchored by a record-low cost structure of $800 per foot."

"This dramatic reduction in cost structure is anchored by structural changes and includes the reengineering of upcoming projects, which increased our average lateral length by 60% compared to the prior plans. This long lateral program combined with lower service costs structurally lowers our breakeven costs and generates a strong 2025 program that we are excited to invest in."

5) Market Outlook for Marcellus Gas Investments

  • Coterra remains flexible with Marcellus investment.

  • Could increase Marcellus drilling later in 2025 if gas prices hold above $4/MMBtu.

  • Target: Return to 2 Bcf/d flat production by mid-to-late 2026.

Key Quote:

"We remain prepared to modestly accelerate our Marcellus program if the current positive outlook persists through mid-year. This acceleration could add $50 million to our 2025 capital program, allowing Coterra to deliver incremental natural gas production volumes by early 2026 in time to capture winter pricing."

"We don’t want to pre-commit to spending, but if gas fundamentals continue improving, we are ready to pivot our investment toward increasing volumes."

  • Gulf Coast LNG exports surging – record flows in February.

  • Coterra actively exploring long-term LNG sales contracts.

  • Seeing increased demand for gas-fired power generation.

  • Potential role in supplying gas to new data centers.

Key Quotes:

"The ramp of Gulf Coast LNG has begun with record flows in February. We continue to explore potential export deals to add to our existing international portfolio."

"We are seeing new calls on natural gas for power generation in the basins we operate in. We are working with power providers and power consumers to see how Coterra gas can help generate the electrons they require."

7) Q&A Commentary on Marcellus

On 2025 Marcellus Investment & Future Growth

"The returns we're seeing in our program are now competitive at our current price outlook. We've had a nice winter and we continue to light candles for increasing cold. Storage is looking much more positive. The situation in Europe is looking interesting from a storage standpoint. We have ex-LNG as well opening up."
"We're prepared to either hold our current course steady or pick up the pace a little bit, but a very constructive outlook and we'd like to see that hold."

On Marcellus Inventory Longevity & Future Well Design

"We will be returning to the Dimit box in 2025 and overfilling with some Upper Marcellus wells, but co-development is also in the plans for the box as we move forward."
"This program allows us to hold production flat at that 2 Bcf/d level while maximizing economic efficiency."

Final Takeaways for Natural Gas & Oil Traders

  • Marcellus natural gas strategy is highly flexible – rig count could increase if gas prices hold above $4/MMBtu.

  • Coterra remains committed to maintaining ~2 Bcf/d of production in the Marcellus, with potential growth in 2026-2027.

  • Longer laterals & lower drilling costs ($800/ft) improve project economics.

  • Coterra is well-positioned for stronger LNG demand and power sector growth.

  • Possible $50M additional capex in 2025 if the gas market stays strong.

Bottom Line: Coterra has improved capital efficiency in Marcellus significantly and will make gas investment decisions dynamically based on market conditions.