Coterra Energy Inc. (CTRA) Bundle
Understanding Coterra Energy Inc. (CTRA) Revenue Streams
Understanding Coterra Energy Inc.’s Revenue Streams
The primary revenue sources for Coterra Energy Inc. include oil, natural gas, and natural gas liquids (NGL). For the nine months ended September 30, 2024, the breakdown of revenues was as follows:
| Revenue Source | Revenue (In millions) | Percentage of Total Revenue |
|---|---|---|
| Oil | $2,240 | 55.1% |
| Natural Gas | $1,177 | 29.0% |
| NGL | $535 | 13.2% |
| Gain on Derivative Instruments | $48 | 1.2% |
| Other | $63 | 1.5% |
| Total Revenue | $4,063 | 100% |
Year-over-Year Revenue Growth Rate
In terms of year-over-year revenue growth, the total revenue for the nine months ended September 30, 2024, decreased by 6% compared to the same period in 2023, where total revenue was $4,318 million.
Here’s a summary of the year-over-year changes:
- Oil Revenue: Increased by $315 million (16%) from $1,925 million in 2023 to $2,240 million in 2024.
- Natural Gas Revenue: Decreased by $562 million (32%) from $1,739 million in 2023 to $1,177 million in 2024.
- NGL Revenue: Increased by $59 million (12%) from $476 million in 2023 to $535 million in 2024.
- Gain on Derivative Instruments: Decreased by $81 million (63%) from $129 million in 2023 to $48 million in 2024.
- Other Revenue: Increased by $14 million (29%) from $49 million in 2023 to $63 million in 2024.
Contribution of Different Business Segments to Overall Revenue
The oil segment has consistently been the largest contributor to total revenue, comprising over half of the overall revenue. The contributions for the nine months ended September 30, 2024, are detailed below:
| Business Segment | Revenue (In millions) | Percentage Contribution |
|---|---|---|
| Oil | $2,240 | 55.1% |
| Natural Gas | $1,177 | 29.0% |
| NGL | $535 | 13.2% |
| Gain on Derivative Instruments | $48 | 1.2% |
| Other | $63 | 1.5% |
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams for the nine months ended September 30, 2024, include:
- The oil revenue growth was driven by higher production levels, particularly in the Permian Basin, despite lower average prices.
- Natural gas revenue suffered a major decline due to significantly lower prices and a strategic reduction in production in the Marcellus Shale.
- NGL revenues benefited from increased production, though prices also saw a slight decrease.
Overall, the revenue analysis indicates a mixed performance across different segments, with oil revenues increasing while natural gas revenues faced a notable decline.
A Deep Dive into Coterra Energy Inc. (CTRA) Profitability
A Deep Dive into Coterra Energy Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 46.7%, compared to 53.6% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was around 24.5%, decreasing from 30.2% in 2023.
Net Profit Margin: The net profit margin for the nine months ending September 30, 2024, was 20.3%, down from 27.7% in 2023.
Trends in Profitability Over Time
Net income for the nine months ended September 30, 2024, was $824 million, or $1.11 per share, down from $1.2 billion, or $1.59 per share, in 2023. This reflects a decrease of $385 million year-over-year.
For the third quarter of 2024, net income was $252 million, a decline from $323 million in the same quarter of 2023.
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, Coterra's gross profit margin of 46.7% is above the industry average of 42%. The operating profit margin of 24.5% compares favorably against the industry average of 22%, while the net profit margin of 20.3% is also above the average of 18%.
Analysis of Operational Efficiency
Operating expenses for the nine months ended September 30, 2024, totaled $3.003 billion, compared to $2.753 billion in 2023, indicating a 9% increase.
The breakdown of operating expenses is as follows:
| Expense Type | 2024 (in millions) | 2023 (in millions) | Variance (in millions) | Percentage Change |
|---|---|---|---|---|
| Direct Operations | 481 | 401 | 80 | 20% |
| Gathering, Processing, and Transportation | 737 | 729 | 8 | 1% |
| Taxes Other Than Income | 194 | 211 | (17) | (8%) |
| Exploration | 19 | 14 | 5 | 36% |
| Depreciation, Depletion and Amortization | 1,354 | 1,185 | 169 | 14% |
| General and Administrative | 218 | 213 | 5 | 2% |
The increase in direct operations expense reflects higher production activity, while the increase in depreciation, depletion, and amortization is attributed to increased production and a higher depletion rate.
Overall, the trends indicate a decline in net income and profit margins, despite maintaining a competitive position in terms of profitability metrics compared to industry averages.
Debt vs. Equity: How Coterra Energy Inc. (CTRA) Finances Its Growth
Debt vs. Equity Structure
The company's financial strategy heavily relies on a balanced approach between debt and equity financing. As of September 30, 2024, the total debt stood at $2,066 million, a decrease from $2,161 million at the end of 2023. The stockholders' equity was reported at $13,034 million, slightly down from $13,039 million over the same period.
The overall total capitalization is $15,100 million, with a debt-to-total capitalization ratio of 14%, consistent with the previous year. This indicates a conservative leverage strategy, aligning with industry standards where a debt-to-equity ratio typically ranges from 20% to 40% in the energy sector.
Debt Levels
The company maintains both long-term and short-term debt. As of the latest reports, the current portion of long-term debt included $575 million that was repaid at maturity in September 2024. The company issued $500 million in senior notes with a 5.60% interest rate due in 2034, utilizing the proceeds to manage existing debt obligations effectively.
Debt-to-Equity Ratio
The debt-to-equity ratio can be calculated using the formula:
Debt-to-Equity Ratio = Total Debt / Total Equity
Using the most recent figures, this results in:
Debt-to-Equity Ratio = $2,066 million / $13,034 million = 0.158
This ratio of 0.158 indicates a low reliance on debt compared to equity, suggesting a stable financial position relative to industry peers.
Recent Debt Issuances and Credit Ratings
The company has been active in managing its debt profile. The issuance of the aforementioned $500 million senior notes in March 2024 was a strategic move to refinance the maturing $575 million in senior notes. The company currently enjoys a strong credit profile, with compliance to all financial covenants associated with its credit agreements.
Balancing Debt Financing and Equity Funding
The strategic balance between debt and equity funding is reflected in the company’s approach to capital expenditures, which totaled $1.3 billion for 2024. The company primarily funds its capital expenditures through cash flows from operations and, when necessary, through borrowings under its revolving credit line.
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Debt | $2,066 million | $2,161 million |
| Stockholders’ Equity | $13,034 million | $13,039 million |
| Total Capitalization | $15,100 million | $15,200 million |
| Debt-to-Total Capitalization Ratio | 14% | 14% |
| Debt-to-Equity Ratio | 0.158 | N/A |
| Recent Senior Notes Issued | $500 million | N/A |
Assessing Coterra Energy Inc. (CTRA) Liquidity
Assessing Coterra Energy Inc.'s Liquidity
Current and Quick Ratios
The current ratio for Coterra Energy Inc. as of September 30, 2024, stands at 1.3, indicating a solid liquidity position. The quick ratio, which excludes inventory, is approximately 1.1, suggesting that the company can cover its short-term liabilities without relying on the sale of inventory.
Analysis of Working Capital Trends
As of September 30, 2024, the company reported working capital of $1.2 billion, an increase from $1.1 billion in December 31, 2023. This trend reflects a positive shift in the company's ability to manage its short-term assets and liabilities effectively.
Cash Flow Statements Overview
The cash flows for the nine months ended September 30, 2024, were as follows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $2,169 | $2,898 |
| Investing Activities | $(1,327) | $(1,589) |
| Financing Activities | $(959) | $(1,136) |
| Net Change in Cash | $(117) | $173 |
Potential Liquidity Concerns or Strengths
Despite a decline in net cash provided by operating activities from $2.9 billion in 2023 to $2.2 billion in 2024, the company maintains a robust cash balance of $843 million as of September 30, 2024. This liquidity cushion provides a buffer against potential fluctuations in commodity prices and operational costs.
Additionally, the company has amended its revolving credit agreement to increase commitments from $1.5 billion to $2.0 billion, further enhancing its liquidity position and allowing for greater flexibility in managing short-term financial obligations.
Is Coterra Energy Inc. (CTRA) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio is calculated based on an earnings per share (EPS) of $1.11 and the stock price of approximately $25.00, resulting in a P/E ratio of 22.52.
Price-to-Book (P/B) Ratio: The book value per share is approximately $17.60 calculated from total stockholders’ equity of $13,034 million and 739 million shares outstanding. This gives a P/B ratio of 1.42.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: Calculating the enterprise value as total debt of $2,066 million plus market capitalization of $18,485 million, gives an enterprise value of $20,551 million. With EBITDA for the last twelve months at approximately $2,500 million, the EV/EBITDA ratio is 8.22.
Stock Price Trends
The stock price over the last 12 months has shown the following trends:
- 12 months ago: $30.00
- 6 months ago: $28.00
- 3 months ago: $24.50
- Current price: $25.00
Dividend Yield and Payout Ratios
The current dividend yield is 0.84%, based on an annual dividend of $0.21 per share. The payout ratio is approximately 18.9%, calculated from the net income of $824 million and total dividends paid of $160 million.
Analyst Consensus
Analyst consensus on the stock valuation is as follows:
- Buy: 8
- Hold: 5
- Sell: 2
| Metric | Value |
|---|---|
| P/E Ratio | 22.52 |
| P/B Ratio | 1.42 |
| EV/EBITDA | 8.22 |
| Stock Price (12 months ago) | $30.00 |
| Stock Price (6 months ago) | $28.00 |
| Current Stock Price | $25.00 |
| Dividend Yield | 0.84% |
| Payout Ratio | 18.9% |
| Analyst Buy Ratings | 8 |
| Analyst Hold Ratings | 5 |
| Analyst Sell Ratings | 2 |
Key Risks Facing Coterra Energy Inc. (CTRA)
Key Risks Facing Coterra Energy Inc.
Industry Competition: The oil and gas sector is highly competitive, with numerous players vying for market share. In 2024, the company reported an increase in oil production by 3.9 MMBbl to reach 29.4 MMBbl, while natural gas production decreased by 10.4 Bcf to 769.1 Bcf. The competitive landscape pressures pricing and profitability.
Regulatory Changes: The energy sector is subject to extensive regulations that can impact operational costs and project timelines. In 2024, the company amended its revolving credit agreement to increase commitments from $1.5 billion to $2.0 billion. Compliance with evolving regulations can lead to increased operational costs and potential sanctions if not adhered to.
Market Conditions: Market volatility significantly affects commodity prices. In 2024, average realized prices for oil fell to $74.18 per Bbl, down 8% from $80.74 per Bbl in 2023. Natural gas prices decreased by 30% to $1.41 per Mcf. This volatility can lead to unpredictable cash flows and affect investment decisions.
Operational Risks: Production operations can be disrupted by various factors, including equipment failures and natural disasters. The company strategically curtailed natural gas production in the Marcellus Shale, resulting in an estimated reduction of 275 MMcf per day due to unfavorable market conditions.
Financial Risks: Fluctuating interest rates and debt levels can affect financial health. As of September 30, 2024, total debt stood at $2.066 billion, with a debt-to-capitalization ratio of 14%. Interest expense increased by $27 million compared to the previous year.
Cash Flow Risks: The company's cash flow from operating activities decreased by $729 million year-over-year, from $2.9 billion in 2023 to $2.2 billion in 2024. This drop highlights the impact of lower revenues from natural gas sales and increased operating costs.
| Risk Factor | Description | 2024 Data |
|---|---|---|
| Oil Production | Increased production levels | 29.4 MMBbl |
| Natural Gas Production | Decreased production levels | 769.1 Bcf |
| Average Oil Price | Decline in average price | $74.18 per Bbl |
| Natural Gas Price | Decline in average price | $1.41 per Mcf |
| Total Debt | Company's debt levels | $2.066 billion |
| Debt to Capitalization | Ratio of debt to total capitalization | 14% |
| Cash Flow from Operations | Year-over-year change | Decreased by $729 million |
Mitigation Strategies: The company aims to manage these risks by diversifying its production and focusing on operational efficiencies. Recent capital expenditures for drilling and completion were $418 million in 2024, down from $542 million in 2023, indicating a strategic approach to investment.
In addition, the company has maintained $843 million in cash and cash equivalents as of September 30, 2024, providing a buffer against cash flow fluctuations.
Future Growth Prospects for Coterra Energy Inc. (CTRA)
Future Growth Prospects for Coterra Energy Inc.
Key growth drivers for Coterra Energy Inc. include strategic market expansions and significant capital investments in high-potential regions. The company has focused its efforts primarily on the Permian Basin and the Anadarko Basin, which are known for their high production efficiency.
Market Expansions
In 2024, the company successfully expanded its operations, achieving an increase in oil production by 3.9 MMBbl from 25.5 MMBbl in 2023 to 29.4 MMBbl. This translates to an average daily production increase from 93.3 MBbl to 107.4 MBbl.
Revenue Growth Projections
Future revenue growth projections indicate a steady increase due to higher production volumes, despite fluctuations in commodity prices. For the nine months ended September 30, 2024, total oil revenues reached $2.24 billion, an increase of 16% compared to $1.93 billion in 2023.
Strategic Initiatives and Partnerships
Strategic initiatives include the issuance of $500 million in senior notes to repay maturing debt, enhancing financial flexibility. Additionally, the company amended its revolving credit agreement to increase commitments from $1.5 billion to $2.0 billion and extend the maturity date to September 2029.
Competitive Advantages
Coterra Energy Inc. has several competitive advantages, including:
- Strong operational efficiency in the Permian Basin, leading to lower production costs.
- Diversified production mix with significant contributions from NGLs and natural gas.
- Robust financial position with total debt standing at $2.066 billion as of September 30, 2024, which is 14% of total capitalization.
| Metric | 2024 | 2023 | Variance |
|---|---|---|---|
| Oil Production (MMBbl) | 29.4 | 25.5 | +3.9 |
| Natural Gas Production (Bcf) | 769.1 | 779.5 | -10.4 |
| NGL Production (MMBbl) | 27.3 | 23.9 | +3.4 |
| Total Capital Expenditures ($ million) | 1,345 | 1,647 | -302 |
| Oil Revenues ($ million) | 2,240 | 1,925 | +315 |
| Natural Gas Revenues ($ million) | 1,177 | 1,739 | -562 |
| NGL Revenues ($ million) | 535 | 476 | +59 |
Overall, Coterra Energy Inc. is positioned for future growth through its strategic focus on key markets, operational efficiencies, and financial management.
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Article updated on 8 Nov 2024
Resources:
- Coterra Energy Inc. (CTRA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Coterra Energy Inc. (CTRA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Coterra Energy Inc. (CTRA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.