Q4 2023 Coterra Energy Inc Earnings Call

Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coterra Energy 4th Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the call Terra Energy fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

To ask a question during this time simply press Star then the number one on your telephone keypad.

Or withdraw your question press the Star one again, we do ask that you. Please limit your questions to two.

Operator: We do ask that you please limit your questions to two. I would now like to turn the conference over to Dan Guffey, Vice President, Finance, Planning, and Investor Relations. Please go ahead.

I'd now like to turn the conference over to Dan Guffey, Vice President Finance planning and Investor Relations. Please go ahead.

Daniel Guffey: Thank you, operator. Good morning, and thank you for joining Coterra Energy's fourth quarter and full year 2023 earnings and 2024 outlook conference. Today's prepared remarks will include an overview from Tom Jorden, Chairman, CEO, and President, Shane Young, Executive Vice President and CFO, and Blake Sergo, Senior Vice President of Operations. Following our prepared remarks, we will take your questions during our Q&A session. As a reminder, on today's call, we will make forward-looking statements based on our current expectations. Additionally, some of our comments will reference non-GAAP financial measures.

Daniel Guffey: Thank you operator, good morning, and thank you for joining <unk> Energy's fourth quarter and full year 2023 earnings in 2024 outlook Conference call. Today's prepared remarks will include an overview from Tom Jorden, Chairman, CEO and President Shane Young Executive Vice President and CFO.

Dan Guffey: Sergey <unk> senior Vice President of operations.

Dan Guffey: Following our prepared remarks, we will take your questions during our Q&A session. As a reminder, on today's call. We will make forward looking statements based on our current expectations. Additionally, some of our comments will reference non-GAAP financial measures forward looking statements and other disclaimers as well as reconciliations to the most directly comparable.

Thomas E. Jorden: Forward-looking statements and other disclaimers, as well as reconciliation for the most directly comparable GAAP financial measures, were provided in our earnings release and updated investor presentation, both of which can be found on our website. With that, I'll turn the call over to Dan. Thank you, Dan, and welcome to all of you who are joining us on the call. Coterra had an excellent fourth quarter, as shown by the results that we released last night. Shane will walk you through the specifics here, which include coming in above the high end of our guidance for oil, natural gas, and BOE, or barrels of oil equivalent, and below our capital guidance. For full year 2023, we finished the year with 5% year-over-year growth in BOE and 10% year-over-year growth in oil volumes, while hitting the midpoint of our capital guide. More importantly, we generated excellent returns. We have also made great progress on emissions reduction and continue to push the envelope on our environmental initiatives.

S. GAAP financial measures were provided in our earnings release and updated investor presentation, both of which can be found on our website.

Dan Guffey: With that I'll turn the call over to Tom.

Thomas E. Jorden: Thank you Dan and welcome to all of you who are joining us on the call co chair had an excellent fourth quarter as shown by the results that we released last night.

Thomas E. Jorden: Shane will walk you through the specifics here, which includes coming in above the high end of our guidance on oil natural gas N V O E or barrels of oil equivalent and below our capital guide for.

Thomas E. Jorden: For full year 2023, we finished the year with 5% year over year growth in V O E and 10% year over year growth in oil volumes, while hitting the midpoint of our capital guide.

Thomas E. Jorden: More importantly, we generated excellent returns.

Thomas E. Jorden: We also made great progress on emissions reduction and continue to push the envelope on our environmental initiatives.

Thomas E. Jorden: As we look ahead to 2024, total capital is projected to be between $1.75 and $1.95 billion. Given the outlook for commodity prices and commensurate revenue, we think that this is a prudent level of investment, as it represents approximately 60% of our projected cash flow. We will grow our investments in the Permian and the Anadarko Basins and retrench in the Marcellus. We are reducing our Marcellus investments by over 400 million dollars in 2024 compared to 2023. Mark Twain said that a man learns something by carrying a cat by the tail that he can learn in no other way.

Thomas E. Jorden: As we look ahead to 2024 total capital is projected to be between 175 and $1.95 billion.

Thomas E. Jorden: Given the outlook for commodity prices and commensurate revenue. We think that this is a prudent level of investment as it invests approximately 60% of our projected cash flow.

Thomas E. Jorden: We will grow our investments in the Permian Anadarko basins and retrench in the Marcellus.

Thomas E. Jorden: We are reducing our Marcellus investments by over $400 million in 2024 compared to 2023.

Thomas E. Jorden: Mark Twain said that a man learned something by carrying a cat by the tail that they can learn to know where their way.

Thomas E. Jorden: Through commodity cycles, we have learned that although downswings typically do not last long, they also do not come pre-labeled with how long they will last. We have learned to be disciplined and patient. Experience tells us that our focus should always be on returns and never on production or activity.

Thomas E. Jorden: Through the commodity cycles, we have learned that although down swings typically do not last long.

Thomas E. Jorden: I also do not come pre label with how long they will last we have learned to be disciplined and patient.

Thomas E. Jorden: Experience tells us that our focus should always be on returns and never unproductive and their activity.

Thomas E. Jorden: In this case, that means throttling back on our Marcellus program. However, we remain highly optimistic about the 12- to 18-month outlook for the gas market. The impact of new LNG export capacity coming online at the end of 2024 and early 2025, coupled with the possibility of cold weather, provides reasonable hope for significant price recovery in natural gas. However, experience tells us that although we will underwrite our hopes with the future strip price, we should never underwrite our capital program. We will be patient and watch for recovery in the gas macro. Missing a few months of the recovery is much better than fully participating in the downside.

In this case that means throttling back on our Marcellus program.

We remain highly optimistic on the 12 months to 18 months outlook for the gas macro.

Thomas E. Jorden: The impact of new LNG export capacity coming online at the end of 2024 and early 2025, coupled with the possibility of cold weather provides reasonable hope for significant price recovery in natural gas.

Thomas E. Jorden: However experience tells us that although we will underwrite our hopes with the future strip price, we should never underwrite our capital program with it.

Thomas E. Jorden: We will be patient and watch for a recovery in the gas macro.

Thomas E. Jorden: Missing a few months of the recovery is much better than fully participating in the downside.

Thomas E. Jorden: We project that this slowdown in the Marcellus will result in our natural gas volume shrinking 6% in the Marcellus in 2024. However, if we see signs of recovery in natural gas, our 2024 capital range includes a contingency plan to accelerate our MESELAS program in the latter half of the year, which would reposition us for significant growth in our gas volumes in 2025 and 2026. We will watch and be ready to act. In the meantime, we will pivot to our deep inventory in the Anadarko and Permian, where our returns are actually higher. We have a tremendous program ahead of us in 2024, and we are excited to be increasing activity in both the Permian and Adarco. All three business units, however, are poised and ready for out-year acceleration should conditions warrant it. This ability to redirect and reposition activity around premier assets is one of the differentiating strengths of Coterra.

We project that the slowdown in the Marcellus will result in our natural gas volumes shrinking 6% in the Marcellus in 2024.

If we see signs of recovery in natural gas our 2024 capital range includes a contingency plan to accelerate our Marcellus program in the latter half of the year, which would reposition us for significant growth in our gas volumes in 2025 and 2026.

Thomas E. Jorden: We will watch and be ready to act in the meantime, we will pivot to our deep inventory in the Anadarko and Permian, where our returns are excellent.

Thomas E. Jorden: We have a tremendous program ahead of us in 2024, and we are excited to be increasing activity in both the Permian Anadarko.

Thomas E. Jorden: All three business units, however are poised and ready for out year acceleration should conditions warrant.

Thomas E. Jorden: This ability to redirect our repositioning activity around premier assets is one of the differentiating strengths of coach Tara.

Thomas E. Jorden: We also provided an update on our three-year outlook. Our new 2024 to 2026 outlook has Coterra with an average annual capex of $1.75 to $1.95 billion, which is expected to generate annual growth in the low single digits for BOE and 5% plus for oil growth. This plan leverages our deep, high-quality inventory, demonstrates improving capital efficiency, and clearly displays the confidence we have in our ability to continue a cadence of operations. This is an achievable outlook under current conditions. As always, we continuously adjust our plans with changing conditions. As we have previously said, planning at Coterra is like a guided missile, not a rocket.

Thomas E. Jorden: We also provided an update on our three year outlook.

Our new 2024 to 2026 outlook has co chair with an average annual capex of $1 75 to 195 billion.

Thomas E. Jorden: Which is expected to generate annual growth in the low single digits for both <unk>.

Thomas E. Jorden: And 5% plus for oil growth.

Thomas E. Jorden: This plan Leverages, our deep high quality inventory demonstrates improving capital efficiency and clearly displays the confidence we have in our ability to continue a cadence of operational excellence.

Thomas E. Jorden: This is an achievable outlook under current conditions as always we continuously adjust our plans with changing conditions. As we have previously said planning ecoterra as a guided missile not arise.

Thomas E. Jorden: In closing, I want to acknowledge our remarkable field organization. They set the pace for operations. They work in hostile environments with dedication, perseverance, and an unwavering commitment to safety. They serve as an example to all of us.

Thomas E. Jorden: In closing I want to acknowledge our remarkable field organization. They set the pace for operational excellence, they work and hostile environments with dedication and perseverance.

Thomas E. Jorden: Unwavering commitment to safety they serve as an example to all of us.

Thomas E. Jorden: The Coterra brand stands for operational excellence, leading-edge technology and innovation, best-in-class development of outstanding assets, and the ability to adapt nimbly to changing markets. We want to be known for our pristine balance sheet, investment discipline, and rigorous economic decision analysis. We are not perfect. However, having a great organization, great assets, and a great balance sheet allows us to learn from our mistakes, make continuous progress, and always push ourselves farther and harder. With that, I will turn the call over to Shane.

Thomas E. Jorden: The co chair of brand stands for operational excellence, leading edge technology and innovation best in class development of outstanding assets and the ability to adapt nimbly to changing market conditions.

Thomas E. Jorden: We want to be known for a pristine balance sheet investment discipline and rigorous economic decision analysis, we are not perfect. However, having a great organization, great assets and a great balance sheet allows us to learn from our mistakes made continuous progress.

Thomas E. Jorden: And always push ourselves farther and harder with that I will turn the call over to Shane.

Shane Young: So thank you, Tom, and thank you, everyone, for joining us on today's call. This morning, I'll focus on four areas. First, I'll discuss highlights from our fourth quarter and full year 2023 results. Then I'll provide production and capital guidance for the first quarter and full year 2024. Next, I will provide a new and updated three-year production and capital outlook for 2024 through 2026. Finally, I'll discuss our shareholder return program and our debt maturity later this year. Turning to our strong performance during the fourth quarter, fourth quarter total production averaged 697 MVOE per day, with oil averaging 104.7 MVO per day and natural gas averaging 2.97 VCF. All production streams came in above the high end of guidance driven by well performance and acceleration of pill timing during the quarter. Specifically, turn-in lines during the quarter totaled 40 net wealth, including 28 in the Permian, near the high end of guidance, and 12 in the Marcellus, slightly above the midpoint of guidance.

Shane Young: Thank you Tom and thank you everyone for joining us on today's call.

Shane Young: This morning, I'll focus on four areas.

Shane Young: First I'll discuss highlights from our fourth quarter and full year 2023 results.

Then I'll provide production and capital guidance for the first quarter and full year 2024.

Shane Young: Next I will provide a new and updated three year production and capital outlook for 2024 through 2026.

Finally, I'll discuss our shareholder shareholder return program and our debt maturity later this year.

Turning to our strong performance during the fourth quarter.

Shane Young: Fourth quarter total production averaged 697 <unk> per day with oil averaging $104 seven Mcf per day, and natural gas, averaging $2 97 Bcf per day.

Shane Young: All production strange came in above the high end of guidance, driven by well performance and acceleration of sale timing during the quarter.

Shane Young: Specifically turn in lines during the quarter totaled 40, net wells, including 28 in the Permian near the high end of guidance and 12 in the Marcellus slightly above the midpoint of guidance.

Shane Young: During the fourth quarter, pre-edge revenues were approximately $1.5 billion, of which 61% were generated by oil and NGL sales. In the quarter, we reported net income of $416 million, or $0.55 per share, and adjusted net income of $387 million, or $0.52 per share. Total cash costs during the quarter, including LOE, workover, transportation, production taxes, and G&A, totaled $8.41 per BOE, near the midpoint of our annual guidance range of $7.30 to $9.40 per BOE. Cash hedge gains during the quarter totaled $46 million.

Shane Young: During the fourth quarter pre hedged revenues were approximately $1 5 billion.

Shane Young: Which 61% were generated by oil and NGL sales.

Shane Young: In the quarter, we reported net income of $416 million or <unk> 55 per share and adjusted net income of $387 million or <unk> 52 per share.

Shane Young: Total cash costs during the quarter, including LOE, Workover transportation and production taxes, and G&A totaled $8 41 per Boe.

Shane Young: Near the midpoint of our annual guidance range of $7 30.

The $9 40 per Boe.

Shane Young: Cash hedge gains during the quarter totaled $46 million.

Shane Young: Incurred capital expenditures in the fourth quarter totaled $457 million, just below the low end of our guidance. Discretionary cash flow was $881 million, and free cash flow was $413 million, after cash capital expenditures of $468 million. For the full year 2023, Coterra produced outstanding total equivalent production that exceeded the high end of our initial February guidance, coming in at 667 MVOE per day. This outperformance was driven by a combination of better-than-expected well timing and beats on expected well productivity. Oil production for the year was 96.2 MBO per day, exceeding the high end of initial guidance by over 4%. Capital costs were right at the midpoint of our guidance range, coming in at $2.1 billion as a result of relentless focus on capital by our teams in each of our business units. Cash operating costs per unit totaled $8.37 per VOE for the year, slightly below our initial guidance.

Shane Young: We incurred capital expenditures in the fourth quarter totaled $457 million just below the low end of our guidance range.

Correct generic cash flow was $881 million and free cash flow was $413 million after cash capital expenditures of $468 million.

Shane Young: For the full year 2023, co Terra produced outstanding results.

Shane Young: Total equivalent production exceeded the high end of our initial February guidance coming in at 667 Boe per day.

Shane Young: This outperformance was driven by a combination of better than expected well timing and beats unexpected well productivity.

Oil production for the year was $96 two indio per day exceeding the high end of initial guidance by over 4%.

Shane Young: Capital costs were right at the midpoint of our guidance range coming in at $2 1 billion.

Shane Young: As a result of relentless focus on capital by our teams in each of our business units.

Shane Young: Cash operating cost per unit totaled $8 37 per Boe for the year slightly below our initial guidance midpoint.

Shane Young: Looking ahead to 2020, during the first quarter of 2024, we expect total production to average between 660 and 690 MVOE per day, oil to be between 95 and 99 NBO per day, and natural gas to be between 2.85 and 2.95 BCF per day.

Shane Young: Looking ahead to 2024.

Shane Young: During the first quarter of 2024, we expect total production to average between 660 and 690 Boe per day.

Shane Young: Oil to be between 95% 99, <unk> per day, and natural gas to be between $2 85, and 295 Bcf per day.

Shane Young: We anticipate first-quarter oil production to have the lowest average for any quarter during 2024, primarily as a result of kill timing that pulled some volume forward and into the fourth quarter of 2020. Regarding investment, we expect incurred capital in the first quarter to be between $460 and $540 million. For the full year 2024, we expect incurred capital to be between $1.75 and $1.95 billion, 12% lower at the midpoint than our 2023 capital. Our 2024 program will modestly increase capital allocation to the liquids-rich Permian and Anadarko basins and significantly decrease capital by more than 50% in the Marcella. We expect total production for the year to average between 635 and 675 MVOE per day, and oil Natural gas is expected to be between 2.65 and 2.8 BCF per day, approximately 5.5% lower at the midpoint than gas production was in 2020.

Shane Young: We anticipate first quarter oil production to have the lowest average for any quarter. During 2024, primarily as a result of til timing that pulled some volume forward and into the fourth quarter of 2023.

Shane Young: Regarding investment, we expect incurred capital in the first quarter to be between 460 and $540 million.

Shane Young: For the full year 2024, we expect to incur capital to be between $1 75, and $1 95 billion.

Shane Young: Or 12% lower at the midpoint than our 2023 capital spend.

Shane Young: Our 2024 program will modestly increase capital allocation to the liquids rich Permian and Anadarko basins and significantly decreased capital by more than 50% in the Marcellus.

Shane Young: We expect total production for the year to average between $635 and 675 Boe per day.

And oil to be between 99, and 105 mbo per day or 6% higher at the mid points than oil was in 2023.

Shane Young: Natural gas is expected to be between $2 65, and two eight Bcf per day, approximately five 5% lower at the midpoint and gas production was in 2023.

Shane Young: It is important to note that we have incorporated efficiency gains achieved in 2023 into our 2024 guide. Reflecting on our new three-year, As we did this time last year, Yesterday, we announced our new three-year outlook for 2024 through 2026. We believe this is a robust, capital-efficient plan that delivers consistent, profitable growth for our shareholders. We anticipate that our project inventory can deliver 5% plus oil volume growth over this period with 0 to 5% BOE growth by investing between $1.75 and $1.95 billion of capital per year.

Shane Young: It is important to note that we have incorporated efficiency gains achieved in 2023 into our 2020 for guidance.

Shane Young: Reflecting on our new three year outlook.

Shane Young: As we did this time last year yesterday, we announced our new three year outlook for 2024 through 2026.

Shane Young: We believe this is a robust capital efficient plan that delivers consistent profitable growth for our shareholders.

Shane Young: We anticipate that our project inventory and deliver 5% plus oil volume growth over this period with zero to 5% DAU growth by investing between 175 and $1 $95 billion of capital per year.

Shane Young: This reflects increased capital efficiency and is designed to afford Coterra the flexibility to reallocate capital between our business units as market conditions change. This Outlook incorporates an appropriate level of reinvestment and delivers meaningful free cash flow to underpin shareholder returns. Moving on to shareholder returns, last night, we announced a 21-cent per share base dividend for the fourth quarter, increasing our annual base dividend by 5% to $0.84 per share.

Shane Young: This reflects increased capital efficiency and is designed to afford coats era, the flexibility to reallocate capital between our business units as market conditions change.

This outlook incorporates an appropriate level of reinvestment and delivers meaningful free cash flow to underpin shareholder returns.

Speaker Change: Moving on to shareholder returns.

Speaker Change: Last night, we announced the <unk> 21 per share base dividend for the fourth quarter.

Speaker Change: Increasing our annual base dividend by 5% to <unk> 84 per share.

Shane Young: This remains one of the highest-yielding base dividends in the industry at well over 3%. Management and the board remain committed to responsibly increasing the base dividend on an annual basis. During 2023, despite relatively lower commodity prices and cash flow, Coterra continued to execute on its shareholder return program by repurchasing 17 million shares for $418 million at an average price of approximately $25 per share. In total, we returned 77% of free cash flow during the year, or just over $1 billion.

This remains one of the highest yielding base dividends in the industry at well over 3%.

Management and the board remain committed to responsibly, increasing the base dividend on an annual cadence.

Speaker Change: During 2023, despite relatively lower commodity prices and cash flow <unk> continued to execute on its shareholder return program by repurchasing 17 million shares for $418 million at an average price of approximately $25 per share.

Speaker Change: In total we returned 77% of free cash flow during the year or just over $1 billion.

Shane Young: We remain committed to our strategy of returning 50% or more of our annual free cash flow to shareholders through a combination of a healthy base dividend and our share repurchase program. On to our 2024 notes. We have continued to monitor and analyze opportunities regarding our $575 million maturity coming this September. With low leverage at 0.3 times, we believe we have strong access to the active refinancing market.

Speaker Change: We remain committed to our strategy of returning 50% or more of our annual free cash flow to shareholders through a combination of a healthy base dividend and our share repurchase program.

Speaker Change: On to our 2024 notes.

We have continued to monitor and analyze opportunities regarding our $575 million maturity coming this September.

Speaker Change: With low leverage at 0.3 times, we believe we have strong access to the active refinancing markets.

Shane Young: At the same time... We had approximately $2.5 billion of liquidity between cash and our undrawn credit facility at year end, affording us many options with regard to our 2024 maturity. In summary, Coterra's team delivered another quarter of high-quality results, both operationally and financially. We are poised for a strong first year of 2024, which we believe will set a solid foundation for the full year 2024 and beyond. With that, I will hand the call over to Blake to provide additional color and detail on our operations. Blake

Speaker Change: At the same time, we had approximately $2 5 billion of liquidity between cash and our Undrawn credit facility at year end.

Speaker Change: Letting us many options with regard to our 2020 for maturity.

Speaker Change: In summary, <unk> team delivered another quarter of high quality results, both operationally and financially.

Speaker Change: We are poised for a strong.

Speaker Change: 2024, which we believe will set a solid foundation for the full year 2024 and beyond.

Speaker Change: With that I will hand, the call over to Blake to provide additional color and detail on our operations Blake.

Blake Sergo: Thanks Shane. This morning, I will discuss our capital expenditures and provide an operational summary. In the fourth quarter, accrued capital expenditures totaled $457 million, coming in just below the low end of our guy. The lower capex was driven by efficiency and cost gains. Produced Infrastructure Spend, Lower Than Estimated Non-Operated Capital, and Shuffling of the Timing on a Few Projects. As noted, strong execution in the field pulled a few Q1 orders into Q4, which contributed to the Q4'23 production beat. Coterra finished the year at $2.104 billion in total, at our midpoint of our annual.

Blake: Thanks Shane.

Blake: This morning, I will discuss our capital expenditures and provide an operational update.

Blake: Fourth quarter accrued capital expenditures totaled $457 million coming in just below the low end of our guidance.

The lower Capex was driven by efficiency and cost gains reduced infrastructure spend lower than expected non operated capital and shuffling of the timing on a few projects.

Blake: As noted strong execution in the field pulled a few Q1 <unk> into Q4, which contributed to the Q4 'twenty three production beat.

Blake: <unk> finished the year at two one over $4 billion of total capex at our midpoint of our annual guidance.

Blake Sergo: This quarter marks the 10th quarter in Coterra's history and 10 straight quarters of delivering on our oil. This was accomplished thanks to our operations teams across our who strive for operation, at Coterra Operations, operating safely and with integrity, while always looking for ways. Moore.

Blake: This quarter marks the 10th quarter in <unk>.

Blake: And 10 straight quarters of delivering on our oil guidance.

Blake: This was accomplished thanks to our operations teams across our business units.

Blake: Strive for operational excellence.

Blake: Ecoterra operational excellence means operating safely and with integrity, while always looking for ways to accomplish more for less.

Blake Sergo: We do not tolerate sacred cows, and we are always on the hunt for new ideas, even if they are not our own. As we enter 2024, we are delivering a plan that continues to do more. In the Permian, we are planning to bring in line 75 to 90 wells in 2025, which is down 13% over 2020. These wells will have a dollar per foot of 1075, down approximately 10% year-over-year

Blake: We do not tolerate sacred cows, and we are always on the hunt for new ideas, even if they are not our own.

Blake: As we enter 2024, we are delivering a plan that continues to do more for less.

Blake: In the Permian, we are planning to turn in line, 75% to 90 wells in 2024, which is down 13% over 2023. These wells will have $1 per foot of $10 75 down approximately 10% year over year.

Blake Sergo: In the Permian, we are currently running two frat crews in eight that are performing at or near all-time efficiency. Our frac efficiencies are coupled with new equipment that offers increased cost savings to Coterra. Across our permeable footprint, we are taking advantage of our large continuous assets to bring economies of scale. This is highlighted by our Wyndham Row Project in Culverson County, where we are conducting a 51-well row development, each well targeting the upper. By concentrating activity at this scale, we are able to minimize rig and frag modes, commingled facilities, and maximize efficiency.

Blake: In the Permian, we are currently running two frac crews and eight drilling rigs, which are performing at or near all time efficiency Records.

Blake: Our frac efficiencies are coupled with new contracts that offer increased cost savings to co terra as we gain in efficiency.

Across our Permian footprint, we are taking advantage of our large contiguous assets that bring economies of scale to bear.

Blake: This is highlighted by our Wyndham Road project in Culberson County, where we are prosecuting a 51, well row development across six drill spacing units with each well targeting the upper wolfcamp.

Blake: By concentrating activity at this scale, we are able to minimize rig and frac moves commingle facilities and maximize timelines.

Blake Sergo: Combine this with our first grid-powered electric thermal, and we expect to deliver these wells at 5 to 15% lower cost. Our Permian asset is an engine, and continues to find. In the Marcellus, we are currently running two rigs and one frac, with plans to go to one rig and lower our. Our Marcellus Ops teams worked diligently in 2023 to lower our through increased frac efficiencies and improved water handling. We are also pushing new limits on laterals, with three and four mile laterals now part of our. These cost gains help us to minimize our DMC spend as we go into 2024 and throttle down our. Our 2024 Marcellus program remains, and includes multiple on-ramps and off-ramps, which will allow us to adjust to changing macro conditions. In Anadarko, we are currently running two rigs and one fresh. Our Anadarko team had a great year executing with improved drilling times and... Our 2024 program includes 20 to 25 turn-in lines, focused on our liquids-rich, which we expect will continue to yield stronger. Consistency of execution paired with strong will. Nader Anadarko, Outcompetitors.

Blake: Combine this with our first grid powered electric <unk> and we expect to deliver these wells at 5% to 15% lower cost than our historical program.

Blake: Our Permian asset is an engine of capital efficiency and that engine continues to define the new gear.

Blake: In the Marcellus we are currently running two rigs and one frac crew with plans to go to one rig and lowered our frac activity.

Blake: Our Marcellus ops teams worked diligently in 2023 to lower our cost structure through increased frac efficiencies improved water handling and lower facility costs.

Blake: We are also pushing new limits on lateral length with three and four mile laterals now part of our program.

Blake: These cost gains helped us to minimize our D&C spend as we go into 2024 and throttle down our activity.

Blake: Our 2024 Marcellus program remains flexible and includes multiple on ramps and offerings, which will allow us to adjust to changing macro conditions. If warranted in the Anadarko. We are currently running two rigs and one frac crew or.

Blake: Our Anadarko team had a great year executing with improved drilling times and Frac efficiencies.

Blake: Our 2024 program includes 20% to 25 turn in lines across five projects focused on our liquids rich assets, which we expect will continue to yield strong returns.

Blake: Consistency of execution paired with strong well results have made our anadarko assets, a stout competitor for capital allocation Echo tier.

Blake Sergo: Allocation. Our unrelenting focus on operational excellence continued to bear fruit in 2020, and we expect the team to seek out and execute incremental efficiency. With that, I'll turn it back. Thank you, Shane and Blake.

Blake: Our unrelenting focus on operational excellence continued to bear fruit in 2023, and we expect the team to seek out and execute incremental efficiencies in 2024.

Blake: And with that I'll turn it back to Tom.

Thomas E. Jorden: Thank you Shane and Blake we are.

Thomas E. Jorden: We are pleased with our continued execution in 2023 and expect to deliver on our goals outlined in our 2024 plan. We appreciate your interest in Coterra and look forward to discussing our results and our, will now be open to questions. At this time, if you would like to ask a question, press the star followed by the number one on your telephone.

Thomas E. Jorden: We're pleased with our continued execution in 2023 and expect to deliver on our goals outlined in our 2024 plants we.

Thomas E. Jorden: We appreciate your interest in co chair and look forward to discussing our results and outlook.

Thomas E. Jorden: We will now be open for questions.

Speaker Change: At this time, if you would like to ask a question press star followed by the number one on your telephone keypad.

Operator: We do ask that you please limit your questions to two. Our first question will come from the line of Nitin Kumar with Mizuho Securities. Please go ahead. Thanks. Good morning, Tom, Shane, and Blake.

<unk>. Thank you. Please limit your questions to queue. Our first question will come from the line of Mitten Kumar with Mizuho Securities. Please go ahead.

Mitten Kumar: Thanks, Good morning, Tom Shannon Blake. Thanks for taking my question Congrats on a strong year that really showcases the idea that was behind what Tara I.

Nitin Kumar: Thanks for taking my question. Congratulations on a strong year that really showcases the idea that was behind Coterra. I guess I want to start with just the capital allocation. You're cutting activity in the Marcellus in response to gas prices. But a lot of people think of the Anadarko Basin as a gas basin, and you're allocating some incremental capital there. Could you walk us through the thought process behind that? I'll probably disappoint you with my answer because it's pretty simple.

Mitten Kumar: I guess I want to start at just a capital allocation youre cutting activity in the Marcellus in response to gas prices.

But.

Mitten Kumar: A lot of people think of the Anadarko basin is a gas basin and you're allocating some incremental capital there, but could you walk us through kind of the thought process there.

Speaker Change: Alright. Thanks.

Speaker Change: I'll, probably disappoint with my answer.

Speaker Change: Because it's pretty simple.

Thomas E. Jorden: I'll say up front, I know a lot of people think of Anadarko in a lot of ways, and I'd like them to keep thinking that way, because we think Anadarko is a tremendous basin with great opportunities. You know, one of the things that was a challenge for the Anadarko team was just showing repeatability. You know, I've talked at length about capital allocation being a function of return on capital and repeatability in addition to how much windage you have in the price file. And our team showed great repeatability on some outstanding projects in 2023. And so the increased allocation is really a function of letting them just continue their activity level. Had we done anything other than that, we would have throttled back or, you know, pulled the plug on their continued activity. The returns are outstanding. I'll just say that. And so, you know, we're reallocating a little under $300 million between the Permian and Anadarko. And, you know, that's just...

Speaker Change: Say upfront I know a lot of people think of Anadarko in lot of ways and I'd like them to keep thinking that way because we think the Anadarko is a tremendous basin with great opportunity.

Speaker Change: One of the things that was a challenge for Anadarko team was just showing repeatability I've talked I've talked at length about capital allocation being a function of return on capital and Repeatability. In addition to how much when did you have and the price file and our team showed great repeatability answer that.

Speaker Change: Outstanding projects in 2023, and so the increased allocation is really a function of letting them just continue their activity level.

Speaker Change: <unk> done anything other than that we would have throttled back our.

Speaker Change: Pulled the plug on their continuing activity. The returns are outstanding I will just say that and so we're reallocating a little under $300 million between the Permian and Anadarko.

Speaker Change: <unk>.

Speaker Change: You know that's just.

Thomas E. Jorden: It was challenging because we have great returns everywhere. I'll also say that one of the things that we see in the Anadarko coming forward is that we have some peers that are also moving forward with increased activity, and so we expect a larger outside-operated call on our capital in the Anadarko, and some of that is embedded in that allocation. So really, it's a problem that we'd love to have, and we're very pleased with our allocation. Great, great. Thanks for the color.

Speaker Change: It was challenging because we have great returns everywhere I'll also say that one of the things that we see in the Anadarko coming forward as we have some peers that are also moving forward with increased activity and so we expect a larger outside operated call on our capital in the Anadarko and some of.

Speaker Change: That is embedded in that allocation. So really it's a problem that we love to have and we're very pleased with our allocation decision.

Speaker Change: Okay, great. Thanks for the color and then Tom.

Arun Jairam: And then Tom, you know, industry consolidation continues at a pretty frantic pace as you look around the lease lines; you have new neighbors or maybe the same neighbor around you. Your thoughts on scale, and M&A for Coterra from here on out? You certainly have a plethora of organic opportunities, but I'd love to hear your thoughts on M&A going forward. And then thank you for that. Our criteria is very simple.

Speaker Change: Industry consolidation continues at a pretty frantic pace as you look around the lease lines, you have new neighbors or maybe the same neighbor around you.

Thomas E. Jorden: Your thoughts on scale M&A for a quote from here on out you certainly have a plethora of organic opportunities, but I'd love to hear your thoughts on M&A going forward.

Speaker Change: And then thank you for that our criteria is very simple.

Thomas E. Jorden: When we look at potential combinations, we ask ourselves, would we rather own a share of Coterra or a share of the combined reformulated company? And there are, of course, a lot of elements to that. But first and foremost, it must create value for our owners. And look, I think the Wall Street Journal should have a weekend breaking story that says, flash, everybody is looking at everybody else in the MP space because that's what we have. So, you know, there haven't been any opportunities that we really have browbeaten ourselves on that have come and gone.

Speaker Change: When we look at potential combinations, we ask ourselves would we rather own a share cartera for its share of the combined reformulated company.

Speaker Change: And there are of course, a lot of elements to that but first and foremost it must create value for our owners.

Speaker Change: Look I think the Wall Street journal's should have a weekend breaking story that says flash everybody looking at everybody else in the E&P space because thats, what we have.

Speaker Change: There haven't been any opportunities that we really have browbeat ourselves on that have come and gone we remain deeply curious about what consolidation could offer for hotel owners.

Thomas E. Jorden: We remain deeply curious about what consolidation could offer for Coterra owners. But the bar is very, very high. Yeah, I'll just leave it at that. Your next question will come from the line of Arun Jairam with J.P. Morgan. Please go ahead. Yeah, good morning, gentlemen.

Speaker Change: The bar is very very high.

Ill just leave at that.

Speaker Change: Your next question will come from the line of Arun Jairam with J P. Morgan. Please go ahead.

Arun Jairam: Yes, good morning, gentlemen.

Blake Sergo: I was wondering, I'm looking at slide 15 in your deck, where you highlight your expectations for well productivity in the Delaware Basin relative to peers and the results from Coterra from 2021 to 23. I was wondering if you could maybe provide some color around expectations for productivity in 24, if we could kind of compare that to what you did last year. Yeah, Ren, this is Blake.

Arun Jairam: I was wondering I'm looking at slide 15 in your deck.

Arun Jairam: Or you're highlighting.

Arun Jairam: Your expectations for well productivity in the Delaware basin are relative to peers and the results from <unk> from 'twenty to 'twenty one to 'twenty three.

Arun Jairam: I was wondering if you can maybe provide some color around expectations on productivity in 'twenty four if we could kind of compare that to.

Arun Jairam: What you did last year.

Arun Jairam: Yes, Brian This is Blake I'll take that and Thats really why we kind of give that range on that slide.

Blake Sergo: I'll take that. You know, that's really why we kind of give that range on that slide. As we've talked about in the past, our Permian program is really a rotation through our assets, and that's driven by a lot of different things. The mix can vary somewhat year to year, but over a multi-year timeframe, it's pretty consistent. And so I just say we'd expect 24 to fall well within that band and deliver another good year in terms of productivity. And just thoughts on comparison to what you delivered in 23. Just trying to understand how you think year-over-year productivity could trend on a per-foot basis. I would say it is very similar.

Blake: As we've talked about in the past our Permian program is really a rotation throughout our assets and that's driven by a lot of different things the mix can vary somewhat year to year, but over a multiyear timeframe is pretty consistent so.

Blake: Just say, we expect 24 to fall well within that basin.

Deliver another good year on productivity.

Blake: And just thoughts on comparison to what you delivered in 'twenty three just trying to understand how you think year over year productivity could trend on a per foot basis.

Blake: I would say very similar.

Doug Leggett: You know, there's definitely some room for upside there with some of the allocations, but I'd expect another strong year. Your next question comes from the line of Doug Leggett with Bank of America. Please go ahead. Hey, good morning, guys. This is actually Kalan for Doug Sue.

Speaker Change: Definitely some room for upside there with some of the allocations, but I would expect another strong year.

Speaker Change: Your next question comes from the line of Doug Leggate with Bank of America. Please go ahead.

Clay: Hey, Good morning, guys. This is actually clay on for Doug. Thank you very much for taking my question.

Kalan: Thank you very much for taking my call. The first thing I want to hit is the Marcellus, where you're adapting activity in response to price.

Clay: The first thing I want to hit as the Marcellus.

Clay: Youre adapting activity in response to pricing.

Clay: So I guess I'm trying to understand the scenario analysis, is Marcella's pre-cash flow break even on 24-strip, and assuming basis is static, at what hub price does activity begin to shift higher? All right. Clay, this is Tom.

Clay: Alright.

So I guess I'm trying to understand the scenario analysis.

Clay: The Marcellus free cash flow breakeven on 24 strip and assuming basis is static at what hub price that activity begin to ship higher.

Speaker Change: That's correct.

Tom: You know, we've been debating that internally. I can't give you a firm number, but I will say that we are looking really carefully at the receipt price. And, you know, I know we talk about the weighted average sales price, but we really look at the price received by the next molecule, which is really a function of what would be the basis price, less fixed costs. I would say we would really like to see a price close to or above $3, I think, before it would really meet a criterion that shifts a lot of capital. But it's also a function of the oil-to-gas ratio, and, you know, we'd really like to see a sustained ratio that's somewhere in the neighborhood of 20 to 1, oil to gas. And you know we're really optimistic we'll see that when the market resets with LNG exports. But that's kind of what we're looking for. Tom.

Speaker Change: We've been debating that internally I can't give you a firm number but I will say that we look really carefully our received price.

And I know I know, we talked about weighted average sales price, but we really look at the price received by the next molecule, which is really a function of what would be a basis price less our fixed costs.

Speaker Change: Yes.

Speaker Change: I would say, we would really like to see a price.

Speaker Change: Close to or above $3 I think before it would really be a criteria that shifts a lot of capital, but it's also a function of the oil to gas ratio and.

Speaker Change: We'd really like to see a sustained ratio thats somewhere in the neighborhood of 20 to one oil to gas.

Speaker Change: And yes, we're really optimistic we're going to see that when the market reassess with LNG exports, but that's kind of what we're looking for.

Speaker Change: I appreciate that Tom My follow up is on the Anadarko.

Tom: My follow-up is on Anadarko. I seem to remember that the geology there is quite complex, so I'm wondering if you can expand on what the team accomplished last year to give you more confidence to re-engage in the capital program. Well, geology is complex across our portfolio. And if you don't, you know, I have to catch myself or I'll spend the rest of the call talking about geology.

Speaker Change: I think to remember that the geology, there being quite complex. So wondering if you can expand on what the team accomplished last year to give you more confidence to re engage in the capital program.

Speaker Change: Well geologist complex across our portfolio and if you don't have to.

Speaker Change: Catch myself.

Then the rest of the call talking about geology.

Tom: But, you know, what's most important is that we've tested this section. We've got a lot of calibration, and we understand the stratigraphic variation. We understand the oil gas complex ratio variation.

But what's most important is that we've tested this section we've got a lot of calibration and we understand the stratigraphic variation we understand the oil gas complex ratio variation, we understand the pressure drilling challenges. So I think we're highly calibrated.

Tom: We understand the pressure and drilling challenges. So I think we're highly calibrated. So, you know, look, complex geology is a bigger issue at the early phases of development than when you've got that calibration. And we feel really confident that we understand the geological overprint. Your next question comes from the line of David Deckelbaum with T.D. Cowan.

Speaker Change: So look complex geology is a bigger issue at the early phases of development than when you've got that calibration and we feel really confident that we understand the geological overprint.

Speaker Change: Your next question comes from the line of David <unk> with TD Cowen. Please go ahead.

David Adam Deckelbaum: Please go ahead. Thank you for taking my questions, everyone. Um, I was curious just if you could go into this. Obviously, the program this year is shifting more, or I guess it's high grading, a bit more on the lower Marcellus. Yeah, I think in your multi-year outlook, you sort of assume that Marcella's production is back up to about 100 million a day and I guess it is averaging in that 2.2 range versus 2.3 last year. Can you talk about the considerations of inventory management and how that mixes?

David: Thanks for taking my questions everyone.

David: I was curious just if you could go into.

David: Obviously the program. This year is shifting more or I guess, it's high grading a.

David: A bit more on the lower Marcellus.

David: I think in your multi year outlook, you sort of assume that the Marcellus production comes back up I guess about 100 million a day and I guess is averaging about two two range versus two three last year.

David: Can you talk about the considerations of inventory management, and how that mix of lower versus upper is looking at over time.

Tom: of lower versus higher, you know, is looking over time. It seems like there is a multi-year shift now where you're going to be emphasizing the lower a bit more and the lower price. But just wondering if there's more nuance to it and if your thoughts have changed on the internet.

David: It seems like there is.

David: <unk> ships, now where youre going to be emphasizing the lower a bit more in the lower price environment.

David: But just wondering if theres more nuance to it.

David: <unk> changed on the inventory management side there.

Tom: Our thoughts really haven't changed. As I would just repeat what we've said in the past, we've talked about a reduced inventory in the lower Marcellus. I think if we were heavy in the lower Marcellus, we'd probably be talking about a three to five-year inventory at this point, three to six maybe, depending on our level of activity. Our inventory is longer than that now as we've lowered our investment.

David: Our thoughts really haven't changed.

Speaker Change: Yes, I would just repeat what we've said in the past.

Speaker Change: We've talked about a reduced inventory in the lower Marcellus I think I think.

Speaker Change: If we were heavy on the lower Marcellus, we'd probably be talking about.

Speaker Change: A three to five year inventory at this 0.3 to six maybe depending on our level of activity our inventory is longer than that now as we lowered our investment.

Tom: But it's really a function of what's available to us, and that's the function of our gathering system, where we think we have additional capacity. But there's also an area of this field that's opened up to us that we're out exploiting, and we're really glad to be there and getting after some of the really, really productive rocks. We'll be drilling in the lower Marcellus for a long, long time.

Speaker Change: But.

It's really a function of what's what's available to us and that's the function of our gathering system, where we think we have additional capacity, but there's also a area of us feel thats opened up to us.

Exploiting and we're really glad to be there.

Speaker Change: Getting after some of the really really productive rock so well.

Speaker Change: Well, we'll be drilling in the lower Marcellus for a long long time, so we call it inventory numbers Thats really.

David Adam Deckelbaum: When we quote inventory numbers, it's really strongly overprinted by which formation we're drilling in. You know, the lower is going to be a significant part of our program for a number of years, of color there. I was also curious about the Hermion, you know, embedded in this multi-year five.

Speaker Change: Strongly over pressed by which formation, we're drilling yet but.

Speaker Change: The lower it's going to be a significant part of our program for a number of years.

Extra color there.

Speaker Change: So curious on the Permian.

Speaker Change: Permian.

Speaker Change: Bedded in this multi year five plus percent oil growth outlook through 2006.

Blake Sergo: Oil Growth Outlook through 26. So, how many sort of projects similar to the size of Wyndham Row are you planning? I know that there was an expectation that we would see sort of a large-scale project every year, year and a half. Is that still kind of the cadence? A multi-year guide, or are there some early learnings from Wyndham Row that are kind of iterating that process? Yeah, David, this is Blake

Speaker Change: How many sort of projects similar to the size of Wyndham ROE are you baking in I guess per year.

There was an expectation that we would see sort of a large scale projects.

Speaker Change: Every year year and a half is that.

On kind of the cadence.

Speaker Change: The multiyear guide or.

Speaker Change: Are there some early learnings from one narrow that or kind of iterating that process now.

Speaker Change: Yes, David This is Blake I'll take that one.

Blake Sergo: I'll take that one. You know, right now, we really expect to do a row project almost every single year. And, you know, I know that it's kind of scary to talk about a 51 well development, but I think it's important to remember these are six distinct drill spacing units that we have chosen to develop in a row to maximize efficiency. These units are our standard Culberson two-mile upper wolf camp units with designs from seven to ten wells per section.

Blake: Right now, we really expect to do a row project almost every single year.

Blake: I know, it's kind of scary to talk about a 51, well development, but I think it's important to remember these are six distinct drill spacing units that we have chosen to develop in a row to maximize efficiencies. These.

Blake: These units are standard culberson two mile Upper Wolfcamp units with designs from 7% to 10 wells per section. This is just really our bread and butter I mean, we've developed many of these over the years where district in them together.

Blake Sergo: This is just really our bread and butter. I mean, we've developed many of these over the years. We're just stringing them together. Our operations teams work really hard to kind of war game these projects and these rows to think of all the execution risks that could go on. That's why we picked up our eighth rig sooner to get a good duct build in front of the frat crew. These projects have large multi-well pads.

Blake: Our ops teams work really hard to kind of war game. These projects in these roes to think of all the execution risks that could go on and that's why we picked up our eighth rig sooner.

Blake: Good depth build in front of the Frac crew. These projects have large multi well pads.

Blake Sergo: That means if we have any well trouble, our frat crew can pivot while we deal with the well trouble. For the simulfrac part of this project, we've modeled really conservative completion timing, and that's because, you know, it's our first application of this in Culberson, but we don't really expect our electric crew to operate any less efficiently than it has in the past. We work through a lot of standard water logistics to make sure everything has abundant sourcing. You know, we own and operate our SWD system out there. That means we have plenty of water on demand at all times. It allows us to keep it in the pipe, so we're not building any produced water pits with this project.

Blake: That means if we have any well treble our frac crews.

Blake: While we deal with the world treble.

Blake: Our simultaneous part of this project, we've modeled really conservative completion timing and that's because.

Blake: It's our first application of this in Culberson, but we don't really expect our electric crew to operate any less efficient than it has in the past we worked through a lot of sand and water logistics to make sure everything has abundant sourcing we own and operate our <unk> system out there that means we have plenty of water on demand at all time it allows.

Blake: Is to keep it in the pipe. So we're not building any produced water pits with this project.

Blake Sergo: You know, this is just part of our operation now, and I'd expect many more row developments for years to come. Your next question comes from the line of Neil Dingman with Truist. Please go ahead. Morning, guys. Thanks for the time.

Blake: This is just part of our operation now and I would expect many more row development for years to come.

Your next question comes from the line of Neal Dingmann with Truest. Please go ahead.

Neal Dingmann: Good morning, guys. Thanks for the time My first question just on.

Neil Dingman: My first question is just on the flat spend and 0 to 5% BOE CAGR. I'm just wondering, did these assumptions include, I'm just wondering, do you assume with those on a go forward years, has that ensued well productivity, improved well productivity, lower well cost, or maybe just help me understand what's involved in those assumptions? We don't project future advancements in advance of having achieved them. I think we will achieve them, but we like to calibrate results. I mean, hopefully that's not a surprise to anybody on this call.

Neal Dingmann: The flat spend in the zero to 5% <unk> CAGR I'm just wondering.

Neal Dingmann: These assumptions include I'm, just wondering do you assume with those on a go forward years does that ensue, well productivity improve well productivity and lower well cost or maybe just help me on whats involved in those assumptions.

Neal Dingmann: Yes.

Speaker Change: We don't project.

Speaker Change: Sure advancements in advance of having achieved.

Speaker Change: I think we will achieve them, but we don't.

Speaker Change: Wed like to calibrate results I mean, I hopefully that's not a surprise to anybody on this call we'd much rather talk about results and promises and I was just wanted to say one more time, we don't manage are at multi year outlook by that production number we look at projections of what we think is our assumed cash flow, we say how much of that cash.

Tom: We'd much rather talk about results than promises. And I just want to say one more time, you know, we don't manage our multi-year outlook by that production number. We look at projections of what we think is our assumed cash flow. We say, how much of that cash flow do we want to invest? And that's typically in a fair way.

Speaker Change: Cash flow do we want to invest and that's typically in a fair way I'm going to give a wide one of 40% to 70% net allows us to achieve our shareholder returns that we promised.

Tom: I'm going to give you a wide one of 40 to 70 percent. And that allows us to achieve the shareholder returns that we promised. And then with that, we say, OK, here's the capital. Where's the best place to put it?

And then with that we say, okay, here's the capital Where's the best place to put it and the very last part of that process is what production does that generate.

Tom: And the very last part of that process is, what production does it generate? We don't get over our skis on that. We try to push our teams to model the most recent operational efficiencies, and then we drive them crazy trying to get better. But production is not the input. It's the output of good, solid capital allocation. Great, great point, Tom.

Speaker Change: We don't get over our skis on that we try to push our teams to model. The most recent operational efficiencies and then we drive them crazy trying to get better.

Production is not the important is the output of good solid capital allocation.

Speaker Change: Great Great point in time, and maybe just maybe my second along that same line I'm just wondering looking at the slide the types of electric gas production on this one.

Neil Dingman: And maybe just, maybe a second along that same line, I'm just wondering, you know, is it fair to say that, you know, you maybe have seen peak production, or is it just what you're forecasting that is just a basis of what's going on with prices? You know, that's going to be an ultimate driver.

Is it fair to say that you maybe have seen peak production or is it just.

What's your forecast in that or just a basis of what's going on with prices.

Speaker Change: That's going to be an ultimate driver.

Tom: Yes, it would not be fair to assume anything from our projection other than that it's our current look at an uncertain future. You know, we say that we have contingency plans if gas prices really recover, as we hope they will. Within our capital guide, we have plans to get back to work this year and set ourselves up for nice growth over the next two years. That's not a plan, but it's on the shelf ready to go. Our next question will come from the line of Michael Scialla with Stevens. Please go ahead. Good morning, everybody.

Speaker Change: Yes.

Not be fair to assume anything from our projection other than it's our current look at an uncertain future.

Yes, we say that we have contingency plans if gas prices really recover as we hope they will within our capital guide we have plans to get back to work this year.

Speaker Change: And set ourselves up for a nice growth over the next two years, that's not our plan, but it's on the shelf ready to go.

Speaker Change: Our next question will come from the line of Michael Gallo with Stephens. Please go ahead.

Michael Stephen Scialla: Hey, good morning, everybody.

Michael Stephen Scialla: I just want to ask about your return on capital. Obviously, it is way above your target for the year, but even with the bump in the dividend in the fourth quarter, it looks like you slowed that down a little bit. I wanted to ask about that and then also... the decision to bump the base dividend when you had been leaning more toward the share buybacks when you pulled back on the variable dividend, why they bumped the base dividend rather than buying back more shares. Yeah, hey, Mike, Shane here.

Michael Stephen Scialla: Just wanted to ask about your return of capital.

Michael Stephen Scialla: Way above your target for the year.

Michael Stephen Scialla: Even with the bump in the dividend in the fourth quarter it looks like it slowed down.

Michael Stephen Scialla: Is that a little bit I wanted to ask about that and then also.

The decision to bump the base dividend when you had been leaning more towards the share buybacks when you pull back on the variable dividend.

Michael Stephen Scialla: Why.

Michael Stephen Scialla: Bumping the base dividend rather than buying back more shares.

Speaker Change: Yes, it might change here I'll take those two questions.

Shane Young: I'll take those two questions. On the buyback, you know, we remained active in the market during the quarter, but we were a little bit cautious. We were trying to kind of get a gauge on whether winter and the weather would materialize, and I think as it didn't, we decided to carry some of that cash over into year end. So that's why you saw the cash balance build up to around a billion dollars, which really puts us in good shape in what looks like it could be a soft gas market in 2024 to be a bit more aggressive on the buyback. So there was a little bit of a timing element to that, I would say. On the base dividend, you know, listen, in addition to the commitment to deliver 50% plus of our free cash flow to shareholders on an annual basis, we also remain committed to increasing the annual dividend responsibly on an annual cadence. 5% feels like a pretty good lift, but not overly excessive.

Speaker Change: On the buyback we remained active in the market during the quarter, but we were a little bit cautious we're trying to kind of get a gauge whether winter and weather would materialize and I think as it didn't we decided to carry some of that cash over into year end. So that's why you saw the cash balance build up to around $1 billion, which really puts us in <unk>.

Speaker Change: Good shape.

But it looks like it could be a soft gas market in 2024 to be a bit more aggressive on the buyback. So there was a little bit of a timing element to that I would say.

Speaker Change: On the base dividend.

Speaker Change: In addition to the commitment to deliver 50% plus of our free cash flow to shareholders on an annual basis.

Speaker Change: Also.

Speaker Change: We remain committed to increasing the annual dividend responsibly on an annual cadence.

Speaker Change: 5% feels like a pretty good.

Speaker Change: But not not overly excessive so we're happy with the 5% bump and then we'll get into next year, we'll evaluate it again, if it makes sense to do it we would expect to continue to do it on an annual cadence.

Shane Young: So we're happy with the 5% bump, and when we get the next year, you know, we'll evaluate it. Again, if it makes sense to do it, we would expect to continue to do it on an annual cycle. Your next question comes from the line of Scott Gruber with Citigroup. Please go ahead.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Scott Gruber with Citigroup. Please go ahead.

Yes, good morning.

Scott Gruber: Through your road development program, you've been able to push down your Delaware cost to $7,100 a foot. As you re-engage in the NADARCO, do you think you'll be able to work down the cost structure into play? You know, are you thinking about pad size or rectifying operations or any other actions to meaningfully push down that $1,300 figure? Yeah, this is Blake.

Scott Gruber: So your ROE development program, you've been able to push down your Delaware cost to sub 11 under the foot as you re engagement of DARPA or do you think you'll be able to work down the cost structure of the play you think about pad sizes electrifying operations or any other actions to cleanly meaningfully push down that taking under dollar figure.

Scott Gruber: Yes. This is this is Blake I'm happy to take that one yes, we think there's always room to push our efficiencies further and we do share a lot of our learnings across basins.

Blake Sergo: I'm happy to take that one. Yeah, we think there's always, you know, room to push our efficiencies further, and we do share a lot of our learnings across basins. But at the same time, the Anadarko is a different basin than the Permian.

Scott Gruber: But at the same time, the Anadarko is a different basin in the Permian. So it's deeper it's higher pressure.

Blake Sergo: So it's deeper, it's higher pressure, the drilling can be more difficult, and really, what we've seen from our Anadarko team is we ran a real consistent program in 2023, so consistent drilling activity, and our crews did what they always do. They got better at it, and we saw our costs come down and get more in line. They're already taking advantage of a lot of the same pad efficiencies we see in the Permian, but if we see opportunities to enlarge projects and get more economies of scale, we'll absolutely take advantage of those. Got it.

Scott Gruber: The drilling can be more difficult and really what we've seen from our Anadarko team as we ran a real consistent program in 2023, so consistent drilling activity and our crews did what they always do they got better at it and we saw our costs come down and get more in line. There are already taking advantage of lot of the.

Scott Gruber: Same pad efficiencies, we see in the Permian, but if we saw opportunities to enlarge projects and get more economies of scale, we will absolutely take advantage of this.

Speaker Change: Got it.

Blake Sergo: And, you know, you guys have stuck with an estimate of about five percent deflation in service costs and material costs, but we're now seeing, you know, several operators obviously take actions to reduce activity in the Marcellus. Do you think you'll be able to, you know, see additional service cost savings on top of that five percent, especially in the Marcellus, on your remaining activity? I mean, I sure hope so.

Speaker Change: And you guys have stuck with an estimate of about 5% deflation in service costs and the material cost, but we're now seeing several operators, obviously take actions to reduce activity in the Marcellus.

Do you think you'll be able to do youll see additional.

Speaker Change: Service cost savings on top of that 5%, especially in the Marcellus on remaining activity.

Speaker Change: I sure hope so.

Blake Sergo: We'll see how the market plays out. Typically, when more services become available, it does drive prices down. We've been very strategic in how we've gone into 24 with our contracts. We're very, very lightly contracted, and that's by design, so we can take advantage of any downswings. But at the same time, you know, who we work with and making sure we have premium service providers that share our safety culture and our drive for excellence is really important to us, and our service providers need to make a return, also. So we'll be working with them closely, and if there's continued movement in the market, we'll be there to take advantage of that. But, you know, I don't want that point to be lost.

Speaker Change: We'll see how the market plays out.

Speaker Change: Typically when more services become available it does drive pricing down.

Speaker Change: We've been very strategic how we've gone into 'twenty four with our contracts.

Speaker Change: Very very lightly contracted and thats by design. So we can take advantage of any down swings, but at the same time, who we work with and making sure. We have premium service providers that serve our safety culture and our drive for excellence is really important to us and our service providers need to make a return also so.

Speaker Change: We'll be working with them closely and if there is continued movement in the market will be there to take advantage of it.

But I don't want that point to be loss one of the reasons, we have such flexibility in our capital allocation. This because we've worked really hard over the last couple of years to have a great set of vendor partners and Theyre very light amount of long term commitments. So we really do have a lot of flexibility in both our drill.

Blake Sergo: One of the reasons we have such flexibility in our capital allocation is because we've worked really hard over the last couple of years to have a great set of vendor partners and a very light amount of long-term commitments. So we really do have a lot of flexibility in both our drilling and completion services to pivot from one basin to another. Your next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Please go ahead. Good morning.

Speaker Change: In completion services to pivot from one basin to another.

Okay.

Kevin Moreland MacCurdy: Your next question comes from the line of Kevin Mccarthy with Pickering Energy Partners. Please go ahead.

Kevin Mccarthy: Good morning, first I want to say, we appreciate the three year outlook I think youre one of the few companies in your peer group with the confidence in your inventory to provide a detailed multi year outlook.

Kevin Moreland MacCurdy: First, I want to say we appreciate the three-year outlook. I think you're one of the few companies in your peer group with the confidence in your inventory to provide a detailed multi-year outlook. My first question is on that outlook. Are you assuming a similar capital allocation in 2025 and 2026 as in 2024? And under that scenario, when and at what levels does the Marcello start to flatten out?

Kevin Moreland MacCurdy: My first question is on that outlook are you assuming a similar capital allocation in 2025 and 2026 as in 2024 and under that scenario when and at what levels of Marcellus starting to flatten out.

Tom: Yeah, the answer, Kevin, is no; we're not assuming a similar level of allocation. That said, you know, it's fluid, but the model that underpins that is a reallocated number. Okay. And under that three-year scenario, what happens if we have a bullish gas market in 2025 and 2026? Do you reallocate capital from the Permian and Anadarko fields back to the Marcellus? Or do you increase your overall capex?

Speaker Change: Yes, the answer Kevin is no we're not assuming a similar level of allocation that said it is.

Fluid, but the model that underpins that is re allocated number.

Speaker Change: Okay.

And under that three year scenario, what happens if we have a bullish gas market in 2025, and 2026 do you reallocated capital from the Permian and the Anadarko back to the Marcellus or do you increase your overall Capex I know you spoke about a contingency plan in 2024, but just thinking about how you would think about that over the long term.

Tom: I know you spoke about a contingency plan in 2024, but just thinking about how you would think about that over, Well, you've left a very nice wide opening for me with that question. Because you know, I say it's always our best look at current conditions. So if we had a significant recovery in the gas macro, which we hope and expect, our cash flow goes way up. And within that investment fairway of, you know, I said 40 to 70%, we probably would have the flexibility to look at increasing our capital. But you know, none of that is enshrined in our current outlook. Because we we don't, as you know, there's not there's no hope in any of the outlooks around here.

Speaker Change: Well.

Speaker Change: You've left a very nice wide opening for me with that question because I would say it's always of.

Speaker Change: Our best look at current conditions. So if we had significant recovery in the gas macro, which we hope and expect our cash flow goes way up and within that investment fairway of I said, 40% to 70%.

Speaker Change: It probably would have the flexibility to look at increasing our capital, but none of that is in trying to in our current outlook because we don't.

Speaker Change: Theres not theres no hope in any of the outlooks around here, but we will react when conditions change.

Tom: But we'll react when conditions change. Great, thanks. Our next question will come from the line of Addie Modak with Goldman Sachs. Please go ahead. Hi, good morning team. Just curious how you view the macro setup for the gas markets here. What's the risk of surprise in associated gas from the Permian, and how do we work our way through that? Are you seeing sufficient signs of supply rationalization to suggest that we're in a better environment for 2025? Yeah, hey, it's Shane here.

Speaker Change: Great. Thanks for the detail.

Speaker Change: Our next question will come from the line of Adam <unk> with Goldman Sachs. Please go ahead.

Adam: Hi, Good morning, just curious how you view the macro setup for the gas markets here.

Adam: What's the risk of surprise in associated gas from the Permian and how do we work our way through back you've seen sufficient signed the supplier rationalization to suggest that we are in a better environment for 25.

Adam: Yeah, Hey, it's Shane here ill start off on that.

Shane Young: I'll start off on that. Look, it's very challenging today, and as we look at the storage numbers and the weather picture as it's played out, you know, winter to date, and the way the outlook is for the next several weeks. Look, you know, we could sort of end the winter at a pretty high spot on a historical basis. Production, on the other side, has been incredibly resilient, you know, probably more so than many of us have expected. It's great to see and hear some discipline in the marketplace, but, you know, it's unclear that it's enough, and it's unclear that it's sort of broad-based enough at this point.

Shane Young: It's very challenging today and as we look at the storage numbers and the weather picture as it played out.

Shane Young: Winter to date and the way the outlook is.

Shane Young: Over the next several weeks.

Look we can sort of in the winter it at a pretty high spot on a historical basis production.

Production on the other side has been incredibly resilient.

Shane Young: Probably more so than many of us have expected it's great to see.

Shane Young: Here's some discipline in.

Shane Young: In the marketplace, but.

Shane Young: It's unclear that it's enough and it's unclear then it's sort of broad based enough at this point so we're cautious on.

Shane Young: So we're cautious on gas, and you see that in our 2024 planning and budgeting. You see that in the way we manage our balance sheets, but if it does turn, and when it does turn, we'll certainly be prepared to react.

Shane Young: On gas and you see that in our 2020 for planning and budgeting you you see that.

Shane Young: And the way, we manage our balance sheets, but.

Shane Young: But if it does turn and when it does turn we will certainly be prepared to react.

Speaker Change: Great and then you talked about this a little bit, but maybe I can approach this in a different way.

Addie Modak: And then you talked about this a little bit, but maybe I can approach this in a different way. Your three-year outlook on growth is based on relatively stable annual capex. Curious what factors you've baked into that growth outlook in terms of the incremental efficiency gains? What should we expect to hear from you on that front over this time period? We don't bake in any incremental efficiency gains.

Speaker Change: Your three year outlook on growth is on relatively stable annual Capex curious what factors you've baked into that growth outlook in terms of being connected medication fee gains.

What should we expect to hear from you on that front. Thank you.

Speaker Change: We don't bake in any incremental efficiency gains so we we.

Blake Sergo: So we take all our most recent gains and stress test them by going through them extensively to make sure they're real and part of our program. And then we build them into our forecasting. And so while our expectation is that our teams will continue to drive efficiencies, none of that's built into these. Our final question will come from the line of Charles Meade with Johnson Rice. Please go ahead. Thank you. Good morning, Tom.

Speaker Change: We take all our most recent gains in our program.

Speaker Change: We kind of stress test those by going through them extensively to make sure they're real and part of our program and then we build them into our forecasting and so well while our expectation is our teams will continue to drive efficiencies none of that's built into these protections.

Speaker Change: Our final question will come from the line of Charles Meade with Johnson Rice. Please go ahead.

Charles A. Meade: See you and your whole team there. Good morning. I have two questions on the Marcellus, and you've addressed some of this, but I just want to... One more shot at it. If we look at the decline... $435 million in CapEx. 24 versus 23. And you look at that versus, you know, you went from two rigs to one rig and one frac crew to maybe a half frac crew. It seems like the decrement in activity is smaller than the decrement in capital expenditure. And so what are the other pieces that complete that picture?

Charles A. Meade: Good morning, John to you and your whole team there.

Charles A. Meade: Good morning, I have two questions on the Marcellus you've addressed some of this but.

Charles A. Meade: I just wanted to.

Charles A. Meade: I'll make one more run at it if we look at the decrement of $435 million in Capex in <unk>.

Charles A. Meade: <unk> 24 versus 23.

Charles A. Meade: And you look at that versus you went from two rigs to one rig and one frac crew to maybe a half frac crew it seems like the <unk>.

Charles A. Meade: The decrement in activity is smaller than that then the decrement in capex.

Speaker Change: What are the other pieces that that complete that picture.

Tom: Well, one of the things that we see is that we will finish the year with four pads waiting to be completed. So, you know, a lot of what we're doing in 24 is setting up 25. So, you know, it's not always showing up in the first year of CapEx. With projects that have cycle times like ours and like everybody else's, you really have to have a multi-year outlook on any plan. So a lot of that is a benefit of what we did last year that's currently being completed. And what happens next year is a function of what we do this year. You know, the annual snapshot on capital versus production is interesting, but fairly incomplete. Right, that makes sense. And then, maybe, one other question. You have on your slide, I believe it's slide 6, you show that 10% decline in Marcell's production for 2024 but then actually a slight incline for 2025. What's the underlying price assumption for natural gas in that scenario where you grow again in 2025?

Well one of the things that we see is we will finish the year with four pads waiting to be completed.

Speaker Change: There are a lot of what we're doing in 'twenty four is setting up 25%.

Speaker Change: So it's not always showing up.

Speaker Change: In the first year Capex.

Speaker Change: Projects have cycle times like ours, and like everybody else is you really have to have a multi year outlook on any plans. So a lot of that is benefit of what we did last year. This current currently being completed and what happens next year as a function of what we do this year.

Speaker Change: Youll snapshot on capital versus production is interesting, but fairly incomplete.

Speaker Change: Right that makes sense and then.

Speaker Change: And then maybe one other one other question you have on your slide I believe it's slide six you show.

Speaker Change: That 10% decline in Marcellus production for 24, but then it actually a slight incline for 25.

Speaker Change: What's the what's the underlying price assumption for natural gas and that and that scenario, where you grow we're getting 25.

Tom: Well, we have lots of price assumptions. You know, I would say we have strip, we run a 55 to 75, we run a 75 to 50. I mean, we have we run a 75 375.

Speaker Change: Well, we have lots of price assumptions I would say we have strip we run a 55 to $2 75, we run a 75 to $2 50, I mean, we have we were at 75 375 I'm looking at my model is now I mean, we.

Tom: I'm looking at our models now. We have a smorgasbord of price files that really set our fairway for our economic analysis. But, you know, I would say this is probably based on the STRIP as a foundational forecast, and then we run permutations from there.

Speaker Change: We have a smorgasbord of price files that really set our.

Speaker Change: Define the fairway of our economic analysis.

Speaker Change: I would say this is probably based on the strip as a foundational forecast and then.

Speaker Change: Brian permutations from there.

Speaker Change: I'll now turn the call back over to Tom Jorden for any closing remarks.

Thomas E. Jorden: I'll now turn the call back over to Tom Jorden for any closing remarks. Well, thank you very much for joining us. We look forward to continuing to deliver. As I hope you've learned from Coterra, we really appreciate your interest and love talking about results and intend to deliver them. So thank you so much. Everyone, this does conclude our conference call for today. Thank you all for joining me. You may now disconnect.

Thomas E. Jorden: Well. Thank you very much for joining us we look forward to continuing to deliver as I hope you've learned from co. Tara we really appreciate your interest and love talking about results.

Thomas E. Jorden: We intend to deliver them. So thank you so much.

Speaker Change: Everyone. This does conclude our conference call for today. Thank you all for joining you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Sure.

Speaker Change: [music].