Coterra Energy Inc. Financial Report Analysis: Q4 2024 and Full-Year Review

Key Insights and Summary

Coterra Energy Inc. (NYSE: CTRA) has released its financial report for the year ending December 31, 2024, showcasing strong performance but also highlighting several challenges. Below are the critical metrics and insights for investors:

• Revenue: $5.461 billion in 2024, slightly down from $5.684 billion in 2023.
• Net Income: $1.120 billion in 2024, down from $1.620 billion in 2023.
• Earnings Per Share (EPS): $1.51 for 2024, compared to $2.14 in 2023.
• Dividends: Consistent quarterly dividends increased to $0.22 per share in Q1 2025.
• Debt: Total debt increased to $3.5 billion, with a healthy coverage ratio.
• Cash Flow: Operating cash flows remain stable, indicating solid liquidity.

Recommendation

Hold: While Coterra Energy has faced challenges with declining revenues and profits, its strategic initiatives, including a robust dividend policy and active risk management through derivative instruments, suggest stability. Investors should monitor the company’s operational efficiency and external market conditions closely before making any changes to their positions.

Detailed Financial Performance Analysis

Revenue Overview

Coterra Energy reported total revenues of $5.461 billion for 2024, a decrease from $5.684 billion in 2023. The revenue breakdown is as follows:

• Oil: $2.953 billion
• Natural Gas: $1.693 billion
• Natural Gas Liquids (NGL): $738 million
• Other Revenues: $77 million

The decline in revenue, particularly in natural gas sales, is concerning and reflects broader market trends impacting commodity prices.

Net Income and Earnings Per Share

The company’s net income for 2024 was $1.120 billion, a decline from $1.620 billion in 2023, leading to a basic EPS of $1.51 compared to $2.14 in the previous year. This decline can be attributed to lower commodity prices and increased operational costs.

Debt and Leverage

Total debt increased significantly to $3.5 billion, up from $2.075 billion in 2023. However, the company maintains a favorable debt-to-EBITDA ratio of 3.0:1, which suggests manageable leverage. Key debt metrics include:

• Interest Expense: Increased to $101 million in 2024 from $82 million in 2023.
• Debt Coverage Ratio: The company has a minimum cash flow to interest expense ratio of 2.8:1, indicating strong cash flow management.

Cash Flows

Coterra reported stable cash flows from operations, which are essential for meeting ongoing obligations and funding growth initiatives:

• Cash Paid for Interest: $99 million in 2024.
• Income Taxes Paid: $341 million in 2024.
• Cash Flows from Operating Leases: Increased slightly to $137 million compared to $132 million in 2023.

Dividend Policy

Coterra has maintained a robust dividend policy, increasing its quarterly dividend to $0.22 per share for Q1 2025. This indicates a commitment to returning value to shareholders despite recent challenges in profitability.

Risk Management

The report highlights Coterra’s use of derivatives for risk management, particularly in managing commodity price fluctuations:

• Derivative Instruments: The company has engaged in various financial derivatives, including collars and swaps, to hedge against price volatility in oil and gas markets. The fair value of derivative assets and liabilities reflects the company’s strategic approach to managing risks associated with commodity prices.

Environmental and Regulatory Compliance

Coterra continues to prioritize compliance with environmental regulations, a critical aspect of operations in the energy sector. The report indicates ongoing monitoring and investments in sustainability practices to mitigate potential regulatory risks.

Future Outlook

Looking ahead, Coterra’s strategic initiatives, including planned acquisitions and expansions, could bolster revenue in the long term. The company is actively pursuing growth opportunities while managing costs effectively.

Conclusion

Coterra Energy Inc. demonstrates resilience amidst challenges in the energy sector, highlighting a stable operational foundation through effective cash flow management and a commitment to shareholder returns. Investors should remain vigilant regarding commodity price trends and the company's ability to navigate market volatility. Overall, a Hold recommendation is warranted as the company positions itself for future growth while addressing current challenges.