Club holdings Coterra Energy (CTRA) and Pioneer Natural Resources (PXD) delivered fourth-quarter earnings beats Wednesday. But we’ll be watching for how the market responds to higher capital expenditure outlooks and lower quarterly dividends for both of these Texas-based oil-and-gas firms. Coterra’s total revenue increased 2.5% year-over-year, to $2.28 billion, beating analysts’ forecasts of $2.11 billion, according to estimates compiled by Refinitiv. Coterra’s adjusted diluted earnings-per-share (EPS) grew 40% compared with the year prior, to $1.16 a share, narrowly beating expectations for EPS of $1.10, Refinitiv data showed. Pioneer’s total revenue increased 18% year-over-year, to $5.10 billion, beating analysts’ forecasts of $3.53 billion, according to Refinitiv. Pioneer’s adjusted diluted EPS grew 29% on an annual basis, to $5.91 a share, topping expectations for EPS of $5.77, Refinitiv data showed. Note : Both companies are scheduled to host their earnings conference calls with analysts and investors Thursday at 10:00 a.m. ET. Bottom line Solid production and pricing, coupled with low costs, helped both companies deliver fourth-quarter results ahead of expectations. But with investors looking ahead to 2023, Coterra and Pioneer could both see their stock prices come under pressure over concerns about lower dividends on a sequential basis and higher capital expenditures in 2023 — as was the case with Club holding Devon Energy (DVN) last week. That move prompted us to reduce our exposure to any potential post-earnings downside by trimming Coterra and Pioneer late last week. However, given last week’s energy sell-off some of the dividend news may have already been priced into their share prices. After a strong 2022, energy stocks have stumbled out of the gate this year, tracking the declines in the underlying commodities. West Texas Intermediate crude — the U.S. oil benchmark — has fallen about 7.5% this year, to hover around $74 a barrel, while natural gas has seen its value come down by more than half, to around the low $2-per-cubic-foot level. We’ll look for more color on both companies’ 2023 frameworks tomorrow on their conference calls. For the moment, we reiterate 2 ratings on both firms. In afterhours trading Wednesday, Coterra was trading up more than 2%, at $23.80 a share, while Pioneer was up nearly 1%, at $207.11 a share. Capital allocation Coterra Energy said its upcoming quarterly fixed-plus-variable dividend will be 57 cents a share — factoring in a base dividend of 20 cents a share and a variable of 37 cents a share — compared with 68 cents per share in the prior quarter. Still, the new annualized payment represents a hefty 9.8% dividend yield based on Coterra’s closing price of $23.26 on Wednesday. Coterra also increased its annual base dividend to 80 cents per share from 60 cents, while announcing a new $2 billion share repurchase program. The company continues to target returning 50% or more of its free cash flow…
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