Oil-and-gas producer Coterra Energy (CTRA) on Thursday delivered a top-and -bottom-line beat for the first quarter, while reiterating its commitment to return at least half of its free cash flow to shareholders like us. Revenue for the three months ended March 31 increased 6% year-over-year, to $1.78 billion, beating analysts’ forecasts of $1.61 billion, according to estimates compiled by Refinitiv. Adjusted diluted earnings-per-share (EPS) fell by 14% on the year prior, to 87 cents, but still outpaced analysts’ predictions of 70 cents per share, Refinitiv data showed. Bottom line Coterra’s realized prices for its first-quarter oil sales came in a tad below expectations, but that proved inconsequential, as strong production and low costs resulted in better-than expected earnings and cash-flow generation. Free cash flow is a particularly important metric for Coterra because the company’s management remains committed to returning at least 50% to shareholders through a base dividend and share repurchases. This was a strong performance across the board and we look forward to hearing more from management on the results. Coterra is scheduled to host a post-earnings conference call on Friday at 10:00 a.m. ET. Capital allocation Coterra said it plans to return a total of $420 million to shareholders, representing about 76% of its free cash flow in the first quarter. Of that, $152 million will be distributed through a 20 cent-per-share dividend, to be paid out on June 9, while the remaining $268 million will be returned to investors via share repurchases. Annualizing that $420 million figure results in a yield of just over 9%, based on the company’s roughly $18.50 billion market capitalization as of Thursday’s close. First-quarter production The stellar production results not only exceeded the high end of managements guidance — in terms of total production, as well as for oil and gas distinctly — but also outpaced analysts’ forecasts. Outlook Looking ahead, guidance for both the second quarter and full year 2023 was largely in line with expectations. Notably, Coterra lowered its full-year expectation for free cash flow by $300 million, largely due to a $400 million reduction in its forecast for operating cash flow. But the new target was still slightly ahead of analysts’ predictions. The downward revision isn’t surprising, given natural gas prices have come under significant pressure since the start of the year. Accordingly, Coterra reduced its full-year price assumption for natural gas to $2.89 per million British thermal units (MMBtu), from a previous estimate of $3.50 per MMBtu. The company reiterated its expectation for West Texas Intermediate (WTI) crude to average $76 a barrel for the full year. The price of natural gas, which has fallen roughly 37% year-to-date, closed out Thursday at $2.30 per MMBtu. WTI has fallen more than 17% from its 2023 high last month, settling Thursday at $68.56 a barrel. (Jim Cramer’s Charitable Trust is long…
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