Coterra reports steady earnings in 2Q and will maintain current operations in Oklahoma

  • August 5, 2025

 

 

Houston’s Coterra Energy Inc., a firm with significant operations in Oklahoma, reported second quarter financial operating results that were nearly equal of a year ago.

The company declared a dividend of $0.22 per share based on $511 million in net income or $0.67 per share. It compared to the first quarter net income of $516 million or $0.68 per share.

Second quarter adjusted net income of $367 million or $0.48 per share was down from the $608 million and $0.80 per share the firm had in the first quarter. Cash flow from second quarter operating activities totaled $1,144 million while discretionary cash flow was $1,135 million and free cash flow came to $663 million.

Coterra had two rigs running in the Anadarko Basin of Oklahoma and Tom Jorden, Chairman and CEO at Coterra said there would be no change in the second half of 2025 as the company experienced lower than expected capital expenditures and higher than expected production.

“We are expecting to run consistent activity in the second half of 2025, with nine rigs in the Permian, two rigs in the Marcellus, and one to two rigs in the Anadarko. Our high-quality assets provide robust returns in the current environment and remain durable through the cycles. While we maintain significant operational flexibility, we expect our steady activity cadence to support a highly capital efficient 2026.

Key Takeaways & Updates

  • For the second quarter of 2025, total BOE (barrels of oil equivalent) and natural gas production exceeded the high-end of our guidance ranges while oil volumes beat the midpoint by approximately 2%. Capital expenditures (non-GAAP) were below the low-end of our guidance range.
  • Increasing full-year 2025 total equivalent and natural gas production guidance, maintaining oil production midpoint.
  • Expect 2025 capital expenditures (non-GAAP) to be approximately $2.3 billion, which assumes consistent activity in the second half of the year with nine rigs in the Permian, two rigs in the Marcellus, and one to two rigs in the Anadarko.
  • Expect 2025 Free Cash Flow (non-GAAP) to total $2.1 billion, at recent strip prices.
  • Second-quarter 2025 direct shareholder returns totaled approximately 58% of Free Cash Flow (non-GAAP), which includes our declared dividend of $0.22 per share, or approximately $168 million, and $23 million of share repurchases. Additionally, the Company repaid $100 million of term loans bringing total returns to 89% of Free Cash Flow (non-GAAP). In 2025, Coterra remains committed to reducing leverage and executing opportunistic share repurchases.
  • Announcing a new power netback gas sale agreement in the Permian, expected to start in 2028, further diversifying our natural gas marketing portfolio.
  • Coterra published its 2025 Sustainability Report on August 4, 2025. The report can be found under “Sustainability” on the Company’s website.

Second-Quarter 2025 Highlights

  • Net Income (GAAP) totaled $511 million, or $0.67 per share. Adjusted Net Income (non-GAAP) was $367 million, or $0.48 per share.
  • First-Quarter 2025 Highlights
    • Net Income (GAAP) totaled $516 million, or $0.68 per share. Adjusted Net Income (non-GAAP) was $608 million, or $0.80 per share.
    • Cash Flow From Operating Activities (GAAP) totaled $1,144 million. Discretionary Cash Flow (non-GAAP) totaled $1,135 million. Free Cash Flow (non-GAAP) totaled $663 million.
    • Cash paid for capital expenditures for drilling, completion and other fixed asset additions (GAAP) totaled $472 million. Incurred capital expenditures from drilling, completion and other fixed asset additions (non-GAAP) totaled $552 million, in the lower half of our guidance range of $525 to $625 million.
  • Cash Flow From Operating Activities (GAAP) totaled $937 million. Discretionary Cash Flow (non-GAAP) totaled $949 million. Free Cash Flow (non-GAAP) totaled $329 million.
  • Cash paid for capital expenditures for drilling, completion and other fixed asset additions (GAAP) totaled $620 million. Incurred capital expenditures from drilling, completion and other fixed asset additions (non-GAAP) totaled $569 million, below the low end of our guidance range of $575 to $650 million.
  • Unit operating cost (reflecting costs from direct operations, transportation, production taxes and G&A) totaled $9.34 per BOE, near the mid-point of our annual guidance range.
  • Total equivalent production of 783.9 MBoepd (thousand barrels of oil equivalent per day), above the high end of guidance (710 to 760 MBoepd).
    • Oil production averaged 155.4 MBopd (thousand barrels of oil per day), near the high end of our guidance range (147 to 157 MBopd).
    • Natural gas production averaged 2,998.6 MMcfpd (million cubic feet of gas per day), exceeding the high end of guidance (2,700 to 2,850 MMcfpd).
    • NGLs production averaged 128.7 MBopd.
  • Realized average prices:
    • Oil was $62.80 per Bbl (barrel), excluding the effect of commodity derivatives, and $64.01 per Bbl, including the effect of commodity derivatives.
    • Natural Gas was $2.20 per Mcf (thousand cubic feet), excluding the effect of commodity derivatives, and $2.27 per Mcf, including the effect of commodity derivatives.
    • NGLs were $18.72 per Bbl.
  • Share Repurchases: During the quarter, the Company repurchased 0.9 million shares for $23 million, leaving $1.1 billion remaining as of June 30, 2025 on its $2.0 billion share repurchase authorization.
  • Shareholder Returns: During the quarter, direct shareholder returns amounted to approximately $191 million, comprised of approximately $168 million of declared dividends and $23 million of share repurchases, totaling approximately 58% of Free Cash Flow (non-GAAP).The Company also repaid $100 million of debt during the quarter.
  • Reiterate Shareholder Return Strategy: Coterra expects to return 50% or greater of annual Free Cash Flow (non-GAAP) to shareholders through the cycles via its base dividend and share repurchases. However, in 2025, after payment of its base dividend, the Company is prioritizing debt reduction as it looks to retire the outstanding $650 million term loans, associated with the Company’s Delaware Basin acquisition in first quarter. Coterra retired $350 million of term loans in the first half of 2025.

Guidance Updates

  • Expect 2025 capital expenditures (non-GAAP) of approximately $2.3 billion.
  • Announcing third-quarter 2025 guidance, including total equivalent production of 740 to 790 MBoepd, oil production of 158 to 168 MBopd, natural gas production of 2,750 to 2,900 MMcfpd, and capital expenditures (non-GAAP) of $625 to $675 million.
  • Estimate full-year 2025 effective tax rate of 22%, which we expect to be 40% to 60% current tax.
  • For more details on annual and third-quarter 2025 guidance, see 2025 Guidance Section in the tables below.

Announcing New Power Sales Agreement in the Permian

Coterra is announcing a new power netback gas sale agreement with CPV Basin Ranch Energy Center, a proposed 1,350 megawatt (MW) combined-cycle natural gas power plant designed with the option to include a carbon capture system. The agreement to sell 50 MMcf per day for a seven-year term is expected to start in 2028, and will be indexed to ERCOT West pricing, adding to the Company’s two existing power netback deals in the Marcellus which currently comprise 330 MMcf per day. Coterra has also secured a right to purchase up to 250 MW per day of power from the facility, located in Ward County, Texas. This is the first power netback deal secured by Coterra in the Permian Basin. Coterra will continue to explore ways to further diversify its gas sales portfolio across all three of its operating basins through power, LNG, data centers and other long-term opportunities.

Strong Financial Position

In conjunction with the closing of the Franklin Mountain Energy and Avant Natural Resources acquisitions in late January, Coterra issued $1.0 billion of new debt through its term loan agreements. Subsequently, Coterra has paid down $350 million of the term loans year-to-date, including an incremental $100 million during the second quarter, leaving $650 million of term loan debt outstanding. As of June 30, 2025, Coterra had total debt outstanding of $4.15 billion (principal balance). The Company exited the quarter with cash and cash equivalents of $192 million, and no debt outstanding under its $2.0 billion revolving credit facility, resulting in total liquidity of approximately $2.19 billion. Coterra’s Net Debt to trailing twelve-month Adjusted Pro Forma EBITDAX ratio (non-GAAP) at June 30, 2025 was 0.9x, pro forma for the Franklin and Avant acquisitions. The Company remains committed to near-term debt reduction.

Jerry Bohnen