Coterra signals modest capital reduction for 2026 while boosting 2025 production outlook and shareholder returns

Earnings Call Insights: Coterra Energy Inc. (CTRA) Q3 2025

MANAGEMENT VIEW

* CEO Thomas Jorden stated that "Coterra had a strong third quarter and is on track to deliver on the ambitious annual goals that we set for ourselves for the full year 2025." He highlighted that volumes on gas, oil, and barrel of oil equivalent came in above the midpoint of guidance and that the integration of Lea County assets acquired earlier in the year has resulted in "significant uplifts in asset performance, cost reductions and future inventory."
* Jorden previewed a "soft guide for 2026" and emphasized a long-term focus on "consistency, profitable growth and value creation for shareholders," noting that capital is expected to be modestly down year-over-year while maintaining profitable growth.
* On portfolio diversification, Jorden described committed gas supply agreements, including 200 million cubic feet per day to LNG deals, 350 million cubic feet per day to Cove Point LNG, and additional volumes to power plants, totaling roughly 30% of Coterra’s gas production.
* Jorden announced a management change, with Michael Deshazer and Blake Sirgo swapping portfolios to "build redundancy in our skill sets and build broader depth of expertise on the executive team."
* CFO Shannon Young reported, "Performance in all 3 business units exceeded expectations during the third quarter. Coterra's oil, natural gas and BOE production each came in approximately 2.5% above the midpoint of our guidance. Additionally, NGL production was strong, posting an all-time high for Coterra at around 136 MBoe per day."
* Young added, "Pre-hedge oil and gas revenues came in at $1.7 billion with 57% of revenues coming from oil production. This is up sequentially from 52% in the prior quarter and was driven by a substantial uptick in oil volumes of 11,300 barrels per day, an increase of above 7% above our second quarter levels."

OUTLOOK

* Young disclosed fourth quarter oil production is expected to be 175 MBoe per day at the midpoint, a 5% increase quarter-over-quarter. Total production guidance is 770 to 810 MBoe per day, and natural gas is projected at 2.78 to 2.93 Bcf per day.
* For full year 2025, annual MBoe per day production guidance is increased to 777 at the midpoint, a 5% rise from initial February guidance. Oil production guidance midpoint remains at 160 MBoe per day, with a tightened range.
* Natural gas production midpoint is raised to 2.95 Bcf per day, over 6% higher than the initial full year guidance.
* Young stated, "We expect capital for the quarter to be around $530 million, significantly below the third quarter results as we wrapped up frac activity in the Anadarko late in the third quarter."
* Young also provided a snapshot for 2026, saying "capital should be down modestly year-over-year while still maintaining production parameters laid out in our 3-year guide."

FINANCIAL RESULTS

* Cash operating costs totaled $9.81 per BOE, up 5% quarter-over-quarter due to production mix and increased workover activity. Incurred capital for the quarter was $658 million.
* Discretionary cash flow for the quarter was $1.15 billion and free cash flow was $533 million after cash capital expenditures, with both figures benefiting from negative current taxes.
* Coterra announced a dividend of $0.22 per share and repaid $250 million of term loans, bringing total term loan pay down to $600 million through Q3 2025.
* The company reinitiated its share buyback program in October.
* As of September 30, total debt outstanding was $3.9 billion, down from $4.5 billion at acquisition close in January. Total liquidity stood at $2.1 billion.
* Coterra projects 2025 free cash flow of around $2 billion, a 60% increase over 2024, driven by higher natural gas realizations and oil volumes from acquired assets.

Q&A

* Douglas George Blyth Leggate, Wolfe Research: Asked about the Kimmeridge letter and the rationale for a multi-basin portfolio. Jorden responded that "we like to see us trade at a premium multiple" and that the company sees benefits from being "a multi-basin, multi-commodity company."
* Leggate also inquired about LOE levels and future oil production. Deshazer explained that LOE increased due to workover activity but is expected to decrease in Q4. Young confirmed, "we do expect that number to settle for the year within range on the LOE."
* Wei Jiang, Barclays: Questioned the resumption of share buybacks and cash return strategy. Young replied, "we reinitiated the program...and expect that we'll continue to be opportunistic," referencing past returns of 94% and 75% of free cash flow in 2024 and 2023, respectively.
* Jiang followed up on Permian activity. Young noted productivity in the TILs as expected or better, with production timing affecting the 2026 outlook. Jorden added, "we'll exit the year a much stronger company than we entered the year."
* Arun Jayaram, JPMorgan: Asked about CapEx reduction drivers for 2026. Jorden said, "part of our ability to lower our capital is driven by our asset performance."
* Jayaram also asked about the post-acquisition performance of Franklin and Avant assets. Sirgo highlighted that teams are "finding new zones" and "driving down dollar per foot," contributing to inventory improvement.

SENTIMENT ANALYSIS

* Analyst sentiment was generally constructive but focused on cash returns, capital allocation, and strategic direction, with a slightly positive tone. Questions regarding portfolio structure and capital efficiency were persistent.
* Management maintained a confident tone during prepared remarks and Q&A, emphasizing operational and financial strength. Jorden’s statement, "We are confident that patience is prudent and that the future of natural gas will provide tremendous opportunities for Coterra," reflected optimism. Young referenced the company’s "highly capital-efficient plan that generates a substantial amount of free cash flow."
* Compared to the previous quarter, management's tone remained steady, with continued emphasis on capital efficiency and consistent operational execution. Analyst tone was more focused on shareholder returns and guidance evolution in the current quarter.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2025 was raised for both total production and natural gas volumes; oil production guidance midpoint was maintained but range was tightened.
* Management reiterated a focus on free cash flow and capital efficiency, with a new emphasis on a modest reduction in 2026 capital and continued balance sheet strengthening.
* Analysts shifted from operational issues such as the Harkey remediation in Q2 to capital allocation, buybacks, and shareholder returns in Q3.
* Management confidence and communication style remained consistent, while analyst questions were more centered on returns and portfolio strategy this quarter.

RISKS AND CONCERNS

* Jorden highlighted market volatility, referencing "the swing between optimism and pessimism" and the need for discipline amid "a lot of moving pieces" in oil markets.
* Management acknowledged public scrutiny from the Kimmeridge letter, stating willingness to consider suggestions while defending current strategy.
* Deshazer noted the need to monitor cost inflation and workover expense, with expectations for moderation into the fourth quarter.
* The company is maintaining flexibility on rig and frac crew contracts to adapt to market conditions.

FINAL TAKEAWAY

Coterra Energy enters the final quarter of 2025 with momentum across all business units, having raised its full-year production outlook while signaling modestly lower capital spending for 2026. The company continues to prioritize shareholder returns through dividends and a resumed buyback program, supported by strong free cash flow, improved asset integration, and disciplined capital allocation. Management remains confident in its multi-basin strategy, operational flexibility, and ability to deliver value through commodity cycles, while remaining open to strategic input from stakeholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ctra/earnings/transcripts]

MORE ON COTERRA ENERGY

* Coterra Energy Inc. (CTRA) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4837552-coterra-energy-inc-ctra-q3-2025-earnings-call-transcript]
* Coterra Energy: Excellent Natural Gas Production Results Leads To Improved Guidance [https://seekingalpha.com/article/4819824-coterra-energy-excellent-natural-gas-production-results-leads-to-improved-guidance]
* Coterra Energy Inc. (CTRA) Presents At Barclays 39th Annual CEO Energy-Power Conference 2025 (Transcript) [https://seekingalpha.com/article/4819545-coterra-energy-inc-ctra-presents-at-barclays-39th-annual-ceo-energy-power-conference-2025]
* Coterra needs overhaul of leadership and strategy, activist investor Kimmeridge says [https://seekingalpha.com/news/4514283-coterra-needs-overhaul-of-leadership-and-strategy-activist-investor-kimmeridge-says]
* Coterra Energy Non-GAAP EPS of $0.41 misses by $0.02, revenue of $1.8B beats by $50M [https://seekingalpha.com/news/4513550-coterra-energy-non-gaap-eps-of-0_41-misses-by-0_02-revenue-of-1_8b-beats-by-50m]