Ugurhan
Kotera Energy (New York Stock Exchange:Chuo Transportation) Production report for the first quarter of 2024 Although it exceeded expectations Postponed 12 The company will idle the Marcellus wells until later this year. The company expects to achieve its full-year guidance for natural gas production. Even though those wells came on stream later than originally expected, Cotera raised its full-year oil-production outlook by 2% to 3%, citing strong well performance as the positive outlook revision.
Cotera is expected to generate $1.232 billion in free cash flow in 2024 at current strip prices, which is nearly $100 million less than I had projected. MarchThe improved production guidance is more than offset by lower commodity prices. However, I maintain my long-term outlook for WTI crude oil at $75 and Henry Hub natural gas at $3.75. Cotera’s stock price is expected to rise slightly to $32 per share on strength in oil production.
Q1 2024 results
Cotera had a very strong first quarter 2024 performance. Total production (and natural gas production) was The midpoint of the guidance, Oil production also beat the midpoint of guidance by 6%.
These results were achieved despite Cotera postponing 12 net Marcellus wells until late 2024 due to weak natural gas prices. Had Cotera brought those wells online in the first quarter of 2024 as scheduled, natural gas and total production would have been even higher.
The well deferrals resulted in Cotera’s capital expenditures for the first quarter of 2024 being $450 million, below its guidance range of $460 million to $540 million for the quarter.
Notes on Guidance
Cotera raised its full-year oil production outlook by 2% to 3% due to faster cycle times and strong well performance. Cotera’s oil production has beaten expectations in recent quarters.
Cotera also maintained its full-year natural gas production guidance. Cotera’s natural gas production has also exceeded expectations in recent quarters, but the company has postponed the commissioning of its Marcellus well, which was scheduled for the first quarter of 2024, due to weak natural gas prices. Cotera also does not plan to commission the Marcellus well in the second quarter of 2024. This is expected to result in a 10% sequential decline in the company’s natural gas production from the first quarter of 2024 to the second quarter of 2024. However, the strong first quarter of 2024 natural gas production performance should enable Cotera to achieve its original full-year natural gas production guidance. As natural gas prices are expected to improve further in the second half of 2024, the postponed wells are expected to be commissioned as scheduled around that time.
Cotera’s capital expenditure budget remains unchanged. The well deferral will shift some capital expenditures from the first quarter of 2024 to the second half of 2024.
Outlook for 2024
The current strip for 2024 includes WTI crude oil at just over $76 and Henry Hub natural gas at about $2.52. With Cotera’s updated production guidance, which includes oil production of 104,500 barrels per day, Cotera is now projected to generate revenue of $5.521 billion, including hedges.
| type | unit | $ per barrel/Mcf | one million dollars |
| Oil (barrel) | 38,142,500 | $74.00 | $2,823 |
| NGL (barrel) | 35,161,667 | $20.00 | $703 |
| Natural gas (MCF) | 994,625,000 | $1.95 | $1,940 |
| Hedge Value | $55 | ||
| Total Revenue | $5,521 |
As a result, free cash flow (before dividends) at current strip prices is expected to be $1.232 billion, which is pretty close to Coterra’s forecast of $1.3 billion in free cash flow in 2024, assuming slightly improved overall commodity prices.
| type | one million dollars |
| Direct Operation (LOE + Workover) | $598 |
| Transport, processing and collection | $956 |
| Non-income taxes | $265 |
| Cash and administrative expenses | $215 |
| Net Cash Interest | $55 |
| Cash Tax | $350 |
| Capital Expenditures | $1,850 |
| total cost, total expenses, total expenses | $4,289 |
Cotera repurchased 5.6 million shares in the first quarter of 2024 for $150 million (excluding 1% excise tax) at an average price of $26.94 per share. As of the last reported date (May 1), the company had approximately 744 million shares outstanding.
After subtracting Cotera’s dividend ($0.21 per quarter), that would leave approximately $457 million of 2024 free cash flow to be used for additional share repurchases and other purposes in 2024.
Cotera also had $1.289 billion in cash at the end of the first quarter of 2024, of which $575 million is expected to be used to repay its notes maturing in September 2024.
Rating Notes
When I reviewed Cotera in March, I estimated its value at $31 per share based on long-term (2024+) WTI crude oil prices of $75 and Henry Hub natural gas prices of $3.75.
Kotera’s 2024 free cash flow is now expected to be slightly lower than I previously modeled due to lower commodity prices, however the reduction is only $0.12 per share and we are not changing our long-term commodity price expectations at this time.
I believe that strong performance from Cotera’s wells and an improving oil production outlook will lead to a slight increase in the company’s stock price, perhaps to around $32 per share.
Conclusion
Strong performance from Cotera’s wells led the company to beat expectations for the first quarter of 2024 and raise its full-year oil production guidance. Weak natural gas prices caused the company to postpone some of its Marcellus wells to later this year, but it still expects to achieve its original natural gas production guidance.
Strong well performance and improved capital efficiency boost Cotera’s estimated stock price to $32 per share over the long term at $75 for WTI crude and $3.75 for Henry Hub natural gas. Cotera’s stock repurchases in the mid-$20s would also provide a slight boost to the stock.
