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Coterra Energy: EPS Up 173%, Dividend Yield Of 9.6%, Priced At 5x FCF

May 04, 2022 5:55 AM ETCoterra Energy Inc. (CTRA)22 Comments


  • Coterra Energy delivered impressive results, with its adjusted EPS earnings increasing 173% y/y.
  • Coterra Energy has one of the best balance sheets in the sector.
  • Coterra Energy is approximately 25% hedged for 2022.
  • CTRA stock is priced at 5x free cash flow, with 9.6% yield at current strip prices.
  • As always, happy to discuss my thesis further in the comments section.
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Pipeline and valve of chemical plant

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Investment Thesis

Coterra Energy (NYSE:CTRA) is an E&P oil, natural gas, and NGL upstream company. Coterra announced its Q1 2022 results that simply outshone expectations. I had high expectations for this company going into print.


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This article was written by

Michael Wiggins De Oliveira is an energy specialist whose primary focus is capitalizing on “the Great Energy Transition” - the confluence of decarbonization, digitalization with AI, and deglobalization - to achieve greater investment returns. Through his 9+ years analyzing countless companies, Michael has accumulated outstanding professional experience in the energy sector and a following of over 40K on Seeking Alpha.

Michael is the leader of the investing group Deep Value Returns. Features of the group include: Insights through his concentrated portfolio of value stocks, timely updates on stock picks, a weekly webinar for live advice, and "hand-holding" as-needed for new and experienced investors alike. Deep Value Returns also has an active, vibrant, and kind community easily accessible via chat. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Michael is long VET and AR.

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Comments (22)

I would appreciate greater colour than just numbers. Where is the production. Plans for growth...
25% Hedged Not sure about that.
Dear author, how do you come up with 5x FCF?
Is this geerating schedule K-1?
Headline states Dividend Yield Of 9.6% ? Seeking Alpha's site shows it as 1.90%. ???
@odgreen025 because sites like seeking alpha and Yahoo finance are using previous dividends paid. This company and a lot of the companies in the energy space now are using variable dividends based on their cash flow. So management, will forecast their free cash flow and will commit to paying a certain percentage of that going forward to shareholders. In this case if you do the math it comes up to an 8 to 9% dividend yield. Devon energy is also doing it and I think pioneer may be doing it this way as well.
Pablomike profile picture
@John kilgore1
I don't like that the author has a headline with 9.6% Yield offered. It distorts the variability of the actual dividend, which is just $.60 or 2%. Just since Oct. we've enjoyed $1.535 of variable dividend but no guarantee it will continue.
@Pablomike Actually $0.60 + $0.15 is for that quarter. Multiply $0.75 you can come up with 9.6%.
why dont they pay a decent dividend under 2% cmon
What is their plan for hedges in 2023 and beyond?
Another point about their very low 0.4 leverage: when commodity prices go south, CTRA can leverage their balance sheet comfortably, to increase their resource holdings.
I bought shares last year when it was Cabot. And the whole time I've owned it I've been puzzled by how cheap it is, especially when they don't have the lousy hedges that most of their peers do. Yesterday finally saw a strong bump up. Maybe investors are finally getting it.
chi_tino profile picture
Any idea why they filed a mixed shelf this morning (May 4) to sell additional debt and equity?
Michael Wiggins De Oliveira profile picture

Probably a regulatory filing. I wouldn't get distracted by that.
@chi_tino I was unable to find the filing. Could you please provide a link
or list the source. Thanks!
chi_tino profile picture
@kylesmith It's an SEC filing. Check the SEC website.
Solojif1 profile picture
I love your thesis to keep it simple.
Germany, Europe, Russia and FCF. Toss the dividend in for good measure. Thanks for the article.
Michael Wiggins De Oliveira profile picture

''Germany, Europe, Russia and FCF.''

^^You got it!
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