Coterra Energy: A Capital-Efficient Oil Growth Story Planned for 2025

Coterra Energy (CTRA) delivered strong operational execution in 2024, exceeding the high-end of production guidance while keeping capital expenditures in check. For 2025, the producer is focused on capital efficiency, disciplined reinvestment, and strategic development across its three core basins: Permian, Anadarko, and Marcellus.

Key highlights for 2025:

Oil production growth of 5%+ YoY, supported by an optimized drilling plan in the Permian and Anadarko Basins. Marcellus drilling is anticipated to restart sooner than planned, boosting production in the second half of 2025. Significant well cost reductions across all three basins, driven by service cost deflation, longer laterals, and enhanced efficiencies.

Production and Capex:

CTRA is expected to deploy $2.2B in Capex for 2025, while increasing oil production. The company is prioritizing high-return projects and cost savings, leading to one of the most capital-efficient growth plans among peers. The goal of the capital program appears to be efficiency-driven, with a focus on reducing well costs, extending lateral lengths across each of their operating basins, and improving drilling speed.

Permian FY25 Activity: CTRA’s Permian basin operations will see the largest capital investment in 2025, totaling $1.6B. The producer intends to operate ten rigs and three frac crews, including expanded simul-frac operations in Culberson County, TX to improve cycle times and reducing per-foot costs.

• Capex: $1.6B

• Wells Online: ~155 net wells

• D&C Cost per Foot: $960 (vs. $1,020 in 2024, a 6% reduction YoY)

• Average Lateral Length: 10,400 feet.

• Cost Reductions and Efficiency Gains: Acquisition synergies and cost deflation are expected to reduce D&C costs by ~10%.

Anadarko FY25 Activity: Estimating a $240MM capital program for the basin down ~$50MM from FY24, averaging ~1 rig and less than one frac crew. The focus remains on longer laterals, optimized well spacing, and well cost reductions.

• Capex: $240MM

• Wells Online: ~17 net wells

• D&C Cost per Foot: $1,070 (vs. $1,300 in 2024, down 18% YoY)

• Average Lateral Length: 11,170 feet

• Operational Improvements and Cost Savings: Longer laterals (+15% YoY) appears to be driving lower costs per well. Service cost reductions and centralized facilities improving efficiency.

Marcellus FY25 Activity: CTRA is expected to kick-off its program in late 1Q/early 2Q with two rigs and less than one frac crew to be used this year and also beginning in 2Q25. The focus remains on capital efficiency and longer laterals.

• Capex: $260 million

• Wells Online: ~13 net wells

• D&C Cost per Foot: $700 (Upper Marcellus), $860 (Lower Marcellus)

• Average Lateral Length: Upper Marcellus: 19,000 feet Lower Marcellus: 14,500 feet

• Efficiency Gains and Cost Reductions: Well costs are forecasted to be down 22% YoY, driven by 60% longer laterals.

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Financial Strength and Capital Allocation 

CTRA is maximizing shareholder returns while maintaining a strong balance sheet. The producer is expected to generate ~$2.0B in FCF (up from $1.2B in FY24) and plans to return 50% or more to investors.

2025 Capital Allocation:

• Capex: $2.2B (up from $1.8B in 2024)

• Debt Reduction: forecasting ~$1B in term loan repayment.

• Shareholder Returns: forecasting $700-$800MM in dividends for FY25

Bottom Line: CTRA’s low reinvestment rate and strong cash flow growth position it well for long-term value creation.

Financial Statement Model

Companies Mentioned

• Coterra Energy (CTRA)

_{Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Patrick Enwright accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Patrick Enwright makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.}