Coterra Energy Inc.

Ladies and gentlemen, good morning and thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Katerra Energy fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call over to Ms. Katrina Papadimitropoulos. Please begin.

Thank you, Brent. Good morning, everyone, and thank you for joining Cotera Energy's fourth quarter 2021 earnings conference calls. During today's call, we may reference an updated investor presentation, which can be found on the company's website. Today's prepared remarks will include a business overview from Tom Jordan, CEO and President, and Scott Schroeder, Executive Vice President and CFO. Also in the room, we have Steve Lindeman, Blake Sergo, Dan Guthrie, and Todd Reimer. As a reminder, on today's call, we will make forward-looking statements based on our current expectations. Additionally, some of our comments will reference non-GAAP financial measures. Forward-looking statements and other disclaimers, as well as reconciliations to the most directly comparable GATT financial measures were provided in yesterday's afternoon, yesterday afternoon's release, which can be found on our website. Following our prepared remarks, we will take your questions. Please limit yourself to one question and one follow-up. With that, I'll turn the call over to Tom.

Thank you, Katarina, and thanks to all of you who are joining us this morning for the Q4 2021 Cotera Conference Call. I will be making a few overview remarks, followed by our Chief Financial Officer, Scott Schroeder. We'll then turn the call over to Q&A. Yesterday afternoon, we reported our fourth quarter 2021 results, which was our first full quarter as Cotera. All in all, things lined up nicely during the quarter. Our production came in right on top of the midpoint of our guidance, including a quarterly average oil production of 88.6 thousand barrels of oil per day. This is an increase of 31% over the legacy CIMRx Q4 2020. Our Marcellus program delivered as promised and company-wide all three streams, oil, gas, and natural gas liquids, came in at or above forecast. Scott will walk us through the financial details later on. We are very pleased to have delivered a strong Q4. We also announced our enhanced return to shareholders, including a 20% increase in our common dividend, a fourth quarter 21 total dividend equal to 60% of our fourth quarter free cash flow, and the launch of a $1.25 billion share buyback. Taken as a package, this positions Cotera to be one of the most attractive yield stories in our sector. Furthermore, we have confidence that this three-pronged approach is sustainable through the cycles. These are good times in our industry, but they will not last forever. Our experience tells us that things tend to stay good until they turn bad, and these turns are swift and unanticipated. There is every reason to be optimistic about our business right now. Oil demand and prices are firming, supported by fundamental supply-demand imbalances. Natural gas demand and LNG exports are increasing, driven in part by a reawakening to the fact that natural gas is an essential component to the world's energy transition needs. Public policymakers in the United States and abroad are reexamining their energy policies in a manner that favors natural gas demand. We hope these good times last, but Cotera is prepared for whatever the future may bring. As we look ahead into 2022, we have a well-crafted plan backstopped by the outstanding returns that our assets are providing. Our goal in formulating the 2022 capital plan was simple, to maximize our cash flow, capital efficiency, and hold production relatively flat. As we have previously discussed, we are strategically interested in balancing liquids upward as a percent of our overall revenue and cash flow. In 2022, we expect liquids to account for 47% of our revenue mix, up from 40% in 2021. We plan to accomplish this by weighting more capital to our oil and liquids-rich areas, with 49% in the Permian, 7% in the Anadarko, and 44% Marcellus. While all three basins offer comparable returns, the tilt towards our liquids-rich areas was a multi-factor decision driven by the current commodity environment, service and inflation headwinds, and the goal to maximize free cash flow. The output of our plan, we expect to generate $3 billion in free cash flow in 2022, while investing less than 35% of cash flow into our capital program. Our 22 plan hits the right stride, deploying the power of our portfolio to maximize cash flow, not production. A few words on the impact of inflation. Like all of our peers, we are experiencing inflation across our supply chain. This includes rig rates, pressure pumping, labor, fuel, sand, and chemicals. We are also seeing increased pressure on trucking services, particularly in the Marcellus. Comparing 2021 service rates to projected 2022 service rates, we see 12% to 14% inflation in total well costs. Although we continue to push back with ongoing operational efficiencies, it does remain a factor in our overall capital level. Among the ways we are pushing back is increased project size as measured by the number of wells per pad. In the Permian, our average wells per pad is increasing from 5.5 in 2021 to 8.3 wells per pad in 2022. We are also striving to capitalize on longer well lengths wherever possible, and our 22 average will be 11,000 feet. up over 10% year-over-year. Overall, we are seeing a net Permian inflation impact of 7% when we factor in inflation against ongoing operational efficiencies. Both of these counterinflationary pushbacks, the number of wells and the longer well length, are illustrated by our Pruitt Justify Authentic project in Culberson County, where we are drilling a 14-well project with an average lateral length of 15,750 foot. The Pruitt Justify Authentic Project is projected to deliver total well costs, including drilling completion and facilities of approximately $700 per foot, the lowest of our 2022 program. To our knowledge, this project is the largest three mile lateral project in the Permian Basin. We are already hard at work on our 2023 plans. As I've said in the past, owing to the long lead times required for PAD development, much of our 2022 plans were baked in before we closed on the Cotera transaction. However, we were able to impact these plans by balancing our oil and liquids contribution upwards. We will continue to work to optimize our portfolio and deliver consistent results through the cycles. As we look into the future, Cotera is blessed by a deep inventory throughout our asset base. The Permian, Marcellus, and Anadarko all have greater than 15 years of top-tier inventory at our current investment rates. For these purposes, we consider top-tier inventory as those locations that generate a PVI 10 of 1.5 or greater at mid-cycle price which we define as index prices of $55 oil and $2.75 gas. PBI 10 of 1.5 generally equates to an after-tax rate of return of 50% to 60% depending on the decline profile. If we look at lower returns, our inventory gets even longer at current conditions. We worry about a lot of things at Cotero. Inventory is not one of them. Finally, allow me to make a few comments on the progress of the integration of our two legacy companies. Thus far, the integration has gone remarkably well. Our organization is in place and functioning as one team. We are in the midst of integrating our various software systems and databases, accounting, land, engineering, geoscience, human resources. The team is making tremendous progress. Most importantly, We are seeing broad technical collaboration between our asset teams. We are exchanging ideas, gaining new insights from new colleagues, and raising the performance bar across our organization. We have an incredibly talented and dedicated team of professionals, and they are experiencing humility, as am I, as we come together and review the great work across our platform. We are exchanging spacing ideas, completion ideas, drilling efficiency, and EHS experiences and vision. We are challenging one another and developing trust. We are united in our commitment to make Cotera the best, most resilient company in our sector. I want to acknowledge our organization for their steadfastness in working through the integration process. This has involved long hours, occasional creative workarounds, and perseverance. The progress we are making is a testament to the quality of our workforce. I would also like to acknowledge our field staff, who once again this winter have been tasked with enduring severe winter storm events and through it all kept our production online and operated safely through exceedingly challenging conditions. I want to express my personal gratitude to these exemplary employees. With that, I will turn the call over to Scott.