Coterra Energy Inc.

Thank you for standing by. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cotera Energy first quarter 2022 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. Katerina Papadimitropoulos, Investor Relations, you may begin your conference.

Thank you, Cheryl. Good morning, everyone, and thank you for joining Cotera Energy's first quarter 2022 earnings conference call. During today's call, we may reference an updated investor presentation, which can be found on the company's website. Today's Prepare to March 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, Todd Reimer, and Daniel Guffey. 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 recommendations to the most directly comparable GAAP financial measures, were provided in yesterday afternoon's earnings 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, Katerina, and thank you to all who are joining us this morning. By all measures, Cotera had an outstanding quarter. First quarter results were driven by a nice production beat and strong commodity prices. Our assets performed well, as evidenced by our production coming at the high end of our guidance. We generated $961 million in free cash flow during the quarter and prosecuted our capital program with less than 30% of our cash flow from operations. For the full year 2022, we currently project discretionary cash flow of $5.9 billion. with our total 2022 capital program coming in at less than 30% of cash flow, leaving almost $4.5 billion in free cash flow. We were pleased to declare an ordinary dividend of 15 cents per share and a variable dividend of 45 cents per share for a total cash dividend of 60 cents per share. Furthermore, we launched our share buyback program in the first quarter, buying in 7.6 million shares totaling $184 million. Taken together, this resulted in a return of 69% of our free cash flow to our shareholders. My remarks will cover a few high-level areas of interest. The outlook for inflation, the outlook for commodity prices, and the role of the EMP sector in responding to the growing demand for oil and natural gas. First, a few thoughts on inflation. As with all of our peers, we are seeing significant inflation in the oil field. Pricing for drilling rigs, completion crews, fuel, sand, labor, oil field services, and trucking are all moving upward. Lead times for ordering tubulars, compressors, electrical equipment, production equipment, and line pipe are, in many instances, 12 to 14 months from order to delivery. Premier drilling rigs and premier completion crews are in short supply. Overall, we are seeing inflation moving towards 15 to 20% when comparing fiscal year 2022 to 2021. Although we are pushing back with operational efficiencies, inflation is putting pressure on our capital guidance range. For now, we are holding our capital guidance at the previously announced $1.4 billion to $1.5 billion range for the full year. There are, however, some bright lights. Wherever we can, we're powering our Permian drilling rigs with grid electrical power. All six of our Permian rigs are capable of running from grid power. 75% of our 2022 Permian drilling locations will be powered off the grid. which saves an estimated $50,000 per well or $4.3 million gross. We will also see significant savings from our first grid-powered frack crew, which arrives late Q2. Now a few words on commodity prices. For the first time in a decade, we are seeing support for oil and natural gas prices that is driven by long-term fundamental supply and demand outlooks. For many years, any conversations on global oil supply ultimately pivoted to a conversation on what OPEC Plus would do. Suddenly, the conversation is about the consequences of long-term underinvestment in replacing oil reserves in production. This has led to constructive thinking on long-term oil pricing by thoughtful, informed analysts and investors. Natural gas and its vital role in world power generation has returned as a welcomed hot topic. The world is ill-prepared to meet ambitious climate goals, and natural gas is a necessary part of the solution. That, coupled with affordability and accessibility, make natural gas and U.S. LNG exports a vital component to world energy supply. Energy security has returned as a top concern and U.S. natural gas has a leading role to play in global energy security and U.S. geopolitical influence. We have seen solid support in natural gas prices, natural gas optimism, and a serious discussion on the long-term role of U.S. natural gas in the world arena. Cotera is well positioned to contribute to this critical need for U.S. natural gas and U.S. LNG exports. Finally, a few words on the EMP sector's ability and willingness to respond to increasing demand. The U.S. EMP operator has proven to be remarkably resilient through times of crisis. It is through times of plenty that we have stumbled, through lack of discipline and overinvestment. As a consequence, Our sector has created an environment of boom and bust cycles, each peak and trough setting the stage for the next cyclic response. Shale 3.0 and the investor sentiment around it has been a sea change in our business. Our investors have been clear. They want us to be disciplined in both high and low commodity price environments and be proactive in returning cash to our shareholders. In a clear and an equivocal way, our shareholders have telegraphed that they want to change behavior out of us. We have listened and have responded with conviction around the revised approach to discipline investing. Now we find ourselves in a global energy crisis. Starting last summer, natural gas prices in much of the world spiked, owing to demand that was brought on by underperformance of renewables and restricted supply into Europe. Now the terrible tragedy in Ukraine and the loss of Russian oil and gas supplies have led to an energy crisis unlike anything the world has seen in almost 50 years. In order for the U.S. EMP sector to respond with increased U.S. supply, we need well-thought-out regulation and policies that encourage responsible resource development and infrastructure build-out. We need pipelines, which will take new legislation and cooperation from all stakeholders, including federal and state legislature and regulators, as well as the American public. Also, we need our investors to respond and encourage responsible growth. Lastly, we need the American public to realize that we, as employees of U.S. E&P companies, are Americans first, and we will do everything we can to meet our patriotic duties. Cooperation between all parties, including the E&P industry, is essential for global energy security and the long-term health of our industry. Cotera stands ready to engage in these tough challenges. We have the assets, the organization, the talent, and the wherewithal to do what we do best, solve difficult problems. And we will do that in partnership and conversation with our owners. With that, I will turn the call over to Scott Schroeder, our Chief Financial Officer.