Coterra Energy Inc.

Thank you for standing by. At this time, I would like to welcome everyone to the Cotera Energy fourth quarter 2022 earnings 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 one. Thank you. Dan Guffey, Vice President, Finance, Planning, Analysis, and Investor Relations. You may begin your conference.

Thank you, and good morning. Thank you for joining Cotera Energy's fourth quarter 2022 earnings conference call. Today's prepared remarks will include an overview from Tom Jordan, Chairman, CEO, and President, and Scott Schroeder, Executive Vice President and CFO. Also on the call, we have Blake Sergo and Todd Raymer. Following our prepared remarks, we will take your questions during our Q&A session. 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 GAAP financial measures, were provided in our earnings release and updated investor presentation, both of which can be found on our website. With that, I'll turn the call over to Tom.

Thank you, Dan, and welcome to all of you who've joined us for our fourth quarter conference call. We're looking forward to a fruitful discussion on Cotera performance, outlook for 2023, three-year outlook, and our tune-up on our return of capital approach. We had an excellent fourth quarter and full year in 2022, driven by superior asset performance, good execution, and some commodity price windage. We finished the fourth quarter above the high end of our guidance on both oil and natural gas. This was made possible by the efforts we undertook during the year on weatherization. We experienced little downtime during the December winter storm events in the Permian, Anadarko, and the Marcellus. This took careful planning, smart engineering, great field coordination and perseverance, and a lot of grit on the part of our operational staff in all three regions. The lack of significant downtime was also helped by collaboration between our Permian, Anadarko, and Marcellus business units. We brought our teams together earlier in the fall to share experiences and best practices on weatherization, and it paid off. Kudos to our teams who kept us online and flowing during these challenging weather events. We also generated excellent financial results during the quarter and full year. For the full year 2022, we generated almost $4 billion in free cash flow. We returned almost $2 billion in cash to our shareholders through the dividends, bought back $1.25 billion of Cotera stock, and retired $874 million in long-term debt. We achieved almost all of our annual operational goals, including a continuation of our multi-year effort towards emission reduction. Cotera maintains one of the lowest emission intensities in our space. This is also true if one separates our Permian assets and looks at them in isolation. It's due to our continuing efforts towards tankless facility implementation, electrification, moving to centralized emergency flaring, and establishing a more aggressive inspection cadence than federal and state rules demand. Our entire organization is focused on these efforts. Our top-tier results are a reflection of our commitment and focus. We announced last night that our Board of Directors has authorized a $2 billion share buyback, which, based on our current outlook, could be executed over the next 18 to 24 months. We are pivoting our capital return priorities to favor buybacks over the variable dividend. This is an outgrowth of intensive study and debate about the macro environment we find ourselves in, investor feedback, and our viewpoint on a looming global supply-demand imbalance. We're not backing off our core pledge to return at least 50% of free cash flow to our owners in the form of our base dividend, buybacks, and variable dividends. The world has changed, and we find it prudent to adjust our cash return tactics accordingly. Furthermore, we think that one of the best, most accretive opportunities in the acquisition market lies in Cotera at our current market valuation. As a wise general once said to his troops, if you find that the map doesn't match the terrain, go with the terrain. In 2023, we're going with the terrain. We also announced the three-year outlook with our release. Although this plan is not set in stone, It reflects our current multi-year activity schedule. It's based on real, ready-to-go locations, updated and calibrated type curves, and projects our current cost structure. As slide six in our investor deck shows, we have an active plan that generates an annual average 0% to 5% BOE in natural gas growth and an annual average of 5% oil growth by investing 2.0% to $2.1 billion per year in each of the next three years on average. 2023 is year one of this multi-year plan. Basically, the 2023 plan that we announced last night sets up the three-year cadence nicely. Although production is anticipated to be relatively flat in 2023, we establish a cadence that will have significant impact on 2024 and beyond. Furthermore, we have optionality. The 2023 capital plan of $2.0 to $2.2 billion has off-ramps in the event conditions were to significantly degrade. We have balanced our program with some services under our annual contract, while others are on a quarter-to-quarter basis. This provides flexibility as we navigate through the year. Our program is designed to be a guided missile, not a rifle shot. Cotera enjoys one of the industry's lowest cost of supply with our Marcellus gas assets, and at the current commodity strip, our projected returns on our 2023 Marcellus program are outstanding. We have the projects and market takeaway at the ready. However, if conditions worsen and we choose to retrench, we can pare back. Our capital program is highly flexible depending upon commodity pricing and costs. This means that we can either significantly curtail total activity in capital or shift it from basin to basin as conditions warrant. We could pare back as much as 10% of our total capital this year without impacting 2023. However, it would lower our growth trajectory in the out years. That said, we do not manage our program based upon daily spot prices. Our outlook for 2023 is both guarded and optimistic. We're guarded owing to a muddled outlook on inflation and the inevitable impact that weather has on our natural gas business. We're optimistic because at the current and projected oil and natural gas prices, our project returns are excellent. Although they're not as robust as they were in 2022 owing to commodity downdrafts and the fact that we drilled some spectacular opportunities in 2022, Our projected 2023 returns are excellent by historical standards. We've built a multi-year plan that invests through the cycles, generates modest profitable growth, and checks the box for ability to withstand further commodity price erosion. The ability to confidently invest through the cycles is one of the many benefits of having a Fortress balance sheet and assets with a low cost of supply. The flexibility of our multi-year program allows us to control those elements within our control and adjust those elements outside of our control. You'll also find a little more granularity on our asset inventory on slide seven in our investor deck. As always, these are real locations with defined calibrated targets and type curves. These locations will be drilled. I hope that you will draw the conclusion from this that we do. Although one needs to continually high-grade inventory, Cotera is well positioned for more than 15 years ahead. I would also like to draw your attention to our Anadarko inventory, which is significant and high quality. We are modestly increasing our activity in the Anadarko Basin in 2023 in order to bring forward some outstanding projects. There are more like them waiting in the wings. The Anadarko has a significant role to play in Cotera's future. Finally, with this release, we have closed the books on our reserve revision issue. This was a necessary step to level set our evaluation across our portfolio. We finished in the middle of the fairway that we had defined in our Q3 release. As we had promised, there are no new surprises in our end of year numbers. With that, I will turn the call over to Scott.