Coterra Energy Inc.

Thank you for standing by. At this time, I would like to welcome everyone to the Cotera Energy second quarter 2023 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 and Analysis, and Investor Relations. You may begin your conference.

Thank you, Cheryl, and good morning, and thank you for joining Cotera Energy's second quarter 2023 earnings conference call. Today's prepared remarks will include an overview from Tom Jordan, CEO and President, and Shane Young, Executive Vice President and CFO. Also on the call are Blake Sergo, Senior Vice President of Operations, and Scott Schroeder. 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 have joined our call this morning. We're looking forward to discussing our second quarter results as well as our approach to the business and outlook for the years ahead. First, some remarks on our second quarter results. We had an excellent quarter driven by production beats on oil, natural gas, and natural gas liquids. Volumes on all three commodities exceeded the high end of our guidance. Our production beat was primarily driven by well productivity that exceeded our expectations. This was true in the Marcellus, Anadarko, and the Permian. This beat was driven by many factors, including optimization of completion design, spacing, landing zone selection, and better than expected performance from a project of three-mile laterals. Our go-forward well productivity should closely approximate current trends in the coming years. We are highly confident in our sustainable asset performance. Excellent results are easy to describe but tremendously hard to achieve. It takes dedication and teamwork between our operations, marketing, midstream, and regulatory teams. It takes support from our corporate engineering group, our machine learning team, our it team and our accounting team mostly it takes the dedication and passion of our field staff who put their shoulder to the wheel 24 7 365 days a year with a commitment to excellence and safety the cotera team is operating as one and it is a pleasure to be a member of such an outstanding team our vision for cotera is one of consistent profitable growth through the cycles a vision made possible by hard work and perseverance. We expect our CapEx for the full year to fall within our previously announced annual cost guidance range. Costs continue to moderate slightly, but not as significantly as we had hoped. Slide 12 in our investor deck shows that although we look ahead to a 10% to 15% reduction in some big ticket items, we foresee a net 5% reduction in total well costs as we look ahead to 2024. Second, I'd like to make a few remarks regarding our approach to the business. With top-tier assets, a pristine balance sheet, and few contractual service commitments, we have tremendous flexibility for 2024 and beyond. Now, as ever, our mission is to generate consistent, profitable growth. Having outstanding oil and natural gas assets with a low cost of supply allows us the wherewithal to accomplish this. It takes discipline and at times a dose of courage. We will not stop and start our program with short-term swings in commodity pricing. We have learned over time that chasing the strip up or down is a fool's errand. Our experience tells us that in a cyclic commodity business, The winners are those that can maintain discipline, consistency. Highly reactive behavior can badly backfire, especially in a world where project cycle times can be longer than short-term swings in commodity prices. We choose a steady-as-she-goes approach to our program design and execution. We stress test all of our opportunities at draconian low commodity prices so that we can deliver reasonable returns through the ups and downs of the cycles. We play to win. Finally, let me make a few remarks regarding our outlook for the years ahead. Although we are currently working on our 2024 plans, we will not be making specific comments on them. Our plans will be built with some simple considerations. First, based on range bound assumptions of future commodity pricing, We estimate what level of total capital expenditure is appropriate for Cotera. We continuously reexamine our inventory with the goal of selecting the very best returns. We stress test these opportunities to ensure that they can withstand downdrafts and pricing, as well as increase in costs. We insist on flexibility so that we can pivot if macro commodity conditions change. In long-term planning, we think of total Cotera capital. And within that framework, capital will flow from basin to basin as conditions warrant. We have a firm conviction that production is an outcome, not a primary driver. Consistent annual progress is our goal. And if smart project architecture leads to quarterly fluctuations, so be it. We'll have some large projects in 2023 and beyond driven by our goal of achieving the best returns over the long haul. We don't get distracted by quarterly fluctuations as projects come online. Although we like production beats, our commitment is to invest for results that can withstand commodity swings. These principles are in our corporate DNA. As we look ahead into 2024, we have options and flexibilities. For example, we can drop capital in the Marcellus by more than $200 million versus 2023 and still hold the region's production flat over multiple years. We have the option to redirect the capital or to simply invest at a slower cadence. We also retain the ability to restore activity if the gas macro were to significantly recover. Although we're confident in our ability to deliver on our updated three-year outlook, as shown on slide five of our investor deck, we have a wide range of options on total capital and allocation. The outstanding quality and durability of our assets, the flexibility of our capital allocation, our organizational capacity and our consistent execution are what differentiates Cotera. As always, We prefer to speak about results rather than promises. Before I turn the call over to Shane, I want to welcome him to Cotera. Shane will be a key player in our team for many years to come. We are absolutely delighted that he has joined the team. He will make us better. Welcoming Shane is a bit bittersweet, for it's on the heels of Scott Schroeder's decision to retire. Today will be Scott's last quarterly conference call. Scott's career is one for the record books. With Cabot, Scott was instrumental in building one of the finest companies in our sector and a defining success for the shale era. Scott's vision and wisdom were key to the formation of Cotera, and he has become a trusted advisor and dear friend to us all. We will miss Scott and wish him a fruitful and satisfying retirement. He leaves with our deep gratitude. With that, I will turn the call over to Shane.