According to its latest strategy, Coterra Energy Inc. CTRA has entered into an accord with two companies whereby it will acquire certain Permian Basin assets from Franklin Mountain Energy and Avant Natural Resources for $3.95 billion. The acquisition will be closed via a cash and stock deal, financed through $2.95 billion in cash and $1 billion in Coterra stock. The cash portion will consist of cash in hand and new borrowings and the company will issue 40.9 million shares of Coterra stock valued at $1 billion.
The deal, expected to close by early 2025, will provide several benefits to the company, like adding two high-quality assets to its portfolio, expanding the company’s core area in New Mexico and adding significant volumes to its oil production.
CTRA will acquire 49,000 net acres from the two Denver-based companies, expanding its footprint in New Mexico within the Permian Delaware basin. The acquisition will increase Coterra’s net locations in the state by 75% and its net locations in the Permian by 25%.
The newly acquired assets will boost the company’s oil production capacity by an estimated 60,000 to 70,000 barrels of oil equivalent per day.
Following the acquisition, the pro forma reinvestment rate is expected to be around 50% and the pro forma production capacity is likely to be around 160,000 barrels per day in 2025.
125 miles of pipeline and other infrastructure will be added to the company’s portfolio, which will enhance its netbacks and optimize the operational economics.
CTRA highlights that these acquisitions will provide a boost to their cash flow and net asset value. The estimated oil production in 2025 will also increase by 49% over 2024 production capacities. The company also expects to maintain a strong balance sheet and high liquidity ratio by the end of 2025. Since the company is committed to providing value to its shareholders, it also plans to return at least 50% of its free cash flow through dividends and buybacks.
Houston-based Coterra Energy is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. Currently, CTRA has a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like Mach Natural Resources LP MNR, Enerflex Ltd. EFXT and Flotek Industries, Inc. FTK.While Mach currently sports a Zacks Rank #1 (Strong Buy), Enerflex and Flotek Industries each carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Mach Natural Resources LP is an independent upstream oil and gas company that focuses on the acquisition, development and production of oil, natural gas and natural gas liquids reserves. The Zacks Consensus Estimate for AROC’s 2024 earnings indicates 200% year-over-year growth.
Canada-based Enerflex Ltd. provides oilfield services for natural gas and petroleum producers. EFXT’s expected EPS (earnings per share) growth rate for the next quarter is 188.89%, which compares favorably with the industry loss rate of 22.45%.
Flotek Industries develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the energy, consumer industrials and food & beverage industries. The Zacks Consensus Estimate for FTK’s 2024 earnings indicates 125% year-over-year growth.
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