Executive Changes at Coterra Energy – New CFO, CHRO
In October 2021, Cimarex Energy, a Permian driller, and Cabot Oil & Gas, a Pennsylvania Marcellus driller, merged and renamed the company to Coterra Energy (see Cimarex Takes Over Cabot, Merged Co. Called “Coterra Energy”). Cabot’s Chief Financial Officer (CFO), Scott Schroeder, became the CFO for Coterra. Scott has been with Cabot (now Coterra) for 28 years. Yesterday Coterra announced Scott is retiring and will be replaced by Shane Young.
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For individuals, discretionary income is what’s left after you pay your taxes and fixed costs like housing, food, and clothing. For shale drillers, the equivalent to discretionary income is cash flow from operating activities (CFOA), which is the net income a company generates adjusted for non-cash expenses like depreciation and stock-based compensation, and for changes in working capital. Drillers can use their extra cash to grow production by spending more for drilling new wells (capital expenditures or capex). Or drillers can send some of the extra cash back to investors via share buybacks and dividends. How did Marcellus/Utica drillers spend their CFOA during the first quarter of 2023?
It’s possible to track which institutional investors (big investors like BlackRock) are buying or selling shares in various companies by reviewing Securities and Exchange Commission (SEC) Form 13F filings. S&P Global Market Intelligence performed a 13F review of which companies bought, and which sold (and how much) shares of stocks for shale gas drillers during the first quarter of 2023. The topmost active shale gas driller having its stock purchased by institutional investors was Comstock Resources, which drills exclusively in the Haynesville Shale. The reason Comstock came out on top, postulates S&P, is because the Haynesville is located close to the Gulf Coast and LNG export plants. However, it was the rest of the list that interested us.
An advisory note from Citi analyst Paul Diamond, picked up by the Seeking Alpha investor website, says U.S. natural gas producers are “primed for a wave of consolidation” in the medium term. Near the top of the list of potential takeover targets is, according to Diamond, Southwestern Energy, which had concentrated mainly on the Marcellus/Utica region until 2021, when it went wandering into Haynesville drilling. Who might be interested in buying Southwestern?
The weather has been fantastic for those of us living in the northeastern U.S. over the past few weeks. Clear blue skies (when they aren’t clouded with wildfire smoke from Canada), really warm temperatures, and absolutely no rain to spoil outdoor activities. Here in the Binghamton, NY area, we went from a surplus of rain and swollen rivers and lakes just a month ago to a rain deficit today. Lawns and fields and beginning to turn brown. Hey, we’re not complaining! But we do need some rain. The lack of rain in the Susquehanna River Basin has triggered water withdrawal restrictions for 42 oil and gas drillers and four other large water users (46 in all) by the Susquehanna River Basin Commission (SRBC). In many cases, the SRBC order is to “cease withdrawal.”
It’s been a wild ride for shale energy companies from the beginning of the shale revolution around 20 years ago. Here in the Marcellus/Utica, the very first Marcellus well was sunk by Range Resources in 2004. Until a few years ago, most shale drillers were not profitable, eating through investors’ money like candy. Just before the beginning of the pandemic, shale drillers got the “free cash flow” religion and began to pull back on new drilling in favor of profitability for shareholders. The pandemic, followed by Russia’s war against Ukraine, added new market gyrations. Bottom line: Last year, shale oil and gas drillers saw historic revenues and profitability. This year, the bottom is dropping out once again…
New shale permits issued for May 15-21 in the Marcellus/Utica took a substantial hit. There were only 12 new permits issued, down by more than half from the 26 new permits issued the previous week. Last week’s tally included 10 new permits for Pennsylvania, 2 new permits for Ohio, and no new permits in West Virginia. Last week the top receiver of new permits was a tie–Coterra Energy and Chesapeake Energy each received 3 new permits, with Coterra’s permits issued in Susquehanna County, PA, and Chessy’s permits in Bradford County, PA. Range Resources and Olympus Energy each received 2 new permits, and Southwestern Energy and EOG Resources each received 1 new permit.
This is precisely what we feared might happen and why we were against the merger of Cimarex Energy and Cabot Oil & Gas, now called Coterra Energy (see 
The sharp analysts at RBN Energy have sifted through the announcements and “guidance” statements from 42 of the country’s major publicly-traded oil and natural gas drillers for 2023. Among them are 11 gas-focused drillers, nine of which have operations in the Marcellus/Utica region. Looking at the list of 11 gas-focused drillers, RBN finds production will be just about the same in 2023 as it was in 2022–projecting a dip of 1% this year. The analysis also finds collectively that the 11 gas-focused drillers will spend around 9% more on drilling this year due to Bidenflation. Spending more to produce the same–not a winning formula for a politician to run on.