Coterra's Q2 2025 Earnings Call: Contradictions on Harkey Wells, Marcellus Activity, and Oil Growth Trajectory

Production and Revenue Performance:
- Coterra Energy exceeded the high end of its guidance for natural gas and total barrel of oil equivalent (BOE) production, with revenues for the quarter balanced between oil and natural gas.
- Oil production was 2% above the midpoint of the guidance, while natural gas production was above the high end of the guidance range.
- The strong performance was attributed to outperformance in all three business units, including significant contributions from the Marcellus production and NGL volumes.

Capital Expenditures and Reinvestment:
- Capital expenditures in the second quarter were $44 million less than the midpoint and below the low end of the guidance range, primarily due to timing and additional cost savings.
- For the full year 2025, Coterra plans to invest approximately 50% of its cash flow, with consistent activity across all three business units in the second half of the year.
- The low reinvestment rate is considered an indicator of asset quality, with Coterra aiming to maintain high capital efficiency and consistent profitable growth.

Harkey Remediation and Long-term Prospects:
- Coterra is making progress in addressing issues with the Windham Harkey flowbacks, with 6 new Harkey wells recently brought online showing strong performance.
- The company expects the Harkey program to be a solid contributor in the future, with plans to drill 10 to 20 gross wells annually from 2025 to 2027.
- The success of the new wellbore designs and the ability to mechanically isolate wells give confidence in the long-term potential of the Harkey interval.

Macroeconomic Stability and Strategic Positioning:
- Coterra has decided to maintain its deployment of rigs to maintain consistent activity due to stabilization in the macroeconomic situation, with 9 rigs in Permian, 2 in Marcellus, and 1 to 2 in Anadarko.
- The company remains optimistic about long-term industry prospects and its ability to maintain a steady operational cadence through cyclical commodity uncertainties.
- Coterra's deep inventory of low-cost assets and strong capital efficiency position it well to maintain its strong capital efficiency even as Tier 1 inventory declines.