Stock Analysis & Valuation Coterra Energy Inc. (0HRZ.L)

• Previous Close: £28.52
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	14.50	-49
Intrinsic value (DCF)	10.10	-65
Graham-Dodd Method	9.60	-66
Graham Formula	5.00	-82

Strategic Investment Analysis

Company Overview

Coterra Energy Inc. (LSE: 0HRZ.L) is a leading independent oil and gas company specializing in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs) in the United States. Headquartered in Houston, Texas, Coterra operates key assets across three major basins: the Marcellus Shale in Pennsylvania (177,000 net acres), the Permian Basin (306,000 net acres), and the Anadarko Basin in Oklahoma (182,000 net acres). The company’s diversified portfolio includes significant proved reserves of 2.9 billion barrels of oil equivalent, with a strong focus on natural gas production. Coterra serves a broad customer base, including industrial users, local distribution companies, and power generation facilities, leveraging its integrated midstream infrastructure for efficient operations. As a key player in the U.S. energy sector, Coterra combines scale, operational efficiency, and a disciplined capital strategy to deliver sustainable returns in a volatile commodity market.

Investment Summary

Coterra Energy presents a compelling investment case due to its diversified asset base, strong cash flow generation, and disciplined capital allocation. With $2.8B in operating cash flow (FY 2024) and a manageable debt-to-equity profile, the company maintains financial flexibility while returning capital to shareholders via a $0.86/share dividend. Its low beta (0.31) suggests relative resilience to oil price volatility compared to peers. However, exposure to natural gas prices (44% of 2021 reserves) poses risks amid potential demand softness. The Permian Basin footprint offers growth optionality, but regulatory pressures in the Marcellus Shale could constrain long-term gas development. Trading at a moderate valuation (~3.4x revenue), Coterra suits investors seeking energy exposure with balanced risk-reward.

Competitive Analysis

Coterra Energy’s competitive advantage stems from its multi-basin diversification, low-cost structure, and integrated midstream assets. In the Marcellus Shale, Coterra benefits from tier-1 acreage in the dry gas window, achieving breakeven costs below $2.00/MMBtu, making it resilient in low-price environments. Its Permian position provides oil-weighted growth optionality, with stacked pay zones enhancing drilling efficiency. The company’s Anadarko Basin assets contribute stable NGL production, diversifying revenue streams. Coterra’s midstream infrastructure, including gas gathering and disposal systems in Texas, reduces third-party dependency and improves margins. Competitively, Coterra lags pure-play Permian operators in oil production scale but outperforms Appalachian-focused peers on cost efficiency. Its balanced commodity mix (55% gas, 45% liquids) mitigates single-commodity risks, though it lacks the international footprint of supermajors. ESG risks are partially offset by lower methane intensity versus industry averages, but regulatory scrutiny in Pennsylvania remains a headwind.

Major Competitors

• EOG Resources (EOG): EOG Resources dominates as a low-cost Permian and Eagle Ford shale operator, with superior oil-weighted production (80% liquids) driving higher margins than Coterra. Its technical prowess in well completion drives industry-leading IRRs, but lacks Coterra’s gas-focused diversification. EOG’s minimal hedging strategy increases exposure to oil price swings.
• Range Resources (RRC): A pure-play Marcellus operator, Range Resources competes directly with Coterra in Appalachian gas but with higher leverage (net debt/EBITDA ~1.8x). Its superior hedge book provides near-term cash flow stability, but limited Permian exposure makes it more vulnerable to gas price downturns versus Coterra’s diversified portfolio.
• Diamondback Energy (FANG): Diamondback is a Permian pure-play with peer-leading well productivity and scale (400k+ net acres). Its oil-centric model (70% production) commands premium valuations but lacks Coterra’s gas revenue buffer. Diamondback’s aggressive share buybacks contrast with Coterra’s balanced dividend-growth approach.
• Southwestern Energy (SWN): Southwestern overlaps with Coterra in the Marcellus and holds Haynesville Shale assets, but struggles with higher breakevens ($2.50+/MMBtu). Its smaller scale and debt burden (net debt/EBITDA ~2.5x) limit financial flexibility compared to Coterra’s stronger balance sheet and cash flow stability.
• ExxonMobil (XOM): Exxon’s integrated global model and Guyana offshore assets provide unmatched scale and diversification, but its higher-cost structure and slower shale responsiveness contrast with Coterra’s leaner operations. Exxon’s LNG capabilities offset gas price risks better than Coterra’s domestic-focused gas sales.