Citi analysts raised their rating for Coterra Energy (NYSE:CTRA) from Neutral to Buy, while also increasing the price target from $28.00 to $30.00. The bank’s upgrade is based on the potential for capital efficiency improvements in Coterra Energy’s portfolio in 2024.
In the Delaware region, Coterra Energy is concentrating on large row development programs aimed at reducing cycle times and drilling and completion (D&C) costs. The company’s strategy differs from its peers in that it focuses on the core Wolfcamp, Harkey, and Bone Spring zones, rather than developing multiple zones in cube programs.
In the Marcellus region, Coterra has incorporated a higher percentage of less productive Upper Marcellus wells in recent years. This mix is expected to stabilize at around 40% next year. Additionally, Coterra is poised to capitalize on previous investments in the Lower Marcellus when developing the Upper Marcellus, potentially reducing capital expenditure by approximately $200 million. The analysts do not anticipate this saving to be redeployed due to the current low commodity prices, which they believe points to enhanced returns.
Furthermore, the analysts highlighted that a recovery in gas prices would significantly benefit Coterra Energy, given that about 70% of its production is gas-exposed.