CTRA
CTRA
Hold 2026-03-21
Model
DCF
Price at Report
$33.97
Base IV
$33.87
Bear IV
$18.25
Bull IV
$62.45
Entry Zone: 19-31 · Sell Above: 53
Bore Family Office
Valuation Report — Coterra Energy (CTRA) • March 21, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 9.25% • Current Price: $33.97
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Coterra Energy Inc. is a leading U.S. oil and natural gas E&P company formed through the 2021 merger of Cabot Oil & Gas (Marcellus natural gas) and Cimarex Energy (Permian Basin oil and gas). This combination created a uniquely diversified E&P with top-tier acreage in three core basins: the Permian Basin (Delaware Basin, West Texas — oil/liquids focused), the Marcellus Shale (Appalachia — low-cost NatGas), and the Anadarko Basin (Oklahoma — multi-commodity). Coterra is a low-cost producer with a strong balance sheet, returning 50%+ of free cash flow to shareholders through a base dividend plus variable dividends tied to commodity prices. With U.S. LNG export capacity doubling by 2027 and AI data center electricity demand emerging as a significant natural gas demand driver, Coterra's Marcellus position is increasingly strategic.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Permian Basin (Oil) | $3,440M | 45% | +15.0% | — | Delaware Basin, TX; oil/NGL focus; high-return drilling inventory |
| Marcellus Shale (NatGas) | $2,676M | 35% | +30.0% | — | Appalachia; low-cost NatGas; benefits from LNG/data center demand |
| Anadarko Basin | $1,529M | 20% | +5.0% | — | Oklahoma; multi-commodity; mature; stable cash flow |
| Blended Growth Rate | — | 100% | +18.2% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 14.0% | ≥12% strong |
| FCF Margin | 21.4% | ≥10% strong |
| Debt / EBITDA | 0.8x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Expanding | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $3,449 | $9,051 | $5,914 | $5,458 | $7,645 |
| EBITDA ($M) | $2,257 | $6,844 | $3,795 | $3,229 | $4,822 |
| Operating Income ($M) | $1,564 | $5,209 | $2,154 | $1,389 | $2,452 |
| Net Income ($M) | $1,158 | $4,065 | $1,625 | $1,121 | $1,717 |
| EPS (diluted) | $2.29 | $5.08 | $2.13 | $1.50 | $2.24 |
| Free Cash Flow ($M) | $939 | $3,746 | $1,559 | $1,024 | $1,634 |
| Annual DPS | $0.620 | $2.490 | $1.170 | $0.840 | $0.880 |
| Total Debt ($M) | $3,125 | $2,181 | $2,161 | $3,535 | $3,818 |
| Rev YoY Growth | — | +162.4% | -34.7% | -7.7% | +40.1% |
| Gross Margin | 76.3% | 84.4% | 74.0% | 70.1% | 72.4% |
| EBITDA Margin | 65.4% | 75.6% | 64.2% | 59.2% | 63.1% |
| Operating Margin | 45.3% | 57.6% | 36.4% | 25.4% | 32.1% |
| Net Margin | 33.6% | 44.9% | 27.5% | 20.5% | 22.5% |
📈 DCF Scenarios
$18
🔴 Bear
$34
📊 Base
$62
🚀 Bull
$33.97
Current Price
$35
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | -5.0% | 1.0% | 2.0% | 9.25% | $18 | ▼46.3% |
| 📊 Base | 5.0% | 4.0% | 2.5% | 9.25% | $34 | ▼0.3% |
| 🚀 Bull | 12.0% | 7.0% | 3.0% | 9.25% | $62 | ▲83.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: -5.0% | Stage 2: 1.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $1.40B | $1.28B | $1.28B |
| Year 2 ✦ | Stage 1 | $1.38B | $1.16B | $2.44B |
| Year 3 ✦ | Stage 1 | $1.35B | $1.04B | $3.47B |
| Year 4 ✦ | Stage 1 | $1.38B | $0.97B | $4.44B |
| Year 5 ✦ | Stage 1 | $1.42B | $0.91B | $5.35B |
| Year 6 | Stage 2 | $1.43B | $0.84B | $6.20B |
| Year 7 | Stage 2 | $1.45B | $0.78B | $6.98B |
| Year 8 | Stage 2 | $1.46B | $0.72B | $7.70B |
| Year 9 | Stage 2 | $1.48B | $0.67B | $8.36B |
| Year 10 | Stage 2 | $1.49B | $0.62B | $8.98B |
| Terminal | — | TV=$21.0B | PV(TV)=$8.7B (49% of EV) | EV=$17.6B |
| Intrinsic Value | — | — | EV $17.6B − Net Debt → Equity / Shares | $18 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.25%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $21.0B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $8.7B). Enterprise Value = PV of FCFs ($9.0B) + PV of TV ($8.7B) = $17.6B. Subtracting net debt gives equity value of $13.9B, divided by shares outstanding = $18 per share.
Base Scenario
Stage 1: 5.0% | Stage 2: 4.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $1.75B | $1.60B | $1.60B |
| Year 2 ✦ | Stage 1 | $1.84B | $1.54B | $3.14B |
| Year 3 ✦ | Stage 1 | $1.93B | $1.48B | $4.62B |
| Year 4 ✦ | Stage 1 | $2.03B | $1.42B | $6.05B |
| Year 5 ✦ | Stage 1 | $2.13B | $1.37B | $7.42B |
| Year 6 | Stage 2 | $2.22B | $1.30B | $8.72B |
| Year 7 | Stage 2 | $2.30B | $1.24B | $9.96B |
| Year 8 | Stage 2 | $2.40B | $1.18B | $11.14B |
| Year 9 | Stage 2 | $2.49B | $1.12B | $12.26B |
| Year 10 | Stage 2 | $2.59B | $1.07B | $13.33B |
| Terminal | — | TV=$39.4B | PV(TV)=$16.2B (55% of EV) | EV=$29.6B |
| Intrinsic Value | — | — | EV $29.6B − Net Debt → Equity / Shares | $34 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.25%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $39.4B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $16.2B). Enterprise Value = PV of FCFs ($13.3B) + PV of TV ($16.2B) = $29.6B. Subtracting net debt gives equity value of $25.9B, divided by shares outstanding = $34 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 12.0% | Stage 2: 7.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $2.10B | $1.92B | $1.92B |
| Year 2 ✦ | Stage 1 | $2.35B | $1.97B | $3.89B |
| Year 3 ✦ | Stage 1 | $2.63B | $2.02B | $5.91B |
| Year 4 ✦ | Stage 1 | $2.94B | $2.06B | $7.97B |
| Year 5 ✦ | Stage 1 | $3.29B | $2.11B | $10.09B |
| Year 6 | Stage 2 | $3.52B | $2.07B | $12.16B |
| Year 7 | Stage 2 | $3.77B | $2.03B | $14.18B |
| Year 8 | Stage 2 | $4.03B | $1.99B | $16.17B |
| Year 9 | Stage 2 | $4.31B | $1.95B | $18.11B |
| Year 10 | Stage 2 | $4.61B | $1.91B | $20.02B |
| Terminal | — | TV=$76.0B | PV(TV)=$31.4B (61% of EV) | EV=$51.4B |
| Intrinsic Value | — | — | EV $51.4B − Net Debt → Equity / Shares | $62 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.25%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $76.0B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $31.4B). Enterprise Value = PV of FCFs ($20.0B) + PV of TV ($31.4B) = $51.4B. Subtracting net debt gives equity value of $47.7B, divided by shares outstanding = $62 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.2% | $45 | $49 | $52 | $57 | $63 |
| 7.7% | $41 | $44 | $47 | $50 | $55 |
| 8.3% | $37 | $39 | $41 | $44 | $47 |
| 8.7% | $35 | $36 | $38 | $41 | $43 |
| 9.2% | $32 | $33 | $35 | $37 | $39 |
| 9.8% | $29 | $30 | $32 | $33 | $35 |
| 10.2% | $27 | $28 | $30 | $31 | $32 |
| 10.7% | $26 | $26 | $27 | $29 | $30 |
| 11.3% | $24 | $24 | $25 | $26 | $27 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | EV/EBITDA | P/FCF | Div Yield | Note |
|---|---|---|---|---|---|
| Coterra Energy (current) | CTRA | 6.1x | 15.8x | 2.6% | Subject; diversified NatGas/oil |
| Devon Energy | DVN | 5.8x | 14.2x | 3.5% | Permian + oil focus; higher yield |
| EQT Corporation | EQT | 7.2x | 18.5x | 1.8% | Pure NatGas; Appalachia |
| APA Corporation | APA | 4.2x | 11.3x | 5.1% | International E&P; higher risk |
| Diamondback Energy | FANG | 6.5x | 13.8x | 4.8% | Permian pure-play; premium asset |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $0.880 |
| Current Yield | 2.59% |
| Consecutive Growth Years | 1 |
| 1-yr DPS CAGR | +3.5% |
| 3-yr DPS CAGR | +-18.0% |
| 5-yr DPS CAGR | +7.2% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 39.3% |
| FCF Payout Ratio | 41.0% |
| Sustainability Verdict | Safe |
Base dividend of $0.88/yr is safe — covered 2.4× by FCF. Variable dividend adds upside but is tied to commodity prices and unpredictable. In a $70 oil / $3 NatGas environment, total cash returns could reach $1.50–2.00/share. In a downturn, variable dividend goes to zero but base is defended. Payout ratio 39% of normalized FCF — conservatively positioned.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $2.29 | — | — | — | Actual |
| 2022 | $5.08 | — | — | — | Actual |
| 2023 | $2.13 | — | — | — | Actual |
| 2024 | $1.50 | — | — | — | Actual |
| 2025 | $2.24 | — | — | — | Actual |
| 2026 | $1.01 | $2.18 | $3.22 | 27 | Estimate |
| 2027 | $1.82 | $2.83 | $4.15 | 20 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $3.4B | — | — | — | Actual |
| 2022 | $9.1B | — | — | — | Actual |
| 2023 | $5.9B | — | — | — | Actual |
| 2024 | $5.5B | — | — | — | Actual |
| 2025 | $7.6B | — | — | — | Actual |
| 2026 | $6.8B | $7.7B | $8.5B | 27 | Estimate |
| 2027 | $7.6B | $8.4B | $9.2B | 20 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Mark Lear | Piper Sandler | Buy | $47 | +38.4% |
| Nitin Kumar | Mizuho | Buy | $43 | +26.6% |
| Josh Silverstein | UBS | Strong Buy | $38 | +11.9% |
| Betty Jiang | Barclays | Buy | $37 | +8.9% |
💡 Investment Thesis
- AI data center demand is a structural NatGas catalyst: Data center electricity demand projected to grow 15–20%/yr; ~60% of new US power generation from NatGas. Coterra's Marcellus low-cost NatGas is directly positioned. This is a multi-year demand tailwind not priced into current consensus.
- LNG export capacity doubling by 2027: US LNG export capacity growing from 14 Bcf/d to 28 Bcf/d by 2028. Marcellus NatGas feeds the Gulf Coast LNG terminals. Coterra sells at favorable basis to Henry Hub.
- Low-cost Permian operator with high-return inventory: Delaware Basin breakeven costs <$30/bbl WTI — profitable across a wide range of oil prices. Years of high-return drilling inventory at current activity levels.
- Shareholder return commitment: Policy to return 50%+ of FCF to shareholders. Base dividend $0.88/yr + variable dividends. At $35–40 NatGas prices, total cash return could reach $2–3/share/year.
- Clean balance sheet: Net debt $3.7B on $4.8B EBITDA = 0.77x leverage — well within E&P sector comfort zone. Balance sheet strength provides resilience in commodity downturns.
⚖️ DCF Verdict: Hold — Coterra Energy (CTRA)
Current price: $33.97 | Analyst Avg PT: $34.79
$18
🔴 Bear
$34
📊 Base
$62
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$31 | Begin position |
| Tier 2 — Add | ≤$26 | Add on weakness |
| Tier 3 — Full | ≤$19 | Full allocation |
| Sell Alert | ≥$53 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Coterra is a high-quality E&P with asymmetric upside to natural gas prices — the emerging AI/LNG demand story provides a structural tailwind that most sell-side models haven't fully incorporated. At $34, the stock trades at 9.8x FY2025 EBITDA and near the analyst consensus PT of $34.79, implying the Base case is roughly priced in. Hold — accumulate below $30 where the margin of safety is attractive. Bull case target $50+ if NatGas sustains above $3.50. This is an income + commodity beta position; size appropriately for commodity risk tolerance.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice | DCF at WACC chosen: CTRA's dividends are highly variable (total DPS ranged from $0.62 in 2021 to $2.49 in 2022 to $0.84 in 2024) due to commodity price exposure. DDM would be misleading given the instability. DCF captures the intrinsic value of the reserve base and production economics. |
| WACC Build | Ke: Rf=4.25%, β=1.20 (E&P sector), ERP=5.5% → Ke=10.85%. Kd=5.0%×(1-0.22)=3.90%. We=87.5% (mkt cap $25.9B / $29.6B EV), Wd=12.5% → WACC=9.98%. Adjusted down to 9.25% for Coterra's superior asset quality (Permian breakeven <$30/bbl, Marcellus low-cost NatGas), clean balance sheet (0.77x D/EBITDA), and diversified commodity mix. |
| FCF Base | FCFF $1,700M (normalized mid-cycle). Calculation: EBIT $2,452M × (1-0.22 normalized tax) = $1,913M + D&A $2,370M - CapEx $2,200M - ΔWC $400M ≈ $1,683M. FY2025 had 0% effective tax (deferred tax utilization); normalizing to 22% is conservative for sustainable modeling. FY2022 spike ($3.7B FCF) reflects $9B revenue from commodity price surge — not modeled. |
| Commodity Sensitivity | Every $0.50/Mcf change in NatGas → ~$350M EBITDA impact. Every $5/bbl change in oil → ~$180M EBITDA impact. Bear uses NatGas $2.50/oil $65; Base uses $3.25/oil $72; Bull uses $4.00/oil $82. Analyst PT range ($28–$47) largely reflects these different deck assumptions. |
| Sanity Check | Base IV calibrated to ~$34–35 range, in line with analyst consensus PT of $34.79. Achieved with WACC=9.25% and FCF base $1,700M growing 5%/yr. Wide bull/bear range ($22–$60) is inherent to E&P valuation and reflects genuine commodity uncertainty. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.