Coterra Unveils Strategic Acquisitions in the Permian Basin

Coterra Energy Inc. has entered into two definitive agreements to acquire assets from Franklin Mountain Energy and Avant Natural Resources, along with its affiliates, for a total consideration of $3.95 billion. This deal consists of $2.95 billion in cash and $1.0 billion in Coterra common stock, which will be issued to one of the sellers, subject to price adjustments. The cash portion of the purchase will be funded through a mix of cash on hand and new borrowings. The transactions, pending customary terms and conditions, are anticipated to close in the first quarter of 2025, with an effective date of October 1, 2024. Importantly, the acquisitions are independent of each other, meaning the completion of one does not depend on the other.

Tom Jorden, Chairman, CEO, and President of Coterra, expressed excitement about the acquisitions, which will significantly expand Coterra’s footprint in the Permian Basin. These acquisitions will create a larger core area in New Mexico, aligned with Coterra’s strengths, and are expected to add substantial oil volumes in 2025 while also providing inventory upside in oil-weighted formations. Jorden highlighted the company’s longstanding presence in Lea County, New Mexico, where it has been drilling since 2010, and emphasized the strong future opportunities these assets present. The deal will enhance the company’s ability to drive capital-efficient development and generate substantial free cash flow, all while maintaining a robust balance sheet.

The acquisitions will establish a new oil-weighted focus area in New Mexico, featuring acreage strategically located next to Coterra’s existing assets. The acquisitions are highly accretive, expected to increase per-share Discretionary Cash Flow and Free Cash Flow by more than 15%, as well as add value to Net Asset Value per share. The deal is part of Coterra’s disciplined 2025 framework, which includes an expected reinvestment rate of about 50%. Pro forma production is projected to reach 150–170 mbod of oil and 720–760 mboed of total equivalent production, with capital expenditures for 2025 anticipated between $2.1 billion and $2.4 billion.

Coterra will also gain over 49,000 net acres in the northern Delaware Basin, expanding its footprint to approximately 83,000 net acres. These assets include 400–550 net Permian locations, targeting multiple formations, including Bone Spring, Harkey, Avalon, and the emerging Lower Wolfcamp/Penn Shale. The acquired assets are expected to generate strong returns, with a 13% estimated 2025 Free Cash Flow yield at $70/bbl WTI and $3.00/MMBtu Henry Hub price assumptions. Coterra expects to maintain its industry-leading balance sheet with a low net leverage ratio, even under more conservative commodity price scenarios. The company is committed to returning at least 50% of annual Free Cash Flow to shareholders through dividends and share buybacks.

Coterra is a leading exploration and production company headquartered in Houston, Texas, with key operations in the Permian Basin, Marcellus Shale, and Anadarko Basin. The company aims to be a top energy producer, generating sustainable returns through the efficient and responsible development of its diverse asset portfolio.