Breaking Down Coterra Energy Inc. (CTRA) Financial Health: Key Insights for Investors

You are looking at Coterra Energy Inc. (CTRA) right now and wondering if their operational success translates to durable financial health, especially with natural gas prices being so volatile. The short answer is yes, they are executing well, but you have to watch their capital efficiency like a hawk. For 2025, Coterra is guiding to a robust total equivalent production midpoint of around 777 thousand barrels of oil equivalent per day (MBoepd), a clear signal that their multi-basin strategy in the Permian, Marcellus, and Anadarko is firing on all cylinders. But here's the quick math: they are maintaining a significant capital expenditure budget of approximately $2.3 billion, which is a big number, but they still project a strong Free Cash Flow (FCF) of about $2.0 billion, supporting a commitment to return 50% or more of that FCF to shareholders. This combination of high investment and high cash generation is the core of the story, and it's why analysts are projecting their 2025 net income to land near $1.948 billion. Still, the risk is always in the commodity price realization (the actual price they get for their oil and gas), so the key is understanding how they manage that massive capital program to sustain production growth without letting costs creep up too much.

Revenue Analysis

You're looking at Coterra Energy Inc. (CTRA) and asking the right question: where is the money actually coming from? The short answer is a strong rebound in production and prices, pushing their trailing twelve months (TTM) revenue as of September 30, 2025, up to a significant $7.081 billion USD.

This figure represents a substantial year-over-year revenue growth of 25.13%, a sharp reversal from the recent past. To be fair, this is off a lower base, as the company saw annual revenue decline from $5.914 billion USD in 2023 to $5.458 billion USD in 2024, largely due to commodity price volatility. But still, the current trend is a clear positive signal. Here's the quick math on their primary revenue streams (oil, natural gas, and natural gas liquids).

Breakdown of Primary Revenue Sources

Coterra Energy Inc. is an independent oil and natural gas (E&P) company, so its revenue is tied directly to the sale of three core commodities. What's critical is the mix, and for the third quarter of 2025, oil production became the dominant revenue driver before the impact of hedging (financial contracts to lock in prices). This is a defintely a trend to watch, as it shifts the risk profile.

The core revenue sources break down like this:

• Oil Revenue: This is the largest single contributor to pre-hedge revenue.
• Natural Gas Revenue: A major component, bolstered by higher realized prices and increased production volumes in 2025.
• Natural Gas Liquids (NGL) Revenue: Provides diversification, with volumes reaching an all-time high of 135.8 thousand barrels of oil equivalent per day (MBopd) in Q3 2025.

Segment Contribution and Growth Drivers

In the third quarter of 2025, Coterra Energy Inc.'s pre-hedge oil and gas revenues totaled approximately $1.7 billion USD. The crucial insight here is the segment split: 57% of that revenue came from oil production. This means roughly $969 million USD came from oil, with the remaining $731 million USD coming from natural gas and NGLs combined. This is a significant tilt toward liquids (oil and NGLs) in a company that is often associated with its strong natural gas position.

The biggest change driving this is Coterra Energy Inc.'s strategic expansion in the Permian Basin. The January 2025 acquisitions of FME and Avant assets directly fueled a surge in oil and natural gas production, particularly in the Permian, which now receives about 67% of the company's full-year capital program. This is a clear action mapping near-term opportunity: acquire high-return, oil-rich assets to capitalize on stronger oil prices, even as natural gas prices face persistent weakness. You can dive deeper into the ownership structure and market sentiment by Exploring Coterra Energy Inc. (CTRA) Investor Profile: Who's Buying and Why?

Profitability Metrics

The core takeaway for Coterra Energy Inc. (CTRA) is that its profitability metrics for the 2025 fiscal year demonstrate a strong rebound in earnings power, though future margin compression remains a key risk to monitor. The company's projected net profit margin of over 25% significantly outpaces historical sector averages, reflecting effective cost control and a favorable commodity mix.

When we look at the 2025 projections, Coterra Energy Inc. is set to deliver substantial profits, with annual net income forecast to hit approximately $1,948 million on net sales of $7,759 million. This translates directly into the three key margins we track: gross profit, operating profit, and net profit. The gross profit margin, which shows how efficiently the company produces its oil and gas before overhead, is particularly robust.

The trend in profitability is defintely upward, which is a big deal. For instance, analysts project a massive increase in earnings before interest and taxes (EBIT, or operating income) of nearly 79.41% from the 2024 fiscal year to 2025, while net income is expected to jump by 73.78% over the same period. Here's the quick math: that kind of jump shows a powerful ability to translate revenue growth into bottom-line profit, which is the definition of operational leverage.

This efficiency is also visible in their cost management. Coterra Energy Inc. reported its unit operating cost at $9.34 per BOE (barrel of oil equivalent) in the second quarter of 2025, which was right near the midpoint of their annual guidance. Keeping those per-unit costs locked in while production guidance is raised-as they did recently-is a sign of disciplined capital deployment. They are projecting 2025 capital expenditures (CapEx) to be around $2.3 billion, focusing capital where it generates the best return. Good companies don't just chase volume; they chase profitable volume.

When we compare Coterra Energy Inc.'s margins to the broader Exploration & Production (E&P) industry, their projected net margin of 25.1% is highly competitive, especially considering the sector's inherent volatility. What this estimate hides, however, is the external pressure. Analysts warn that industry-wide cost pressures, partly from potential tariff-related increases on key materials, could squeeze sector margins going forward. For Coterra Energy Inc., the risk is that their margins could decline to as low as 19.5% by 2028 due to these commodity cycles and cost pressures, even with revenue growth. So, while the 2025 numbers look great, your next step is to understand the long-term commodity price hedging strategy and cost structure. You can dive deeper into the ownership structure and market sentiment by Exploring Coterra Energy Inc. (CTRA) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

The first thing I look at is how Coterra Energy Inc. (CTRA) funds its operations-the mix of debt and shareholder equity. You want to see a balance that supports growth without exposing the company to undue risk when commodity prices swing. For Coterra, the story in 2025 is one of strategic, acquisition-driven borrowing followed by aggressive paydown, keeping the balance sheet very healthy.

As of the third quarter ending September 30, 2025, Coterra Energy Inc. reported total debt of approximately $3.9 billion. This is a solid reduction from the $4.5 billion total debt they had at the start of the year following a couple of key acquisitions. This reduction shows their commitment to a fortress balance sheet, which is defintely a good sign in the volatile energy sector. Their current liabilities, which include short-term debt and obligations due within a year, stood at about $1.49 billion.

The most telling metric is the Debt-to-Equity (D/E) ratio, which measures total liabilities against shareholder equity. For Coterra Energy Inc., using the most recent September 30, 2025, figures, the D/E ratio is approximately 0.27. Here's the quick math: total debt of $3.92 billion divided by total equity of $14.72 billion gives you that low number.

• Coterra Energy Inc. D/E Ratio (Q3 2025): 0.27
• Oil & Gas E&P Industry Average D/E Ratio (Nov 2025): 0.48

A D/E ratio of 0.27 means that for every dollar of shareholder equity, the company uses only about 27 cents of debt to fund its assets. This is significantly lower than the Oil & Gas Exploration & Production (E&P) industry average of 0.48, which tells you Coterra Energy Inc. is one of the least leveraged players in the sector. They are using debt conservatively.

The company made a strategic move in late 2024 and early 2025 to fund its Delaware Basin acquisitions. They issued $1.5 billion in senior notes in December 2024 (unsecured debt due in 2035 and 2055) and took on a $1.0 billion term loan in January 2025. However, their stated priority for 2025 has been deleveraging. They have aggressively paid down $600 million of the term loans through the third quarter of 2025, showing a clear preference for equity and cash flow funding over sustained high debt. Their goal is to get their Net Debt to Adjusted Pro Forma EBITDAX ratio down to around 0.5x, from the 0.8x it was at the end of Q3 2025. This focus on paying down short-term acquisition debt with strong free cash flow is a textbook move for maintaining a strong balance sheet through the commodity cycle. You can read more about their corporate strategy here: Mission Statement, Vision, & Core Values of Coterra Energy Inc. (CTRA).

Here's a snapshot of the key financial figures for the latest reported quarter, which underscores their current capital structure:

The takeaway is simple: Coterra Energy Inc. uses debt opportunistically for growth, but they are quick to pay it down using their substantial free cash flow, which is exactly what you want to see from a well-managed E&P company.

Liquidity and Solvency

You want to know if Coterra Energy Inc. (CTRA) has the immediate cash to cover its bills, and the answer is a clear yes. Their liquidity position for the 2025 fiscal year is solid, driven by strong operational cash flow that easily outpaces short-term obligations and funds significant debt reduction.

We look at two key ratios for this: the current ratio and the quick ratio (acid-test ratio). Both measure the ability to pay short-term liabilities (current liabilities) with short-term assets (current assets). A ratio above 1.0 is generally good; Coterra Energy Inc. is right in that sweet spot.

• Current Ratio: 1.13. This means Coterra Energy Inc. has $1.13 in current assets for every dollar of current liabilities.
• Quick Ratio: 1.08. This is a stricter test, excluding less-liquid inventory. A value of 1.08 is defintely a sign of good short-term financial strength.

These ratios show the company can cover its short-term debts even if it had to liquidate its most-liquid assets quickly. That's a good buffer, especially in an industry with commodity price volatility.

Working Capital and Cash Flow Dynamics

While the ratios are strong, the trend in working capital-current assets minus current liabilities-shows a slight draw on cash from operations. The change in working capital for the trailing twelve months (TTM) ended in September 2025 was a negative $-330 million. This negative change often means the company is using more cash to fund its operating assets (like growing accounts receivable or inventory) than it's generating from its current liabilities, but in Coterra Energy Inc.'s case, it's a minor outflow relative to the massive cash generation.

The real story is in the cash flow statement, which shows where the money is actually moving. Here's the quick math on their 2025 activity:

The company's focus on generating significant Free Cash Flow (FCF) is the core strength. They project FCF of around $2.0 billion for the full year 2025, which is the cash left over after all capital expenditures. This FCF is what they use for debt paydown and shareholder returns. They've already committed to retiring $1.0 billion in term loans this year, which is a massive deleveraging move. Plus, they plan to pay $672 million in annual dividends and allocate $600 million to share repurchases.

Liquidity Strengths and Near-Term Actions

Coterra Energy Inc. has excellent liquidity, which is a major strength. They ended Q2 2025 with total liquidity of approximately $2.19 billion, including $192 million in cash and an undrawn $2.0 billion revolving credit facility. You don't see any immediate liquidity concerns here. Their pro forma leverage (Net Debt to Adjusted EBITDAX) is conservative at approximately 0.8x as of November 2025, well below the 1.0x target they set for themselves.

The clear action for you, the investor, is to recognize that this financial strength provides a significant margin of safety and flexibility. It lets them navigate commodity price swings and continue to return capital to shareholders while funding their growth projects. To dig deeper into who is capitalizing on this strength, check out Exploring Coterra Energy Inc. (CTRA) Investor Profile: Who's Buying and Why?

Next Step: Review Coterra Energy Inc.'s CapEx schedule against their production guidance to ensure the $2.3 billion investment is translating into the expected production growth for 2026.

Valuation Analysis

You want to know if Coterra Energy Inc. (CTRA) is a smart buy right now, and the short answer is that, based on key metrics in November 2025, the stock looks undervalued relative to its peers and historical averages. The analyst consensus is a clear 'Moderate Buy,' suggesting a significant upside from the current price.

My analysis, drawn from the latest fiscal year data, shows Coterra Energy Inc. trading at a discount. This is an independent oil and gas company that has been generating strong cash flow, yet the market hasn't fully recognized its value, which is a common disconnect in the energy sector. We're looking for a margin of safety, and the valuation multiples suggest we have one.

• Buy: 17 analysts
• Hold: 5 analysts
• Sell: 1 analyst

The average 1-year price target from analysts is around $32.38 to $32.43 per share. Considering the stock was trading near $25.70 in mid-November 2025, that target implies a potential return of over 23%. This is a defintely compelling upside for a company with a market capitalization of approximately $19.78 billion.

Key Valuation Multiples (2025 Fiscal Year)

When assessing Coterra Energy Inc., I focus on three core ratios. They tell a story of a profitable company trading cheaply on its assets and earnings power. Its Price-to-Book (P/B) ratio, for instance, is currently near its 10-year low, which is a classic value indicator.

Here's the quick math: A P/B ratio of 1.28x means you are paying $1.28 for every dollar of Coterra Energy Inc.'s net assets (Book Value). For a company with a strong balance sheet and a focus on debt reduction-they plan to repay $1 billion in debt in 2025-that is a very attractive entry point.

Stock Performance and Income Stream

The stock's movement over the last 12 months has been relatively flat to down, with a decline of about -0.85% to -6.12%. This underperformance, while frustrating for current holders, is what creates the opportunity for new investors. The 52-week trading range of $22.33 to $29.95 shows the stock has traded higher recently and has room to run toward the analyst targets.

For income-focused investors, Coterra Energy Inc.'s dividend profile is solid. The company offers an annual dividend of $0.88 per share, resulting in a yield of approximately 3.4% as of November 2025. Crucially, the payout ratio is a moderate 40.55%. This low payout ratio signals that the dividend is sustainable, giving the company plenty of room to reinvest in its core business or continue its share repurchase program without jeopardizing shareholder returns. This blend of low valuation and a sustainable dividend makes it a compelling value-plus-income play.

For more detail on the company's fundamentals, read the full post: Breaking Down Coterra Energy Inc. (CTRA) Financial Health: Key Insights for Investors

Risk Factors

You need to look past Coterra Energy Inc. (CTRA)'s strong production numbers and focus on the core risks, particularly the twin threats of commodity price swings and rising operational costs. The company's strategy is smart, but it doesn't eliminate the volatility that comes with this business.

The biggest near-term risk remains the external market: commodity price volatility. Even with a diversified portfolio spanning the Permian Basin and the Marcellus Shale, Coterra Energy Inc. has significant unhedged production, which means a sustained downturn in oil and natural gas prices would hit revenue hard. Honestly, natural gas price volatility is the single biggest driver for the stock right now. Plus, you can't ignore the regulatory and environmental risks; the increasing scrutiny on the oil and gas industry could easily increase operating costs or delay key projects.

• Commodity Price Volatility: Unhedged production exposes Coterra Energy Inc. to sharp revenue swings.
• Regulatory Headwinds: New environmental and legislative changes could increase compliance costs.
• Geopolitical Risk: Global instability impacts energy demand and supply chains, which is a constant, defintely unquantifiable risk.

Operational and Strategic Risks from Q3 2025 Filings

Looking at the recent filings, a couple of internal risks stand out. First, operational costs are rising. The average unit cost jumped to $19.33 per barrel of oil equivalent (BOE) in Q3 2025, up from $16.96 a year ago. Here's the quick math: that's a 41.3% jump in direct operations expenses, driven partly by the higher lifting costs associated with the recent acquisitions of assets from Franklin Mountain Energy and Avant Natural Resources. What this estimate hides is the challenge of integrating those assets and bringing their cost structure in line with Coterra Energy Inc.'s legacy operations.

Second, there is a clear strategic risk from activist investor pressure. Activist investor Kimmeridge is publicly demanding a leadership change, arguing the company has underperformed since the 2021 merger and should focus more on its oil-rich Delaware Basin assets. This kind of internal friction can distract management, delay long-term planning, and force a strategic pivot that may not be optimal for all shareholders.

Mitigation Strategies and Actionable Steps

To be fair, Coterra Energy Inc. is a trend-aware realist and has clear mitigation strategies in place. They're not just sitting back. Their multi-basin strategy-balancing Permian oil with Marcellus natural gas-is their primary defense against commodity-specific downturns. They also maintain a flexible capital program, which is crucial.

For example, in 2025, they adjusted their capital budget to a range of $2.0 billion to $2.3 billion, which included a 30% decrease in Permian oil-directed activity in the second half of the year. This move was designed to enhance free cash flow while maintaining production guidance. On the financial side, they are focused on debt reduction, having paid down $600 million of term loans through September 2025, with a goal to retire $1.0 billion in term loans for the full year. This disciplined approach keeps their net debt to Adjusted EBITDAX leverage ratio below 1.0x, which is a strong signal of balance sheet health.

They also expect to return 50% or more of Free Cash Flow (FCF) to shareholders, with FCF projected to be in the range of $2.0 billion to $2.7 billion for the year, depending on strip prices. This commitment to capital return acts as a floor for investor confidence. For a deeper dive into the company's financial structure, you can read the full post: Breaking Down Coterra Energy Inc. (CTRA) Financial Health: Key Insights for Investors.

Growth Opportunities

You want to know where Coterra Energy Inc. (CTRA) goes from here, and the answer is simple: the growth story is less about massive new exploration and more about disciplined, high-return execution in their core basins. This is a capital-efficient model built to generate serious Free Cash Flow (FCF) for shareholders, even with natural gas prices still a headwind.

The core of Coterra Energy Inc.'s near-term growth is the successful integration of its recent Permian Basin acquisitions-specifically the Franklin Mountain Energy and Avant Natural Resources assets-which were completed for approximately $3.9 billion. These deals added a significant inventory of high-return drilling locations, including around 49,000 net acres and 400 to 550 net locations in Lea County, New Mexico. This is the engine that drives their oil production targets. They are defintely focused on making those assets hum.

For the 2025 fiscal year, the financial projections back this focus on operational strength and efficiency. Analysts forecast Coterra Energy Inc.'s annual revenue to reach approximately $7.081 billion. More impressively, the company's earnings are projected to see a substantial year-over-year increase in 2025, with one estimate putting the annual Earnings Per Share (EPS) growth at a strong 97.6%.

Strategic Initiatives and Competitive Edge

Coterra Energy Inc.'s competitive advantage lies in its dual-asset strategy and relentless focus on capital discipline. They have a diversified portfolio across the Permian Basin (oil-focused) and the Marcellus Shale (natural gas-focused), which helps insulate them from the extreme price swings of a single commodity.

Their capital program for 2025 is expected to be approximately $2.3 billion, with a conservative reinvestment rate of about 55% of Discretionary Cash Flow. This low reinvestment rate is a key signal: they are spending only on the best-returning projects, leaving a large portion of cash flow for shareholder returns and debt reduction. In fact, a major near-term action is the planned retirement of a $1 billion term loan before initiating a stock buyback program.

Beyond drilling, Coterra Energy Inc. is strategically positioning its natural gas for future demand, which is a smart long-term play. They have a 7-year power netback gas sales agreement with the CPV Basin Ranch Energy Center, a 1,350 MW natural gas power plant in Texas, set to begin in 2028. This ties their Permian gas to the growing US power generation and Liquefied Natural Gas (LNG) export market.

• Focus on operational efficiency, like reducing Permian well costs to a projected $960 per foot in 2025.
• Leveraging technology, including AI and machine learning, to optimize field operations.
• Maintaining a top-tier balance sheet with a low net debt-to-EBITDA ratio of 0.5x.
• Commitment to returning capital via a base dividend and planned stock repurchases.

What this estimate hides is the persistent risk of low natural gas prices, which could challenge margins despite their operational strength. Still, their balanced asset base and capital discipline provide a strong foundation. You can read more about their core philosophy here: Mission Statement, Vision, & Core Values of Coterra Energy Inc. (CTRA).