Coterra Energy Inc. (NYSE:CTRA), a $18.8 billion market cap player in the crude petroleum and natural gas industry, has amended an earlier agreement to acquire additional assets, according to a recent 8-K filing with the U.S. Securities and Exchange Commission.
InvestingPro data shows the company maintains strong financial health with liquid assets exceeding short-term obligations and a moderate debt level. The company, headquartered in Houston, Texas, entered into the First Amendment to Membership Interest Purchase Agreement on Monday, December 28, 2024, which includes approximately 1,650 net royalty acres owned by Sandia Minerals, LLC.
The assets, previously excluded from the November 12, 2024 agreement, have now been incorporated into the deal, with Coterra agreeing to increase the cash consideration by $43 million. This move is significant for Coterra as it looks to bolster its portfolio in the energy sector. According to InvestingPro analysis, the company appears undervalued at its current price of $25.52, suggesting potential upside from this strategic expansion.
The original Membership Interest Purchase Agreement involved several parties, including Franklin Mountain Energy Holdings, LP, Franklin Mountain Energy Holdings 2, LP, Franklin Mountain GP2, LLC, and Cimarex Energy Co (NYSE:XEC)., a subsidiary of Coterra. The amendment to the agreement is detailed in Exhibit 10.2 of the 8-K filing and is effective for all purposes as of the original agreement date.
The agreement underscores Coterra's strategy to expand its operations and asset base, which is crucial in the highly competitive energy industry. The acquisition of the royalty acres from Sandia Minerals represents a strategic addition to Coterra's existing holdings.
The company currently boasts impressive metrics, including a 70.65% gross profit margin and a conservative debt-to-equity ratio of 0.18. The company's stock, listed on the New York Stock Exchange under the ticker CTRA, may see investor reaction to this news in upcoming trading sessions. For deeper insights into Coterra's valuation and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, offering expert analysis of key financial metrics and growth drivers.
In other recent news, Coterra Energy has been making significant financial strides. The Houston-based company has issued $1.5 billion in senior notes, split between two sets due 2035 and 2055. The notes are linked to the company's pending acquisitions of Franklin Mountain Energy and Avant Natural Resources. If these acquisitions do not proceed as planned, the notes will be redeemed. Coterra Energy has also secured $1 billion in term loans, divided into two tranches, with the funds intended to partially cover the costs of the aforementioned acquisitions.
The company's recent acquisitions have been met with varying analyst responses. Truist Securities increased its price target for Coterra Energy, citing the strategic value of these acquisitions. Piper Sandler also raised its target, highlighting the company's strong financial discipline and operational efficiency. However, JPMorgan slightly lowered its target, while maintaining an overweight rating.
Coterra Energy's Q3 performance was robust, reporting a net income of $252 million and total production averaging 669 thousand barrels of oil equivalent per day, surpassing their guidance. The company has also demonstrated a commitment to shareholders by returning 96% of free cash flow through dividends and share repurchases.
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