In its recent third-quarter 2024 earnings report, Coterra Energy (NYSE: CTRA) shared insightful updates about its operations in the Permian Basin, underscoring a commitment to efficiency, cost reduction, and innovative approaches like Simul-Frac. These initiatives are not only boosting production but also positioning Coterra as a leader in operational innovation. Let’s delve into how Coterra is harnessing these strategies to drive value and maintain a strong outlook for the future.
1. Strengthening the Foundation: Permian Basin Performance and Efficiency Gains
The Permian Basin remains a central pillar of Coterra’s operations, and the company’s production results reflect this focus. During the third quarter of 2024, Permian production averaged 274 MBoepd, with a high liquids content (68%), allowing Coterra to surpass its production guidance. This output was fueled by faster cycle times and high-quality assets, making the Permian a significant contributor to Coterra’s overall portfolio.
In terms of capital allocation, the Permian commands a large share, with $1.05 billion set aside for Drilling & Completion (D&C) activities, representing 58% of Coterra’s total D&C budget for 2024. This substantial investment underscores Coterra’s commitment to optimizing and expanding its Permian operations.
2. Reducing Rig Mobilization Time with Centralized Pad Operations
One of the primary challenges in large-scale drilling operations is the time and cost associated with mobilizing rigs and frac crews across expansive acreage. Coterra addressed this by implementing centralized pad operations in the Permian, a move that has minimized the logistical complexities of moving equipment between well sites.
Centralized operations have allowed Coterra to reduce mobilization times for rigs and frac crews, leading to faster transition times between wells and maximizing pump hours each day. This strategy also leverages existing infrastructure, reducing the need for additional pipeline and facility construction. By consolidating operations in one area, Coterra not only cuts costs but also accelerates project timelines, making its Permian projects more efficient and economically viable.
3. Simul-Frac: Enhancing Efficiency and Cutting Costs
A standout feature of Coterra’s operational efficiency is the application of Simul-Frac techniques. Simul-Frac, which involves fracturing multiple wells simultaneously with a single crew, has been pivotal in reducing costs and cycle times for Coterra’s Permian projects, especially the Windham Row project in Culberson County.
Originally, Coterra planned to use Simul-Frac on 50% of the wells in the Windham Row project. However, due to the success of early tests, the company expanded Simul-Frac deployment to approximately 80% of the wells. This approach has proven effective in reducing per-foot well costs and shortening completion timelines. Simul-Frac’s dual-well completion capability not only allows for faster well completions but also supports an anticipated 5–15% reduction in well costs on the project, highlighting the technique’s potential to deliver both speed and savings.
This emphasis on Simul-Frac is emblematic of Coterra’s larger strategy to innovate and refine completion designs. By using Simul-Frac, Coterra is setting a standard for efficient, cost-effective development in the Permian, enhancing its ability to respond to market demands with agility and precision.
4. A Forward-Looking Outlook: Efficiency and Growth in 2024 and Beyond
Looking ahead, Coterra’s outlook in the Permian is defined by continued production growth and capital efficiency. The company has adjusted its full-year 2024 guidance to reflect both reduced capital expenditures and increased production expectations. This discipline in spending—combined with robust production—positions Coterra for sustained growth.
Key updates to Coterra’s 2024 guidance include:
- Capital Expenditures: Reduced to $1.75–$1.85 billion, attributed to efficiency gains in midstream infrastructure, saltwater disposal, and lower costs in the Marcellus region.
- Increased Production Guidance: Oil production is now expected to average 107–108 MBopd, and natural gas production is projected at 2,735–2,775 MMcfpd. These upward adjustments are driven by Coterra’s successful cycle-time improvements and high-performing wells.
Coterra’s proactive approach in reducing rig mobilization times and maximizing operational efficiency with Simul-Frac aligns with its commitment to deliver value to shareholders while minimizing costs. As Coterra expands its portfolio with new LNG contracts and optimizes its well designs, the company’s Permian assets are likely to play a central role in achieving its long-term growth targets.
Conclusion
Coterra’s third-quarter 2024 report highlights how focused investments in operational efficiency, such as reducing mobilization time for rigs and adopting Simul-Frac techniques, can yield significant returns. The Permian Basin continues to be a high-impact region for Coterra, and with a disciplined approach to capital expenditures and production optimization, the company is well-positioned to navigate industry fluctuations and drive long-term value.
As Coterra heads into 2025, its strong foundation in the Permian, bolstered by operational innovations, is set to propel the company toward sustainable growth. Through these strategic initiatives, Coterra is building a resilient, adaptable platform that supports robust performance and aligns with the evolving needs of the global energy landscape.
