The company completed two significant acquisitions, FME and Avant, in January 2025 for a total consideration of $3.2 billion in cash and $785 million in common stock. These acquisitions, located in the Delaware Basin, contributed $224 million in revenue and $89 million in net income in Q1 2025, significantly increasing overall production volumes.

Total equivalent production increased 8% year-over-year to 746.8 MBoe per day in Q1 2025. This growth was led by a 38% increase in oil production to 141.2 MBbl per day and a 9% increase in NGL volumes, largely attributable to the newly acquired FME and Avant assets.

The 2025 full-year capital program is projected to be between $2.0 billion and $2.3 billion, with 67% allocated to the Permian Basin, 14% to the Marcellus Shale, and 11% to the Anadarko Basin. This strategic allocation aims to turn-in-line 175 to 205 total net wells, supporting sustained organic growth.

Direct operations expense increased 38% to $216 million, pushing the cost per Boe from $2.50 to $3.21 in Q1 2025. This rise is primarily attributed to higher production levels and increased costs in the Permian Basin, partially from the integration of acquired FME and Avant assets which have higher lifting costs.

Management demonstrated confidence by increasing the quarterly base dividend from $0.21 to $0.22 per share in February 2025. Additionally, the company repurchased 1 million shares for $24 million during Q1 2025, with $1.1 billion remaining under the current share repurchase program, signaling commitment to shareholder value.

General and administrative (G&A) expense increased by $17 million (23%) to $92 million in Q1 2025, with $14 million of this increase primarily due to acquisition and transition costs associated with the FME and Avant acquisitions completed in January 2025. This reflects the initial costs of integrating the new businesses.

Management highlights that financial results are highly dependent on volatile commodity prices, with oil prices declining in 2025 and natural gas prices trending down after an early 2025 increase. The company expects continued volatility due to market supply/demand, geopolitical factors, and economic policies.

The company is facing governmental proceedings, including Notices of Violation from the EPA regarding alleged Clean Air Act violations in Texas and New Mexico. While management believes the financial impact will not be material, potential fines, penalties, or corrective actions could increase development and operating costs.

The filing identifies increasing tariffs, retaliatory tariffs, actions by OPEC+, inflation, labor shortages, and geopolitical disruptions (e.g., war in Ukraine, Middle East conflict) as factors that could adversely impact operations, increase costs, and affect the ability to forecast future results.

The FME and Avant acquisitions, totaling $4.0 billion in consideration, significantly expanded the company's operations and asset base in the Delaware Basin, a high-growth area. This move strengthens Coterra's competitive footprint and resource potential in a critical producing region.

Coterra's revenue is derived from a mix of oil (46.5%), natural gas (47.2%), and NGL (10.8%) based on Q1 2025 revenue breakdown. This diversification, combined with increased production volumes across all segments, allows it to navigate fluctuations in individual commodity markets and enhances resilience.

The company actively uses financial commodity derivatives (collars, swaps, basis swaps) to hedge a portion of its oil and natural gas production (e.g., 40% of oil production covered by collars, 20% of natural gas by collars in Q1 2025). This strategy aims to reduce exposure to price declines, offering a degree of stability in a volatile market environment.

Direct operations expense increased from $2.50 per Boe in Q1 2024 to $3.21 per Boe in Q1 2025, a 28.4% increase. This was primarily driven by higher production levels and increased costs in the Permian Basin, partly from the FME and Avant acquisitions which have higher lifting costs than legacy wells.

Gathering, processing, and transportation costs increased by $32 million (13%) to $282 million in Q1 2025, primarily due to higher production and transportation rates in the Permian and Anadarko Basins. While an increase, it correlates with the significant production volume growth.

DD&A expense increased by $74 million (17%) to $506 million in Q1 2025, or $7.53 per Boe. This was due to a higher depletion rate and increased production, with the depletion rate specifically impacted by the increased value of oil and gas properties acquired from FME and Avant.

Exploration expense doubled to $10 million in Q1 2025 from $5 million in Q1 2024. This increase suggests a heightened commitment to identifying and developing new oil and gas reserves, which is crucial for long-term production sustainability.

In valuing the FME and Avant acquisitions, the company utilized income and market approaches with Level 3 inputs, including internally generated production and development data, and estimated price and cost estimates. This indicates a robust, data-driven approach to assessing and integrating new properties.

The 10-Q primarily focuses on financial and operational results, and while 'systems costs' are mentioned within G&A, there is no explicit discussion or significant investment highlighted for new drilling technologies, digital transformation projects, or advanced operational technology.

Coterra invested a substantial $3.2 billion in cash and issued $785 million in common stock for the FME and Avant acquisitions in Q1 2025, representing a significant portion of its capital allocation strategy focused on inorganic growth and expanding its Delaware Basin presence.

The company demonstrated a commitment to shareholder returns by increasing its base quarterly dividend from $0.21 to $0.22 per share. Additionally, it repurchased 1 million shares for $24 million in Q1 2025, signaling confidence in its valuation and future cash flows, with $1.1 billion remaining in the repurchase program.

Long-term debt increased by $745 million to $4,280 million as of March 31, 2025, primarily due to borrowing $1.0 billion under new term loans to partially fund the FME and Avant acquisitions. This increased the debt to total capitalization ratio from 21% to 23%.

The company has received Notices of Violation from the EPA regarding alleged Clean Air Act violations in Texas and New Mexico. While management believes the financial impact will not be material, these ongoing legal proceedings highlight potential environmental compliance challenges and risks.

Management explicitly states that increasing political and social attention on climate change has resulted in existing and pending legislation, which may lead to delays or restrictions in permitting, increased costs, and impaired ability to move forward with various operational activities, posing a material risk to financial results.

The filing mentions the recognition of certain long-term commitments for community outreach and charitable contributions, indicating the company's engagement in social responsibility initiatives. While specific details are limited in this excerpt, it reflects an ongoing commitment.

Oil prices have begun to decline in 2025, with the largest decline in April, while natural gas prices, after an early 2025 increase, have subsequently trended down due to warmer temperatures and record domestic production. Management expects this volatility to continue.

The company identifies escalating trade tensions, potential retaliatory tariffs, actions by OPEC+, inflation, labor shortages, and geopolitical disruptions (e.g., war in Ukraine, Middle East conflict) as significant external factors that could adversely impact its operations and financial results.

Prices at the Waha Hub in the Permian Basin were 'particularly depressed' and even turned negative in March 2025 due to oversupply, despite increasing again in April. This highlights persistent regional market imbalances that can impact realized natural gas prices.