Coterra Energy Announces Pricing of $1.5 Billion of Senior Unsecured Notes

Rhea-AI Summary

Coterra Energy (NYSE: CTRA) has priced an offering of $1.5 billion in senior unsecured notes, split between $750 million due 2035 at 5.40% interest and $750 million due 2055 at 5.90% interest. The offering is expected to close on December 17, 2024.

The proceeds, along with cash on hand and borrowings, will fund the cash component of Coterra's previously announced acquisitions of Franklin Mountain Energy Holdings and Avant Natural Resources assets. Both note series include special mandatory redemption provisions at 101% of principal plus accrued interest if the respective acquisitions are not completed.

Positive

• Secured $1.5 billion in long-term debt financing for acquisitions
• Structured financing with extended maturities (2035 and 2055)
• Special mandatory redemption protection for investors if acquisitions fail

Negative

• Taking on substantial new debt of $1.5 billion
• Higher interest expense with rates of 5.40% and 5.90%
• Additional borrowings required beyond the note offering to complete acquisitions

Insights

Financial Analyst

This debt offering represents a significant financial move for Coterra Energy, raising $1.5 billion through two tranches of senior unsecured notes with attractive interest rates of 5.40% and 5.90% for 2035 and 2055 notes respectively. The pricing is relatively competitive in the current rate environment, particularly for longer-dated securities.

The strategic use of proceeds to fund previously announced acquisitions of Franklin Mountain Energy and Avant assets demonstrates Coterra's commitment to growth through M&A. The special mandatory redemption provision at 101% of principal offers noteholders protection if the acquisitions don't close, while giving Coterra flexibility in execution.

The strong syndicate of banks led by J.P. Morgan suggests robust institutional interest. This debt issuance will impact Coterra's capital structure and leverage ratios, but appears manageable given the company's $19.1 billion market cap and the strategic nature of the acquisitions being funded.

HOUSTON--(BUSINESS WIRE)-- Coterra Energy Inc. ("Coterra") (NYSE: CTRA) announced today that it has priced an offering of $750 million aggregate principal amount of senior unsecured notes due 2035, which will carry an interest rate of 5.40% (the "2035 notes"), and $750 million aggregate principal amount of senior unsecured notes due 2055, which will carry an interest rate of 5.90% (the "2055 notes" and, together with the 2035 notes, the "notes"). The offering is expected to close on December 17, 2024, subject to the satisfaction of customary closing conditions.

Coterra intends to use the net proceeds from the offering, together with cash on hand and certain borrowings, to fund the cash consideration component of its previously announced acquisitions of the issued and outstanding equity ownership interests of certain affiliates of Franklin Mountain Energy Holdings, LP (the "Franklin Mountain Energy Acquisition") and certain assets from Avant Natural Resources, LLC and certain of its affiliates (the "Avant Acquisition" and, together with the Franklin Mountain Energy Acquisition, the "Acquisitions") and to pay fees and expenses related to the Acquisitions.

The 2035 notes will be subject to a special mandatory redemption at a redemption price equal to 101% of the principal amount of such series of notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of special mandatory redemption (the “Special Mandatory Redemption Price”) under certain circumstances if either the Franklin Mountain Energy Acquisition or the Avant Acquisition is not consummated. Additionally, the 2055 notes will also be subject to a special mandatory redemption at the Special Mandatory Redemption Price under certain circumstances if both the Franklin Mountain Energy Acquisition and the Avant Acquisition are not consummated.

J.P. Morgan Securities LLC, PNC Capital Markets LLC, TD Securities (USA) LLC, BofA Securities, Inc., Scotia Capital (USA) Inc., U.S. Bancorp Investments, Inc. and Wells Fargo Securities, LLC are acting as book-running managers for the offering. When available, copies of the prospectus supplement and the accompanying base prospectus relating to the offering can be obtained without charge from the Securities and Exchange Commission ("SEC") at www.sec.gov. Alternatively, copies of these documents can be obtained from J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179, Attention: Investment Grade Syndicate Desk, 3rd Floor, by telephone at 1-212-834-4533; PNC Capital Markets LLC, 300 Fifth Avenue, 10th Floor, Pittsburgh, Pennsylvania 15222, Attention: Debt Capital Markets, Fixed Income Transaction Execution, by telephone at 1-855-881-0697; or TD Securities (USA) LLC, 1 Vanderbilt Avenue, 11th Floor, New York, New York 10017, Attention: DCM-Transaction Advisory, by telephone at 1-855-495-9846.

The notes are being offered and will only be sold pursuant to an effective registration statement that was previously filed with the SEC. This press release does not constitute an offer to sell nor a solicitation of an offer to buy any of the notes described herein, nor shall there be any sale of these notes in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About Coterra Energy

Coterra is a premier exploration and production company based in Houston, Texas with focused operations in the Permian Basin, Marcellus Shale, and Anadarko Basin. We strive to be a leading energy producer, delivering sustainable returns through the efficient and responsible development of our diversified asset base. Learn more about us at www.coterra.com.

Cautionary Statement Regarding Forward-Looking Information

This press release contains certain forward-looking statements within the meaning of federal securities laws. Forward-looking statements are not statements of historical fact and reflect Coterra's current views about future events. Such forward-looking statements include, but are not limited to, statements about the offering and the use of proceeds therefrom, the closing of the Acquisitions and the anticipated incurrence of borrowings in connection with the Acquisitions. The words "expect," "project," "estimate," "believe," "anticipate," "intend," "budget," "plan," "predict," "potential," "possible," "may," "should," "could," "would," "will," "strategy," "outlook" and similar expressions are also intended to identify forward-looking statements. We can provide no assurance that the forward-looking statements contained in this press release will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, without limitation, those described in "Risk Factors" in Part I. Item 1A in Coterra's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and those identified from time to time in Coterra's other filings with the SEC.

Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Except to the extent required by applicable law, Coterra does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241203603236/en/

Investor Relations Contacts

Daniel Guffey – Vice President of Finance, Investor Relations, and Treasurer

281.589.4875



Hannah Stuckey – Investor Relations Manager

281.589.4983

Source: Coterra Energy Inc.

FAQ

What is the total value of Coterra Energy's (CTRA) new senior notes offering?

Coterra Energy's senior notes offering totals $1.5 billion, split equally between notes due 2035 and 2055.

What are the interest rates for Coterra Energy's (CTRA) 2035 and 2055 notes?

The 2035 notes carry a 5.40% interest rate, while the 2055 notes carry a 5.90% interest rate.

What is the purpose of Coterra Energy's (CTRA) $1.5 billion notes offering?

The proceeds will fund the cash consideration for acquisitions of Franklin Mountain Energy Holdings and Avant Natural Resources assets, along with related fees and expenses.

When will Coterra Energy's (CTRA) new notes offering close?

The notes offering is expected to close on December 17, 2024, subject to customary closing conditions.