Scott Schroeder
Executive Vice President & Chief Financial Officer at Cabot Oil & Gas
Thanks, Tom. Today, I will discuss our first quarter '23 results, shareholder returns and updates to guidance. During the first quarter, Coterra reported net income of $677 million, discretionary cash flow of $1.039 billion, accrued capital expenditures of $569 million and free cash flow of $556 million. Despite natural gas and oil prices falling 30% and 19%, respectively, versus 1Q '22, discretionary cash flow declined only 16% year-over-year. This was driven by an increase of the company's oil and NGL production, which caused Coterra's liquids production miss to increase 3% year-over-year to 28%. The company expects greater than 55% of its 2023 revenue to come from oil and NGL sales.
Also during the quarter, the company realized a cash hedge gain totaling $100 million versus $172 million loss in Q1 '22. First quarter total production volumes averaged 635 MBoe per day, with oil averaging 92.2 Mbo per day and natural gas volumes at 2.76 Bcf per day. Oil and BOE finished 2.5% and 1.6% above the high end of guidance, respectively, and natural gas hit the high end. The strong performance was driven by a combination of positive well productivity trends and improved cycle times.
Turn-in lines during the quarter totaled 49 net wells above expectations. The incremental wells came online late in the quarter. First quarter accrued capital expenditures totaled $569 million, as I said before, but the cash capital expenditures only $483 million, consistent with expectations.
Turning to return of capital. We announced a $0.20 per share base dividend and remain one of the highest-yielding base dividends in the industry. Management and the Board remain committed to responsibly increasing the base dividend on an annual cadence.
During the first quarter, Coterra followed through on its return priorities by repurchasing 11 million shares or $268 million. In total, we returned 76% of free cash flow during the quarter.
As we communicated in February, it is our intention to pursue strategic buybacks ahead of variable dividends. We have over $1.7 billion remaining on our $2 billion buyback authorization. We are reiterating our annual commitment to return 50% plus of free cash flow to shareholders.
Lastly, I will discuss the refinements to our '23 guidance and activity outlook. We reiterated the company's capital estimate of $2.0 billion to $2.2 billion. While we are seeing clear signs of cost softening, we have yet to realize meaningful savings and therefore, have not built any future cost reductions into our forecast. We are increasing our full year oil guidance 1% to 87 to 93 Mbo per day, driven by efficient operations and strong well performance in both the Permian and Anadarko basins. The total company well turn-in lines are unchanged from our original guidance.
In the Marcellus, as Tom has stated in his remarks, we are finishing up a development this month and then plan to drop 1 of our 2 frac crews and hold a single crew for the balance of the year. We also plan to drop from 3 rigs to 2 rigs this summer as planned earlier this year.
In the Anadarko, a late '23 turn-in line was pushed into '24. This lowers our Anadarko turning lines to seven wells, down from our prior range of 10 to 15 wells. We now intend to maintain 1 to 2 rigs in the basin for the remainder of '23.
In the Permian, we expect to continue to run six rigs for the remainder of the year and will pivot between 2 and 3 frac crews. Due to improved cycle times, we expect to bring on an additional five wells in the Permian during late '23, offsetting the lower turn-in lines in Anadarko.
Turning to unit cost. The company's guidance remains unchanged at midpoint but there was some moving pieces primarily driven by reclassification between cost categories, which occurred after completing our integration into a single accounting system earlier this year. We also reiterate our 3-year outlook, which assumes the company achieves a 3-year oil CAGR of 5%, BOE and natural gas CAGR of 0% to 5%, which is achievable with capital and activity that is flat to down relative to '23.
In summary, despite commodity headwinds, Coterra's outlook remains strong. Driven by continued strong execution, we are well positioned to meet or exceed our 2023 targets.
With that, I will turn it back to the operator for Q&A.