Coterra CEO says it was an easy decision to start buyback, and the energy firm can sustain it

Coterra Energy CEO Thomas Jorden told CNBC’s Jim Cramer on Tuesday the oil and gas firm is confident in its decision to start buying back stock.

Houston-based Coterra — the result of Cabot Oil & Gas Corporation officially merging with Cimarex Energy, in October — announced its $1.25 billion share repurchase program last week.

“We believe in our story. We believe in the future. We believe in the power of our ability to sustain it,” Jorden said in an interview on “Mad Money.” “We look at intrinsic and relative value, and it was not a very difficult decision. We have the cash. We have the wherewithal.”

The CEO noted Coterra’s buyback is in addition to its two-pronged dividend approach. They combine to form Coterra’s strategy return capital to shareholders, at a time when oil and natural gas prices are elevated compared to year-ago levels.

In late February, Coterra’s board also raised the company’s annual base dividend to 60 cents per share, up from its previous 50 cents. Then there’s Coterra’s variable dividend payout, which is calculated quarterly based on the company’s free cash flow.

For the fourth quarter, Coterra’s variable payout came to 41 cents per share, bringing its overall dividend payout to 56 cents per share. The stock closed Tuesday’s session at $24.36, which works out to a more than 9% yield if Coterra maintains that variable dividend payout.

Coterra shares are up more than 28% year to date, bringing the company’s market capitalization to nearly $20 billion.

“Margins are quite high,” Jorden said. “We’re only investing less than 35% of our cash flow in our capital program, so you can kind of the do the math in your head there, that the power of our assets, the power of our portfolio, is really unprecedented from my experience.”

Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.