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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2024
OR
       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission file number 1-10447
COTERRA ENERGY INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3072771
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
Three Memorial City Plaza
840 Gessner Road, Suite 1400, Houston, Texas 77024
(Address of principal executive offices, including ZIP code)
(281) 589-4600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.10 per shareCTRANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of May 1, 2024, there were 744,232,925 shares of common stock, par value $0.10 per share, outstanding.


COTERRA ENERGY INC.
TABLE OF CONTENTS
  Page
 
   
 
   
   
   
   
   
   
   
   
 
   
   
   
   
  
2

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
COTERRA ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In millions, except per share amounts)March 31,
2024
December 31,
2023
ASSETS  
Current assets  
Cash and cash equivalents$1,289 $956 
Restricted cash9 9 
Short-term investments250  
Accounts receivable, net878 843 
Income taxes receivable 51 
Inventories 52 59 
Derivative instruments62 85 
Other current assets10 12 
Total current assets 2,550 2,015 
Properties and equipment, net (Successful efforts method) 17,959 17,933 
Other assets 444 467 
$20,953 $20,415 
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
  
Current liabilities  
Accounts payable $788 $803 
Current portion of long-term debt575 575 
Accrued liabilities 280 261 
Income taxes payable49  
Interest payable17 21 
Total current liabilities 1,709 1,660 
Long-term debt2,076 1,586 
Deferred income taxes 3,391 3,413 
Asset retirement obligations283 280 
Other liabilities 397 429 
Total liabilities7,856 7,368 
Commitments and contingencies (Note 7)
Cimarex redeemable preferred stock88
Stockholders’ equity
Common stock:  
Authorized — 1,800 shares of $0.10 par value in 2024 and 2023
  
     Issued — 745 shares and 751 shares in 2024 and 2023, respectively
75 75 
Additional paid-in capital 7,445 7,587 
Retained earnings 5,558 5,366 
Accumulated other comprehensive income11 11 
Total stockholders' equity 13,089 13,039 
 $20,953 $20,415 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

COTERRA ENERGY INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
 Three Months Ended 
March 31,
(In millions, except per share amounts)20242023
OPERATING REVENUES  
Natural gas $538 $822 
Oil701 615 
NGL173 177 
Gain on derivative instruments 138 
Other 21 25 
 1,433 1,777 
OPERATING EXPENSES  
Direct operations156 134 
Gathering, processing and transportation250 236 
Taxes other than income 74 86 
Exploration 5 4 
Depreciation, depletion and amortization 432 369 
General and administrative 75 76 
 992 905 
(Loss) gain on sale of assets (1)5 
INCOME FROM OPERATIONS 440 877 
Interest expense19 17 
Interest income(16)(12)
Income before income taxes 437 872 
Income tax expense85 195 
NET INCOME$352 $677 
Earnings per share  
Basic $0.47 $0.88 
Diluted$0.47 $0.88 
Weighted-average common shares outstanding   
Basic750 764 
Diluted 755 768 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

COTERRA ENERGY INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
 Three Months Ended 
March 31,
(In millions)20242023
CASH FLOWS FROM OPERATING ACTIVITIES  
  Net income $352 $677 
  Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation, depletion and amortization432 369 
Deferred income tax expense(22)23 
Loss (gain) on sale of assets
1 (5)
Gain on derivative instruments (138)
Net cash received in settlement of derivative instruments26 100 
Amortization of debt premium, discount and debt issuance costs(4)(4)
Stock-based compensation and other12 17 
  Changes in assets and liabilities:
Accounts receivable, net(35)446 
Income taxes100 170 
Inventories7 7 
Other current assets2 1 
Accounts payable and accrued liabilities(4)(198)
Interest payable(4)(6)
Other assets and liabilities(7)35 
Net cash provided by operating activities856 1,494 
CASH FLOWS FROM INVESTING ACTIVITIES  
Capital expenditures for drilling, completion and other fixed asset additions(457)(483)
Capital expenditures for leasehold and property acquisitions(1)(1)
Purchases of short-term investments(250) 
Proceeds from sale of assets 5 
Net cash used in investing activities(708)(479)
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from issuance of debt499  
Repayments of finance leases(1)(2)
Common stock repurchases(150)(268)
Dividends paid(158)(436)
Cash paid for conversion of redeemable preferred stock (1)
Tax withholding on vesting of stock awards (1)
Capitalized debt issuance costs(5)(7)
Net cash provided by (used in) financing activities185 (715)
Net increase in cash, cash equivalents and restricted cash333 300 
Cash, cash equivalents and restricted cash, beginning of period965 683 
Cash, cash equivalents and restricted cash, end of period$1,298 $983 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

COTERRA ENERGY INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(In millions, except per share amounts)Common SharesCommon Stock ParTreasury SharesTreasury StockPaid-In CapitalAccumulated Other Comprehensive IncomeRetained EarningsTotal
Balance at December 31, 2023751 $75  $ $7,587 $11 $5,366 $13,039 
Net income— — — — — — 352 352 
Stock amortization and vesting— — — — 15 — — 15 
Common stock repurchases— — 6 (157)— — — (157)
Common stock retirements(6) (6)157 (157)— —  
Cash dividends on common stock at $0.21 per share
— — — — — — (160)(160)
Balance at March 31, 2024745 $75  $ $7,445 $11 $5,558 $13,089 




(In millions, except per share amounts)Common SharesCommon Stock ParTreasury SharesTreasury StockPaid-In CapitalAccumulated Other Comprehensive IncomeRetained EarningsTotal
Balance at December 31, 2022768 $77  $ $7,933 $13 $4,636 $12,659 
Net income— — — — — — 677 677 
Stock amortization and vesting— — — — 13 — — 13 
Conversion of Cimarex redeemable preferred stock— — — — 3 — — 3 
Common stock repurchases— — 11 (271)— — — (271)
Common stock retirements(11)(1)(11)271 (270)— —  
Cash dividends on common stock at $0.57 per share
— — — — — — (438)(438)
Balance at March 31, 2023757 $76  $ $7,679 $13 $4,875 $12,643 

The accompanying notes are an integral part of these condensed consolidated financial statements.
6


COTERRA ENERGY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Financial Statement Presentation
During interim periods, Coterra Energy Inc. (the “Company”) follows the same accounting policies disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”) filed with the SEC, except for any new accounting pronouncements adopted during the period. The interim condensed consolidated financial statements are unaudited and should be read in conjunction with the Notes to the Consolidated Financial Statements and information presented in the Form 10-K. In management’s opinion, the accompanying interim condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair statement. The results for any interim period are not necessarily indicative of the results that may be expected for the entire year.
From time to time, we make certain reclassifications to prior year statements to conform with the current year presentation. These reclassifications have no impact on previously reported stockholders’ equity, net income or cash flows.
Significant Accounting Policies
Short-term Investments
The Company’s short-term investments include certificates of deposit with maturities between three months and one year. Certificates of deposit are recorded at cost.
2. Properties and Equipment, Net
Properties and equipment, net are comprised of the following:
(In millions)March 31,
2024
December 31,
2023
Proved oil and gas properties$20,136 $19,582 
Unproved oil and gas properties 4,486 4,617 
Gathering and pipeline systems552 527 
Land, buildings and other equipment 223 216 
Finance lease right-of-use asset26 25 
25,423 24,967 
Accumulated DD&A(7,464)(7,034)
 $17,959 $17,933 
Capitalized Exploratory Well Costs
As of and for the three months ended March 31, 2024, the Company did not have any projects with exploratory well costs capitalized for a period of greater than one year after drilling.
7

3. Debt and Credit Agreements
The following table includes a summary of the Company’s long-term debt.
(In millions)March 31,
2024
December 31,
2023
3.65% weighted-average private placement senior notes(1)
$825 $825 
3.90% senior notes due May 15, 2027
750 750 
4.375% senior notes due March 15, 2029
500 500 
5.60% senior notes due March 15, 2034
500  
Revolving credit agreement  
Total2,575 2,075 
Unamortized debt premium85 90 
Unamortized debt discount(1) 
Unamortized debt issuance costs(8)(4)
Total debt
2,651 2,161 
Less: current portion of long-term debt
575 575 
Long-term debt
$2,076 $1,586 
_______________________________________________________________________________
(1)The 3.65% weighted-average senior notes have bullet maturities of $575 million and $250 million due in September 2024 and 2026, respectively.
As of March 31, 2024, the Company was in compliance with all financial covenants for its revolving credit agreement and its 3.65% weighted-average private placement senior notes (the “private placement senior notes”).
As of March 31, 2024, the Company had no borrowings outstanding under its revolving credit agreement and unused commitments of $1.5 billion.
5.60% Senior Notes due March 15, 2034
On March 13, 2024, the Company issued $500 million aggregate principal amount of 5.60% senior notes due 2034 (the “2034 senior notes”). The 2034 senior notes will mature on March 15, 2034, and interest on such notes is payable semi-annually. The 2034 senior notes are general, unsecured obligations of the Company. Under the terms of the indenture governing the 2034 senior notes, the Company may redeem all or any portion of the 2034 senior notes on any date at a price equal to the principal amount thereof, plus applicable redemption prices described in the governing indenture. The Company is also subject to various covenants and events of default customarily found in such debt instruments. The 2034 senior notes were issued at a discount of $1 million, and the Company incurred approximately $5 million of debt issuance costs that were capitalized and will be amortized over the term of such notes.
8

4. Derivative Instruments
As of March 31, 2024, the Company had the following outstanding financial commodity derivatives:
 20242025
Natural GasSecond QuarterThird QuarterFourth QuarterFirst QuarterSecond QuarterThird QuarterFourth Quarter
NYMEX collars
     Volume (MMBtu)44,590,00045,080,00016,690,0009,000,0009,100,000 9,200,000 9,200,000 
     Weighted average floor ($/MMBtu)$2.70 $2.75 $2.75 $3.25 $3.25 $3.25 $3.25 
     Weighted average ceiling ($/MMBtu)$3.87 $3.94 $4.23 $4.79 $4.79 $4.79 $4.79 
2024
OilSecond QuarterThird QuarterFourth Quarter
WTI oil collars
     Volume (MBbl)3,1852,7602,760
     Weighted average floor ($/Bbl)$67.57 $65.00 $65.00 
     Weighted average ceiling ($/Bbl)$90.47 $87.17 $87.17 
WTI Midland oil basis swaps
     Volume (MBbl)3,185 2,7602,760 
     Weighted average differential ($/Bbl)$1.15 $1.14 $1.14 
In April 2024, the Company entered into the following financial commodity derivatives:
20242025
OilThird QuarterFourth QuarterFirst QuarterSecond Quarter
WTI oil collars
     Volume (MBbl)460460900910
     Weighted average floor ($/Bbl)$65.00 $65.00 $65.00 $65.00 
     Weighted average ceiling ($/Bbl)$86.02 $86.02 $84.21 $84.21 
Effect of Derivative Instruments on the Condensed Consolidated Balance Sheet
Fair Values of Derivative Instruments
  Derivative AssetsDerivative Liabilities
(In millions)Balance Sheet LocationMarch 31,
2024
December 31,
2023
March 31,
2024
December 31,
2023
Commodity contractsDerivative instruments (current)$62 $85 $— $— 
Commodity contractsAccrued liabilities (current)— — 2  
Commodity contractsOther assets (non-current)6 7 — — 
$68 $92 $2 $ 
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Offsetting of Derivative Assets and Liabilities in the Condensed Consolidated Balance Sheet
(In millions)March 31,
2024
December 31,
2023
Derivative assets  
Gross amounts of recognized assets$74 $93 
Gross amounts offset in the condensed consolidated balance sheet(6)(1)
Net amounts of assets presented in the condensed consolidated balance sheet68 92 
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet 1 
Net amount$68 $93 
Derivative liabilities   
Gross amounts of recognized liabilities$8 $1 
Gross amounts offset in the condensed consolidated balance sheet(6)(1)
Net amounts of liabilities presented in the condensed consolidated balance sheet2  
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet  
Net amount$2 $ 
Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
 Three Months Ended 
March 31,
(In millions)20242023
Cash received (paid) on settlement of derivative instruments  
Gas contracts$27 $99 
Oil contracts(1)1 
Non-cash gain (loss) on derivative instruments  
Gas contracts7 42 
Oil contracts(33)(4)
 $ $138 
5. Fair Value Measurements
The Company follows the authoritative guidance for measuring fair value of assets and liabilities in its financial statements. For further information regarding the fair value hierarchy, refer to Note 1 of the Notes to the Consolidated Financial Statements in the Form 10-K.
Financial Assets and Liabilities
The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:
(In millions)Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Balance at  
March 31, 2024
Assets    
Deferred compensation plan$35 $ $ $35 
Derivative instruments  74 74 
$35 $ $74 $109 
Liabilities   
Deferred compensation plan$35 $ $ $35 
Derivative instruments  8 8 
$35 $ $8 $43 
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(In millions)Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Balance at  
December 31, 2023
Assets    
Deferred compensation plan$33 $ $ $33 
Derivative instruments  93 93 
$33 $ $93 $126 
Liabilities   
Deferred compensation plan$33 $ $ $33 
Derivative instruments  1 1 
$33 $ $1 $34 
The Company’s investments associated with its deferred compensation plans consist of mutual funds that are publicly traded and for which market prices are readily available.
The derivative instruments were measured based on quotes from the Company’s counterparties or internal models. Such quotes and models have been derived using an income approach that considers various inputs, including current market and contractual prices for the underlying instruments, quoted forward commodity prices, basis differentials, volatility factors and interest rates for a similar length of time as the derivative contract term as applicable. Estimates are derived from, or verified using, relevant NYMEX futures contracts, are compared to multiple quotes obtained from counterparties, or a combination of the foregoing. The determination of the fair values presented above also incorporates a credit adjustment for non-performance risk. The Company measured the non-performance risk of its counterparties by reviewing credit default swap spreads for the various financial institutions with which it has derivative contracts while non-performance risk of the Company is evaluated using credit default swap spreads for various similarly rated companies in the same sector as the Company. The Company has not incurred any losses related to non-performance risk of its counterparties and does not anticipate any material impact on its financial results due to non-performance by third parties.
The most significant unobservable inputs relative to the Company’s Level 3 derivative contracts are basis differentials and volatility factors. An increase (decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively. The Company does not have access to the specific assumptions used in its counterparties’ valuation models. Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.
The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy:
Three Months Ended 
March 31,
(In millions)20242023
Balance at beginning of period$92 $146 
Total gain (loss) included in earnings 138 
Settlement (gain) loss(26)(100)
Transfers in and/or out of Level 3  
Balance at end of period$66 $184 
Change in unrealized gains (losses) relating to assets and liabilities still held at the end of the period$(1)$95 
Non-Financial Assets and Liabilities
The Company discloses or recognizes its non-financial assets and liabilities, such as impairments of oil and gas properties or acquisitions, at fair value on a nonrecurring basis. As none of the Company’s other non-financial assets and liabilities were measured at fair value as of March 31, 2024, additional disclosures were not required.
The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which considers the Company’s credit risk, the time value of money, and the current economic state to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy.
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Fair Value of Other Financial Instruments
The estimated fair value of other financial instruments is the amount at which the instruments could be exchanged currently between willing parties. The carrying amounts reported in the Condensed Consolidated Balance Sheet for cash and cash equivalents and restricted cash approximate fair value due to the short-term maturities of these instruments. The carrying amounts reported in the Condensed Consolidated Balance Sheet for short-term investments approximate fair value, due to market yields being unchanged from stated yields. Cash and cash equivalents and restricted cash are classified as Level 1 in the fair value hierarchy, and the remaining financial instruments are classified as Level 2.
The fair value of the Company’s 3.90% senior notes due May 15, 2027, 4.375% senior notes due March 15, 2029 and 2034 senior notes is based on quoted market prices, which is classified as Level 1 in the fair value hierarchy. The fair value of the Company’s private placement senior notes is based on third-party quotes, which are derived from credit spreads for the difference between the issue rate and the period end market rate and other unobservable inputs. The Company’s private placement senior notes are valued using a market approach and are classified as Level 3 in the fair value hierarchy.
The carrying amount and estimated fair value of debt are as follows:
 March 31, 2024December 31, 2023
(In millions)Carrying
Amount
Estimated Fair
Value
Carrying
Amount
Estimated Fair
Value
Total debt
$2,651 $2,508 $2,161 $2,015 
Current maturities(575)(568)(575)(565)
Long-term debt, excluding current maturities$2,076 $1,940 $1,586 $1,450 
6. Asset Retirement Obligations
Activity related to the Company’s asset retirement obligations is as follows:
(In millions)Three Months Ended 
March 31, 2024
Balance at beginning of period$289 
Liabilities incurred2 
Accretion expense3 
Balance at end of period294 
Less: current asset retirement obligations(11)
Noncurrent asset retirement obligations$283 
7. Commitments and Contingencies
Contractual Obligations
The Company has various contractual obligations in the normal course of its operations. There have been no material changes to the Company’s contractual obligations described under “Gathering, Processing and Transportation Agreements” and “Lease Commitments” as disclosed in Note 8 of the Notes to Consolidated Financial Statements in the Form 10-K.
Legal Matters
Securities Litigation
In October 2020, a class action lawsuit styled Delaware County Emp. Ret. Sys. v. Cabot Oil and Gas Corp., et. al. (U.S. District Court, Middle District of Pennsylvania), was filed against the Company, Dan O. Dinges, its then-Chief Executive Officer, and Scott C. Schroeder, its then-Chief Financial Officer, alleging that the Company made misleading statements in its periodic filings with the SEC in violation of Section 10(b) and Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The suit was later transferred to the United States District Court for the Southern District of Texas. The plaintiffs later amended the complaint to add claims against Phillip L. Stalnaker, the Company’s then-Senior Vice President of Operations, but the claims against Mr. Stalnaker were later dismissed. The current amended complaint was filed on January 9, 2024, and alleges that the Company and the individual defendants made material misstatements and omissions regarding the Company’s 2019 production growth guidance and the status of certain environmental matters in Pennsylvania, including alleged violations of the Pennsylvania Clean Streams Law and the remediation status of certain gas wells. The plaintiffs allege claims under Section 10(b) and Section 20 of the Exchange Act and seek monetary damages, interest, and attorney’s fees. The
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court has certified a class consisting of persons and entities who purchased the Company’s common stock between February 22, 2016, and June 12, 2020, inclusive. On April 29, 2024, the Company and plaintiffs reached a settlement in principle, with nearly all of the settlement amount to be paid by the Company’s insurance carriers. This settlement is subject to finalization and court approval.
Also in October 2020, a stockholder derivative action styled Ezell v. Dinges, et. al. (U.S. District Court, Middle District of Pennsylvania) was filed against Messrs. Dinges and Schroeder and the Board of Directors of the Company serving at that time. Several additional derivative complaints were also filed and have been consolidated with the Ezell suit, which was later transferred to the U.S. District Court for the Southern District of Texas. The most recent consolidated amended derivative complaint asserted claims for alleged securities violations under Section 10(b) and Section 21D of the Exchange Act arising from some of the same alleged misleading statements that form the basis of the class action lawsuit described above, as well as claims based on alleged breaches of fiduciary duty and statutory contribution theories. On January 2, 2024, the Court issued an order and final judgment granting the Company’s and defendants’ motion to dismiss and dismissing the consolidated derivative case in its entirety with prejudice. The derivative plaintiffs filed a notice of appeal regarding the final judgment on February 1, 2024. The Company intends to vigorously defend any further proceedings in the derivative lawsuit.
Additionally, on March 21, 2024, one of the plaintiffs in the consolidated derivative action served a demand letter on the Company’s Board of Directors. The letter requested that the Board of Directors pursue legal claims against various current and former officers and directors of the Company based on similar factual allegations as contained in the securities class action and consolidated shareholder derivative action described above. The Board of Directors has taken the demand under advisement and reserves all rights available under applicable law.
Other Legal Matters
The Company is a defendant in various other legal proceedings arising in the normal course of business. All known liabilities are accrued when management determines they are probable and the potential loss is estimable. While the outcome and impact of these legal proceedings on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will not have a material effect on the Company’s financial position, results of operations or cash flows.
Contingency Reserves
When deemed necessary, the Company establishes reserves for certain legal proceedings. The establishment of a reserve is based on an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible that the Company could incur additional losses with respect to those matters for which reserves have been established. The Company believes that any such amount above the amounts accrued would not be material to the Condensed Consolidated Financial Statements. Future changes in facts and circumstances not currently known or foreseeable could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.
8. Revenue Recognition
Disaggregation of Revenue
The following table presents revenues from contracts with customers disaggregated by product:
Three Months Ended 
March 31,
(In millions)20242023
Natural gas$538 $822 
Oil701 615 
NGL173 177 
Other21 25 
$1,433 $1,639 
All of the Company’s revenues from contracts with customers represent products transferred at a point in time as control is transferred to the customer and generated in the U.S.
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Transaction Price Allocated to Remaining Performance Obligations
As of March 31, 2024, the Company had $6.5 billion of unsatisfied performance obligations related to natural gas sales that have a fixed pricing component and a contract term greater than one year. The Company expects to recognize these obligations over the next 15 years.
Contract Balances
Receivables from contracts with customers are recorded when the right to consideration becomes unconditional, generally when control of the product has been transferred to the customer. Receivables from contracts with customers were $656 million and $723 million as of March 31, 2024 and December 31, 2023, respectively, and are reported in accounts receivable, net in the Condensed Consolidated Balance Sheet. As of March 31, 2024, the Company had no assets or liabilities related to its revenue contracts, including no upfront payments or rights to deficiency payments.
9. Capital Stock
Dividends
Common Stock
In February 2023, the Company’s Board of Directors approved an increase in the base quarterly dividend from $0.15 per share to $0.20 per share. In February 2024, the Company’s Board of Directors approved an increase in the base quarterly dividend from $0.20 per share to $0.21 per share.
The following table summarizes the Company’s dividends on its common stock:
Rate per share
FixedVariableTotalTotal Dividends
(In millions)
2024
First quarter$0.21 $ $0.21 $160 
2023
First quarter$0.20 $0.37 $0.57 $438 
Treasury Stock
During the three months ended March 31, 2024, the Company repurchased and retired 6 million shares for $157 million and as of March 31, 2024, had $1.4 billion remaining under its current share repurchase program. During the three months ended March 31, 2023, the Company repurchased 11 million shares for $271 million under its previous share repurchase program.
10. Stock-Based Compensation
General
Stock-based compensation expense of awards issued under the Company’s incentive plans, and the income tax benefit of awards vested and exercised, are as follows:
Three Months Ended 
March 31,
(In millions)20242023
Restricted stock units - employees and non-employee directors$9 $7 
Restricted stock awards1 4 
Performance share awards3 5 
   Total stock-based compensation expense$13 $16 
Income tax benefit$ $1 
Refer to Note 13 of the Notes to the Consolidated Financial Statements in the Form 10-K for further description of the various types of stock-based compensation awards and the applicable award terms.
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Restricted Stock Units - Employees
During the three months ended March 31, 2024, the Company granted 574,697 restricted stock units to employees of the Company with a weighted average grant date value of $26.16 per unit. The fair value of restricted stock unit grants is based on the closing stock price on the grant date. Restricted stock units generally vest at the end of a three-year service period. The Company assumed a zero percent annual forfeiture rate for purposes of recognizing stock-based compensation expense for awards granted in the first quarter of 2024, based on the Company’s actual forfeiture history and expectations for this type of award.
Performance Share Awards
Total Shareholder Return (“TSR”) Performance Share Awards. During the three months ended March 31, 2024, the Company granted 541,865 TSR Performance Share Awards, which are earned or not earned, based on the comparative performance of the Company’s common stock measured against a predetermined group of companies in the Company’s peer group and certain industry-related indices over a three-year performance period, which commenced on February 1, 2024 and ends on January 31, 2027.
These awards have both an equity and liability component, with the right to receive up to the first 100 percent of the award in shares of common stock and the right to receive up to an additional 100 percent of the value of the award in excess of the equity component in cash. These awards also include a feature that will reduce the potential cash component of the award if the actual performance is negative over the three-year period and the base calculation indicates an above-target payout. The equity portion of these awards is valued on the grant date and is not marked to market, while the liability portion of the awards is valued as of the end of each reporting period on a mark-to-market basis. The Company calculates the fair value of the equity and liability portions of the awards using a Monte Carlo simulation model.
The Company assumed a zero percent annual forfeiture rate for purposes of recognizing stock-based compensation expense for these awards, based on the Company’s actual forfeiture history and expectations for this type of award.
The following assumptions were used to determine the grant date fair value of the equity component and the period-end fair value of the liability component of the TSR Performance Share Awards:
 Grant Date
February 21, 2024March 31, 2024
Fair value per performance share award $19.38 
$5.24 - $10.61
Assumptions:   
     Stock price volatility38.0 %
23.7% - 37.9%
     Risk-free rate of return4.39 %
4.38% - 5.08%
11. Earnings per Share
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS is similarly calculated, except that the shares of common stock outstanding for the period is increased using the treasury stock and as-if converted methods to reflect the potential dilution that could occur if outstanding stock awards were vested or exercised at the end of the applicable period. Anti-dilutive shares represent potentially dilutive securities that are excluded from the computation of diluted income or loss per share as their impact would be anti-dilutive.
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The following is a calculation of basic and diluted net earnings per share under the two-class method:
Three Months Ended 
March 31,
(In millions, except per share amounts)20242023
Income (Numerator)
Net income$352 $677 
Less: dividends attributable to participating securities (2)
Net income available to common stockholders$352 $675 
Shares (Denominator)
Weighted average shares - Basic750 764 
Dilution effect of stock awards at end of period5 4 
Weighted average shares - Diluted755 768 
Earnings per share
Basic$0.47 $0.88 
Diluted$0.47 $0.88 
The following is a calculation of weighted-average shares excluded from diluted EPS due to the anti-dilutive effect:
Three Months Ended 
March 31,
(In millions)20242023
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect calculated using the treasury stock method  
12. Restructuring Costs
Restructuring costs are primarily related to workforce reductions and associated severance benefits that were triggered by the merger with Cimarex Energy Co. that closed on October 1, 2021. The following table summarizes the Company’s restructuring liabilities:
Three Months Ended 
March 31,
(In millions)20242023
Balance at beginning of period$47 $77 
Additions related to merger integration 7
Reductions related to severance payments(11)(7)
Balance at end of period$36 $77 
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13. Additional Balance Sheet Information
Certain balance sheet amounts are comprised of the following:
(In millions)March 31,
2024
December 31,
2023
Accounts receivable, net  
Trade accounts $656 $723 
Joint interest accounts 181 118 
Other accounts 44 4 
 881 845 
Allowance for credit losses(3)(2)
 $878 $843 
Other assets  
Deferred compensation plan $35 $33 
Debt issuance costs7 8 
Operating lease right-of-use assets312 337 
Derivative instruments6 7 
Other accounts84 82 
 $444 $467 
Accounts payable
Trade accounts $64 $60 
Royalty and other owners 378 386 
Accrued gathering, processing and transportation69 80 
Accrued capital costs 158 165 
Taxes other than income 39 33 
Accrued lease operating costs41 39 
Other accounts39 40 
 $788 $803 
Accrued liabilities
Employee benefits $39 $70 
Taxes other than income 23 14 
Restructuring liability 30 35 
Derivative instruments2  
Operating lease liabilities116 116 
Financing lease liabilities 7 6 
Other accounts 63 20 
 $280 $261 
Other liabilities
Deferred compensation plan $35 $33 
Postretirement benefits17 17 
Operating lease liabilities 209 237 
Financing lease liabilities 5 6 
Restructuring liability 6 12 
Other accounts125 124 
 $397 $429 
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14. Interest Expense
Interest expense is comprised of the following:
Three Months Ended 
March 31,
(In millions)20242023
Interest Expense
Interest expense$22 $20 
Debt premium and discount amortization, net(5)(5)
Debt issuance cost amortization1 1 
Other1 1 
$19 $17 
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following review of operations of Coterra Energy Inc. (“Coterra,” the “Company,” “our,” “we” and “us”) for the three month periods ended March 31, 2024 and 2023 should be read in conjunction with our Condensed Consolidated Financial Statements and the Notes included in this Quarterly Report on Form 10-Q (this “Form 10-Q”) and with the Consolidated Financial Statements, Notes and Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed on February 23, 2024 (our “Form 10-K”). For the abbreviations and definitions of certain terms commonly used in the oil and gas industry, please see the “Glossary of Certain Oil and Gas Terms” included within our Form 10-K.
OVERVIEW
Financial and Operating Overview
Financial and operating results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 reflect the following:
Net income decreased $325 million from $677 million, or $0.88 per share, in 2023 to $352 million, or $0.47 per share, in 2024.
Net cash provided by operating activities decreased $638 million, from $1.5 billion, in 2023 to $856 million in 2024.
Equivalent production increased 5.2 MMBoe from 57.2 MMBoe, or 635.0 MBoe per day, in 2023 to 62.4 MMBoe, or 686.1 MBoe per day in 2024.
Natural gas production increased 21.3 Bcf from 248.1 Bcf, or 2,757 Mmcf per day, in 2023 to 269.4 Bcf, or 2,960 Mmcf per day, in 2024.
Oil production increased 1.0 MMBbl from 8.3 MMBbl, or 92.2 MBbl per day, in 2023 to 9.3 MMBbl, or 102.5 MBbl per day, in 2024.
NGL volumes increased 0.7 MMBbl from 7.5 MMBbl, or 83.4 MBbl per day, in 2023 to 8.2 MMBbl, or 90.2 MBbl per day, in 2024.
Average realized prices:
Natural gas was $2.10 per Mcf in 2024, 44 percent lower than the $3.72 per Mcf realized in 2023.
Oil was $75.00 per Bbl in 2024, one percent higher than the $74.09 per Bbl realized in 2023.
NGL price was $21.09 per Bbl in 2024, 11 percent lower than the $23.66 per Bbl realized in 2023.
Total capital expenditures for drilling, completion and other fixed assets were $450 million in 2024 compared to $568 million in the corresponding period of the prior year. The decrease was driven by lower planned capital expenditures in 2024.
Issued $500 million of 5.60% aggregate principal amount senior notes due March 15, 2034 during the three months ended March 31, 2024. We expect to use the net proceeds, and cash on hand, to fund the repayment of the $575 million of 3.65% weighted-average senior notes that mature in September 2024.
Increased our quarterly base dividend from $0.20 per share to $0.21 per share in February 2024.
Repurchased 6 million shares for $157 million during the three months ended March 31, 2024. We repurchased 11 million shares for $271 million during the three months ended March 31, 2023.
Market Conditions and Commodity Prices
Our financial results depend on many factors, particularly commodity prices and our ability to find, develop and market our production on economically attractive terms. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by pipeline capacity constraints, inventory storage levels, basis differentials, weather conditions, and geopolitical, economic and other factors.
Oil prices have recovered in recent years from previous pandemic-related market weakness, particularly on the demand side. Global conflict and supply chain disruptions drove high oil prices in 2022, which then moderated throughout 2023.
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OPEC+ reacted with supply reductions, helping to stabilize oil price levels during 2023. Oil and gas companies in the U.S. have largely refrained from expanding their existing production, which has contributed to steadier oil prices in 2023 as compared to recent years and to improved oil prices in early 2024.
Natural gas prices trended down year-over-year but strengthened in fourth quarter of 2023 due to increased power demand. However, natural gas prices have declined in the first part of 2024 as the domestic market appears oversupplied.
Although the current outlook on oil and natural gas prices is generally favorable and our operations have not been significantly impacted in the short-term, in the event further disruptions occur and continue for an extended period of time, our operations could be adversely impacted, commodity prices could decline, and our costs could increase. Oil and natural gas prices have fallen significantly since their peak in 2022, and we expect commodity price volatility to continue, driven by further geopolitical disruptions, including conflicts in the Middle East and actions of OPEC+ and swift near and medium-term fluctuations in supply and demand. Although we are unable to predict future commodity prices, at current oil, natural gas and NGL price levels, we do not believe that an impairment of our oil and gas properties is reasonably likely to occur in the near future. However, in the event that commodity prices significantly decline or costs significantly increase from current levels, our management would evaluate the recoverability of the carrying value of our oil and gas properties.
In addition, the issue of, and increasing political and social attention on, climate change has resulted in both existing and pending national, regional and local legislation and regulatory measures, such as mandates for renewable energy and emissions reductions targeted at limiting or reducing emissions of GHGs. Changes in these laws or regulations may result in delays or restrictions in permitting and the development of projects, may result in increased costs and may impair our ability to move forward with our construction, completions, drilling, water management, waste handling, storage, transport and remediation activities, any of which could have an adverse effect on our financial results.
For information about the impact of realized commodity prices on our revenues, refer to “Results of Operations” below.
Outlook
Our 2024 full year capital program is expected to be approximately $1.75 billion to $1.95 billion. We expect to fund these capital expenditures with our operating cash flow. We expect to turn-in-line 132 to 158 total net wells in 2024 across our three operating regions. Approximately 61 percent of our drilling and completion capital is expected to be invested in the Permian Basin, 22 percent in the Marcellus Shale and 17 percent in the Anadarko Basin.
In 2023, we drilled 264 gross wells (169.4 net) and turned in line 273 gross wells (173.0 net). For the three months ended March 31, 2024, our capital program focused on the Permian Basin, Marcellus Shale and Anadarko Basin, where we drilled 42.9 net wells and turned in line 33.0 net wells. Our capital program for the remainder of 2024 will focus on execution of our 2024 plan. We allocate our planned program for capital expenditures based on market conditions, return on capital and free cash flow expectations and availability of services and human resources. We will continue to assess the oil and natural gas price environment and may adjust our capital expenditures accordingly.
FINANCIAL CONDITION
Liquidity and Capital Resources
We strive to maintain an adequate liquidity level to address commodity price volatility and risk. Our liquidity requirements consist primarily of our planned capital expenditures, payment of contractual obligations (including debt maturities and interest payments), working capital requirements, dividend payments and share repurchases. Although we have no obligation to do so, we may also from time-to-time refinance or retire our outstanding debt through privately negotiated transactions, open market repurchases, redemptions, exchanges, tender offers or otherwise.
Our primary sources of liquidity are cash on hand, net cash provided by operating activities and available borrowing capacity under our revolving credit agreement. Our liquidity requirements are generally funded with cash flows provided by operating activities, together with cash on hand. However, from time to time, our investments may be funded by bank borrowings (including draws on our revolving credit agreement), sales of non-strategic assets, and private or public financing based on our monitoring of capital markets and our balance sheet. While there are no “rating triggers” in any of our debt agreements that would accelerate the scheduled maturities should our debt rating fall below a certain level, a change in our debt rating could adversely impact our interest rate on any borrowings under our revolving credit agreement and our ability to economically access debt markets. As of the date hereof, our debt is currently rated as investment grade by the three leading ratings agencies. For more on the impact of credit ratings on our interest rates and fees for unused commitments under our revolving credit agreement, see Note 4 of the Notes to the Consolidated Financial Statements in our Form 10-K, “Long-Term Debt and Credit Agreements.” We believe that, with operating cash flow, cash on hand and availability under our revolving
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credit agreement, we have the ability to finance our spending plans over the next 12 months and, based on current expectations, for the longer term.
Our working capital is substantially influenced by the variables discussed above and fluctuates based on the timing and amount of borrowings and repayments under our revolving credit agreement, borrowings and repayments of debt, the timing of cash collections and payments on our trade accounts receivable and payable, respectively, payment of dividends, repurchases of our securities and changes in the fair value of our commodity derivative activity. From time to time, our working capital will reflect a deficit, while at other times it will reflect a surplus. This fluctuation is not unusual. As of March 31, 2024 and December 31, 2023, we had a working capital surplus of $841 million and $355 million, respectively. The increase in our working capital surplus is primarily due to increases in cash and cash equivalents and short-term investments related to our issuance of $500 million of senior notes during the first quarter of 2024. We believe we have adequate liquidity and availability under our revolving credit agreement as outlined above to meet our working capital requirements and repayment of our current maturities of debt over the next 12 months.
As of March 31, 2024, we had no borrowings outstanding under our revolving credit agreement, our unused commitments were $1.5 billion, and we had unrestricted cash on hand and short-term investments of $1.3 billion and $250 million, respectively.
In March 2024, we issued $500 million of 5.60% senior notes. We expect to use these net proceeds, along with cash on hand, to fund the repayment of the $575 million of 3.65% weighted-average senior notes that mature in September 2024.
Our revolving credit agreement includes a covenant limiting our borrowing capacity based on our leverage ratio. As of March 31, 2024, we were in compliance with all financial covenants applicable to our revolving credit agreement and private placement senior notes. Refer to Note 3 of the Notes to the Condensed Consolidated Financial Statements in this report, “Debt and Credit Agreements” and Note 4 of the Notes to the Consolidated Financial Statements in our Form 10-K, “Long-Term Debt and Credit Agreements,” for further details.
Cash Flows
Our cash flows from operating activities, investing activities and financing activities were as follows:
Three Months Ended 
March 31,
(In millions)20242023
Cash flows provided by operating activities $856 $1,494 
Cash flows used in investing activities (708)(479)
Cash flows provided by (used in) financing activities 185 (715)
Net increase in cash, cash equivalents and restricted cash$333 $300 
Operating Activities. Operating cash flow fluctuations are substantially driven by changes in commodity prices, production volumes and operating expenses. Commodity prices have historically been volatile, primarily as a result of supply and demand for oil and natural gas, pipeline infrastructure constraints, basis differentials, inventory storage levels, seasonal influences and geopolitical, economic and other factors. In addition, fluctuations in cash flow may result in an increase or decrease in our capital expenditures.
Net cash provided by operating activities for the three months ended March 31, 2024 decreased by $638 million compared to the same period in 2023. This decrease was primarily due to the decrease in natural gas revenue resulting primarily from lower natural gas prices along with higher operating costs, a smaller contribution from changes in working capital and other assets and liabilities, and a decrease in cash received on derivative settlements. These decreases were partially offset by an increase in oil revenue.
Refer to “Results of Operations” below for additional information relative to commodity prices, production and operating expense fluctuations. We are unable to predict future commodity prices and, as a result, cannot provide any assurance about future levels of net cash provided by operating activities.
Investing Activities. Cash flows used in investing activities increased by $229 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was primarily due to the purchase of short-term investments of $250 million from a portion of the net proceeds received from the issuance of the $500 million of 5.60% senior notes during the first quarter of 2024. This increase was partially offset by $26 million lower cash paid for capital expenditures.
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Financing Activities. Cash flows provided by financing activities increased by $900 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was due to the issuance of the $500 million of 5.60% senior notes during the first quarter of 2024, $278 million lower dividend payments and $118 million lower common stock repurchases. The decrease in dividend payments was a result of a decrease in our dividend rate from $0.57 per common share (base-plus-variable) for the three months ended March 31, 2023 to $0.21 per common share (base only) for the three months ended March 31, 2024, and a decrease in outstanding shares of common stock due to our active share repurchase programs during 2023 and the first three months of 2024.
Capitalization
Information about our capitalization is as follows:
(Dollars in millions)March 31,
2024
December 31,
2023
Total debt (1)
$2,651 $2,161 
Stockholders’ equity
13,089 13,039 
Total capitalization $15,740 $15,200 
Debt to total capitalization 17 %14 %
Cash and cash equivalents $1,289 $956 
Short-term investments$250 $— 
________________________________________________________
(1) Includes $575 million of current portion of long-term debt as of March 31, 2024 and December 31, 2023 that matures in September 2024. There were no borrowings outstanding under our revolving credit agreement as of March 31, 2024 and December 31, 2023.
Share repurchases. During the three months ended March 31, 2024, we repurchased and retired 6 million shares of our common stock for $157 million. We repurchased and retired 11 million shares of our common stock for $271 million during the three months ended March 31, 2023.
Dividends. In February 2024, our Board of Directors approved an increase in the base quarterly dividend from $0.20 per share to $0.21 per share.
The following table summarizes our dividends on our common stock:
Rate Per ShareTotal Dividends
(In millions)
FixedVariableTotal
2024
First quarter$0.21 $— $0.21 $160 
2023
First quarter$0.20 $0.37 $0.57 $438 
Capital and Exploration Expenditures
On an annual basis, we generally fund most of our capital expenditures, excluding any significant property acquisitions, with cash flow provided by operating activities, and, if required, borrowings under our revolving credit agreement. We budget these expenditures based on our projected cash flows for the year.
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The following table presents major components of our capital and exploration expenditures:
Three Months Ended 
March 31,
(In millions)20242023
Capital expenditures:  
Drilling and facilities$420 $523 
Pipeline and gathering27 38 
Other
Capital expenditures for drilling, completion and other fixed asset additions450 568 
Capital expenditures for leasehold and property acquisitions
Exploration expenditures(1)
$456 $573 
________________________________________________________
(1)There were no exploratory dry hole costs for the three months ended March 31, 2024 and 2023.
For the three months ended March 31, 2024, our capital program was focused on the Permian Basin, Marcellus Shale and Anadarko Basin, where we drilled 42.9 net wells and turned in line 33.0 net wells. We continue to expect that our full-year 2024 capital program will be approximately $1.75 billion to $1.95 billion. Refer to “Outlook” above for additional information regarding the current year drilling program. We will continue to assess the commodity price environment and may adjust our capital expenditures accordingly. 
Contractual Obligations
We have various contractual obligations in the normal course of our operations. There have been no material changes to our contractual obligations described under “Gathering, Processing and Transportation Agreements” and “Lease Commitments” as disclosed in Note 8 of the Notes to the Consolidated Financial Statements and the obligations described under “Contractual Obligations” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Refer to our Form 10-K for further discussion of our critical accounting policies.
RESULTS OF OPERATIONS
First Three Months of 2024 and 2023 Compared
Operating Revenues
 Three Months Ended 
March 31,
Variance
(In millions)20242023AmountPercent
Natural gas $538 $822 $(284)(35)%
Oil701 615 86 14 %
NGL173 177 (4)(2)%
Gain on derivative instruments
— 138 (138)100 %
Other 21 25 (4)(16)%
 $1,433 $1,777 $(344)(19)%
Production Revenues
Our production revenues are derived from sales of our oil, natural gas and NGL production. Increases or decreases in our revenues, profitability and future production growth are highly dependent on the commodity prices we receive, which we
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expect to fluctuate due to supply and demand factors, and the availability of transportation, seasonality and geopolitical, economic and other factors.
Natural Gas Revenues
 Three Months Ended 
March 31,
VarianceIncrease
(Decrease)
(In millions)
 20242023AmountPercent
Volume variance (Bcf)269.4248.121.3 %$70 
Price variance ($/Mcf)$2.00 $3.31 $(1.31)(40)%(354)
    $(284)
Natural gas revenues decreased $284 million primarily due to significantly lower natural gas prices, partially offset by higher production. The higher production is primarily due to increased production in the Marcellus Shale and Permian Basin, partially offset by a decrease in the Anadarko Basin production, primarily due to the timing of our drilling and completion activities.
Oil Revenues
 Three Months Ended 
March 31,
VarianceIncrease
(Decrease)
(In millions)
 20242023AmountPercent
Volume variance (MMBbl)9.38.31.0 12 %$74 
Price variance ($/Bbl)$75.16 $74.03 $1.13 %12