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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, 2023
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 3, 2023, there were 757,453,231 shares of Common Stock, Par Value $0.10 Per Share, outstanding.


COTERRA ENERGY INC.
INDEX TO FINANCIAL STATEMENTS
  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,
2023
December 31,
2022
ASSETS  
Current assets  
Cash and cash equivalents$973 $673 
Restricted cash10 10 
Accounts receivable, net775 1,221 
Income taxes receivable 89 
Inventories 56 63 
Derivative instruments184 146 
Other current assets7 9 
Total current assets 2,005 2,211 
Properties and equipment, net (Successful efforts method) 17,682 17,479 
Other assets 452 464 
$20,139 $20,154 
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY  
Current liabilities  
Accounts payable $833 $844 
Accrued liabilities 280 328 
Income taxes payable81  
Interest payable15 21 
Total current liabilities 1,209 1,193 
Long-term debt, net2,176 2,181 
Deferred income taxes 3,362 3,339 
Asset retirement obligations277 271 
Other liabilities 464 500 
Total liabilities7,488 7,484 
Commitments and contingencies (Note 7)
Cimarex redeemable preferred stock811
Stockholders' equity
Common stock:  
Authorized — 1,800 shares of $0.10 par value in 2023 and 2022
  
     Issued — 757 shares and 768 shares in 2023 and 2022, respectively
7677
Additional paid-in capital 7,679 7,933 
Retained earnings 4,875 4,636 
Accumulated other comprehensive income13 13 
Total stockholders' equity 12,643 12,659 
 $20,139 $20,154 

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)20232022
OPERATING REVENUES  
Natural gas $822 $1,111 
Oil615 699 
NGL177 245 
Gain (loss) on derivative instruments138 (391)
Other 25 15 
 1,777 1,679 
OPERATING EXPENSES  
Direct operations134 100 
Transportation, processing and gathering236 233 
Taxes other than income 86 76 
Exploration 4 6 
Depreciation, depletion and amortization 369 360 
General and administrative 76 107 
 905 882 
Gain on sale of assets 5 2 
INCOME FROM OPERATIONS 877 799 
Interest expense17 21 
Interest income(12) 
Income before income taxes 872 778 
Income tax expense195 170 
NET INCOME$677 $608 
Earnings per share  
Basic $0.88 $0.75 
Diluted$0.88 $0.74 
Weighted-average common shares outstanding   
Basic764 810 
Diluted 768 814 
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)20232022
CASH FLOWS FROM OPERATING ACTIVITIES  
  Net income $677 $608 
  Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation, depletion and amortization369 360 
Deferred income tax expense23 36 
Gain on sale of assets(5)(2)
(Gain) loss on derivative instruments(138)391 
Net cash received (paid) in settlement of derivative instruments100 (171)
Amortization of debt premium and debt issuance costs(4)(10)
Stock-based compensation and other17 20 
  Changes in assets and liabilities:
Accounts receivable, net446 (57)
Income taxes170 124 
Inventories7 (2)
Other current assets1 2 
Accounts payable and accrued liabilities(198)21 
Interest payable(6)1 
Other assets and liabilities35 1 
Net cash provided by operating activities1,494 1,322 
CASH FLOWS FROM INVESTING ACTIVITIES  
Capital expenditures for drilling, completion and other fixed asset additions(483)(270)
Capital expenditures for leasehold and property acquisitions(1)(1)
Proceeds from sale of assets5 2 
Net cash used in investing activities(479)(269)
CASH FLOWS FROM FINANCING ACTIVITIES  
Repayments of finance leases(2)(2)
Common stock repurchases(268)(184)
Dividends paid(436)(456)
Cash received for stock option exercises 6 
Cash paid for conversion of redeemable preferred stock(1) 
Tax withholding on vesting of stock awards(1)(6)
Capitalized debt issuance costs(7) 
Net cash used in financing activities(715)(642)
Net increase in cash, cash equivalents and restricted cash300 411 
Cash, cash equivalents and restricted cash, beginning of period683 1,046 
Cash, cash equivalents and restricted cash, end of period$983 $1,457 
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, 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 

(In millions, except per share amounts)Common SharesCommon Stock ParTreasury SharesTreasury StockPaid-In CapitalAccumulated Other Comprehensive IncomeRetained EarningsTotal
Balance at December 31, 2021893 $89 79 $(1,826)$10,911 $1 $2,563 $11,738 
Net income— — — — — — 608 608 
Exercise of stock options— — — — 6 — — 6 
Stock amortization and vesting— — — — 10 — — 10 
Common stock repurchases— — 8 (192)— — — (192)
Cash dividends:
Common stock at $0.56 per share
— — — — — — (455)(455)
Preferred stock at $20.3125 per share
— — — — — — (1)(1)
Other comprehensive income— — — — — 4 — 4 
Balance at March 31, 2022893 $89 87 $(2,018)$10,927 $5 $2,715 $11,718 

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, 2022 (the “Form 10-K”) filed with the Securities and Exchange Commission (“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.
2. Properties and Equipment, Net
Properties and equipment, net are comprised of the following:
(In millions)March 31,
2023
December 31,
2022
Proved oil and gas properties$17,744 $17,085 
Unproved oil and gas properties 5,016 5,150 
Gathering and pipeline systems483 450 
Land, buildings and other equipment 186 183 
Finance lease right-of-use asset25 24 
23,454 22,892 
Accumulated depreciation, depletion and amortization(5,772)(5,413)
 $17,682 $17,479 
Capitalized Exploratory Well Costs
As of March 31, 2023, the Company did not have any projects with exploratory well costs capitalized for a period of greater than one year after drilling.
3. Debt and Credit Agreements
The following table includes a summary of the Company’s long-term debt:
(In millions)March 31,
2023
December 31,
2022
3.65% weighted-average private placement senior notes
$825 $825 
3.90% senior notes due May 15, 2027
750 750 
4.375% senior notes due March 15, 2029
500 500 
Revolving credit agreement  
Total2,075 2,075 
Net premium106 111 
Unamortized debt issuance costs(5)(5)
Long-term debt$2,176 $2,181 
At March 31, 2023, the Company was in compliance with all financial and other covenants for its revolving credit agreement (as defined below), 3.65% weighted-average private placement senior notes (the “private placement senior notes”) and the 3.90% senior notes due May 15, 2027 and 4.375% senior notes due March 15, 2029 (the “senior notes”).
7

Revolving Credit Agreement
On March 10, 2023, the Company entered into a revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”), and certain lenders and issuing banks party thereto. The aggregate revolving commitments under the Credit Agreement are $1.5 billion, with a discretionary swingline sub-facility of up to $100 million and a letter of credit sub-facility of up to $500 million. The Company may also increase the revolving commitments under the Credit Agreement by up to an additional $500 million subject to certain conditions and the agreement of the lenders providing commitments with respect to such increase.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the Company’s option, either a term secured overnight financing rate (“SOFR”) plus a 0.10 percent credit spread adjustment for all tenors or a base rate, plus an interest rate margin which ranges from 0 to 75 basis points for base rate loans and 100 to 175 basis points for term SOFR loans based on the Company’s credit rating. The commitment fee on the unused available credit is calculated at annual rates ranging from 10 basis points to 27.5 basis points. The Credit Agreement matures on March 10, 2028. The maturity date can be extended for additional one-year periods on up to two occasions upon the agreement of the Company and lenders holding at least 50 percent of the commitments under the Credit Agreement.
The Credit Agreement contains customary covenants, including the maintenance of a maximum leverage ratio of no more than 3.0 to 1.0 as of the last day of any fiscal quarter until such time as the Company has no other debt in a principal amount in excess of $75 million outstanding that has a financial maintenance covenant based on a leverage ratio, at which time the Credit Agreement requires maintenance of a ratio of total debt to total capitalization of no more than 65 percent (with all calculations based on definitions contained in the Credit Agreement).
Concurrently with the Company’s entry into the Credit Agreement, the Company terminated its existing Second Amended and Restated Credit Agreement, dated as of April 22, 2019, with the lenders party thereto and JPMorgan, as administrative agent thereunder.
At March 31, 2023, the Company had no borrowings outstanding under its revolving credit agreement and unused commitments of $1.5 billion.
4. Derivative Instruments
As of March 31, 2023, the Company had the following outstanding financial commodity derivatives:
 2023
Natural GasSecond QuarterThird QuarterFourth Quarter
Waha gas collars
     Volume (MMBtu)8,190,000 8,280,000 8,280,000 
     Weighted average floor ($/MMBtu)$3.03 $3.03 $3.03 
     Weighted average ceiling ($/MMBtu)$5.39 $5.39 $5.39 
NYMEX collars
     Volume (MMBtu)31,850,000 32,200,000 29,150,000 
     Weighted average floor ($/MMBtu)$4.07 $4.07 $4.03 
     Weighted average ceiling ($/MMBtu)$6.78 $6.78 $6.61 
2023
OilSecond Quarter
WTI oil collars
     Volume (MBbl)1,365 
     Weighted average floor ($/Bbl)$70.00 
     Weighted average ceiling ($/Bbl)$116.03 
WTI Midland oil basis swaps
     Volume (MBbl)1,365 
     Weighted average differential ($/Bbl)$0.63 
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In April 2023, the Company entered into the following financial commodity derivatives:
 2023
OilSecond QuarterThird QuarterFourth Quarter
WTI oil collars
     Volume (MBbl)910 920 920 
     Weighted average floor ($/Bbl)$65.00 $65.00 $65.00 
     Weighted average ceiling ($/Bbl)$89.66 $89.66 $89.66 
WTI Midland oil basis swaps
     Volume (MBbl)910 920 920 
     Weighted average differential ($/Bbl)$1.01 $1.01 $1.01 
Effect of Derivative Instruments on the Condensed Consolidated Balance Sheet
Fair Values of Derivative Instruments
  Derivative AssetsDerivative Liabilities
(In millions)Balance Sheet LocationMarch 31,
2023
December 31,
2022
March 31,
2023
December 31,
2022
Commodity contractsDerivative instruments (current)$184 $146 $ $ 
Offsetting of Derivative Assets and Liabilities in the Condensed Consolidated Balance Sheet
(In millions)March 31,
2023
December 31,
2022
Derivative assets  
Gross amounts of recognized assets$185 $147 
Gross amounts offset in the condensed consolidated balance sheet(1)(1)
Net amounts of assets presented in the condensed consolidated balance sheet184 146 
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet1 2 
Net amount$185 $148 
Derivative liabilities   
Gross amounts of recognized liabilities$1 $1 
Gross amounts offset in the condensed consolidated balance sheet(1)(1)
Net amounts of liabilities presented in the condensed consolidated balance sheet  
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet 1 
Net amount$ $1 
Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
 Three Months Ended 
March 31,
(In millions)20232022
Cash received (paid) on settlement of derivative instruments  
Gas contracts$99 $(42)
Oil contracts1 (129)
Non-cash gain (loss) on derivative instruments  
Gas contracts42 (182)
Oil contracts(4)(38)
 $138 $(391)
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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, 2023
Assets    
Deferred compensation plan$42 $ $ $42 
Derivative instruments  185 185 
$42 $ $185 $227 
Liabilities   
Deferred compensation plan$54 $ $ $54 
Derivative instruments  1 1 
$54 $ $1 $55 
(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, 2022
Assets    
Deferred compensation plan$43 $ $ $43 
Derivative instruments  147 147 
$43 $ $147 $190 
Liabilities   
Deferred compensation plan$55 $ $ $55 
Derivative instruments  1 1 
$55 $ $1 $56 
The Company’s investments associated with its deferred compensation plans consist of mutual funds and deferred shares of the Company’s common stock 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, and/or are compared to multiple quotes obtained from counterparties. 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 market credit spreads provided by several of the Company’s banks. 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.
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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)20232022
Balance at beginning of period$146 $(152)
Total gain (loss) included in earnings138 (391)
Settlement (gain) loss(100)171 
Transfers in and/or out of Level 3  
Balance at end of period$184 $(372)
Change in unrealized gains (losses) relating to assets and liabilities still held at the end of the period$95 $(291)
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, 2023, 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 takes into account 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.
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. 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 senior notes is based on quoted market prices, which is classified as Level 1 in the fair value hierarchy. The Company uses available market data and valuation methodologies to estimate the fair value of its private placement senior notes. The fair value of the private placement senior notes is the estimated amount the Company would have to pay a third party to assume the debt, including a credit spread for the difference between the issue rate and the period end market rate. The credit spread is the Company’s default or repayment risk. The credit spread (premium or discount) is determined by comparing the Company’s senior notes and revolving credit agreement to new issuances (secured and unsecured) and secondary trades of similar size and credit statistics for both public and private debt. The fair value of the private placement senior notes is based on interest rates currently available to the Company. The Company’s private placement senior notes are valued using an income approach and are classified as Level 3 in the fair value hierarchy.
The carrying amount and estimated fair value of debt is as follows:
 March 31, 2023December 31, 2022
(In millions)Carrying
Amount
Estimated Fair
Value
Carrying
Amount
Estimated Fair
Value
Long-term debt$2,176 $1,985 $2,181 $1,955 
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6. Asset Retirement Obligations
Activity related to the Company’s asset retirement obligations is as follows:
(In millions)Three Months Ended 
March 31, 2023
Balance at beginning of period$277 
Liabilities incurred1 
Liabilities settled 2 
Accretion expense3 
Balance at end of period283 
Less: current asset retirement obligations(6)
Noncurrent asset retirement obligations$277 
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 “Transportation, Processing and Gathering 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 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 plaintiffs allege misstatements in the Company’s public filings and disclosures over a number of years relating to its potential liability for alleged environmental violations in Pennsylvania. The plaintiffs allege that such misstatements caused a decline in the price of the Company’s common stock when it disclosed in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 two notices of violations from the Pennsylvania Department of Environmental Protection and an additional decline when it disclosed on June 15, 2020 the criminal charges brought by the Office of the Attorney General of the Commonwealth of Pennsylvania related to alleged violations of the Pennsylvania Clean Streams Law, which prohibits discharge of industrial wastes. The court appointed Delaware County Employees Retirement System to represent the purported class on February 3, 2021. In April 2021, the complaint was amended to include Phillip L. Stalnaker, the Company’s then Senior Vice President of Operations, as a defendant. The plaintiffs seek monetary damages, interest and attorney’s fees.
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 the Company, Messrs. Dinges and Schroeder and the Board of Directors of the Company serving at that time, for alleged securities violations under Section 10(b) and Section 21D of the Exchange Act arising from the same alleged misleading statements that form the basis of the class action lawsuit described above. In addition to the Exchange Act claims, the derivative actions also allege claims based on breaches of fiduciary duty and statutory contribution theories. In December 2020, the Ezell case was consolidated with a second derivative case filed in the U.S. District Court, Middle District of Pennsylvania with similar allegations. In January 2021, a third derivative case was filed in the U.S. District Court, Middle District of Pennsylvania with substantially similar allegations and it too was consolidated with the Ezell case in February 2021.
On February 25, 2021, the Company filed a motion to transfer the class action lawsuit to the U.S. District Court for the Southern District of Texas, in Houston, Texas, where its headquarters are located. On June 11, 2021, the Company filed a motion to dismiss the class action lawsuit on the basis that the plaintiffs’ allegations do not meet the requirements for pleading a claim under Section 10(b) or Section 20 of the Exchange Act. On June 22, 2021, the motion to transfer the class action lawsuit to the Southern District of Texas was granted. Pursuant to the prior agreement of the parties, the consolidated derivative case discussed in the preceding paragraph was also transferred to the Southern District of Texas on July 12, 2021. Subsequently, an additional stockholder derivative action styled Treppel Family Trust U/A 08/18/18 Lawrence A. Treppel and Geri D. Treppel for the benefit of Geri D. Treppel and Larry A. Treppel v. Dinges, et al. (U.S. District Court, Southern District of Texas, Houston Division), asserting substantially similar Delaware common law claims as in the existing derivative cases, was filed in the Southern District of Texas and consolidated with the existing consolidated derivative cases. On January 12, 2022, the U.S.
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District Court for the Southern District of Texas granted the Company’s motion to dismiss the class action lawsuit but allowed the plaintiffs to file an amended complaint. The class action plaintiffs filed their amended complaint on February 11, 2022. The Company filed a motion to dismiss the amended class action complaint on March 10, 2022. On August 10, 2022, the U.S. District Court for the Southern District of Texas granted in part and denied in part the Company’s motion to dismiss the amended class action complaint, dismissing certain claims with prejudice but allowing certain claims to proceed. The Company filed its answer to the amended class action complaint on September 14, 2022. The class action case is presently in the discovery and class certification stage, with oral argument on class certification currently scheduled for July 7, 2023. With respect to the consolidated derivative cases, on April 1, 2022, the U.S. District Court for the Southern District of Texas granted the Company’s motion to dismiss such consolidated derivative cases but allowed the plaintiffs to file an amended complaint. The derivative plaintiffs filed their third amended complaint on May 16, 2022. The Company filed its motion to dismiss such amended complaint on June 24, 2022, and filed its reply in support of such motion to dismiss on September 4, 2022. The Company’s motion to dismiss the consolidated derivative cases is fully briefed and is pending for decision. On March 27, 2023, the U.S. District Court for the Southern District of Texas denied the motion to dismiss the derivative case as moot and ordered the Company to file a renewed motion to dismiss addressing certain issues regarding the impact of the class action litigation on the derivative case. The Company filed its renewed motion to dismiss on April 28, 2023. Oral arguments on the motion to dismiss is currently scheduled for July 7, 2023. The Company intends to vigorously defend the class action and derivative lawsuits.
In November 2020, the Company received a stockholder demand for inspection of books and records under Section 220 of the General Corporation Law of the State of Delaware (“Section 220 Demand”). The Section 220 Demand seeks broad categories of documents reviewed by the Board of Directors and minutes of meetings of the Board of Directors pertaining to alleged environmental violations in Pennsylvania, as well as documents relating to any board of directors conflicts of interest, dating from January 1, 2015 to the present. The Company also received three other similar requests from other stockholders in February and June 2021. On May 17, 2021, the Company was served with a complaint filed in the Court of Chancery of the State of Delaware by the stockholder making the February 2021 Section 220 Demand to compel the production of books and records requested. After making an agreed books and records production, the Section 220 complaint was voluntarily dismissed effective September 21, 2021. The Company also provided substantially the same books and records production in response to the other three Section 220 requests described above. It is possible that one or more additional stockholder suits could be filed pertaining to the subject matter of the Section 220 Demands and the class and derivative actions described above.
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 based on its best estimate of the potential loss. 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.
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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)20232022
Natural gas$822 $1,111 
Oil615 699 
NGL177 245 
Other25 15 
$1,639 $2,070 
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 United States of America.
Transaction Price Allocated to Remaining Performance Obligations
A significant number of the Company’s product sales contracts are short-term in nature, with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.
As of March 31, 2023, the Company had $7.1 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 16 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 $628 million and $1.1 billion as of March 31, 2023 and December 31, 2022, respectively, and are reported in accounts receivable, net in the Condensed Consolidated Balance Sheet. As of March 31, 2023, the Company has 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.
The following table summarizes the Company’s dividends on its common stock for each quarter in 2023 and 2022:
Rate per share
FixedVariableTotalTotal Dividends
(In millions)
2023:
First quarter$0.20 $0.37 $0.57 $438 
2022:
First quarter$0.15 $0.41 $0.56 $455 
Treasury Stock
In February 2023, the Company’s Board of Directors approved a new share repurchase program which authorizes the purchase of up to $2.0 billion of the Company’s common stock.
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During the three months ended March 31, 2023, the Company repurchased and retired 11 million shares for $268 million under its new repurchase program. As of March 31, 2023, the Company had $1.7 billion remaining under its current share repurchase program. During the three months ended March 31, 2022, the Company repurchased 8 million shares for $192 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)20232022
Restricted stock units - employees and non-employee directors$7 $8 
Restricted stock awards4 5 
Performance share awards5 6 
Deferred performance shares 4 
   Total stock-based compensation expense$16 $23 
Income tax benefit$1 $5 
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.
Subsequent Event. On May 4, 2023, the Company’s stockholders approved the Coterra Energy Inc. 2023 Equity Incentive Plan (the “2023 Plan”) which replaced the existing Cabot Oil & Gas Corporation 2014 Incentive Plan (the “Prior Cabot Plan”) and the Cimarex Energy Co. Amended and Restated 2019 Equity Incentive Plan (the “Prior Cimarex Plan). Under the 2023 Plan, permitted awards include, but are not limited to, options, stock appreciation rights, restricted stock, restricted stock units, performance stock units and other cash and stock-based awards. A total of 22.95 million shares of common stock may be issued under the 2023 Plan. The 2023 Plan expires on February 21, 2033. No additional awards may be granted under the Prior Cabot Plan or the Prior Cimarex Plan on or after May 4, 2023. Awards outstanding under any of the Company’s prior plans will remain outstanding and vest in accordance with their original terms and conditions.
Restricted Stock Units - Employees
During the three months ended March 31, 2023, the Company granted 666,303 restricted stock units to employees of the Company with a weighted average grant date value of $23.00 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 either at the end of a three-year service period or on a graded or graduated vesting basis at each anniversary date over a three-year service period. The Company used an annual forfeiture rate assumption of zero to five percent for purposes of recognizing stock-based compensation expense for its restricted stock units.
Performance Share Awards
Total Shareholder Return (“TSR”) Performance Share Awards. During the three months ended March 31, 2023, the Company granted 577,172 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, 2023 and ends on January 31, 2026.
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.
15

The following assumptions were used to determine the grant date fair value of the equity component on February 21, 2023 and the period-end fair value of the liability component of the TSR Performance Share Awards:
 Grant DateMarch 31,
2023
Fair value per performance share award $17.18 
$10.92 - $11.99
Assumptions:   
     Stock price volatility44.8 %
41.8% - 43.4%
     Risk-free rate of return4.40 %
3.8% - 4.1%
11. Earnings per Common Share
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is similarly calculated, except that the common shares 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.
The following is a calculation of basic and diluted earnings per share under the two-class method:
Three Months Ended 
March 31,
(In millions, except per share amounts)20232022
Income (Numerator)
Net income$677 $608 
Less: dividends attributable to participating securities(2)(2)
Less: Cimarex redeemable preferred stock dividends (1)
Net income available to common stockholders$675 $605 
Shares (Denominator)
Weighted average shares - Basic764 810 
Dilution effect of stock awards at end of period4 4 
Weighted average shares - Diluted768 814 
Earnings per share:
Basic$0.88 $0.75 
Diluted$0.88 $0.74 
The following is a calculation of weighted-average shares excluded from diluted EPS due to anti-dilutive effect:
Three Months Ended 
March 31,
(In millions)20232022
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect calculated using the treasury stock method 1 
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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)20232022
Balance at beginning of period$77 $43 
Additions related to merger integration724
Payments of merger-related restructuring costs(7)(3)
Balance at end of period$77 $64 
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13. Additional Balance Sheet Information
Certain balance sheet amounts are comprised of the following: