10q10k10q10k.net

What changed in Coterra's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Coterra's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+248 added−281 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-27)

Top changes in Coterra's 2023 10-K

248 paragraphs added · 281 removed · 203 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

88 edited+4 added−14 removed96 unchanged
Biggest changeIn order to provide a margin of comfort with regard to these financial covenants, we may seek to reduce our capital expenditures, sell non-strategic assets or opportunistically modify or increase our derivative instruments to the extent permitted under our debt agreements. In addition, we may seek to refinance or restructure all or a portion of our indebtedness.
Biggest changeA prolonged period of lower commodity prices could further increase the risk of our inability to comply with covenants to maintain specified financial ratios. In order to provide a margin of comfort with regard to these financial covenants, we may seek to modify our capital program, sell non-strategic assets or opportunistically modify or increase our derivative instruments.
Each of these risk factors could adversely affect our business, financial condition, results of operations and/or cash flows, as well as adversely affect the value of an investment in our common stock, debt securities, or preferred stock. Commodity prices fluctuate widely, and low prices for an extended period would likely have a material adverse impact on our business.
Each of these risk factors could adversely affect our business, financial condition, results of operations and cash flows, as well as adversely affect the value of an investment in our common stock, debt securities, or preferred stock. Commodity prices fluctuate widely, and low prices for an extended period would likely have a material adverse impact on our business.
The scope and nature of our operations present a variety of significant hazards and risks, including operational hazards and risks such as explosions, fires, product spills, and cybersecurity incidents and unauthorized access to data or systems, among other risks.
The scope and nature of our operations present a variety of significant hazards and risks, including operational hazards and risks such as explosions, fires, product spills, and cybersecurity incidents, such as unauthorized access to data or systems, among other risks.
The occurrence of any event not fully covered by insurance could have a material adverse effect on our financial position, results of operations and cash flows. Our proved reserves are estimates. Any material inaccuracies in our reserves estimates or underlying assumptions could cause the quantities and net present value of our reserves to be overstated or understated.
The occurrence of any event not covered or fully covered by insurance could have a material adverse effect on our financial position, results of operations and cash flows. Our proved reserves are estimates. Any material inaccuracies in our reserves estimates or underlying assumptions could cause the quantities and net present value of our reserves to be overstated or understated.
The sale of our oil, natural gas and NGL production depends on a number of factors beyond our control, including the availability and capacity of transportation and processing facilities. We deliver the majority of our oil, natural gas and NGL production through gathering systems and pipelines that we do not own.
The sale of our oil, natural gas and NGL production depends on a number of factors beyond our control, including the availability and capacity of gathering, transportation and processing facilities. We deliver the majority of our oil, natural gas and NGL production through gathering systems and pipelines that we do not own.
Failure, or a perceived failure, to adequately respond to or meet evolving investor, stockholder or public ESG expectations, concerns and standards may cause a business entity to suffer reputational damage and materially and adversely affect the entity’s business, financial condition, or stock and/or debt prices.
Failure, or a perceived failure, to adequately respond to or meet evolving investor, stockholder or public ESG expectations, concerns and standards may cause a business entity to suffer reputational damage and materially and adversely affect the entity’s business, financial condition, or stock and debt prices.
Further, negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about climate change impacts of methane and other greenhouse gas emissions, hydraulic fracturing, oil spills, and pipeline explosions coupled with increasing societal expectations on businesses to address climate change and potential consumer use of substitutes to carbon-intensive energy commodities may result in increased costs, reduced demand for our oil, natural gas and NGL production, reduced profits, increased regulation, regulatory investigations and litigation, and negative impacts on our stock and debt prices and access to capital markets.
Further, negative public perception regarding us and our industry resulting from, among other things, concerns raised by advocacy groups about climate change impacts of methane and other greenhouse gas emissions, hydraulic fracturing, oil spills, and pipeline explosions coupled with increasing societal expectations on businesses to address climate change and potential consumer use of substitutes to carbon-intensive energy commodities may result in increased costs, reduced demand for our oil, natural gas and NGL production, reduced profits, increased regulation, regulatory investigations and litigation, and negative impacts on our stock and debt prices and access to capital markets.
These actions as well as any future laws or regulations that regulate or limit emissions of GHGs from our equipment and operations could require us to develop and implement new practices aimed at reducing GHG emissions, such as emissions control technologies, and monitor and report GHG emissions associated with our operations, any of which could increase our operating costs and could adversely affect demand for the oil and gas that we produce.
These actions as well as any future laws or regulations that regulate or limit GHG emissions from our equipment and operations could require us to develop and implement new practices aimed at reducing GHG emissions, such as emissions control technologies, and to monitor and report GHG emissions associated with our operations, any of which could increase our operating costs and could adversely affect demand for the oil and gas that we produce.
We have limited ability to influence or control the operation or future development of these non-operated properties and on properties we operate in joint ventures in which we may share control with third parties, including compliance with environmental, safety and other regulations or the amount of capital expenditures that we are required to fund with respect to them.
We have limited ability to influence or control the operation or future development of these non-operated properties and of properties we operate in joint ventures in which we may share control with third parties, including compliance with environmental, safety and other regulations or the amount of capital expenditures that we are required to fund with respect to them.
Our future drilling activities may not be successful and, if unsuccessful, such failure will have an adverse effect on our future results of operations and financial condition. Our operations present hazards and risks that require significant and continuous oversight, and are subject to numerous possible disruptions from unexpected events.
Our future drilling activities may not be successful and, if unsuccessful, such failure will have an adverse effect on our future results of operations and financial condition. Our operations present hazards and risks that require significant oversight and are subject to numerous possible disruptions from unexpected events.
When a new well is completed and produced, the pressure differential in the vicinity of the wellbore causes the migration of reservoir fluids toward the new wellbore (and potentially away from existing wellbores), which could cause a depletion of our proved reserves and may inhibit our ability to further develop our proved reserves.
When a new offset well is completed and produced, the pressure differential in the vicinity of the wellbore causes the migration of reservoir fluids toward the new wellbore (and potentially away from existing wellbores), which could cause a depletion of our proved reserves and may inhibit our ability to further develop our proved reserves.
Potential physical risks resulting from climate change may be event driven (including increased severity of extreme weather events, such as hurricanes, droughts, or floods) or may be driven by longer-term shifts in climate patterns that may cause sea level rise or chronic heat waves.
Potential physical risks resulting from climate change may be event driven (including increased severity of extreme weather events, such as hurricanes, droughts, floods or freezes) or may be driven by longer-term shifts in climate patterns that may cause sea level rise or chronic heat waves.
For additional information, please read “—ESG concerns and negative public perception regarding us and/or our industry could adversely affect our business operations and the price of our common stock, debt securities and preferred stock.” in this Item 1A. Physical Risks.
For additional information, please read “—ESG concerns and negative public perception regarding us and our industry could adversely affect our business operations and the price of our common stock, debt securities and preferred stock.” in this Item 1A. Physical Risks.
These initiatives by activists and banks, including certain banks who are parties to the credit agreement providing for our revolving credit facility, could interfere with our business activities, operations and ability to access capital.
These initiatives by activists and banks, including certain banks who are parties to the credit agreement providing for our revolving credit agreement, could interfere with our business activities, operations and ability to access capital.
If our information technology systems cease to function properly or are breached, we could suffer disruptions to our normal operations, which may include drilling, completion, production and corporate functions.
If our information or operational technology systems cease to function properly or are breached, we could suffer disruptions to our normal operations, which may include drilling, completion, production and corporate functions.
Legal, Regulatory and Governmental Risks ESG concerns and negative public perception regarding us and/or our industry could adversely affect our business operations and the price of our common stock, debt securities and preferred stock.
Legal, Regulatory and Governmental Risks ESG concerns and negative public perception regarding us and our industry could adversely affect our business operations and the price of our common stock, debt securities and preferred stock.
A cyber-attack involving our information systems and related infrastructure, or that of our business associates, could result in supply chain disruptions that delay or prevent the transportation and marketing of our production, equipment damage, fires, explosions or environmental releases, non-compliance leading to regulatory fines or penalties, loss or disclosure of, or damage to, our or any of our customer’s or supplier’s data or confidential information that could harm our business by damaging our reputation, subjecting us to potential financial or legal liability and requiring us to incur significant costs, including costs to repair or restore our systems and data or to take other remedial steps.
A cyber-attack involving our information or operational technology systems and related infrastructure, or that of our business associates or partners, could result in supply chain disruptions that delay or prevent the transportation and marketing of our production, equipment damage, fires, explosions or environmental releases, non-compliance leading to regulatory fines or penalties, loss or disclosure of, or damage to, our or any of our customer’s or supplier’s data or confidential information that could harm our business by damaging our reputation, subjecting us to potential financial or legal liability and requiring us to incur significant costs, including costs to repair or restore our systems and data or to take other remedial steps.
Potential physical risks may cause direct damage to assets and indirect impacts, such as supply chain disruption, and also could include changes in water availability, sourcing, and quality, which could impact drilling and completion operations. These physical risks could cause increased costs, production disruptions, lower revenues and substantially increase the cost or limit the availability of insurance.
Potential physical risks may cause direct damage to assets and indirect impacts, such as supply chain disruption, changes in water availability, sourcing, and quality, which could impact drilling and completion operations. These physical risks could cause increased costs, production disruptions, lower revenues and substantially increase the cost or limit the availability of insurance.
We are subject to a number of privacy and data protection laws, rules and directives (collectively, data protection laws) relating to the processing of personal data. The regulatory environment surrounding data protection laws is uncertain. Complying with varying jurisdictional requirements could increase the costs and complexity of compliance, and violations of applicable data protection laws can result in significant penalties.
We are subject to a number of privacy and data protection laws, rules and directives (collectively, “data protection laws”) relating to the processing of personal data. The regulatory environment surrounding data protection laws is uncertain. Complying with varying jurisdictional requirements could increase the costs and complexity of compliance, and violations of applicable data protection laws can result in significant penalties.
These difficulties include: • the challenge of integrating the acquired businesses and properties while carrying on the ongoing operations of our business; • the inability to retain key employees of the acquired business; • the challenge of inconsistencies in standards, controls, procedures and policies of the acquired business; • potential unknown liabilities, unforeseen expenses or higher-than-expected integration costs; • an overall post-completion integration process that takes longer than originally anticipated; • potential lack of operating experience in a geographic market of the acquired properties; and • the possibility of faulty assumptions underlying our expectations.
These difficulties include: • the challenge of integrating the acquired businesses and properties while carrying on the ongoing operations of our business; 24 Table of Contents • the inability to retain key employees of the acquired business; • the challenge of inconsistencies in standards, controls, procedures and policies of the acquired business; • potential unknown liabilities, unforeseen expenses or higher-than-expected integration costs; • an overall post-completion integration process that takes longer than originally anticipated; • potential lack of operating experience in a geographic market of the acquired properties; and • the possibility of faulty assumptions underlying our expectations.
We make and expect to make substantial capital expenditures in connection with our development and production projects. We rely on access to both our revolving credit facility and longer-term capital markets as sources of liquidity for any capital requirements not satisfied by cash flow from operations or other sources.
We make and expect to make substantial capital expenditures in connection with our development and production projects. We rely on access to both our revolving credit agreement and longer-term capital markets as sources of liquidity for any capital requirements not satisfied by cash flow from operations or other sources.
Furthermore, the continuing and evolving threat of cyber-attacks has resulted in increased regulatory focus on prevention, and we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
Furthermore, the continuing and evolving threat of cyber-attacks has resulted in increased regulatory focus on prevention, mitigation, and notification, and we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
The CFTC has promulgated regulations to implement statutory requirements for derivatives transactions, including swaps. Although we believe that our use of swap transactions exempts us from certain regulatory requirements, the changes to the derivatives market regulation affect us directly and indirectly.
In addition, the CFTC has promulgated regulations to implement statutory requirements for derivatives transactions, including swaps. Although we believe that our use of swap transactions exempts us from certain regulatory requirements, the changes to the derivatives market regulation affect us directly and indirectly.
In addition, organizations that provide ESG information to investors have developed ratings processes for evaluating a business entity’s approach to ESG matters. Although currently no universal rating standards exist, the importance of sustainability evaluations is becoming more broadly accepted by investors and stockholders, with some using these ratings to inform investment and voting decisions.
In addition, organizations that provide ESG information to investors have developed ratings processes for evaluating a business entity’s approach to ESG matters. Although currently no universal rating standards exist, the importance of sustainability evaluations is becoming more broadly accepted by investors and stockholders, with some using these ratings to 27 Table of Contents inform investment and voting decisions.
Our ability to access the capital markets may be restricted at a time when we desire, or need, to raise capital, which could have an impact on our flexibility to react to changing economic and business conditions.
Our ability to access the capital markets may be restricted at a time when we want or need to raise capital, which could have an impact on our flexibility to react to changing economic and business conditions.
Additionally, certain investors use these scores to benchmark businesses against their peers and, if a business entity is perceived as lagging, these investors may engage with the entity to require improved ESG disclosure or performance.
Additionally, certain investors use these scores to benchmark businesses against their peers and, if a business entity is perceived as lagging, these investors may engage with the entity to demand improved ESG disclosure or performance.
As a result, these provisions may make it more difficult for our stockholders to benefit from transactions that are opposed by an incumbent Board of Directors. The personal liability of our directors for monetary damages for breach of their fiduciary duty of care is limited by the Delaware General Corporation Law and by our charter.
As a result, these provisions may make it more difficult for our stockholders to benefit from transactions that are opposed by an incumbent Board of Directors. 30 Table of Contents The personal liability of our directors for monetary damages for breach of their fiduciary duty of care is limited by the Delaware General Corporation Law and by our charter.
Furthermore, our insurance may not be adequate to compensate us for all resulting losses. The cost of insurance may increase and the availability of insurance may decrease, as a result of climate change or other factors.
Furthermore, our insurance may not cover such, or be adequate to compensate us for all resulting losses. The cost of insurance may increase and the availability of insurance may decrease, as a result of climate change or other factors.
Such intense competition also could result in delays in securing, or the inability to secure, the equipment, power, services, resources or facilities necessary for our development activities, which could negatively impact our production volumes.
Such intense competition also could result in delays in securing, or the inability to secure, the equipment, power, services, water or other resources or facilities necessary for our development activities, which could negatively impact our production volumes.
For additional information, please read “Business and Properties—Other Business Matters—Environmental and Safety Regulations—Clean Water Act” in Items 1 and 2. The adoption of climate change legislation or regulations restricting emission of greenhouse gases could result in increased operating costs and reduced demand for the oil and gas we produce.
For additional information, please read “Business and Properties—Other Business Matters—Environmental and Safety Regulations—Clean Water Act” in Items 1 and 2. 28 Table of Contents The adoption of climate change legislation or regulations restricting emission of greenhouse gases could result in increased operating costs and reduced demand for the oil and gas we produce.
In addition, under the SEC’s reserves reporting rules, because PUD reserves generally may be recorded only if they relate to wells scheduled to be drilled within five years of the date of booking, we may be required to remove any PUD reserves that are no longer planned to be developed 25 Table of Contents within this five-year time frame.
In addition, under the SEC’s reserves reporting rules, because PUD reserves generally may be recorded only if they relate to wells scheduled to be drilled within five years of the date of booking, we may be required to remove any PUD reserves that are no longer planned to be developed within this five-year time frame.
Our ability to sell our oil, natural gas and NGL production and/or the prices we receive for our production could be materially harmed if we fail to obtain adequate services such as transportation and processing.
Our ability to sell our oil, natural gas and NGL production and the prices we receive for our production could be materially harmed if we fail to obtain adequate services such as gathering, transportation and processing.
For additional information, please read “Business and Properties—Other Business Matters—Regulation of Oil and Natural Gas Exploration and Production,” “—Regulation of Natural Gas Marketing, Gathering and Transportation,” and “—Environmental and Safety Regulations” in Items 1 and 2. 30 Table of Contents Oil and natural gas production operations, especially those using hydraulic fracturing, are substantially dependent on the availability of water.
For additional information, please read “Business and Properties—Other Business Matters—Regulation of Oil and Natural Gas Exploration and Production,” “—Regulation of Natural Gas Marketing, Gathering and Transportation,” and “—Environmental and Safety Regulations” in Items 1 and 2. Oil and natural gas production operations, especially those using hydraulic fracturing, are substantially dependent on the availability of water.
Additionally, such adverse economic and market conditions could impact our counterparties, including our receivables and our hedging counterparties, who may as a result of such conditions be unable to perform their obligations. 28 Table of Contents Risks associated with our debt and the provisions of our debt agreements could adversely affect our business, financial position and results of operations.
Additionally, such adverse economic and market conditions could impact our counterparties, including our receivables and our hedging counterparties, who may, as a result of such conditions, be unable to perform their obligations. Risks associated with our debt and the provisions of our debt agreements could adversely affect our business, financial position and results of operations.
The extent, quality and reliability of this technical data can vary. The process also requires certain economic assumptions, some of which are mandated by the SEC, such as assumptions relating to commodity prices. Additional assumptions include drilling and operating expenses, capital expenditures, taxes and availability 24 Table of Contents of funds.
The extent, quality and reliability of this technical data can vary. The process also requires certain economic assumptions, some of which are mandated by the SEC, such as assumptions relating to commodity prices. Additional assumptions include drilling and operating expenses, capital expenditures, taxes and availability of funds.
If we fail to make required payments or otherwise default on our debt, the lenders who hold such debt also could accelerate amounts due, which could potentially trigger a default or acceleration of other debt. Our debt agreements also require compliance with covenants to maintain specified financial ratios.
If we fail to make required payments or otherwise default on our debt, the lenders who hold such debt also could accelerate amounts due, which could potentially trigger a default or acceleration of other debt. 26 Table of Contents Our debt agreements also require compliance with covenants to maintain specified financial ratios.
Unauthorized access to our seismic data, reserves information, customer or employee data or other proprietary or commercially sensitive information could lead to data corruption, communication interruption or other disruptions in our exploration or production operations or planned business transactions, any of which could have a material adverse impact on our business and operations.
Unauthorized access to our seismic data, reserves information, customer or employee data or other proprietary or commercially sensitive information could lead to data integrity issues, communication interruption or other disruptions in our exploration or production operations or planned business transactions, any of which could have a material adverse impact on our business and operations.
Notwithstanding the determinations made in the development of our 2023 plan, business opportunities not previously identified periodically may come to our attention, including possible acquisitions and dispositions.
Notwithstanding the determinations made in the development of our 2024 plan, business opportunities not previously identified periodically may come to our attention, including possible acquisitions and dispositions.
Studies have found that emission of certain gases, commonly referred to as greenhouse gases (“GHG”), impact the earth’s climate. The U.S. Congress and various states have been evaluating, and in some cases implementing, climate-related legislation and other regulatory initiatives that restrict emissions of GHGs.
Studies have found that emission of certain gases, commonly referred to as GHGs impact the earth’s climate. The U.S. Congress and various states have been evaluating, and in some cases implementing, climate-related legislation and other regulatory initiatives that restrict GHG emissions.
Moreover, economic or other circumstances may change from those contemplated by our 2023 plan, and our failure to recognize or respond to those changes may limit our ability to achieve our objectives.
Moreover, economic or other circumstances may change from those contemplated by our 2024 plan, and our failure to recognize or respond to those changes may limit our ability to achieve our objectives.
In addition, investment advisers, banks, and certain sovereign wealth, pension, and endowment funds recently have been promoting divestment of investments in fossil fuel companies and pressuring lenders to limit funding to companies engaged in the extraction, production, and sale of oil and gas.
In addition, investment advisers, banks, and certain sovereign wealth, pension, and endowment funds recently have been promoting divestment of investments in fossil fuel companies and pressuring lenders to limit funding to companies engaged in the 29 Table of Contents extraction, production, and sale of oil and gas.
Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells may be adversely affected by actions other operators may take when drilling, completing or operating wells that they own.
Many of our properties are in areas that may have been partially depleted or drained by offset (i.e., neighboring) wells and certain of our wells may be adversely affected by actions other operators may take when drilling, completing or operating wells that they own.
This exclusive-forum provision may limit the ability of a stockholder to bring a claim in a judicial forum of its choosing for disputes with us or our 33 Table of Contents directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.
This exclusive-forum provision may limit the ability of a stockholder to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.
Furthermore, substantial, extended decreases in commodity prices may render such projects uneconomic, which may result in significant downward adjustments to our estimated proved reserves and could negatively impact our ability to borrow and cost of capital and our ability to access capital markets, increase our costs under our revolving credit facility and limit our ability to execute aspects of our business plans.
Furthermore, substantial, extended decreases in commodity prices may render certain projects uneconomic, which may result in significant downward adjustments to our estimated proved reserves and could negatively impact our ability to borrow, our cost of capital and our ability to access capital markets, increase our costs under our revolving credit agreement and limit our ability to execute aspects of our business plans.
Although we are not a party to any such climate-related or “greenwashing” litigation currently, unfavorable rulings against us in any such case brought against us in the future could significantly impact our operations and could have an adverse impact on our financial condition. 31 Table of Contents Technology Risks.
Although we are not a party to any such climate-related or “greenwashing” litigation currently, unfavorable rulings against us in any such case brought against us in the future could significantly impact our operations and could have an adverse impact on our financial condition. Technology Risks.
Decisions on whether, when and in which amounts to declare and pay any future dividends, or to authorize and make any repurchases of our common stock, will remain in the discretion of our Board of 34 Table of Contents Directors.
Decisions on whether, when and in which amounts to declare and pay any future dividends, or to authorize and make any repurchases of our common stock, will remain in the discretion of our Board of Directors.
Many of our properties are in areas that may have been partially depleted or drained by earlier offset drilling. We have no control over offsetting operators, who could take actions, such as drilling and completing additional wells, which could adversely affect our operations.
Many of our properties are in areas that may have been partially depleted or drained by earlier drilled offset wells. We have no control over offsetting operators who could take actions such as drilling and completing nearby wells, that could adversely affect our operations.
The integration of the businesses and properties we have acquired, including via the Merger, or may in the future acquire could be difficult, and may divert management’s attention and financial resources away from our existing operations.
The integration of the businesses and properties we have acquired or may in the future acquire could be difficult, and may divert management’s attention and financial resources away from our existing operations.
In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period, and our systems and insurance coverage for protecting against such cybersecurity risks may be costly and may not be sufficient.
In addition, certain cyber incidents, such as reconnaissance campaigns, may remain undetected for an extended period, and our systems and insurance coverage for protecting against such cybersecurity risks may be costly and may not be sufficient.
Our indebtedness as a result of the Merger and related transactions could have adverse effects on our business, financial condition, results of operations and cash flows, including by requiring us to use a substantial portion of our cash flow to make debt service payments, which will reduce the funds that would otherwise be available for operations, returning cash flow from operations to stockholders and future business opportunities.
Our indebtedness could have adverse effects on our business, financial condition, results of operations and cash flows, including by requiring us to use a substantial portion of our cash flow to make debt service payments, which would reduce the funds that would otherwise be available for operations, returning cash flow from operations to stockholders and future business opportunities.
Wide fluctuations in commodity prices may result from relatively minor changes in the supply of and demand for oil, natural gas and NGLs, market uncertainty and a variety of additional factors that are beyond our control, including global events or conditions that affect supply and demand, such as the COVID-19 pandemic, the war in Ukraine and other geopolitical risks and sanctions, the actions of OPEC+ members and climate change.
Wide fluctuations in commodity prices may result from relatively minor changes in the supply of and demand for oil, natural gas and NGLs, market uncertainty and a variety of additional factors that are beyond our control, including global events or conditions that affect supply and demand, such as pandemics, the war in Ukraine, conflict in the Middle East and other geopolitical risks and sanctions, the actions of OPEC+ members and climate change.
Other companies operate some of the properties in which we have an interest. As of December 31, 2022, non-operated wells represented approximately 51 percent of our total owned gross wells, or 13 percent of our owned net wells.
Other companies operate some of the properties in which we have an interest. As of December 31, 2023, non-operated wells represented approximately 51 percent of our total owned gross wells, or 12 percent of our owned net wells.
We depend on this technology to record and store financial data, estimate quantities of oil and natural gas reserves, analyze and share operating data and communicate internally and externally. Computers control nearly all of the oil and gas distribution systems in the U.S., which are necessary to transport our products to market.
We depend on this technology to, for example, record and store information like financial data, estimate quantities of oil and natural gas reserves, analyze and share operating data, and communicate internally and externally. Information and operational technology systems control nearly all of the oil and gas distribution systems in the U.S., which are necessary to transport our products to market.
Tax law changes could have an adverse effect on our financial position, results of operations and cash flows. Substantive changes to existing federal income tax laws have been proposed that, if adopted, would repeal many tax incentives and deductions that are currently used by U.S. oil and gas companies and would impose new taxes.
Tax law changes could have an adverse effect on our financial position, results of operations and cash flows. Periodically U.S. legislators propose substantive changes to existing federal income tax laws that would repeal many tax incentives and deductions that are currently used by U.S. oil and gas companies and would impose new taxes.
In 27 Table of Contents addition, the Biden administration also may impose new restrictions and regulations affecting our ability to drill, conduct hydraulic fracturing operations, and obtain necessary rights-of-way on federal lands, which could, in turn, result in the loss of federal leases.
In addition, the government also may impose new restrictions and regulations affecting our ability to drill, conduct hydraulic fracturing operations, and obtain necessary rights-of-way on federal lands, which could, in turn, result in the loss of federal leases.
In recent years (and, in large part, due to the COVID-19 pandemic), we have increased the use of remote networking and online conferencing services and technologies that enable employees to work outside of our corporate infrastructure, which exposes us to additional cybersecurity risks, including unauthorized access to sensitive information as a result of increased remote access and other cybersecurity related incidents.
In recent years (and, in large part, due to the COVID-19 pandemic), we have increased the use of remote networking and online conferencing services and technologies that enable employees to work outside of our corporate infrastructure, which exposes us to additional cybersecurity risks, including unauthorized access to proprietary, confidential, or other sensitive information.
General Risk Factors The loss of key personnel could adversely affect our ability to operate. Our operations depend on a relatively small group of key management and technical personnel, and one or more of these individuals could leave our employment.
General Risk Factors The loss of key personnel could adversely affect our ability to operate. Our operations depend on a relatively small group of key management and technical personnel, and one or more of these individuals could leave our employment. The unexpected loss of the services of one or more of these individuals could have a detrimental effect on us.
These changes, as in effect and as continuing to be implemented, could increase the cost of derivative contracts, limit the availability of derivatives to protect against risks that we encounter, reduce our ability to monetize or restructure our existing derivative contracts and increase our exposure to less creditworthy counterparties.
These changes, as in effect and as continuing to be implemented, as well as a reduced liquidity in oil and gas derivative market, could increase the cost of derivative contracts, limit the availability of derivatives to protect against risks that we encounter, reduce our ability to monetize or restructure our existing derivative contracts and increase our exposure to less creditworthy counterparties.
If any of our counterparties were to default on its obligations under our financial derivative instruments, such a default could (1) have a material adverse effect on our results of operations, (2) result in a larger percentage of our future production being subject to commodity price changes and (3) increase the likelihood that our financial derivative instruments may not achieve their intended strategic purposes. 29 Table of Contents We will continue to evaluate the benefit of utilizing derivatives in the future.
If any of our counterparties were to default on its obligations under our financial derivative instruments, such a default could (1) have a material adverse effect on our results of operations, (2) result in a larger percentage of our future production being subject to commodity price changes and (3) increase the likelihood that our financial derivative instruments may not achieve their intended strategic purposes.
Computers also enable communications and provide a host of other support services for our business.
These systems also enable communications and provide a host of other support services for our business.
Cyber-attacks are becoming more sophisticated and include, but are not limited to, malicious software, phishing, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
Cyber-attacks are becoming more sophisticated and can include, but are not limited to, the use of malicious software, phishing scams, ransomware, attempts to gain unauthorized access to systems or data, or other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, such as personal information of our employees, and corruption of data.
The proposals include: repeal of the percentage depletion allowance for oil and gas properties; elimination of the ability to fully deduct intangible drilling costs in the year incurred; and increase in the geological and geophysical amortization period for independent producers. Additional proposed general tax law changes include raising tax rates on both domestic and foreign income.
Past proposals have included repeal of the percentage depletion allowance for oil and gas properties; elimination of the ability to fully deduct intangible drilling costs in the year incurred; and increase in the geological and geophysical amortization period for independent producers. These proposals have also included general tax law changes to raise tax rates on both domestic and foreign income.
Our operations are also subject to broader global events and conditions, including public health crises, pandemic or epidemic, war or civil unrest, acts of terror, weather events and natural disasters, including weather events or natural disasters that are related to or exacerbated by climate change.
Our operations are also subject to broader global events and conditions, including public health crises, pandemics, epidemics, war or civil unrest, acts of terror, weather events and natural disasters, including those that are related to 22 Table of Contents or exacerbated by climate change.
These factors include estimates of recoverable reserves, exploration potential, future commodity prices, operating costs, production taxes and potential environmental and other liabilities. These assessments are complex and inherently imprecise. Our review of the properties we acquire may not reveal all existing or potential problems.
Successful property acquisitions require an assessment of a number of factors beyond our control. These factors include estimates of recoverable reserves, exploration and development potential, future commodity prices, operating costs, production taxes and potential environmental and other liabilities. These assessments are complex and inherently imprecise. Our review of the properties we acquire may not reveal all existing or potential problems.
Future challenges in the global financial system may adversely affect the terms on which we are able to obtain financing, which could impact our business, financial condition and access to capital.
Adverse economic and market conditions, could adversely affect our ability to access such sources of liquidity. Future challenges in the global financial system may adversely affect the terms on which we are able to obtain financing, which could impact our business, financial condition and access to capital.
Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A for further discussion concerning our use of derivatives.
We will continue to evaluate the benefit of utilizing derivatives in the future. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A for further discussion concerning our use of derivatives.
In developing our business plans, we considered allocating capital and other resources to various aspects of our business including well-development (primarily drilling), reserve acquisitions, exploratory activity, corporate items and other alternatives. We also consider our likely sources of capital.
Our future growth prospects depend on our ability to identify optimal strategies for our business. In developing our business plans, we considered allocating capital and other resources to various aspects of our business including well-development (primarily drilling and completion), reserve acquisitions, exploratory activity, corporate items and other alternatives. We also consider our likely sources of capital.
We cannot provide assurance that we will be able to successfully execute any of these strategies, and such strategies may be unavailable on favorable terms or at all.
In addition, we may seek to refinance or restructure all or a portion of our indebtedness. We cannot provide assurance that we will be able to successfully execute any of these strategies, and such strategies may be unavailable on favorable terms or at all.
The combined net acreage expiring over the next three years represents less than one percent of our total net undeveloped acreage as of December 31, 2022. Our actual drilling activities may materially differ from those presently identified, which could adversely affect our business.
As of December 31, 2023, less than one percent of our net undeveloped acreage in our core operating areas will expire over the next three years. Our actual drilling activities may materially differ from those presently identified, which could adversely affect our business.
The failure of an operator of our wells or joint venture participant to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interest could reduce our production and revenues.
An operator of our wells or a joint venture participant may not adequately perform operations, may breach applicable agreements or may fail to act in ways that are in our best interest, which could reduce our production and revenues and expose us to liabilities.
Developing PUD reserves requires significant capital expenditures, and the estimated future development costs associated with our PUD reserves may not equal our actual costs, development may not occur as scheduled and results of our development activities may not be as estimated.
As of December 31, 2023, approximately 21 percent of our estimated proved reserves (by volume) were undeveloped. Developing PUD reserves requires significant capital expenditures, and the estimated future development costs associated with our PUD reserves may not equal our actual costs, development may not occur as scheduled and results of our development activities may not be as estimated.
Our business and the oil and gas industry in general have become increasingly dependent on digital data, computer networks and connected infrastructure, including technologies that are managed by third-party providers on whom we rely to help us collect, host or process information.
Our business, like the oil and gas industry in general, has become increasingly dependent on data, information systems, and digitally connected infrastructure, including technologies managed by third-party providers on whom we rely to help us 25 Table of Contents collect, host or process information.
Unless we successfully replace the reserves that we produce, our reserves will decline as reserves are depleted, eventually resulting in a decrease in oil and natural gas production and lower revenues and cash flow from operations. Our future production is, therefore, highly dependent on our level of success in finding or acquiring additional reserves.
Our future performance depends on our ability to find or acquire additional oil and natural gas reserves that are economically recoverable. Unless we successfully replace the reserves that we produce, our reserves will decline as reserves are depleted, eventually resulting in a decrease in oil and natural gas production and lower revenues and cash flow from operations.
Our dependence on the operator and other working interest owners, including a joint venture participant, for these projects and our limited ability to influence or control the operation and future development of these properties could materially adversely affect the realization of our targeted returns on capital in drilling or acquisition activities and lead to unexpected future costs.
Our dependence on the operator or a joint venture participant could materially adversely affect the realization of our targeted returns on capital in drilling or acquisition activities and lead to unexpected future costs.
In addition, significant acquisitions can change the nature of our operations and business if the acquired properties have substantially different operating and geological characteristics or are in different geographic locations than our existing properties. 26 Table of Contents The integration of the businesses and properties we have acquired or may in the future acquire could be difficult, and may divert management’s attention away from our existing operations.
In addition, significant acquisitions can change the nature of our operations and business if the acquired properties have substantially different operating and geological characteristics or are in different geographic locations than our existing properties.
We may not be able to replace reserves through our exploration, development and exploitation activities or by acquiring properties at acceptable costs. Additionally, there is no way to predict in advance of any exploration and development whether any particular location will yield sufficient quantities to recover drilling or completion costs or be economically viable.
Additionally, there is no way to predict in advance of any exploration and development whether any particular location will yield sufficient quantities to recover drilling or completion costs or be economically viable. Low commodity prices may further limit the kinds of reserves that we can develop and produce economically.
For example, the IRA contains tax inducements and other provisions that incentivize investment, development and deployment of alternative energy sources and technologies. Legal risks include potential lawsuits or regulations regarding the impacts of climate change, failure to adapt to climate change, and the insufficiency of disclosure around material financial risks.
Legal risks include potential lawsuits or regulations regarding the impacts of climate change, failure to adapt to climate change, and the insufficiency of disclosure around material financial risks.
Competition in our industry is intense, and many of our competitors have substantially greater financial and technological resources than we do, which could adversely affect our competitive position. Competition in the oil and natural gas industry is intense.
If we cannot retain our technical personnel or attract additional experienced technical personnel, our ability to compete could be harmed. 31 Table of Contents Competition in our industry is intense, and many of our competitors have substantially greater financial and technological resources than we do, which could adversely affect our competitive position.
Low commodity prices may further limit the kinds of reserves that we can develop and produce economically. If we are unable to replace our current and future production, our revenues will decrease and our business, financial condition and results of operations may be adversely affected.
If we are unable to replace our current and future production, our revenues will decrease and our business, financial condition and results of operations may be adversely affected. The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate.
Delays in the development of our PUD reserves, decreases in commodity prices and increases in costs to drill and develop such reserves may also result in some projects becoming uneconomic.
Delays in the development of our PUD reserves, decreases in commodity prices and increases in costs to drill and develop such reserves may also result in some projects becoming uneconomic. 23 Table of Contents Strategic determinations, including the allocation of capital and other resources to strategic opportunities, are challenging, and our failure to appropriately allocate capital and resources among our strategic opportunities may adversely affect our financial condition and reduce our growth rate.

… 26 more changes not shown on this page.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+4 added−0 removed2 unchanged
Biggest changeWhile we cannot predict with certainty whether these notices of violation will result in fines, penalties or both, if fines or penalties are imposed, they may result in monetary sanctions, individually or in the aggregate, in excess of $300,000.
Biggest changeWhile we cannot predict with certainty whether these notices of violation will result in fines, penalties or both, if fines or penalties are imposed, they may result in monetary sanctions, individually or in the aggregate, in excess of $300,000. In June 2023, we received a Notice of Violation and Opportunity to Confer (“NOVOC”) from the U.S.
Added
EPA alleging violations of the Clean Air Act, the Texas State Implementation Plan, the New Mexico State Implementation Plan (“NMSIP”) and certain other state and federal regulations pertaining to facilities in Texas and New Mexico. Separately, in July 2023, we received a letter from the U.S. Department of Justice that the EPA has referred this NOVOC for civil enforcement proceedings.
Added
In August 2023, we received a second NOVOC from the EPA alleging violations of the Clean Air Act, the NMSIP, and certain other state and federal regulations pertaining to facilities in New Mexico. We have exchanged information with the EPA and continue to engage in discussions aimed at resolving the allegations.
Added
At this time we are unable to predict with certainty the financial impact of these NOVOCs or the timing of any resolution. However, any enforcement action related to these NOVOCs will likely result in fines or penalties, or both, and corrective actions, which may increase our development costs or operating costs.
Added
We believe that any fines, penalties, or corrective actions that may result from this matter will not have a material effect on our financial position, results of operations, or cash flows.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

14 edited+6 added−4 removed0 unchanged
Biggest changeVela previously served in various capacities at Coterra and Cimarex beginning in 2005, including Vice President, Assistant General Counsel, Chief Litigation Counsel and Corporate Counsel. Mr. Vela is a member of the Texas, Colorado, American, and Houston Hispanic Bar associations, as well as the Foundation for Natural Resources and Energy Law.
Biggest changeVela is a member of the Texas, Colorado, American and Houston Hispanic Bar associations, as well as the Foundation for Natural Resources and Energy Law. Mr. DeShazer was appointed Vice President of Business Units following the Merger with Cimarex in October 2021. Mr.
Sirgo served in a number of technical and leadership roles since joining Cimarex in 2008, including Vice President of Operation Resources from November 2018 to February 2020, Permian Division Production Manager from 2016 to November 2018, and in various engineering and production manager positions. Before joining Cimarex, Mr. Sirgo worked at Occidental Petroleum. Mr.
Sirgo served in a number of technical and leadership roles since joining Cimarex in 2008, including Vice President of Operations from February 2020 to October 2021, Vice President of Operation Resources from November 2018 to February 2020, Permian Division Production Manager from June 2016 to November 2018, and in various engineering and production manager positions. Before joining Cimarex, Mr.
Bell was appointed Executive Vice President of Business Development following the Merger with Cimarex in October 2021. At Cimarex, Mr. Bell was appointed Senior Vice President of Business Development and Land in September 2002 and was named Executive Vice President of Business Development in September 2012. Mr.
Bell was appointed Executive Vice President of Business Development following the Merger with Cimarex in October 2021. At Cimarex, Mr. Bell was appointed Senior Vice President of Business Development and Land in September 2002 and was named Executive Vice President of Business Development in September 2012. Mr. Bell served at Key prior to its acquisition by Cimarex.
In 2006 he was named West Region Engineering Manager for the Rocky Mountain and Mid-Continent operating areas, and in 2009 he was promoted to Regional Operations Manager for the North Region, with responsibility for Appalachian Basin operations and engineering. Mr. Smith was appointed Vice President and Chief Technology Officer following the Merger with Cimarex in October 2021. Mr.
In 2006 he was named West Region Engineering Manager for the Rocky Mountain and Mid-Continent operating areas, and in 2009 he was promoted to Regional Operations Manager for the North Region, with responsibility for Appalachian Basin operations and engineering. Mr. Roemer was appointed Vice President and Chief Accounting Officer in July 2019. Mr.
DeShazer was appointed Vice President of Business Units following the Merger with Cimarex in October 2021. Mr. DeShazer joined Cimarex in 2007, serving in various engineering and reservoir manager positions, as well as multiple leadership roles, including Technology Group Manager from 2016 to 2018 and Asset Evaluation Team Manager from 2018 to 2019.
DeShazer joined Cimarex in 2007, serving in various engineering and reservoir manager positions, as well as multiple leadership roles, including Technology Group Manager from 2016 to 2018, Asset Evaluation Team Manager from 2018 to 2019 and Vice President of the Permian Business Unit in 2019. Mr. Hlavinka was appointed Vice President of the Marcellus Business Unit in April 2022.
Smith began his career with Cimarex in 2007, serving in a number of technical and leadership roles, including Director of Technology and Anadarko Exploration Region Manager. In September 2020, Mr. Smith assumed the role of Chief Engineer for Cimarex. Mr. Vela was appointed Vice President and General Counsel in October 2022. Mr.
Smith was appointed Vice President and Chief Technology Officer following the Merger with Cimarex in October 2021. Mr. Smith began his career with Cimarex in 2007, serving in a number of technical and leadership roles, including Director of Technology and Anadarko Exploration Region Manager. In September 2020, Mr.
Jorden held multiple leadership roles at Key Production Company, Inc. (“Key”), which was acquired by Cimarex in 2002. He joined Key in 1993 as Chief Geophysicist and subsequently became Executive Vice President of Exploration. Before joining Key, Mr. Jorden served at Union Pacific Resources and Superior Oil Company. Mr.
At Cimarex, he began serving as Executive Vice President of Exploration when the company formed in 2002. Prior to the formation of Cimarex, Mr. Jorden held multiple leadership roles at Key Production Company, Inc. (“Key”), which was acquired by Cimarex in 2002. He joined Key in 1993 as Chief Geophysicist and subsequently became Executive Vice President of Exploration.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table shows certain information as of February 27, 2023 about our executive officers, as such term is defined in Rule 3b-7 of the Securities Exchange Act of 1934. Name Age Position Officer Since Thomas E. Jorden 65 Chairman, Chief Executive Officer and President 2021 Scott C.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table shows certain information as of February 23, 2024 about our executive officers, as such term is defined in Rule 3b-7 of the Securities Exchange Act of 1934. All officers are elected annually by our Board of Directors. Name Age Position Thomas E.
Hlavinka worked initially as a Facility Engineer and District Superintendent in the Company’s West Virginia production operations, and subsequently as a Corporate Reservoir Engineer in Houston, Texas.
Since joining Coterra, formerly Cabot Oil & Gas Corporation, in 1989, he has served in engineering and management roles across the Company’s operations, in multiple producing basins. Mr. Hlavinka worked initially as a Facility Engineer and District Superintendent in the Company’s West Virginia production operations, and subsequently as a Corporate Reservoir Engineer in Houston, Texas.
Bell served at Key prior to its 35 Table of Contents acquisition by Cimarex. He joined Key in 1994 as Vice President of Land and was appointed Senior Vice President of Business Development and Land in 1999. Mr. Clason was appointed Senior Vice President and Chief Human Resources Officer following the Merger with Cimarex in October 2021. Mr.
He joined Key in 1994 as Vice President of Land and was appointed Senior Vice President of Business Development and Land in 1999. Ms. Alexander was appointed Senior Vice President and Chief Human Resources Officer in July 2023. Ms. Alexander served as Chief People Officer at Rent the Runway from June 2021 to July 2023. Ms.
All of the executive officers have been employed by Coterra Energy Inc. for at least the last five years, except for the following officers: Mr. Jorden was appointed Chief Executive Officer and President of Coterra following the Merger with Cimarex in October 2021 and Chairman of the Board of Coterra in November 2022. Mr.
Jorden was appointed Chief Executive Officer and President of Coterra following the Merger with Cimarex in October 2021 and Chairman of the Board of Coterra in November 2022. Mr. Jorden previously served as the Chief Executive Officer and President of Cimarex beginning September 2011 and as Chairman of the Board of Directors of Cimarex beginning August 2012.
DeShazer 37 Vice President of Business Units 2021 Gary Hlavinka 61 Vice President, Marcellus Business Unit 2022 Todd M. Roemer 52 Vice President and Chief Accounting Officer 2010 Kevin W. Smith 37 Vice President and Chief Technology Officer 2021 Adam Vela 49 Vice President and General Counsel 2021 All officers are elected annually by our Board of Directors.
DeShazer 38 Vice President of Business Units Gary Hlavinka 62 Vice President, Marcellus Business Unit Todd M. Roemer 53 Vice President and Chief Accounting Officer Kevin W. Smith 38 Vice President and Chief Technology Officer Mr.
Schroeder 60 Executive Vice President and Chief Financial Officer 1997 Stephen P. Bell 68 Executive Vice President, Business Development 2021 Christopher H. Clason 56 Senior Vice President and Chief Human Resources Officer 2021 Blake Sirgo 40 Senior Vice President, Operations 2021 Michael D.
Jorden 66 Chairman, Chief Executive Officer and President Shannon E. Young III 52 Executive Vice President and Chief Financial Officer Stephen P. Bell 69 Executive Vice President, Business Development Andrea M. Alexander 42 Senior Vice President and Chief Human Resources Officer Blake Sirgo 41 Senior Vice President, Operations Adam Vela 50 Senior Vice President and General Counsel Michael D.
His background includes extensive international experience at Citigroup and early career work at Chevron. Mr. Sirgo was appointed Senior Vice President of Operations in October 2022. Mr. Sirgo previously served as Vice President of Operations at Coterra from October 1, 2021 to October 1, 2022. Prior to the Merger with Cimarex in October 2021, Mr.
Alexander served in various roles of increasing responsibility, including Associate Partner and Professional Development Manager, at McKinsey & Company, a management consulting company, from 2009 to 2021. Mr. Sirgo was appointed Senior Vice President of Operations in October 2022. Mr. Sirgo previously served as Vice President of Operations at Coterra from October 1, 2021 to October 1, 2022.
Removed
Jorden previously served as the Chief Executive Officer and President of Cimarex beginning September 2011 and as Chairman of the Board of Directors of Cimarex beginning August 2012. At Cimarex, he began serving as Executive Vice President of Exploration when the company formed in 2002. Prior to the formation of Cimarex, Mr.
Added
Before joining Key, Mr. Jorden served at Union Pacific Resources and Superior Oil Company. Mr. Young was appointed Executive Vice President and Chief Financial Officer in July 2023. From 2019 to 2023, Mr. Young served as Executive Vice President and Chief Financial Officer of Talos Energy Inc. Prior to joining Talos Energy Inc., 34 Table of Contents Mr.
Removed
Clason joined Cimarex as Vice President and Chief Human Resources Officer in 2019 and was named Senior Vice President and Chief Human Resources Officer in February 2020. Prior to Cimarex, Mr. Clason was Director of MBA Career Management and Employer Relations at the Marriott School of Business at Brigham Young University from 2016 to 2019.
Added
Young served in similar positions with Sheridan Production Company, LLC, Cobalt International Energy, Inc. and Talos Energy LLC. Mr. Young served as a Managing Director for the Global Energy Group at Goldman, Sachs & Co. from 2010 to 2014 and was an investment banker at Morgan Stanley from 1998 to 2010. Mr.
Removed
Prior to his work in higher education, he was Senior Vice President and Chief Human Resources Officer at ProBuild LLC, a Devonshire Investors company. From 2001 until 2014, Mr. Clason held various global human resources executive leadership roles at Honeywell International, including Vice President Human Resources and Communications at Honeywell Aerospace.
Added
Prior to the Merger with Cimarex in October 2021, Mr.
Removed
He was named Vice President of the Permian Business Unit in 2019. Mr. Hlavinka was appointed Vice President of the Marcellus Business Unit in October 2022. Since joining Cabot Oil & Gas Corporation in 1989 he has served in engineering and management roles across the Company’s operations, in multiple producing basins. Mr.
Added
Sirgo worked at Occidental Petroleum. Mr. Vela was appointed Vice President and General Counsel in October 2022 and was promoted to Senior Vice President and General Counsel in August 2023. Mr. Vela previously served in various capacities at Coterra and Cimarex beginning in 2005, including Vice President, Assistant General Counsel, Chief Litigation Counsel and Corporate Counsel. Mr.
Added
Roemer previously served as Vice President and Controller from February 2017 to July 2019 and Controller from March 2010 to February 2017. Prior to joining Coterra in 2010, Mr. Roemer was a Senior Manager in the energy practice of PricewaterhouseCoopers LLP. Mr. Roemer is a Certified Public Accountant in the state of Texas. Mr.
Added
Smith assumed the role of Chief Engineer for Cimarex. 35 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−5 removed0 unchanged
Biggest changePeriod Total Number of Shares Purchased (In thousands) (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (In thousands) (2) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In millions) October 2022 — $ — — $ 510 November 2022 4,492 $ 27.07 4,492 $ 388 December 2022 15,730 $ 25.22 15,409 $ — Total 20,222 19,901 _______________________________________________________________________________ (1) Includes 320,236 shares of common stock purchased at an average price of $27.43 per share from employees in order for employees to satisfy income tax withholding payments related to share-based awards that vested in the period.
Biggest changePeriod (1) Total Number of Shares Purchased (In thousands) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (In thousands) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In millions) October 2023 430 $ 26.90 430 $ 1,603 November 2023 307 $ 27.47 307 $ 1,595 December 2023 (2) 333 $ 26.14 333 $ 1,586 Total 1,070 1,070 _______________________________________________________________________________ (1) All purchases during the covered periods were made under the new share repurchase program, which was approved by our Board of Directors in February 2023 and which authorized the repurchase of up to $2.0 billion of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our $0.10 par value common stock is listed and principally traded on the NYSE under the ticker symbol “CTRA.” Cash dividends were paid to our common stockholders in each quarter of 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our $0.10 par value common stock is listed and principally traded on the NYSE under the ticker symbol “CTRA.” Cash dividends were paid to our common stockholders in each quarter of 2023.
Future dividend payments will depend on the company’s level of earnings, financial requirements and other factors considered relevant by our Board of Directors.
Future dividend payments will depend on the Company’s level of earnings, financial requirements and other factors considered relevant by our Board of Directors. As of February 6, 2024, there were 858 registered holders of our common stock.
(2) In February 2022, our Board of Directors terminated the previously authorized share repurchase program and authorized a new share repurchase program. This new share repurchase program authorized us to purchase up to $1.25 billion of our common stock in the open market or in negotiated transactions, and was fully executed at December 31, 2022.
ISSUER PURCHASES OF EQUITY SECURITIES In February 2023, our Board of Directors terminated the previously authorized share repurchase plan and approved a new share repurchase program that authorizes us to purchase up to $2.0 billion of our common stock in the open market or in negotiated transactions.
As of February 1, 2023, there were 866 registered holders of our common stock. 36 Table of Contents ISSUER PURCHASES OF EQUITY SECURITIES The following table sets forth information regarding repurchases of our common stock during the quarter ended December 31, 2022.
The following table sets forth information regarding repurchases of our common stock during the quarter ended December 31, 2023.
Removed
During the quarter ended December 31, 2022, we purchased 19.9 million common shares for $510 million. 37 Table of Contents PERFORMANCE GRAPH The following graph compares our common stock performance (“CTRA”) with the performance of the Standard & Poor’s 500 Stock Index, the Dow Jones U.S.
Added
During the quarter ended December 31, 2023, we purchased 1 million shares of common stock for $29 million, bringing our total repurchases in 2023 to 17 million shares of common stock at a total cost of $418 million. As of December 31, 2023, we were authorized to repurchase up to approximately an additional $1.6 billion of our outstanding common stock.
Removed
Exploration & Production Index and the S&P Oil & Gas Exploration & Production Index for the period December 2017 through December 2022. The graph assumes that the value of the investment in our common stock and in each index was $100 on December 31, 2017 and that all dividends were reinvested.
Added
The new share repurchase program does not have an expiration date. (2) In December 2023, we purchased 332,634 shares of common stock delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards.
Removed
December 31, Calculated Values 2017 2018 2019 2020 2021 2022 CTRA $ 100.00 $ 78.93 $ 62.53 $ 59.81 $ 73.87 $ 104.33 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 Dow Jones U.S.
Removed
Exploration & Production $ 100.00 $ 82.23 $ 91.60 $ 60.78 $ 103.88 $ 165.77 S&P Oil & Gas Exploration & Production $ 100.00 $ 80.50 $ 90.17 $ 58.24 $ 108.95 $ 172.69 The performance graph above is furnished and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any registration statement or other filing under the Securities Act or the Exchange Act unless specifically identified therein as being incorporated therein by reference.
Removed
The performance graph is not soliciting material subject to Regulation 14A of the Exchange Act. 38 Table of Contents PART II

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+29 added−49 removed36 unchanged
Biggest changeInterest Expense, net The table below reflects our interest expense, net for the periods indicated: Year Ended December 31, (In millions) 2022 2021 Variance Interest Expense, net Interest expense $ 110 $ 62 $ 48 Debt premium amortization (37) (10) (27) Debt issuance cost amortization 4 3 1 Other (7) 7 (14) $ 70 $ 62 $ 8 Interest expense, net increased $8 million due to (i) an increase of $48 million in interest expense primarily related to incremental interest expense associated with the debt assumed in the Merger of $2.2 billion, which was partially offset by lower interest due to the repayment of $100 million of our 3.65% weighted-average private placement senior notes, which matured in September 2021, the repayment of $37 million of our 6.51% weighted-average private placement senior notes and $87 million of our 5.58% weighted-average private placement senior notes in August 2022 and the redemption of $750 million of the 4.375% senior notes in September and October 2022; (ii) an increase of $27 million of debt premium amortization associated with the previously mentioned debt related to the Merger and (iii) a decrease of $14 million of other interest expense primarily due to interest income earned from higher interest rates and higher cash balances subject to interest income during 2022.
Biggest changeInterest Expense The table below reflects our interest expense, net for the periods indicated: Year Ended December 31, (In millions) 2023 2022 Variance Interest Expense Interest expense $ 82 $ 110 $ (28) Debt premium amortization (21) (37) 16 Debt issuance cost amortization 3 4 (1) Other 9 3 6 $ 73 $ 80 $ (7) Interest expense decreased $28 million primarily due to the repayment of our 6.51% and 5.58% weighted-average private placement senior notes in August 2022 and the redemption of $750 million of the 4.375% senior notes in late 2022.
Development costs, including costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Oil and Gas Reserves The process of estimating quantities of proved reserves is inherently imprecise, and the reserves data included in this document is only an estimate.
Development costs, including costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Oil and Gas Reserves The process of estimating quantities of proved reserves is inherently imprecise, and the reserves data included in this document are only an estimate.
Our rate of recording DD&A expense is dependent upon our estimate of proved and proved developed reserves, which are utilized in our unit-of-production calculation. If the estimates of proved reserves were to be reduced, the rate at which we record DD&A expense would increase, reducing net income.
Our rate of recording DD&A expense is dependent upon our estimate of proved reserves, which are utilized in our unit-of-production calculation. If the estimates of proved and proved developed reserves were to be reduced, the rate at which we record DD&A expense would increase, reducing net income.
We have considered these impacts when determining the amortization of our undeveloped acreage. If the average unproved property life decreases or increases by one year, the amortization would increase by approximately $12 million or decrease by $8 million, respectively, per year. As these properties are developed and reserves are proved, the remaining capitalized costs are subject to depreciation and depletion.
We have considered these impacts when determining the amortization of our unproved acreage. If the average unproved property life decreases or increases by one year, the amortization would increase by approximately $12 million or decrease by $8 million, respectively, per year. As these properties are developed and reserves are proved, the remaining capitalized costs are subject to depreciation and depletion.
Our financial condition, results of operations and liquidity can be significantly impacted by changes in the market value of our derivative instruments due to volatility of commodity prices, including changes in both index prices (such as NYMEX and Waha) and basis differentials. Income Taxes We make certain estimates and judgments in determining our income tax expense for financial reporting purposes.
Our financial condition, results of operations and liquidity can be significantly impacted by changes in the market value of our derivative instruments due to volatility of commodity prices, including changes in both index prices (such as NYMEX) and basis differentials. Income Taxes We make certain estimates and judgments in determining our income tax expense for financial reporting purposes.
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 may continue to increase further.
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 may increase.
Unproved oil and gas properties are assessed periodically for impairment on an aggregate basis through periodic updates to our undeveloped acreage amortization based on past drilling and exploration experience, our expectation of converting leases to held by production and average property lives.
Unproved oil and gas properties are assessed periodically for impairment on an aggregate basis through periodic updates to our unproved acreage amortization based on past drilling and exploration experience, our expectation of converting leases to held by production and average property lives.
Among other factors, some of these costs vary with commodity prices, some trend with the volume and commodity mix of production, some are a function of the number of wells we own and operate, some depend on the prices charged by service companies, and some fluctuate based on a combination of the foregoing.
Among other factors, some of these costs vary with commodity prices, some trend with volume and commodity mix, some are a function of the number of wells we own and operate, some depend on the prices charged by service companies, and some fluctuate based on a combination of the foregoing.
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 facility, 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.
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, 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.
Such a reduction in reserves may result from lower market prices, which may make it uneconomic to drill and produce higher cost fields. A five percent positive or negative revision to proved reserves would result in a decrease of $0.31 per Boe and an increase of $0.34 per Boe, respectively, on our DD&A rate.
Such a reduction in reserves may result from lower market prices, which may make it uneconomic to drill and produce higher cost fields. A five percent positive or negative revision to proved reserves would result in a decrease of $0.31 per Boe and an increase of $0.35 per Boe, respectively, on our DD&A rate.
In 2022, greater than 90 percent of the total future net revenue discounted at 10 percent attributable to our proved reserves were subject to this evaluation. For more information regarding reserves estimation, including historical reserves revisions, refer to the Supplemental Oil and Gas Information included in Item 8.
In 2023, greater than 90 percent of the total future net revenue discounted at 10 percent attributable to our proved reserves were subject to this evaluation. For more information regarding reserves estimation, including historical reserves revisions, refer to the Supplemental Oil and Gas Information included in Item 8.
Our Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K contain additional information that should be referenced when reviewing this material. This discussion and analysis also includes forward-looking statements.
Our Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K contain additional information that should be referenced when reviewing this material. This discussion and analysis also include forward-looking statements.
A change in our debt rating could impact our interest rate on any borrowings under our revolving credit facility and our ability to economically access debt markets in the future and could trigger the requirement to post credit support under various agreements, which could reduce the borrowing capacity under our revolving credit facility.
A change in our debt rating could impact our interest rate on any borrowings under our revolving credit agreement and our ability to economically access debt markets in the future and could trigger the requirement to post credit support under various agreements, which could reduce the borrowing capacity under our revolving credit agreement.
We believe that, with operating cash flow, cash on hand and availability under our revolving credit facility, we have the ability to finance our spending plans over the next twelve months and, based on current expectations, for the longer term.
We believe that, with operating cash flow, cash on hand and availability under our revolving credit agreement, we have the ability to finance our spending plans over the next twelve months and, based on current expectations, for the longer term.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is based on management’s perspective and is intended to assist you in understanding our results of operations and our present financial condition and outlook.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis are based on management’s perspective and are intended to assist you in understanding our results of operations and our present financial condition and outlook.
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 greenhouse gases.
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.
Contractual Obligations We have various contractual obligations in the normal course of our operations. As of December 31, 2022, our material contractual obligations include debt and related interest expense, transportation and gathering agreements, lease obligations, operational agreements, drilling and completion obligations, derivative obligations and asset retirement obligations.
Contractual Obligations We have various contractual obligations in the normal course of our operations. As of December 31, 2023, our material contractual obligations include debt and related interest expense, gathering, processing and transportation agreements, lease obligations, operational agreements, drilling and completion obligations, derivative obligations and asset retirement obligations.
From time to time, we enter into arrangements that can give rise to material off-balance sheet obligations. As of December 31, 2022, the material off-balance sheet arrangements we had entered into included certain firm transportation and processing commitments and operating lease agreements with terms at commencement of less than 12 months for equipment used in our exploration and development activities.
We enter into arrangements that can give rise to material off-balance sheet obligations. As of December 31, 2023, the material off-balance sheet arrangements we had entered into included certain firm gathering, processing and transportation commitments and operating lease agreements with terms at commencement of less than 12 months for equipment used in our exploration and development activities.
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. At December 31, 2022 and 2021, we had a working capital surplus of $1.0 billion and $916 million, respectively.
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. At December 31, 2023 and 2022, we had a working capital surplus of $355 million and $1.0 billion, respectively.
At December 31, 2022, we were in compliance with all financial covenants in our private 42 Table of Contents placement senior notes. Refer to Note 4 of the Notes to the Consolidated Financial Statements, “Long-Term Debt and Credit Agreements,” for further details regarding the restrictive covenants contained in our various debt instruments.
At December 31, 2023, we were in compliance with all financial covenants in our private placement senior notes. Refer to Note 4 of the Notes to the Consolidated Financial Statements, “Long-Term Debt and Credit Agreements,” for further details regarding the restrictive covenants contained in our various debt instruments.
Average property lives are determined on a geographical basis and based on the estimated life of unproved property leasehold rights. Historically, the average property life in each of the geographical areas has not significantly changed and generally ranges from three to five years. The commodity price environment may impact the capital available for exploration projects as well as development drilling.
Average property lives are determined on a geographical basis and based on the estimated life of unproved property leasehold rights. Historically, the average property life in each of the geographical areas has not significantly changed and generally ranges from three to five years. The commodity price environment may impact the capital available for our drilling activities.
The effective tax rate was lower for 2022 compared to 2021 due to differences in the non-recurring discrete items recorded during 2022 versus 2021. 2021 and 2020 Compared For information on the comparison of the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Coterra Energy Inc.
The effective tax rate was higher for 2023 compared to 2022 due to differences in the non-recurring discrete items recorded during 2023 versus 2022. 46 Table of Contents 2022 and 2021 Compared For information on the comparison of the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Coterra Energy Inc.
This estimated impact is based on current data, and actual events could require different adjustments to our DD&A rate. In addition, a decline in proved reserves estimates may impact the outcome of our impairment test under applicable accounting standards. No impairment resulted from our recent downward reserves revision in the Marcellus Shale.
This estimated impact is based on current data, and actual events could require different adjustments to our DD&A rate. In addition, a decline in proved reserves estimates may impact the outcome of our impairment test under applicable accounting standards.
Periodic revisions to the estimated reserves and future cash flows may be necessary as a result of reservoir performance, drilling activity, commodity prices, fluctuations in operating expenses, technological advances, new geological or geophysical data or other economic factors.
Periodic revisions to the estimated reserves and future cash flows may be necessary as a result of reservoir performance, drilling activity, commodity prices, fluctuations in operating expenses, technological advances, new geological or geophysical data or other economic factors. Accordingly, reserves estimates are generally different from the quantities ultimately recovered.
In the event that commodity prices significantly decline, we would test the recoverability of the carrying value of our oil and gas properties and, if necessary, record an impairment charge. Fair value is calculated by discounting the future cash flows.
Given the significant volatility in oil, natural gas and NGLs prices, estimates of such future prices are inherently imprecise. In the event that commodity prices significantly decline, we would test the recoverability of the carrying value of our oil and gas properties and, if necessary, record an impairment charge. Fair value is calculated by discounting the future cash flows.
We have no other off-balance sheet debt or other similar unrecorded obligations. 44 Table of Contents Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period.
The following table presents the components of “Loss on derivative instruments” for the years indicated: Year Ended December 31, (In millions) 2022 2021 Cash paid on settlement of derivative instruments Gas contracts $ (438) $ (307) Oil contracts (324) (124) Non-cash gain on derivative instruments Gas contracts 149 99 Oil contracts 150 111 $ (463) $ (221) Operating Costs and Expenses Costs associated with producing oil and natural gas are substantial.
The following table presents the components of “Gain (loss) on derivative instruments” for the years indicated: Year Ended December 31, (In millions) 2023 2022 Cash received (paid) on settlement of derivative instruments Gas contracts $ 280 $ (438) Oil contracts 4 (324) Non-cash gain (loss) on derivative instruments Gas contracts (72) 149 Oil contracts 18 150 $ 230 $ (463) Operating Costs and Expenses Costs associated with producing oil and natural gas are substantial.
In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, current commodity prices, our liquidity position, our asset quality and reserve mix, debt levels, cost structure and growth plans.
In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, current commodity prices, our liquidity position, our debt levels and leverage ratios, the size and mix of our production and proved reserves, and our cost structure.
In addition, the senior note agreements governing various series of senior notes that were issued in separate private placements (the “private placement senior notes”) require us to maintain a minimum annual coverage ratio of consolidated cash flow to interest expense for the trailing four quarters of 2.8 to 1.0 and require a maximum ratio of total debt to consolidated EBITDA for the trailing four quarters of not more than 3.0 to 1.0.
In addition, the senior note agreement governing various series of senior notes that were issued in a private placement (the “private placement senior notes”) requires us to maintain a minimum annual coverage ratio of consolidated cash flow to interest expense for the trailing 39 Table of Contents four quarters of not less than 2.8 to 1.0 and requires us to maintain, as of the last day of any fiscal quarter, a maximum ratio of total debt to consolidated EBITDAX for the trailing four quarters of not more than 3.0 to 1.0.
Accordingly, reserves estimates are generally different from the quantities ultimately recovered. 45 Table of Contents The reserves estimates of our oil and gas properties have been prepared by our petroleum engineering staff and certain of our reserves are subject to an evaluation performed by an independent third-party petroleum consulting firm.
The reserves estimates of our oil and gas properties have been prepared by our reservoir engineering staff and certain of our reserves are subject to an evaluation performed by an independent third-party petroleum consulting firm.
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 increase significantly from current levels, our management would evaluate the recoverability of the carrying value of our oil and gas properties.
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.
Refer to Note 4 of the Notes to the Consolidated Financial Statements, “Long-Term Debt and Credit Agreements,” for further details regarding the interest rate on future borrowings under the revolving credit facility and our leverage ratio.
At December 31, 2023, we were in compliance with all financial covenants for our revolving credit agreement. Refer to Note 4 of the Notes to the Consolidated Financial Statements, “Long-Term Debt and Credit Agreements,” for further details regarding the interest rate on future borrowings under the revolving credit agreement and our leverage ratio.
A small change in our estimated future tax rate could have a material effect on current period earnings. Contingency Reserves A provision for contingencies is charged to expense when the loss is probable and the cost is estimable.
Our effective tax rate is affected by changes in the allocation of property, payroll and revenues among states in which we operate. A small change in our estimated future tax rate could have a material effect on current period earnings. Contingency Reserves A provision for contingencies is charged to expense when the loss is probable and the cost is estimable.
The following table presents our dividends paid on our common stock for the full year 2022 and 2021.
The following table presents our dividends paid on our common stock for the year ended December 31, 2023 and 2022.
Transportation, Processing and Gathering Transportation, processing and gathering costs principally consist of expenditures to prepare and transport production downstream from the wellhead, including gathering, fuel, and compression and processing costs, which are incurred to extract NGLs from the raw natural gas stream. Gathering costs also include costs associated with operating our gas gathering infrastructure, including operating and maintenance expenses.
Gathering, Processing and Transportation Gathering, processing and transportation costs principally consist of expenditures to treat and transport production downstream from the wellhead, including gathering, fuel, and compression and processing costs, the last of which are incurred to extract NGLs from the raw natural gas stream.
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 facility), sales of non-strategic assets, and private or public financing based on our monitoring of capital markets and our balance sheet.
However, from time to time, our investments may be funded by bank borrowings (including draws under 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.
Commodity pricing is estimated by using a combination of assumptions management uses in its budgeting and forecasting process, historical and current prices adjusted for geographical location and quality differentials, as well as other factors that we believe will impact realizable prices. Given the significant volatility in oil, natural gas and NGLs prices, estimates of such future prices are inherently imprecise.
Commodity pricing is 47 Table of Contents estimated by using a combination of assumptions management uses in its budgeting and forecasting process, historical and current prices adjusted for geographical location and quality differentials, as well as other factors that we believe will impact realizable prices.
To calculate fair value, we use various models, including both a Black Scholes or a Monte Carlo valuation model, as determined by the specific provisions of the award.
To calculate fair value, we use various models, including both a Black Scholes or a Monte Carlo valuation model, as determined by the specific provisions of the award. The use of these models requires significant judgment with respect to expected life, volatility and other factors.
Certain Restrictive Covenants Our ability to incur debt, incur liens, pay dividends, repurchase or redeem our equity interests, redeem our senior notes, make certain types of investments, enter into mergers, sell assets, enter into transactions with affiliates, and engage in certain other activities are subject to certain restrictive covenants in our various debt instruments.
Certain Restrictive Covenants Our ability to incur debt, incur liens, enter into mergers, sell assets, enter into transactions with affiliates, and engage in certain other activities are subject to certain restrictive covenants in our various debt instruments.
We measure the non-performance 46 Table of Contents risk of our counterparties by reviewing credit default swap spreads for the various financial institutions with which we have derivative transactions, while our non-performance risk is evaluated using a market credit spread provided by several of our banks.
We measure the non-performance risk of our counterparties by reviewing credit default swap spreads for the various financial institutions with which we have derivative transactions, while our non-performance risk is evaluated by using credit default swap spreads for various similarly rated companies in our sector.
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, geopolitical, economic and other factors. NYMEX oil and natural gas futures prices have strengthened since the reduction of pandemic-related restrictions and increased OPEC+ cooperation.
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.
Income Tax Expense Year Ended December 31, (In millions) 2022 2021 Variance Income Tax Expense Current tax expense $ 869 $ 218 $ 651 Deferred tax expense 235 126 109 $ 1,104 $ 344 $ 760 Combined federal and state effective income tax rate 21 % 23 % Income tax expense increased $760 million due to higher pre-tax income in 2022 compared to 2021, partially offset by a lower effective tax rate.
Income Tax Expense Year Ended December 31, (In millions) 2023 2022 Variance Income Tax Expense Current tax expense $ 429 $ 869 $ (440) Deferred tax expense 74 235 (161) $ 503 $ 1,104 $ (601) Combined federal and state effective income tax rate 24 % 21 % Income tax expense decreased $601 million primarily due to lower pre-tax income in 2023 compared to 2022, partially offset by a higher effective tax rate.
The following table presents major components of our capital and exploration expenditures: Year Ended December 31, (In millions) 2022 2021 2020 Acquisitions (1) : Proved $ — $ 7,472 $ — Unproved — 5,381 — Total $ — $ 12,853 $ — Capital expenditures Drilling and facilities $ 1,617 $ 688 $ 547 Leasehold acquisitions 10 5 6 Pipeline and gathering 56 9 — Other 54 23 17 1,737 725 570 Exploration expenditures (2) 29 18 15 Total $ 1,766 $ 743 $ 585 _______________________________________________________________________________ (1) These amounts represent the fair value of the proved and unproved properties recorded in the purchase price allocation with respect to the Merger.
We budget these expenditures based on our projected cash flows for the year. 40 Table of Contents The following table presents major components of our capital and exploration expenditures: Year Ended December 31, (In millions) 2023 2022 2021 Acquisitions (1) : Proved $ — $ — $ 7,472 Unproved — — 5,381 Total $ — $ — $ 12,853 Capital expenditures Drilling and completion $ 1,979 $ 1,617 $ 688 Pipeline and gathering 91 56 9 Other 34 54 23 Capital expenditures for drilling, completion and other fixed asset additions 2,104 1,727 720 Capital expenditures for leasehold and property acquisitions 10 10 5 Exploration expenditures (2) 20 29 18 Total $ 2,134 $ 1,766 $ 743 _______________________________________________________________________________ (1) These amounts represent the fair value of the proved and unproved properties recorded in the purchase price allocation with respect to the Merger.
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 $2.0 billion from 2021 to 2022.
Refer to “Results of Operations” for additional information relative to commodity price, 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 $385 million from 2022 to 2023.
The following table presents taxes other than income for the years indicated: Year Ended December 31, (In millions) 2022 2021 Variance Taxes Other than Income Production $ 282 $ 57 $ 225 Drilling impact fees 31 22 9 Ad valorem 53 3 50 Other — 1 (1) $ 366 $ 83 $ 283 Taxes other than income as a percentage of production revenue 3.9 % 2.3 % Taxes other than income increased $283 million.
The following table presents taxes other than income for the years indicated: Year Ended December 31, (In millions) 2023 2022 Variance Taxes Other than Income Production $ 205 $ 282 $ (77) Drilling impact fees 23 31 (8) Ad valorem 53 53 — Other 2 — 2 $ 283 $ 366 $ (83) Production taxes as a percentage of revenue (Permian and Anadarko Basins) 5.6 % 5.5 % Taxes other than income decreased $83 million.
We had $1.5 billion of capacity on our revolving credit facility at December 31, 2022, and unrestricted cash on hand of $673 million. 41 Table of Contents Cash Flows Our cash flows from operating activities, investing activities and financing activities are as follows: Year Ended December 31, (In millions) 2022 2021 2020 Cash flows provided by operating activities $ 5,456 $ 1,667 $ 778 Cash flows (used in) provided by investing activities (1,674) 313 (584) Cash flows used in financing activities (4,145) (1,086) (256) Operating Activities.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit agreement, our unused commitments were $1.5 billion, and we had unrestricted cash on hand of $956 million. 38 Table of Contents Cash Flows Our cash flows from operating activities, investing activities and financing activities are as follows: Year Ended December 31, (In millions) 2023 2022 2021 Cash flows provided by operating activities $ 3,658 $ 5,456 $ 1,667 Cash flows (used in) provided by investing activities (2,059) (1,674) 313 Cash flows used in financing activities (1,317) (4,145) (1,086) Operating Activities.
We did not repurchase any shares of our common stock during 2021 under our previously authorized share repurchase program. During the years ended December 31, 2022 and 2021, 320,236 and 125,067 shares of common stock, respectively, were recorded as treasury stock related to common shares that were retained from vested restricted stock awards for withholding of taxes.
During the years ended December 31, 2023 and 2022, 332,634 and 320,236 shares of common stock, respectively, were recorded as treasury stock and retired related to common shares that were retained from vested restricted stock awards for withholding of taxes.
As of December 31, 2022, this repurchase program was fully executed and in February 2023 our Board of Directors approved a new share repurchase program which authorizes the purchase of $2.0 billion of our common stock. During 2022, we repurchased 48 million shares of our common stock for $1.25 billion under our authorized share repurchase program.
In February 2023, our Board of Directors approved a new share repurchase program which authorizes the purchase of up to $2.0 billion of our common stock in the open market or in negotiated transactions. During 2023, we repurchased and retired 17 million shares of our common stock for $418 million under our authorized share repurchase program.
NGL Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2022 2021 Amount Percent Volume variance (MMBbl) 28.7 7.1 21.6 304 % $ 738 Price variance ($/Bbl) $ 33.58 $ 34.18 $ (0.60) (2) % (17) Total $ 721 NGL revenues increased $721 million primarily due to our expanded operations and related production after the Merger, partially offset by slightly lower NGL prices. 48 Table of Contents Loss on Derivative Instruments Net gains and losses on our derivative instruments are a function of fluctuations in the underlying commodity index prices as compared to the contracted prices and the monthly cash settlements (if any) of the derivative instruments.
NGL Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2023 2022 Amount Percent Volume variance (MMBbl) 32.9 28.7 4.2 15 % $ 141 Price variance ($/Bbl) $ 19.56 $ 33.58 $ (14.02) (42) % (461) Total $ (320) NGL revenues decreased $320 million primarily due significantly lower NGL prices, partially offset by higher NGL volumes, particularly in the Permian Basin. 42 Table of Contents Gain (Loss) on Derivative Instruments Net gains and losses on our derivative instruments are a function of fluctuations in the underlying commodity index prices as compared to the contracted prices and the monthly cash settlements (if any) of the derivative instruments.
Net cash provided by operating activities in 2022 increased by $3.8 billion compared to 2021. This increase was primarily due to higher net income as a result of higher natural gas, oil and NGL revenue, partially offset by higher operating expenses, higher cash paid on derivative settlements and unfavorable changes in working capital and other assets and liabilities.
This decrease was primarily due to lower net income as a result of lower natural gas, oil and NGL revenue due to lower commodity prices, partially offset by higher production. This decrease was partially offset by lower operating costs, higher cash received on derivative settlements and a larger contribution from changes in working capital and other assets and liabilities.
If our estimates and judgments change regarding our ability to realize our deferred tax assets, our tax provision could increase in the period it is determined that it is more likely than not it will not be realized.
If our estimates and judgments change regarding our ability to realize our deferred tax assets, our tax provision could increase in the period it is determined that it is more likely than not it will not be realized. 48 Table of Contents Our effective tax rate is subject to variability as a result of factors other than changes in federal and state tax rates and changes in tax laws which could affect us.
Actual results could differ from those estimates, and changes in our estimates are recorded when known. We consider the following to be our most critical estimates that involve judgement of management. Purchase Accounting From time to time we may acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Merger.
Actual results could differ from those estimates, and changes in our estimates are recorded when known. We consider the following to be our most critical estimates that involve judgement of management. Successful Efforts Method of Accounting We follow the successful efforts method of accounting for our oil and gas producing activities.
Year Ended December 31, Variance Per Boe (In millions, except per Boe) 2022 2021 Amount Percent 2022 2021 Operating Expenses Direct operations $ 460 $ 156 $ 304 195 % $ 1.99 $ 0.93 Transportation, processing and gathering 955 663 292 44 % 4.13 3.97 Taxes other than income 366 83 283 341 % 1.58 0.50 Exploration 29 18 11 61 % 0.13 0.11 Depreciation, depletion and amortization 1,635 693 942 136 % 7.07 4.15 General and administrative 396 270 126 47 % 1.70 1.62 $ 3,841 $ 1,883 $ 1,958 104 % 49 Table of Contents Direct Operations Direct operations generally consists of costs for labor, equipment, maintenance, saltwater disposal, compression, power, treating and miscellaneous other costs (collectively, “lease operating expense”).
Year Ended December 31, Variance Per Boe (In millions, except per Boe) 2023 2022 Amount Percent 2023 2022 Operating Expenses Direct operations $ 562 $ 460 $ 102 22 % $ 2.31 $ 1.99 Gathering, processing and transportation 975 955 20 2 % 4.00 4.13 Taxes other than income 283 366 (83) (23) % 1.16 1.58 Exploration 20 29 (9) (31) % 0.08 0.13 Depreciation, depletion and amortization 1,641 1,635 6 — % 6.74 7.07 General and administrative 291 396 (105) (27) % 1.20 1.70 $ 3,772 $ 3,841 $ (69) (2) % Direct Operations Direct operations generally consist of costs for labor, equipment, maintenance, saltwater disposal, compression, power, treating and miscellaneous other costs (collectively, “lease operating expense”).
Amortization of unproved properties increased $60 million due to the release of certain leaseholds during the period and the amortization of our unproved properties acquired in the Merger. If development of unproved properties is deemed unsuccessful and the properties are abandoned or surrendered, the capitalized costs are expensed in the period the determination is made.
The rate of amortization depends on the timing and success of our exploration and development program. If development of unproved properties is deemed unsuccessful and the properties are abandoned or surrendered, the capitalized costs are expensed in the period the determination is made.
Natural Gas Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2022 2021 Amount Percent Volume variance (Bcf) 1,024.3 911.1 113.2 12 % $ 348 Price variance ($/Mcf) $ 5.34 $ 3.07 $ 2.27 74 % 2,323 Total $ 2,671 Natural gas revenues increased $2.7 billion primarily due to significantly higher natural gas prices combined with higher production.
Natural Gas Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2023 2022 Amount Percent Volume variance (Bcf) 1,052.7 1,024.3 28.4 3 % $ 152 Price variance ($/Mcf) $ 2.18 $ 5.34 $ (3.16) (59) % (3,329) Total $ (3,177) Natural gas revenues decreased $3.2 billion primarily due to significantly lower natural gas prices, partially offset by higher production.
The increase in our year-over-year capital expenditures is primarily driven by our expectations around the impact of inflation on our 2023 capital program and a modest increase in activity. We will continue to assess the commodity price environment and may increase or decrease our capital expenditures accordingly.
The decrease in our year-over-year capital expenditures is primarily driven by lower planned spending in the Marcellus Shale, partially offset by modest increases in the Permian Basin and Anadarko Basin. We will continue to assess the commodity price environment and may increase or decrease our capital expenditures accordingly.
In December 2022, our Board of Directors authorized the retirement of our common stock held in treasury and as of December 31, 2022, there were no common shares held in Treasury Stock on the Consolidated Balance Sheet.
Accordingly, as of December 31, 2023 and 2022, there were no common shares held in Treasury Stock on the Consolidated Balance Sheet. Dividends. In February 2023, our Board of Directors approved an increase in the base quarterly dividend from $0.15 per share to $0.20 per share.
Our revolving credit facility also requires us to maintain a leverage ratio of no more than 3.0 to 1.0 until such time as we have no other debt outstanding that has a financial maintenance covenant based on a leverage ratio, and thereafter requires us to maintain a ratio of total debt to total capitalization of no more than 65 percent.
At such time as we have no other debt in a principal amount in excess of $75 million outstanding that has a financial maintenance covenant based on a substantially similar leverage ratio, in lieu of such maximum leverage ratio covenant, the revolving credit agreement will instead require us to maintain a ratio of total debt to total capitalization of no more than 65 percent.
Costs vary by operating area and will fluctuate with increases or decreases in production volumes, contractual fees, and changes in fuel and compression costs. Transportation, processing and gathering increased $292 million due to our expanded operations due to the Merger.
Gathering costs also include costs associated with operating our gas gathering infrastructure, including operating and maintenance expenses. Costs vary by operating area and will fluctuate with increases or decreases in production volumes, contractual fees, and changes in fuel and compression costs.
Ad valorem taxes increased primarily due to our expanded operations after the Merger and higher property valuations. 50 Table of Contents Depreciation, Depletion and Amortization DD&A expense consisted of the following for the periods indicated: Year Ended December 31, Per Boe (In millions, except per Boe) 2022 2021 Variance 2022 2021 DD&A Expense Depletion $ 1,474 $ 663 $ 811 $ 6.37 $ 3.97 Depreciation 91 23 68 0.40 0.13 Amortization of undeveloped properties 61 1 60 0.26 0.01 Accretion of ARO 9 6 3 0.04 0.04 $ 1,635 $ 693 $ 942 $ 7.07 $ 4.15 Depletion of our producing properties is computed on a field basis using the unit-of-production method under the successful efforts method of accounting.
Drilling impact fees decreased primarily due to the timing of wells drilled in the Marcellus Shale and lower natural gas prices, which drive the fees assessed on our drilling activities. 44 Table of Contents Depreciation, Depletion and Amortization DD&A expense consisted of the following for the periods indicated: Year Ended December 31, Per Boe (In millions, except per Boe) 2023 2022 Variance 2023 2022 DD&A Expense Depletion $ 1,509 $ 1,474 $ 35 $ 6.20 $ 6.37 Depreciation 74 91 (17) 0.30 0.40 Amortization of unproved properties 48 61 (13) 0.20 0.26 Accretion of ARO 10 9 1 0.04 0.04 $ 1,641 $ 1,635 $ 6 $ 6.74 $ 7.07 Depletion of our producing properties is computed on a field basis using the unit-of-production method under the successful efforts method of accounting.
Production taxes represented the majority of our taxes other than income, which increased primarily due to higher production related to properties acquired in the Merger and higher commodity prices. Drilling impact fees increased primarily due to higher natural gas prices.
Production taxes represented the majority of our taxes other than income, which decreased primarily due to lower oil, natural gas and NGL revenues.
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 facility.
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.
Prospectively, share repurchases and shares withheld for the vesting of stock awards will be retired in the period in which they are repurchased or withheld. Dividends. In February 2022, our Board of Directors approved an increase in our base quarterly dividend from $0.125 per share to $0.15 per share beginning in the first quarter of 2022.
In December 2022, our Board of Directors authorized the retirement of our common stock held in treasury as of December 31, 2022 and provided that prospectively, share repurchases and shares withheld for the vesting of stock awards will be retired in the period in which they are repurchased or withheld.
Annual Report on Form 10-K for the year ended December 31, 2021. 52 Table of Contents
Annual Report on Form 10-K for the year ended December 31, 2022, which information is incorporated by reference herein.
Cash flows used in financing activities increased by $3.1 billion from 2021 to 2022. The increase was due to $1.3 billion of higher share repurchases during 2022, $1.2 billion of higher dividend payments in 2022 compared to 2021, and $686 million higher net repayments of debt.
The increase was primarily due to $389 million of higher capital expenditures due to our increased capital budget for 2023 compared to 2022 . Financing Activities. Cash flows used in financing activities decreased by $2.8 billion from 2022 to 2023.
Fixed assets consist primarily of gas gathering facilities, water infrastructure, buildings, vehicles, aircraft, furniture and fixtures and computer equipment and software. These items are recorded at cost and are depreciated on the straight-line method based on expected lives of the individual assets, which range from three to 30 years.
These items are recorded at cost and are depreciated on the straight-line method based on expected lives of the individual assets, which range from three to 30 years. Also included in our depreciation expense is the depreciation of the right-of-use asset associated with our finance lease gathering system.
Direct operations consisted of lease operating expense and workover expense as follows: Year Ended December 31, Per Boe (In millions, except per Boe) 2022 2021 Variance 2022 2021 Direct Operations Lease operating expense $ 370 $ 127 $ 243 $ 1.60 $ 0.76 Workover expense 90 29 61 0.39 0.17 $ 460 $ 156 $ 304 $ 1.99 $ 0.93 Lease operating and workover expense increased due to our expanded operations due to the Merger.
Direct operations also include well workover activity necessary to maintain production from existing wells. 43 Table of Contents Direct operations consisted of lease operating expense and workover expense as follows: Year Ended December 31, Per Boe (In millions, except per Boe) 2023 2022 Variance 2023 2022 Direct Operations Lease operating expense $ 472 $ 370 $ 102 $ 1.94 $ 1.60 Workover expense 90 90 — 0.37 0.39 $ 562 $ 460 $ 102 $ 2.31 $ 1.99 Lease operating expense increased primarily due to higher production levels.
Merger-related expenses decreased $37 million primarily due to $42 million of lower transaction-related costs associated with the Merger, partially offset by an increase of $8 million of employee-related severance and termination benefits associated with the expected termination of certain employees, which is being accrued over the expected transition period.
These decreases were partially offset by higher stock-based compensation costs related to new shares granted during 2023. Merger-related expenses decreased $57 million primarily due to lower employee-related severance and termination benefits associated with the termination of transition employees.
In February 2023, our Board of Directors approved an increase in our base quarterly dividend from $0.15 per share to $0.20 per share beginning in the first quarter of 2023, and approved a quarterly base dividend of $0.20 per share and a variable dividend of $0.37 per share, resulting in a total base-plus-variable dividend of $0.57 per share on our common stock. 43 Table of Contents Capital and Exploration Expenditures On an annual basis, we generally fund most of our capital expenditures, excluding any significant property acquisitions, with cash generated from operations and, if required, borrowings under our revolving credit facility.
Capital and Exploration Expenditures On an annual basis, we generally fund most of our capital expenditures, excluding any significant property acquisitions, with cash generated from operations and, if required, borrowings under our revolving credit agreement.
Oil Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2022 2021 Amount Percent Volume variance (MMBbl) 31.9 8.1 23.8 294% $ 1,799 Price variance ($/Bbl) $ 94.47 $ 75.61 $ 18.86 25% 601 Total $ 2,400 Oil revenues increased $2.4 billion primarily due to our expanded operations and related production after the Merger and higher oil prices.
Oil Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2023 2022 Amount Percent Volume variance (MMBbl) 35.1 31.9 3.2 10% $ 302 Price variance ($/Bbl) $ 75.97 $ 94.47 $ (18.50) (20)% (651) Total $ (349) Oil revenues decreased $349 million primarily due to lower oil prices, offset by higher production mainly in the Permian Basin.
We believe we have adequate liquidity and availability as outlined above to meet our working capital requirements over the next 12 months.
The decrease in our working capital surplus is primarily due to the reclassification during 2023 of $575 million of long-term debt scheduled to mature in September 2024 to current liabilities. We believe we have adequate liquidity and availability under our revolving credit agreement as outlined above to meet our working capital requirements over the next 12 months.
The purchase was funded through the issuance of our common stock. (2) There were no exploratory dry-hole costs in 2022 or 2021. Exploration expenditures include $4 million of exploratory dry-hole costs in 2020.
The purchase was funded through the issuance of our common stock. (2) There were no exploratory dry hole costs in 2023, 2022 and 2021. In 2023, we drilled 264 gross wells (169.4 net) and completed 288 gross wells (183.3 net), of which 98 gross wells (62.7 net) were drilled but uncompleted in prior years.
General and Administrative General and administrative (“G&A”) expense consists primarily of salaries and related benefits, stock-based compensation, office rent, legal and consulting fees, systems costs and other administrative costs incurred. A portion of our G&A expense is reported net of amounts reimbursed to us by working interest owners of the oil and gas properties we operate.
Amortization of unproved properties decreased $13 million primarily due to a non-recurring charge related to the release of certain leaseholds that occurred in 2022. General and Administrative G&A expense consists primarily of salaries and related benefits, stock-based compensation, office rent, legal and consulting fees, systems costs and other administrative costs incurred.
Capitalization Information about our capitalization is as follows: December 31, (Dollars in millions) 2022 2021 Total debt $ 2,181 $ 3,125 Stockholders' equity 12,659 11,738 Total capitalization $ 14,840 $ 14,863 Debt to total capitalization 15% 21% Cash and cash equivalents $ 673 $ 1,036 On September 29, 2021, our stockholders approved an amendment to our certificate of incorporation to increase the number of authorized shares of our common stock from 960,000,000 shares to 1,800,000,000 shares.
Capitalization Information about our capitalization is as follows: December 31, (Dollars in millions) 2023 2022 Total debt $ 2,161 $ 2,181 Stockholders' equity 13,039 12,659 Total capitalization $ 15,200 $ 14,840 Debt to total capitalization 14% 15% Cash and cash equivalents $ 956 $ 673 Share repurchases.
We expect to turn-in-line 150 to 175 total net wells in 2023 across our three operating regions. Approximately 49 percent of our drilling and completion capital will be invested in the Permian Basin, 44 percent in the Marcellus Shale and the balance in the Anadarko Basin.
Approximately 60 percent of our drilling and completion capital will be invested in the Permian Basin, 23 percent in the Marcellus Shale and 17 percent in the Anadarko Basin (at the mid-point).
For information about the impact of realized commodity prices on our revenues, refer to “Results of Operations” below. Inflation Certain of our capital expenditures and expenses are affected by general inflation, which rose throughout 2022.
For information about the impact of realized commodity prices on our revenues, refer to “Results of Operations” below. FINANCIAL CONDITION Liquidity and Capital Resources We strive to maintain an adequate liquidity level to address commodity price volatility and risk.
The table below reflects our G&A expense for the periods identified: Year Ended December 31, (In millions) 2022 2021 Variance G&A Expense General and administrative expense $ 241 $ 107 $ 134 Stock-based compensation expense 86 57 29 Merger-related expense 69 106 (37) $ 396 $ 270 $ 126 G&A expense, excluding stock-based compensation and merger-related expenses, increased $134 million primarily due to the Merger, which significantly expanded our headcount and office-related expenses. 51 Table of Contents Stock-based compensation expense will fluctuate based on the grant date fair value of awards, the number of awards, the requisite service period of the awards, estimated employee forfeitures, and the timing of the awards.
The table below reflects our G&A expense for the periods identified: Year Ended December 31, (In millions) 2023 2022 Variance G&A Expense General and administrative expense $ 220 $ 241 $ (21) Stock-based compensation expense 59 86 (27) Merger-related expense 12 69 (57) $ 291 $ 396 $ (105) G&A expense, excluding stock-based compensation and merger-related expenses, decreased $21 million primarily due to lower legal costs incurred in 2023 compared to 2022, and lower compensation and benefit costs due to the reduction in transition personnel throughout 2023.
Repaid $188 million of private placement senior notes which matured in 2021. 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.
Under our previous share repurchase program, we repurchased 48 million shares for $1.25 billion during the year ended December 31, 2022. 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.
The use of these models requires significant judgment with respect to expected life, volatility and other factors. 47 Table of Contents RESULTS OF OPERATIONS 2022 and 2021 Compared Operating Revenues Year Ended December 31, Variance (In millions) 2022 2021 Amount Percent Natural gas $ 5,469 $ 2,798 $ 2,671 95 % Oil 3,016 616 2,400 390 % NGL 964 243 721 297 % Loss on derivative instruments (463) (221) (242) 110 % Other 65 13 52 400 % $ 9,051 $ 3,449 $ 5,602 162 % Production Revenues Our production revenues are derived from sales of our oil, natural gas and NGL production.
We have no other off-balance sheet debt or other similar unrecorded obligations. 41 Table of Contents RESULTS OF OPERATIONS 2023 and 2022 Compared Operating Revenues Year Ended December 31, Variance (In millions) 2023 2022 Amount Percent Natural gas $ 2,292 $ 5,469 $ (3,177) (58) % Oil 2,667 3,016 (349) (12) % NGL 644 964 (320) (33) % Gain (loss) on derivative instruments 230 (463) 693 (150) % Other 81 65 16 25 % $ 5,914 $ 9,051 $ (3,137) (35) % Production Revenues Our production revenues are derived from sales of our oil, natural gas and NGL production.
Our Board of Directors previously approved an increase in our base quarterly dividend rate in the fourth quarter of 2021 and second quarter of 2021 from $0.11 per share to $0.125 per share and from $0.10 per share to $0.11 per share, respectively.
Rate per share Base Variable Total Total Dividends Paid (In millions) 2023 $ 0.80 $ 0.37 $ 1.17 $ 895 2022 $ 0.60 $ 1.89 $ 2.49 $ 1,991 In February 2024, our Board of Directors approved an increase in our base quarterly dividend from $0.20 per share to $0.21 per share beginning in the first quarter of 2024, and approved a quarterly base dividend of $0.21 per share.

… 79 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+0 added−6 removed6 unchanged
Biggest changeUnder the swap agreements, we receive a fixed price on a notional quantity of natural gas or oil in exchange for paying a variable price based on a market-based index. 53 Table of Contents As of December 31, 2022, we had the following outstanding financial commodity derivatives: 2023 Estimated Fair Value Asset (Liability) (In millions) Natural Gas First Quarter Second Quarter Third Quarter Fourth Quarter Waha gas collars $ 44 Volume (MMBtu) 8,100,000 8,190,000 8,280,000 8,280,000 Weighted average floor ($/MMBtu) $ 3.03 $ 3.03 $ 3.03 $ 3.03 Weighted average ceiling ($/MMBtu) $ 5.39 $ 5.39 $ 5.39 $ 5.39 NYMEX collars $ 95 Volume (MMBtu) 54,000,000 31,850,000 32,200,000 29,150,000 Weighted average floor ($/MMBtu) $ 5.12 $ 4.07 $ 4.07 $ 4.03 Weighted average ceiling ($/MMBtu) $ 9.34 $ 6.78 $ 6.78 $ 6.61 $ 139 2023 Estimated Fair Value Asset (Liability) (In millions) Oil First Quarter Second Quarter WTI oil collars $ 8 Volume (MBbl) 1,350 1,365 Weighted average floor ($/Bbl) $ 70.00 $ 70.00 Weighted average ceiling ($/Bbl) $ 116.03 $ 116.03 WTI Midland oil basis swaps $ (1) Volume (MBbl) 1,350 1,365 Weighted average differential ($/Bbl) $ 0.63 $ 0.63 $ 7 The amounts set forth in the table above represent our total unrealized derivative position at December 31, 2022 and exclude the impact of non-performance risk.
Biggest changeUnder the swap agreements, we receive a fixed price on a notional quantity of natural gas or oil in exchange for paying a variable price based on a market-based index. 49 Table of Contents As of December 31, 2023, we had the following outstanding financial commodity derivatives: 2024 2025 Fair Value Asset (Liability) (In millions) Natural Gas First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter NYMEX collars $ 67 Volume (MMBtu) 35,490,000 44,590,000 45,080,000 16,690,000 9,000,000 9,100,000 9,200,000 9,200,000 Weighted average floor ($/MMBtu) $ 3.00 $ 2.70 $ 2.75 $ 2.75 $ 3.25 $ 3.25 $ 3.25 $ 3.25 Weighted average ceiling ($/MMBtu) $ 5.38 $ 3.87 $ 3.94 $ 4.23 $ 4.79 $ 4.79 $ 4.79 $ 4.79 $ 67 2024 Fair Value Asset (Liability) (In millions) Oil First Quarter Second Quarter Third Quarter Fourth Quarter WTI oil collars $ 26 Volume (MBbl) 2,730 2,730 1,840 1,840 Weighted average floor ($/Bbl) $ 68.00 $ 68.00 $ 65.00 $ 65.00 Weighted average ceiling ($/Bbl) $ 91.37 $ 91.37 $ 90.01 $ 90.01 WTI Midland oil basis swaps (1) Volume (MBbl) 2,730 2,730 1,840 1,840 Weighted average differential ($/Bbl) $ 1.16 $ 1.16 $ 1.17 $ 1.17 $ 25 In January 2024, the Company entered into the following financial commodity derivatives: 2024 Oil First Quarter Second Quarter Third Quarter Fourth Quarter WTI oil collars Volume (MBbl) 300 455 920 920 Weighted average floor ($/Bbl) $ 65.00 $ 65.00 $ 65.00 $ 65.00 Weighted average ceiling ($/Bbl) $ 85.02 $ 85.02 $ 81.49 $ 81.49 WTI Midland oil basis swaps Volume (MBbl) 300 455 920 920 Weighted average differential ($/Bbl) $ 1.10 $ 1.10 $ 1.10 $ 1.10 A significant portion of our production for 2024 and beyond is currently unhedged and directly exposed to the volatility in commodity prices, whether favorable or unfavorable.
The following quantitative and qualitative information is provided for financial instruments to which we were party to as of December 31, 2022 and from which we may incur future gains or losses from changes in commodity prices or interest rates. Commodity Price Risk Our most significant market risk exposure is pricing applicable to our oil, natural gas and NGL production.
The following quantitative and qualitative information is provided for financial instruments to which we were party to as of December 31, 2023 and from which we may incur future gains or losses from changes in commodity prices or interest rates. Commodity Price Risk Our most significant market risk exposure is pricing applicable to our oil, natural gas and NGL production.
Interest Rate Risk At December 31, 2022, we had total debt of $2.2 billion (with a principal amount of $2.1 billion). All of our outstanding debt is based on fixed interest rates and, as a result, we do not have significant exposure to movements in market interest rates with respect to such debt.
Interest Rate Risk At December 31, 2023, we had total debt of $2.2 billion (with a principal amount of $2.1 billion). All of our outstanding debt is based on fixed interest rates and, as a result, we do not have significant exposure to movements in market interest rates with respect to such debt.
Our counterparties are primarily commercial banks and financial service institutions that management believes present minimal credit risk and our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. We perform both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable.
Our counterparties are primarily commercial banks and financial service institutions that management 50 Table of Contents believes present minimal credit risk and our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. We perform both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable.
We have not incurred any losses related to non-performance risk 54 Table of Contents of our counterparties and we do not anticipate any material impact on our financial results due to non-performance by third parties. However, we cannot be certain that we will not experience such losses in the future.
We have not incurred any losses related to non-performance risk of our counterparties and we do not anticipate any material impact on our financial results due to non-performance by third parties. However, we cannot be certain that we will not experience such losses in the future.
Our revolving credit facility provides for variable interest rate borrowings; however, we did not have any borrowings outstanding as of December 31, 2022 and, therefore, no related exposure to interest rate risk. Fair Value of Other Financial Instruments The estimated fair value of other financial instruments is the amount at which the instrument could be exchanged currently between willing parties.
Our revolving credit agreement provides for variable interest rate borrowings; however, we did not have any borrowings outstanding as of December 31, 2023 and, therefore, no related exposure to interest rate risk. Fair Value of Other Financial Instruments The estimated fair value of other financial instruments is the amount at which the instrument could be exchanged currently between willing parties.
The carrying amounts reported in the Consolidated Balance Sheet for cash, cash equivalents and restricted cash approximate fair value due to the short-term maturities of these instruments. The fair value of our senior notes is based on quoted market prices. We use available market data and valuation methodologies to estimate the fair value of our private placement senior notes.
The carrying amounts reported in the Consolidated Balance Sheet for cash, cash equivalents and restricted cash approximate fair value due to the short-term maturities of these instruments. The fair value of our senior notes is based on quoted market prices.
Please read the discussion below as well as Note 5 of the Notes to the Consolidated Financial Statements, “Derivative Instruments,” in Item 8, for a more detailed discussion of our derivatives.
Please read the discussion below as well as Note 5 of the Notes to the Consolidated Financial Statements, “Derivative Instruments,” in Item 8 for a more detailed discussion of our derivatives. Periodically, we enter into financial commodity derivatives, including collar, swap, and basis swap agreements, to protect against exposure to commodity price declines.
During 2022, natural gas collars with floor prices ranging from $1.70 to $8.50 per MMBtu and ceiling prices ranging from $2.10 to $13.08 per MMBtu covered 245.8 Bcf, or 24 percent of natural gas production at a weighted-average price of $4.94 per MMBtu.
During 2023, natural gas collars with floor prices ranging from $3.00 to $7.50 per MMBtu and ceiling prices ranging from $4.55 to $13.08 per MMBtu covered 174.9 Bcf, or 17 percent of natural gas production at a weighted-average price of $4.23 per MMBtu.
We are exposed to market risk on financial commodity derivative instruments to the extent of changes in market prices of oil and natural gas. However, the market risk exposure on these derivative contracts is generally offset by the gain or loss recognized upon the ultimate sale of the commodity.
However, the market risk exposure on these derivative contracts is generally offset by the gain or loss recognized upon the ultimate sale of the commodity.
The carrying amount and estimated fair value of debt is as follows: December 31, 2022 December 31, 2021 (In millions) Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Long-term debt $ 2,181 $ 1,955 $ 3,125 $ 3,163 55 Table of Contents
The carrying amount and estimated fair value of debt is as follows: December 31, 2023 December 31, 2022 (In millions) Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Total debt $ 2,161 $ 2,015 $ 2,181 $ 1,955 Current maturities (575) (565) — — Long-term debt, excluding current maturities $ 1,586 $ 1,450 $ 2,181 $ 1,955 51 Table of Contents
During 2022, oil collars with floor prices ranging from $35.00 to $90.00 per Bbl and ceiling prices ranging from $45.15 to $145.25 per Bbl covered 9.7 MMBbls, or 31 percent, of oil production at a weighted-average price of $55.00 per Bbl.
During 2023, oil collars with floor prices ranging from $65.00 to $80.00 per Bbl and ceiling prices ranging from $89.00 to $118.30 per Bbl covered 7.1 MMBbls, or 20 percent, of oil production at a weighted-average price of $68.75 per Bbl.
The fair value of the private placement senior notes is the estimated amount we 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 our default or repayment risk.
The fair value of our 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.
Oil basis swaps covered 8.7 MMBbls, or 27 percent, of oil production at a weighted-average price of $0.30 per Bbl. Oil roll differential swaps covered 2.7 MMBbls, or 9 percent, of oil production at a weighted-average price of $(0.02) per Bbl.
Oil basis swaps covered 7.6 MMBbls, or 22 percent, of oil production at a weighted-average price of $0.92 per Bbl. We are exposed to market risk on financial commodity derivative instruments to the extent of changes in market prices of the related commodity.
Removed
Periodically, we enter into financial commodity derivatives, including collar, swap, and basis swap agreements, to protect against exposure to commodity price declines related to our oil and natural gas production.
Removed
Our credit agreement restricts our ability to enter into financial commodity derivatives other than to hedge or mitigate risks to which we have actual or projected exposure or as permitted under our risk management policies and not subjecting us to material speculative risks.
Removed
Non-performance risk is considered in the fair value of our derivative instruments that are recorded in our Consolidated Financial Statements and is primarily evaluated by reviewing credit default swap spreads for the various financial institutions with which we have derivative contracts, while our non-performance risk is evaluated using a market credit spread provided by several of our banks.
Removed
A significant portion of our expected oil and natural gas production for 2023 and beyond is currently unhedged and directly exposed to the volatility in commodity prices, whether favorable or unfavorable.
Removed
Natural gas swaps covered 14.9 Bcf, or one percent, of natural gas production at a weighted-average price of $2.26 per MMBtu.
Removed
The credit spread (premium or discount) is determined by comparing our senior notes and revolving credit facility 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 us.

Other CTRA 10-K year-over-year comparisons