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What changed in Coterra's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Coterra's 2023 and 2024 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 2024 report.

+257 added−216 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-23)

Top changes in Coterra's 2024 10-K

257 paragraphs added · 216 removed · 184 edited across 7 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+21 added−5 removed128 unchanged
Biggest changeOur bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of us, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or agent of Coterra to Coterra or our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our bylaws or charter or (4) any action asserting a claim governed by the internal affairs doctrine or asserting an "internal corporate claim" shall, to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the U.S. federal district court for the District of Delaware).
Biggest changeOur bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of us, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or agent of Coterra to Coterra or our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our bylaws or charter or (4) any action asserting a claim governed by the internal affairs doctrine or asserting an "internal corporate claim" shall, to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the U.S. federal district court for the District of Delaware). 30 Table of Contents To the fullest extent permitted by applicable law, this exclusive-forum provision applies to state and federal law claims, including claims under the federal securities laws, including the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
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.
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.
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.
Furthermore, our insurance may not cover such liabilities, 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.
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.
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 capital to stockholders and future business opportunities.
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.
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.
For additional information, please read “—Risks Related to our Indebtedness, Hedging Activities and Financial Position—We have substantial capital requirements, and we may not be able to obtain needed financing on satisfactory terms, if at all” in this Item 1A. Reputation Risk.
For additional information, please read “—Risks Related to our Indebtedness, Hedging Activities and Financial Position—We have substantial capital requirements, and we may not be able to obtain needed financing on satisfactory terms, if at all.” in this Item 1A. Reputation Risk.
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.
Potential physical risks resulting from climate change may be event driven (including increased severity of extreme weather events, such as hurricanes, droughts, floods, tornadoes, wildfires or freezes) or may be driven by longer-term shifts in climate patterns that may cause sea level rise or chronic heat waves.
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.
As of December 31, 2024, 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.
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.
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.
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.
A successful cyber-attack involving our information or operational technology systems and related infrastructure, or that of our business associates or partners, 25 Table of Contents 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.
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.
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.
Furthermore, we could also face an increased risk of climate‐related litigation or “greenwashing” suits with respect to our operations, disclosures, or products. Claims have been made against certain energy companies alleging that GHG emissions from oil, gas and NGL operations constitute a public nuisance under federal and state law.
Furthermore, we could also face an increased risk of climate‐related litigation or “greenwashing” suits with respect to our operations, disclosures, or products. Claims have been made against certain energy companies alleging that GHG emissions 28 Table of Contents from oil, gas and NGL operations constitute a public nuisance under federal and state law.
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.
We make and expect to make substantial capital expenditures in connection with our development and production projects, as well as to finance our acquisitions. 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.
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.
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. 21 Table of Contents Our operations present hazards and risks that require significant oversight and are subject to numerous possible disruptions from unexpected events.
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.
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.
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.
Notwithstanding the determinations made in the development of our 2025 plan, business opportunities not previously identified periodically may come to our attention, including possible acquisitions and dispositions.
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.
Moreover, economic or other circumstances may change from those contemplated by our 2025 plan, and our failure to recognize or respond to those changes may limit our ability to achieve our objectives.
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.
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 or exacerbated by climate change.
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 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 24 Table of Contents leases.
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.
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.
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.
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 and potential legislative and regulatory actions related thereto.
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.
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 and officers for monetary damages for breach of their fiduciary duty of care is limited by the Delaware General Corporation Law and by our charter.
The Delaware General Corporation Law allows corporations to limit available relief for the breach of directors’ duty of care to equitable remedies such as injunction or rescission. Our charter limits the liability of our directors to the fullest extent permitted by Delaware law.
The Delaware General Corporation Law allows corporations to limit available relief for the breach of directors’ or officers’ duty of care to equitable remedies such as injunction or rescission. Our charter limits the liability of our directors and officers to the fullest extent permitted by Delaware law.
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.
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 on to help us collect, host or process information.
For more information about our debt agreements, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Liquidity and Capital Resources.” We may have hedging arrangements that expose us to risk of financial loss and limit the benefit to us of increases in prices for oil and natural gas.
For more information about our debt agreements, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Liquidity and Capital Resources” in Item 7. We may have hedging arrangements that expose us to risk of financial loss and limit the benefit to us of increases in prices for oil and natural gas.
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.
Other companies operate some of the properties in which we have an interest. As of December 31, 2024, non-operated wells represented approximately 50 percent of our total owned gross wells, or 12 percent of our owned net wells.
These factors could also cause the permits we need to conduct our operations to be challenged, withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business.
These factors could also cause the permits we need to 27 Table of Contents conduct our operations to be challenged, withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct our business.
This limitation may have the effect of reducing the likelihood of derivative litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited our stockholders.
This limitation may have the effect of reducing the likelihood of derivative litigation against directors or officers and may discourage or deter stockholders (or, with respect to directors, management) from bringing a lawsuit against directors or officers, as applicable, for breach of their duty of care, even though such an action, if successful, might otherwise have benefited our stockholders.
Specifically, our directors will not be personally liable for monetary damages for any breach of their fiduciary duty as a director, except for liability: • for any breach of their duty of loyalty to the Company or our stockholders; • for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; • under provisions relating to unlawful payments of dividends or unlawful stock repurchases or redemptions; and • for any transaction from which the director derived an improper personal benefit.
Specifically, our directors and officers will not be personally liable for monetary damages for any breach of their fiduciary duty, except for liability: • for any breach of their duty of loyalty to the Company or our stockholders; • for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; • for any transaction from which the director or officer derived an improper personal benefit; • solely with respect to directors, under provisions relating to unlawful payments of dividends or unlawful stock repurchases or redemptions; and • solely with respect to officers, for any action by or in the right of the Company.
Compliance with environmental regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse effect on our operations and financial condition.
Compliance with environmental regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions or termination of our operations. Such delays, interruptions or termination of our operations could have an adverse effect on our operations and financial condition.
We use financial derivative instruments to manage commodity price risk. While there are many different types of derivatives available, we generally utilize collar, swap and basis swap agreements to manage price risk more effectively. While these derivatives reduce the impact of declines in commodity prices, these derivatives conversely limit the benefit to us of increases in prices.
While there are many different types of derivatives available, we generally utilize collar, swap and basis swap agreements to manage price risk more effectively. 26 Table of Contents While these derivatives reduce the impact of declines in commodity prices, these derivatives conversely limit the benefit to us of increases in prices.
Competition in the oil and natural gas industry is intense. Major and independent oil and natural gas companies actively bid for desirable oil and gas properties, as well as for the capital, equipment, labor and infrastructure required to operate and develop these properties.
Major and independent oil and natural gas companies actively bid for desirable oil and gas properties, as well as for the capital, equipment, labor and infrastructure required to operate and develop these properties.
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.
If we cannot retain our technical personnel or attract additional experienced technical personnel, our ability to compete could be harmed. Competition in our industry is intense, and many of our competitors have substantially greater financial, technical and personnel resources than we do, which could adversely affect our competitive position. Competition in the oil and natural gas industry is intense.
Our competitive position is affected by price, contract terms and quality of service, including pipeline connection times, distribution efficiencies and reliable delivery record. Many of our competitors have financial and technological resources and exploration and development budgets that are substantially greater than ours.
Our competitive position is affected by price, contract terms, availability of rigs and completion crews and related equipment and quality of service, including pipeline connection times, distribution efficiencies and reliable delivery record. Many of our competitors have financial, technical and personnel resources and exploration and development budgets that are substantially greater than ours.
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.
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.
Moreover, these availability and capacity issues are likely to occur in remote areas with less established infrastructure, such as our Permian Basin properties where we have significant oil and natural gas production. Any of these availability or capacity issues could negatively affect our operations, revenues and expenses.
Moreover, these availability and capacity issues are likely to occur in remote areas with less established infrastructure, such as our Permian Basin properties where we have significant oil and natural gas production.
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.
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.
Results of drilling, testing and production subsequent to the date of a reserves estimate may justify revising the original estimate. Accordingly, initial reserves estimates often vary from the quantities of oil and natural gas that are ultimately recovered, and such variances may be material. Any significant variance could reduce the estimated quantities and present value of our reserves.
Accordingly, initial reserves estimates often vary from the quantities of oil and natural gas that are ultimately recovered, and such variances may be material. Any significant variance could reduce the estimated quantities and present value of our reserves.
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.
These systems also enable communications and provide a host of other support services for our business. In recent years 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.
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. For example, in September of 2023, California passed climate-related disclosure mandates.
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.
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.
As noted above, we are also subject to the possibility of security and privacy breaches, which themselves may result in a violation of these laws. Additionally, the acquisition of a company that is not in compliance with applicable data protection laws may result in a violation of these laws.
As noted above, we are also subject to the possibility of security and privacy breaches, which themselves may result in a violation of these laws.
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.
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.
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.
Developing PUD reserves requires significant capital expenditures, 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 22 Table of Contents activities may not be as estimated.
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.
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. 23 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 remote areas, vendors also can charge higher rates due to the inability to attract employees to those areas and the vendors’ ability to deploy their resources in easier-to-access areas. The declaration, payment and amounts of future dividends distributed to our stockholders and the repurchase of our common stock will be uncertain.
In remote areas, vendors also can charge higher rates due to the inability to attract employees to those areas and the vendors’ ability to deploy their resources in easier-to-access areas.
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.
Congress and various states have been evaluating, and in some cases implementing, climate-related legislation and other regulatory initiatives that restrict GHG emissions.
Technological improvements or innovations that support the transition to a lower-carbon, more energy efficient economic system may have a significant impact on us. The development and use of emerging technologies in renewable energy, battery storage, and energy efficiency may lower demand for oil and gas, resulting in lower prices and revenues, and higher costs.
The development and use of emerging technologies in renewable energy, battery storage, and energy efficiency may lower demand for oil and gas, resulting in lower prices and revenues, and higher costs.
Drilling for oil and natural gas involves numerous risks, including the risk that no commercially productive reservoirs will be encountered. The cost of drilling, completing and operating wells is substantial and uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors beyond our control.
The cost of drilling, completing and operating wells is substantial and uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors beyond our control, including the risk of electric grid outages and the potential impacts thereof on our electric fracturing systems.
Furthermore, different reserve engineers may make different estimates of reserves and cash flows based on the same data. For example, our total company proved reserves decreased by approximately 17 percent year over year at December 31, 2022. For more information on such revision, refer to the Supplemental Oil and Gas Information included in Item 8.
Furthermore, different reserve engineers may make different estimates of reserves and cash flows based on the same data. For more information on such revision, refer to the Supplemental Oil and Gas Information included in Item 8. Results of drilling, testing and production subsequent to the date of a reserves estimate may justify revising the original estimate.
Cyber-attacks targeting our systems, the oil and gas industry systems and infrastructure or the systems of our third-party service providers could adversely affect our business.
For additional information, please read “Business and Properties—Other Business Matters—Environmental and Safety Regulations—Clean Water Act” in Items 1 and 2. Cyber-attacks targeting our systems, the oil and gas industry systems and infrastructure or the systems of our third-party service providers could adversely affect our business.
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.
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.
This could result in wells being shut in or awaiting a pipeline connection or capacity, which would adversely affect our results of operations and cash flows. Acquired properties may not be worth what we pay to acquire them, due to uncertainties in evaluating recoverable reserves and other expected benefits, as well as potential liabilities.
Acquired properties may not be worth what we pay to acquire them, due to uncertainties in evaluating recoverable reserves and other expected benefits, as well as potential liabilities. Successful property acquisitions require an assessment of a number of factors beyond our control.
Water is an essential component of oil and natural gas production during the drilling process. In particular, we use a significant amount of water in the hydraulic fracturing process. Our inability to locate sufficient amounts of water, or dispose of or recycle water used in our exploration and production operations, could adversely impact our operations.
Restrictions on the Company’s ability to obtain water or dispose of produced water may have a material effect on its financial condition, results of operations and cash flows. Water is an essential component of oil and natural gas production during the drilling and hydraulic fracturing processes. In particular, we use a significant amount of water in the hydraulic fracturing process.
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.
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. Studies have found that emission of certain gases, commonly referred to as GHGs impact the earth’s climate. The U.S.
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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.
Added
In addition, the price for natural gas and NGLs that we sell may be impacted by the demand for liquid natural gas (“LNG”) exports and the impact of such demand on domestic natural gas prices, including if future U.S. regulatory action limits the construction of new LNG facilities or limits the approvals of applications for LNG export authorization.
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These systems also enable communications and provide a host of other support services for our business.
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Drilling for oil and natural gas involves numerous risks, including the risk that no commercially productive reservoirs will be encountered.
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Our ability to produce oil and natural gas economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our operations or are unable to dispose of or recycle the water we use economically and in an environmentally safe manner.
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As of December 31, 2024, approximately 18 percent of our estimated proved reserves (by volume) were undeveloped.
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For example, the SEC in 2022 proposed rules on climate change disclosure requirements for public companies which, if adopted as proposed, could result in substantial compliance costs, and in September of 2023, California passed climate-related disclosure mandates that are broader than the SEC’s proposed rules.
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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. Our future growth prospects depend on our ability to identify optimal strategies for our business.
Removed
To the fullest extent permitted by applicable law, this exclusive-forum provision applies to state and federal law claims, including claims under the federal securities laws, including the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
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Such availability and capacity issues may result in increased basis differentials, which became more divergent in 2024 in part due to constrained pipeline capacity and oversupply in certain geographic areas. At times, such basis differentials have been significant enough to result in negative spot market pricing in certain areas, such as the Waha Hub in the Permian Basin during 2024.
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Any of these availability or capacity issues could negatively affect our operations, revenues and expenses. This could result in wells being shut in or awaiting a pipeline connection or capacity, which would adversely affect our results of operations and cash flows.
Added
Oil and natural gas production operations, especially those using hydraulic fracturing, are substantially dependent upon the availability of water and the ability to dispose of produced water gathered from drilling and production activities.
Added
Limitations or restrictions on the Company’s ability to secure sufficient amounts of water (including limitations resulting from natural causes such as drought) could have a material impact on our operations.
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Severe drought conditions can result in local water districts taking steps to restrict the use of water in their jurisdiction for drilling and hydraulic fracturing in order to protect the local water supply.
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If the Company is unable to obtain water to use in its operations from local sources, it may need to be obtained from new sources and transported to drilling sites, resulting in increased costs, which could adversely affect our financial condition, results of operations and cash flows.
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Our inability to locate sufficient amounts of water, or dispose of or recycle water used in our exploration, development and production activities, could adversely impact our operations.
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In addition, the Company must dispose of the fluids produced from oil and gas production operations, including produced water, which it does directly or through the use of third-party vendors.
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The legal requirements related to the disposal of produced water into a non-producing geologic formation by means of underground injection wells are subject to change based on concerns of the public or governmental authorities regarding such disposal activities.
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More stringent regulations or legal directives, as well as potential litigation or other developments, related to such disposal activities could materially impact our ability to dispose of produced water, which could adversely affect the Company’s business, financial condition and results of operations.
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We have experienced cyber incidents in the past and, although none have been material, we may experience cybersecurity incidents and security breaches in the future.
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In addition, cybersecurity risk is exacerbated with the advancement of technologies like artificial intelligence, which malicious third parties are using to create new, more sophisticated and more frequent attacks.
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We use financial derivative instruments to manage commodity price risk.
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Alternatively, we may be accused of “greenhushing” for the failure to communicate certain climate-related initiatives, commitments and goals, whether in our filings with the SEC or in other disclosures. Technology Risks. Technological improvements or innovations that support the transition to a lower-carbon, more energy efficient economic system may have a significant impact on us.
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Additionally, the acquisition of a company that is not in compliance with applicable data protection laws may result in a violation of these laws. 29 Table of Contents Tax law changes could have an adverse effect on our financial position, results of operations and cash flows.
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We primarily compete with integrated, independent and other energy companies for the sale and transportation of our oil and natural gas production to pipelines, marketing companies and end users.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe IRP was developed in consultation with common cybersecurity frameworks, including NIST Cybersecurity Framework, to provide efficiency, familiarity and consistency in design. As part of our IRP, we have established a Cybersecurity Incident Management Team (“CIMT”), comprised of senior level executives and 32 Table of Contents management, that defines overall policy and strategy when faced with a cybersecurity incident.
Biggest changeAs part of our IRP, we have established a Cybersecurity Incident Management Team (“CIMT”), comprised of senior level executives and management, that defines overall policy and strategy when faced with a cybersecurity incident. The CIMT provides cross-functional and geographical visibility, as well as executive leadership oversight, to address and mitigate associated risks.
ITEM 1C. CYBERSECURITY Governance Our Board of Directors, with assistance from our Audit Committee, oversees our risk management program, which includes technology and cybersecurity risks. Our management team, including our Vice President - Information Technology (“VP - IT”), provides periodic updates on risk management to the Audit Committee and to the Board of Directors.
ITEM 1C. CYBERSECURITY Governance Our Board of Directors, with assistance from our Audit Committee and Cybersecurity Steering Committee, oversees our risk management program, which includes technology and cybersecurity risks. Our management team, including our Vice President - Information Technology (“VP - IT”), provides periodic updates on risk management to the Audit Committee and to the Board of Directors.
Our CIRT members also hold over 29 certifications in risk and information security from organizations such as International Information System Security Certification Consortium (ISC2), The SANS Institute, Global Information Assurance Certification (GIAC), CompTIA and Cisco, including Certified Information Systems Security Professional (CISSP), GIAC, Certified Incident Handler Certification (GCIH), GIAC Critical Controls Certification (GCCC), GIAC Continuous Monitoring Certification (GMON), SANS Security Awareness Professional (SSAP), Certified Information Security Manager (CISM), Certified in Risk and Information Systems Control (CRISC), and Certified Information Systems Auditor (CISA).
Our CIRT members also hold over 31 certifications in risk and information security from organizations such as International Information System Security Certification Consortium (ISC2), The SANS Institute, Global Information Assurance Certification (GIAC), CompTIA and Cisco, including Certified Information Systems Security Professional (CISSP), GIAC, Certified Incident Handler Certification (GCIH), GIAC Critical Controls Certification (GCCC), GIAC Continuous Monitoring Certification (GMON), SANS Security Awareness Professional (SSAP), Certified Information Security Manager (CISM), Certified in Risk and Information Systems Control (CRISC), and Certified Information Systems Auditor (CISA).
Our CIRT is supported by dedicated Information Technology (“IT”) and Operational Technology (“OT”) security resources, and further supported by various external parties, including but not limited to, cybersecurity service providers, assessors, consultants, auditors, and other third parties engaged on an as-needed basis. The CIRT determines whether a cybersecurity incident warrants escalation to the CIMT.
Our CIRT is supported by dedicated Information Technology (“IT”) and Operational Technology (“OT”) security resources, and further supported by various external parties, including but not limited to, cybersecurity service providers, assessors, consultants, auditors, and other third parties engaged on an as-needed basis. 32 Table of Contents The CIRT determines whether a cybersecurity incident warrants escalation to the CIMT.
However, the nature of potential cybersecurity risks and threats are uncertain, and any future incidents, outages or breaches could have a material adverse effect on our reputation, business strategy, results of operations or financial condition. 33 Table of Contents
However, the nature of potential cybersecurity risks and threats are uncertain, and any future incidents, outages or breaches could have a material adverse effect on our reputation, business strategy, results of operations or financial condition.
Our CIRT members possess critical skill sets, experience, and competencies related to the management of cybersecurity risks and matters. In particular, our VP - IT has over 28 years of experience in the field of information systems and cybersecurity and leads an experienced security and networking team with 67 years of additional combined experience in developing and executing cybersecurity strategies.
In particular, our VP - IT has over 29 years of experience in the field of information systems and cybersecurity and leads an experienced security and networking team with 71 years of additional combined experience in developing and executing cybersecurity strategies.
The CIMT provides cross-functional and geographical visibility, as well as executive leadership oversight, to address and mitigate associated risks. Among our CIMT, our VP - IT holds the highest level of executive responsibility for assessing and managing cybersecurity threats, incidents, and risks, as well as developing and implementing all cybersecurity risk management, strategy, and governance recommendations.
Among our CIMT, our VP - IT holds the highest level of executive responsibility for assessing and managing cybersecurity threats, incidents, and risks, as well as developing and implementing all cybersecurity risk management, strategy, and governance recommendations. Our VP - IT leads all components of our information technology functions and reports to our Executive Vice President and Chief Financial Officer.
Our VP - IT leads all components of our information technology functions and reports to our Executive Vice President and Chief Financial Officer. The CIMT is supported by a dedicated Cybersecurity Incident Response Team (“CIRT”), comprised generally of security and networking team members with responsibilities to monitor and assess events, cybersecurity incidents, and technical activities throughout our organization.
The CIMT is supported by a dedicated Cybersecurity Incident Response Team (“CIRT”), comprised generally of security and networking team members with responsibilities to monitor and assess events, cybersecurity incidents, and technical activities throughout our organization. Our CIRT members possess critical skill sets, experience, and competencies related to the management of cybersecurity risks and matters.
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The IRP was developed in consultation with common cybersecurity frameworks, including the Center for Internet Security (CIS) Critical Security Controls Framework, to provide efficiency, familiarity and consistency in design.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeEPA 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.
Biggest changeDepartment of Justice that the EPA has referred this NOVOC for civil enforcement proceedings. 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 Company facilities in New Mexico.
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.
We believe that any fines, penalties, or corrective actions that may result from these matters will not have a material effect on our financial position, results of operations, or cash flows. 33 Table of Contents
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.
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.
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.
Environmental Protection Agency (“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.
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We have exchanged information with the EPA and continue to engage in discussions aimed at resolving the allegations. At this time, we are unable to predict with certainty the financial impact of these NOVOCs or the timing of any resolution.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAlexander 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.
Biggest changeMs. 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. 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.
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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table shows certain information as of February 25, 2025 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.
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.
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. Sirgo was appointed Senior Vice President of Operations in October 2022. Mr.
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.
Roemer was appointed Vice President and Chief Accounting Officer in July 2019. Mr. 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.
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.
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. He joined Key in 1994 as Vice President of Land and was appointed Senior Vice President of Business Development and Land in 1999.
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.
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 Senior Vice President and General Counsel in August 2023. 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.
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.
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.
Jorden 67 Chairman, Chief Executive Officer and President Shannon E. Young III 54 Executive Vice President and Chief Financial Officer Stephen P. Bell 70 Executive Vice President, Business Development Andrea M. Alexander 43 Senior Vice President and Chief Human Resources Officer Michael D. DeShazer 39 Senior Vice President, Business Units Blake A. Sirgo 42 Senior Vice President, Operations Kevin W.
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.
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., Mr. Young served in similar positions with Sheridan Production Company, LLC, Cobalt International Energy, Inc. and Talos Energy LLC. Mr.
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.
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. Bell was appointed Executive Vice President of Business Development following the Merger in October 2021. At Cimarex, 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. Mr. DeShazer was appointed Vice President of Business Units following the Merger with Cimarex in October 2021. 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. 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. 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.
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.
Removed
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.
Added
Smith 39 Senior Vice President and Chief Technology Officer Adam M. Vela 51 Senior Vice President, General Counsel Todd M. Roemer 54 Vice President and Chief Accounting Officer Mr. Jorden was appointed Chief Executive Officer and President of Coterra following the Merger in October 2021 and Chairman of the Board of Coterra in November 2022. Mr.
Removed
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.
Added
Mr. DeShazer was appointed Senior Vice President of Business Units in May 2024. Mr. DeShazer previously served as Vice President of Business Units following the Merger in October 2021. Mr.
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Prior to the Merger with Cimarex in October 2021, Mr.
Added
Sirgo previously served as Vice President of Operations at Coterra from October 1, 2021 to October 1, 2022. Prior to the Merger in October 2021, Mr.
Removed
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
Sirgo worked at Occidental Petroleum. 34 Table of Contents Mr. Smith was appointed Senior Vice President and Chief Technology Officer in May 2024. Mr. Smith previously served as Vice President and Chief Technology Officer following the Merger in October 2021. Mr.
Removed
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.
Added
Roemer is a Certified Public Accountant in the state of Texas. 35 Table of Contents PART II
Removed
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.
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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

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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.
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 2024 (2) 352 $ 24.15 352 $ 1,175 November 2024 443 $ 24.80 443 $ 1,164 December 2024 1,617 $ 24.12 1,617 $ 1,125 Total 2,412 2,412 _______________________________________________________________________________ (1) All purchases during the covered periods were made under the 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 2023.
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 2024.
The following table sets forth information regarding repurchases of our common stock during the quarter ended December 31, 2023.
The following table sets forth information regarding repurchases of our common stock during the quarter ended December 31, 2024.
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.
ISSUER PURCHASES OF EQUITY SECURITIES In February 2023, our Board of Directors 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.
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.
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 14, 2025, there were 884 registered holders of our common stock.
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.
During the quarter ended December 31, 2024, we purchased 2 million shares of common stock for $58 million, bringing our total repurchases in 2024 to 17 million shares of common stock at a total cost of $464 million. As of December 31, 2024, we were authorized to repurchase up to approximately an additional $1.1 billion of our outstanding common stock.
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.
The share repurchase program does not have an expiration date. Purchases were made under terms intended to qualify for exemption under Rules 10b-18 and 10b5-1. (2) In October 2024, we purchased 351,791 shares of common stock delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards.

Item 7. Management's Discussion & Analysis

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

82 edited+43 added−20 removed44 unchanged
Biggest changeReaders are cautioned that such forward-looking statements are based on current expectations and assumptions that involve a number of risks and uncertainties, including those described under “Forward-Looking Statements” in Part I of this report and “Risk Factors” in Part I, Item 1A of this report, which could cause actual results to differ materially from those included in this report. 36 Table of Contents OVERVIEW Financial and Operating Overview Financial and operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 are as follows: • Net income decreased $2.4 billion from $4.1 billion, or $5.09 per share, in 2022 to $1.6 billion, or $2.14 per share, in 2023. • Net cash provided by operating activities decreased $1.8 billion, from $5.5 billion, in 2022 to $3.7 billion in 2023. • Equivalent production increased 12.2 MMBoe from 231.3 MMBoe, or 633.8 MBoe per day, in 2022 to 243.5 MMBoe, or 667.1 MBoe per day, in 2023. ◦ Natural gas production increased 28.4 Bcf from 1,024.3 Bcf, or 2,806 MMcf per day, in 2022 to 1,052.7 Bcf, or 2,884 MMcf per day, in 2023. ◦ Oil production increased 3.2 MMBbl from 31.9 MMBbl, or 87 MBbl per day, in 2022 to 35.1 MMBbl, or 96 MBbl per day, in 2023. ◦ NGL volumes increased 4.2 MMBbl from 28.7 MMBbl, or 79 MBbl per day, in 2022 to 32.9 MMBbl, or 90 MBbl per day, in 2023. • Average realized prices: ◦ Natural gas was $2.44 per Mcf in 2023, 50 percent lower than the $4.91 per Mcf price realized in 2022. ◦ Oil was $76.07 per Bbl in 2023, 10 percent lower than the $84.33 per Bbl price realized in 2022. ◦ NGL price for 2023 was $19.56 per Bbl, 42 percent lower than the $33.58 per Bbl price realized in 2022. • Total capital expenditures for drilling, completion and other fixed assets were $2.1 billion in 2023 compared to $1.7 billion in 2022.
Biggest changeReaders are cautioned that such forward-looking statements are based on current expectations and assumptions that involve a number of risks and uncertainties, including those described under “Forward-Looking Statements” in Part I of this report and “Risk Factors” in Part I, Item 1A of this report, which could cause actual results to differ materially from those included in this report. 36 Table of Contents OVERVIEW Financial and Operating Overview Financial and operating results for the year ended December 31, 2024 compared to the year ended December 31, 2023 reflect the following: • Net income decreased $504 million from $1.6 billion, or $2.14 per share, in 2023 to $1.1 billion, or $1.51 per share, in 2024. • Net cash provided by operating activities decreased $863 million, from $3.7 billion, in 2023 to $2.8 billion in 2024. • Equivalent production increased 4.1 MMBoe from 243.5 MMBoe, or 667.1 MBoe per day, in 2023 to 247.6 MMBoe, or 676.5 MBoe per day, in 2024. ◦ Oil production increased 4.7 MMBbl from 35.1 MMBbl, or 96 MBbl per day, in 2023 to 39.8 MMBbl, or 109 MBbl per day, in 2024. ◦ Natural gas production decreased 28.0 Bcf from 1,052.7 Bcf, or 2,884 MMcf per day, in 2023 to 1,024.7 Bcf, or 2,800 MMcf per day, in 2024. ◦ NGL volumes increased 4.1 MMBbl from 32.9 MMBbl, or 90 MBbl per day, in 2023 to 37.0 MMBbl, or 101 MBbl per day, in 2024. • Average realized prices (including impact of derivatives): ◦ Oil was $74.22 per Bbl in 2024, 2 percent lower than the $76.07 per Bbl price realized in 2023. ◦ Natural gas was $1.75 per Mcf in 2024, 28 percent lower than the $2.44 per Mcf price realized in 2023. ◦ NGL price for 2024 was $19.95 per Bbl, 2 percent higher than the $19.56 per Bbl price realized in 2023. • Total capital expenditures for drilling, completion and other fixed assets were $1.8 billion in 2024 compared to $2.1 billion in 2023.
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.
However, in the event that commodity prices significantly decline or costs significantly increase from current levels, our management would evaluate the recoverability of the carrying value of our oil and gas properties.
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.
Our working capital is substantially influenced by the variables discussed above and fluctuates based on the timing and amount of borrowings and repayments under our revolving credit agreement, borrowings and repayments of debt, the timing of cash collections and payments on our trade accounts receivable and payable, respectively, payment of dividends, repurchases of our securities and changes in the fair value of our commodity derivative activity.
Such quotes and models have been derived using an income approach that considers various inputs including current market and contractual prices for the underlying instruments, quoted forward commodity prices, basis differentials, volatility factors and interest rates for a similar length of time as the derivative contract term, as applicable.
Such quotes have been derived using an income approach that considers various inputs including current market and contractual prices for the underlying instruments, quoted forward commodity prices, basis differentials, volatility factors and interest rates for a similar length of time as the derivative contract term, as applicable.
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 Policies and 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.
Borrowings under our revolving credit agreement bear interest at a rate per annum equal to, at our option, (i) either a term secured overnight financing rate (“SOFR”) plus a 0.10 percent credit spread adjustment for all tenors or (ii) a base rate, in each case plus an interest rate margin which ranges from 0 to 75 basis points for base rate loans and 100 to 175 basis points for term SOFR loans based on our credit rating.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at our option, (i) either a term secured overnight financing rate (“SOFR”) plus a 0.10 percent credit spread adjustment for all tenors or (ii) a base rate, plus, in each case, an interest rate margin which ranges from 0 to 75 basis points for base rate loans and 100 to 175 basis points for term SOFR loans, based on our credit rating.
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.
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. 49 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.
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.
In 2024, 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.
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.
Commodity pricing is 48 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.
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.
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 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.
For information on the comparison of operating, investing, and financing cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Financial Condition (Cash Flows) included in the Coterra Energy Inc. Annual Report on Form 10-K for the year ended December 31, 2022, which information in incorporated by reference herein.
For information on the comparison of operating, investing, and financing cash flows for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Financial Condition (Cash Flows) included in the Coterra Energy Inc. Annual Report on Form 10-K for the year ended December 31, 2023, which information in incorporated by reference herein.
The economic life of each producing property depends upon the estimated proved reserves for that property, which in turn depend upon the assumed realized sales price for future production. Therefore, fluctuations in oil and gas prices will impact the level of proved developed and proved reserves used in the calculation.
The economic life of each producing property depends upon the estimated proved reserves for that property, which in turn depends upon the assumed realized sales price for future production. Therefore, fluctuations in oil and natural gas prices will impact the level of proved developed and proved reserves used in the calculation.
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.
While 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.
Our revolving credit agreement includes certain customary covenants, including the maintenance of a maximum leverage ratio of no more than 3.0 to 1.0 as of the last day of any fiscal quarter.
The Credit Agreement includes certain customary covenants, including the maintenance of a maximum leverage ratio of no more than 3.0 to 1.0 as of the last day of any fiscal quarter.
The change in fair value of derivatives not designated as hedges is recorded as a component of operating revenues in gain (loss) on derivative instruments in the Consolidated Statement of Operations. Our derivative contracts are measured based on quotes from our counterparties or internal models.
The change in fair value of derivatives not designated as hedges is recorded as a component of operating revenues in gain (loss) on derivative instruments in the Consolidated Statement of Operations. Our derivative contracts are measured based on quotes from our counterparties.
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.
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 $0.33 per Boe and an increase of $0.37 per Boe, respectively, on our DD&A rate.
Annual Report on Form 10-K for the year ended December 31, 2022, which information is incorporated by reference herein.
Annual Report on Form 10-K for the year ended December 31, 2023, which information is incorporated by reference herein.
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.
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 Credit Agreement will instead require us to maintain a ratio of total net debt to total capitalization of no more than 65 percent (with all calculations based on definitions contained in the Credit Agreement).
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.
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, 2024 and 2023, we had a working capital surplus of $2.2 billion and $355 million, respectively.
These estimates are derived from or verified using relevant NYMEX futures contracts or are compared to multiple quotes obtained from counterparties for reasonableness. The determination of fair value also incorporates a credit adjustment for non-performance risk.
These estimates are derived from or verified using relevant NYMEX futures contracts or are compared to multiple quotes obtained from counterparties or third-party valuation services, or a combination of the foregoing, for reasonableness. The determination of fair value also incorporates a credit adjustment for non-performance risk.
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.
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.
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.
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 decreased by $297 million in 2024 compared to 2023.
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.
The effective tax rate decreased due to differences in the non-recurring discrete items recorded during 2024 compared to 2023. 47 Table of Contents 2023 and 2022 Compared For information on the comparison of the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Coterra Energy Inc.
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.
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. Amortization of unproved properties remained steady in 2024 compared to 2023.
Increases or decreases in our revenues, profitability and future production growth are highly dependent on the commodity prices we receive, which we expect to fluctuate due to supply and demand factors, and the availability of transportation, seasonality and geopolitical, economic and other factors.
Increases or decreases in our revenues, profitability and future production growth are highly dependent on the commodity prices we receive, which, as discussed above, fluctuate due to a variety of factors (including supply and demand, the availability of transportation, seasonality and geopolitical, economic and other factors).
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.
The following table presents the components of “Gain (loss) on derivative instruments” for the years indicated: Year Ended December 31, (In millions) 2024 2023 Cash received on settlement of derivative instruments Gas contracts $ 96 $ 280 Oil contracts 2 4 Non-cash gain (loss) on derivative instruments Gas contracts (80) (72) Oil contracts (21) 18 $ (3) $ 230 Operating Costs and Expenses Costs associated with producing oil and natural gas are substantial.
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.
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. 41 Table of Contents During the year ended December 31, 2024, we repurchased and retired 17 million shares of our common stock for $464 million.
The revolving credit agreement is scheduled to mature in March 2028 and can be extended for additional one-year periods on up to two occasions upon the agreement of lenders holding at least 50 percent of the commitments under the credit agreement and us.
The maturity date of the Credit Agreement can be extended for additional one-year periods on up to two occasions upon the agreement of lenders holding at least 50 percent of the commitments under the Credit Agreement and us.
Recently Issued Accounting Pronouncements Refer to Note 1 of the Notes to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of new accounting pronouncements that affect us.
Recently Issued and Adopted Accounting Pronouncements Refer to Note 1 of the Notes to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of newly issued and adopted accounting pronouncements.
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.
As of December 31, 2024, 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. We have no other off-balance sheet debt or other similar unrecorded obligations.
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.
We repurchased and retired 17 million shares of common stock for $418 million during the year ended December 31, 2023. During the years ended December 31, 2024 and 2023, 351,791 and 332,634 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.
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.
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 under our revolving credit agreement), sales of assets, and private or public financing based on our monitoring of capital markets and our balance sheet.
Changes in these laws or regulations may result in delays or restrictions in permitting and the development of projects, may result in increased costs and may impair our ability to move forward with our construction, completions, drilling, water management, waste handling, storage, transport and remediation activities, any of which could have an adverse effect on our financial results.
Changes in these laws or regulations may result in delays or restrictions in permitting and the development of projects, may result in increased costs and may impair our ability to move forward with our construction, completions, drilling, water management, waste handling, storage, transport and remediation activities, or may result in renewable energy alternatives that become more competitive with traditional oil and natural gas-derived products (including government subsidies and incentives for electric vehicles), any of which could have an adverse effect on our financial results.
In addition, changes in estimates of reserve quantities, estimates of operating and future development costs, reclassifications of properties from unproved to proved and impairments of oil and gas properties will also impact depletion expense.
In addition, changes in estimates of reserve quantities, estimates of operating and future development costs, reclassifications of properties from unproved to proved and impairments of oil and gas properties will also impact depletion expense. Our depletion expense increased $198 million primarily due to a higher depletion rate and an increase in production.
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.
In the event that commodity prices significantly decline, we would assess whether the decline constitutes a triggering event that would require us to 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.
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.
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 our Credit Agreement and Term Loan, as well as information regarding our restrictive covenants, including our leverage ratio.
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.
Workover expense increased primarily due to an increase in workover activity in the Permian Basin. Gathering, Processing and Transportation Gathering, processing and transportation costs principally consist of expenditures to prepare and transport production downstream from the wellhead, including gathering, fuel, and compression, along with processing costs, which are incurred to extract NGLs from the raw natural gas stream.
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.
For more on the impact of credit ratings on our interest rates and fees for unused commitments under our revolving credit agreement, see Note 4 of the Notes to the Consolidated Financial Statements, “Long-Term Debt and Credit Agreements.” We believe that, with operating cash flow, cash on hand and availability under our revolving credit agreement and term loan, we have the ability to finance our spending plans over the next twelve months and, based on current expectations, for the longer term.
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.
Rate per share Base Variable Total Total Dividends Paid (In millions) 2024 $ 0.84 $ — $ 0.84 $ 630 2023 $ 0.80 $ 0.37 $ 1.17 $ 895 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.
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.
While there are no “rating triggers” in any of our debt agreements that 38 Table of Contents would accelerate the scheduled maturities should our debt rating fall below a certain level, a change in our debt rating could adversely impact our interest rate on any borrowings under our revolving credit agreement and our ability to economically access debt markets and could trigger the requirement to post credit support under various agreements, which could reduce the borrowing capacity under our revolving credit agreement.
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”).
Year Ended December 31, Variance Per Boe (In millions, except per Boe) 2024 2023 Amount Percent 2024 2023 Operating Expenses Direct operations $ 658 $ 562 $ 96 17 % $ 2.66 $ 2.31 Gathering, processing and transportation 976 975 1 — % 3.94 4.00 Taxes other than income 271 283 (12) (4) % 1.09 1.16 Exploration 25 20 5 25 % 0.10 0.08 Depreciation, depletion and amortization 1,840 1,641 199 12 % 7.43 6.74 General and administrative 302 291 11 4 % 1.22 1.20 $ 4,072 $ 3,772 $ 300 8 % 44 Table of Contents 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”).
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.
Natural Gas Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2024 2023 Amount Percent Volume (Bcf) 1,024.7 1,052.7 (28.0) (3) % $ (61) Price ($/Mcf) $ 1.65 $ 2.18 $ (0.53) (24) % (538) Total $ (599) Natural gas revenues decreased $599 million primarily due to significantly lower natural gas prices and lower production.
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.
Oil Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2024 2023 Amount Percent Volume (MMBbl) 39.8 35.1 4.7 13% $ 357 Price ($/Bbl) $ 74.18 $ 75.97 $ (1.79) (2)% (71) Total $ 286 Oil revenues increased $286 million primarily due to higher production in the Permian Basin partially offset by lower oil prices.
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.
Dividends. In February 2023 and 2024, our Board of Directors approved an increase in the base quarterly dividend from $0.15 per share to $0.20 per share beginning in the first quarter of 2023 and from $0.20 per share to $0.21 per share beginning in the first quarter of 2024, respectively.
Other joint owners in the properties operated by us could incur a portion of these costs. We expect that our sources of capital will be adequate to fund these obligations. Refer to the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report for further details.
We expect that our sources of capital will be adequate to fund these obligations. Refer to the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report for further details. We enter into arrangements that can give rise to material off-balance sheet obligations.
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.
These increases were partially offset by lower legal expenses in 2024 compared to 2023. 46 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.
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.
This decrease was primarily due to a decrease in natural gas revenue, caused by lower natural gas prices and production, an increase in operating costs, a decrease in cash received on derivative settlements and a net reduction in working capital during 2024. These decreases were partially offset by higher oil and NGL revenues primarily driven by higher production.
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.
As of December 31, 2024, 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. Other joint owners in the properties operated by us could incur a portion of these costs.
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.
Cash Flows Our cash flows from operating activities, investing activities and financing activities are as follows: Year Ended December 31, (In millions) 2024 2023 2022 Cash flows provided by operating activities $ 2,795 $ 3,658 $ 5,456 Cash flows used in investing activities (1,762) (2,059) (1,674) Cash flows provided by (used in) financing activities 279 (1,317) (4,145) 39 Table of Contents 2024 and 2023 Compared Operating Activities.
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.
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.
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.
Commodity prices are affected by many factors outside of our control, 37 including changes in market supply and demand, which can be impacted by pipeline capacity constraints, inventory storage levels, basis differentials, weather conditions, and geopolitical, economic and other factors. Oil prices were relatively steady in 2024 compared to 2023 as demand has continued for oil supply.
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.
The following table presents taxes other than income for the years indicated: Year Ended December 31, (In millions) 2024 2023 Variance Taxes Other than Income Production $ 217 $ 205 $ 12 Drilling impact fees 17 23 (6) Ad valorem 35 53 (18) Other 2 2 — $ 271 $ 283 $ (12) Production taxes as a percentage of revenue (Permian and Anadarko Basins) 5.6 % 5.6 % Taxes other than income decreased $12 million primarily due to lower ad valorem taxes, which was primarily driven by a combination of lower-than-expected property valuations in 2024 resulting in a lower tax obligation and a reduction of prior period accruals in 2024 due to a change in estimated taxes due for the full-year 2023.
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.
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.
Interest 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.
Interest Expense The table below reflects our interest expense, net for the periods indicated: Year Ended December 31, (In millions) 2024 2023 Variance Interest Expense Interest expense $ 101 $ 82 $ 19 Debt premium and discount amortization, net (21) (21) — Debt issuance cost amortization 9 3 6 Other 17 9 8 $ 106 $ 73 $ 33 Interest expense increased $19 million due to higher debt balances primarily related to the issuance of $500 million of 5.60% senior notes in March 2024 partially offset by the repayment of $575 million related to the 3.65% weighted-average private placement senior notes in September 2024.
Our 2024 capital program is expected to be approximately $1.75 billion to $1.95 billion. We expect to turn-in-line 132 to 158 total net wells in 2024 across our three core operating areas.
Our 2025 full year capital program is expected to be in the range of approximately $2.1 billion to $2.4 billion. We expect to turn-in-line 175 to 205 total net wells in 2025 across our three operating regions.
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.
Refer to Note 4 of the Notes to the Consolidated Financial Statements, “Long-Term Debt and Credit Agreements,” for further details (including our restrictive covenants and required financial ratio).
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.
These decreases were partially offset by an increase in our production taxes, which increased primarily due to higher oil and NGL production compared to 2023. 45 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) 2024 2023 Variance 2024 2023 DD&A Expense Depletion $ 1,707 $ 1,509 $ 198 $ 6.89 $ 6.20 Depreciation 73 74 (1) 0.30 0.30 Amortization of unproved properties 49 48 1 0.20 0.20 Accretion of ARO 11 10 1 0.04 0.04 $ 1,840 $ 1,641 $ 199 $ 7.43 $ 6.74 Depletion of our producing properties is computed on a field basis using the unit-of-production method under the successful efforts method of accounting.
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.
Income Tax Expense Year Ended December 31, (In millions) 2024 2023 Variance Income Tax Expense Current tax expense $ 369 $ 429 $ (60) Deferred tax (benefit) expense (145) 74 (219) $ 224 $ 503 $ (279) Combined federal and state effective income tax rate 16.7 % 23.6 % Income tax expense decreased $279 million primarily due to lower pre-tax income and a lower effective tax rate.
Gathering, processing and transportation increased $20 million primarily due to higher production levels, partially offset by lower costs in the Permian Basin and Anadarko Basin due to lower gathering and transportation rates which were driven by lower commodity prices during 2023 compared to the same period in 2022.
Gathering, processing and transportation increased $1 million primarily due to higher gathering and transportation costs in the Permian Basin related to higher production and higher transportation rates, partially offset by lower gathering charges in the Marcellus Shale related to lower production.
Global conflict and supply chain disruptions drove high oil prices in 2022, which then moderated throughout 2023. OPEC+ reacted with supply reductions, helping to stabilize oil price levels during 2023.
Following global conflict and supply chain disruptions that drove high oil prices in 2022, OPEC+ reacted with supply reductions which helped to stabilize oil price levels in 2023. U.S. oil production was relatively flat from 2023 to 2024, which, when combined with OPEC+’s reductions, contributed to relatively steadier oil prices in 2023 and 2024.
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.
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 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.
The table below reflects our G&A expense for the periods identified: Year Ended December 31, (In millions) 2024 2023 Variance G&A Expense General and administrative expense $ 240 $ 220 $ 20 Stock-based compensation expense 62 59 3 Merger-related expense — 12 (12) $ 302 $ 291 $ 11 G&A expense, excluding stock-based compensation, increased $20 million primarily due to higher employee-related costs in 2024 compared to 2023 and the recognition of certain long-term commitments for community outreach and charitable contributions in 2024.
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.
Although we have no obligation to do so, we may also from time-to-time refinance or retire our outstanding debt through privately negotiated transactions, open market repurchases, redemptions, exchanges, tender offers or otherwise. Our primary sources of liquidity are cash on hand, net cash provided by operating activities and available borrowing capacity under our revolving credit agreement.
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.
The following table presents major components of our capital and exploration expenditures: Year Ended December 31, (In millions) 2024 2023 2022 Capital expenditures Drilling and completion $ 1,645 $ 1,979 $ 1,617 Pipeline and gathering 103 91 56 Other 14 34 54 Capital expenditures for drilling, completion and other fixed asset additions 1,762 2,104 1,727 Capital expenditures for leasehold and property acquisitions 19 10 10 Exploration expenditures (1) 25 20 29 Total $ 1,806 $ 2,134 $ 1,766 _______________________________________________________________________________ (1) Exploration expenditures include $5 million of exploratory dry hole costs in 2024.
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.
Capitalization Information about our capitalization is as follows: December 31, (Dollars in millions) 2024 2023 Total debt (1) $ 3,535 $ 2,161 Stockholders' equity 13,122 13,039 Total capitalization $ 16,657 $ 15,200 Debt to total capitalization 21% 14% Cash and cash equivalents $ 2,038 $ 956 _______________________________________________________________________________ (1) Included $575 million of current portion of long-term debt as of December 31, 2023 that was repaid at maturity in September 2024.
Oil and natural gas prices 37 have fallen significantly since their peak in 2022, and we expect commodity price volatility to continue driven by further geopolitical disruptions, including conflicts in the Middle East and actions of OPEC+, and swift near and medium term fluctuations in supply and demand.
We expect commodity price volatility to continue, including as a result of conflicts in the Middle East, actions of OPEC+ (including the ability of OPEC+ to successfully coordinate production quotas), and potentially swift near- and medium-term fluctuations in supply and demand.
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.
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.
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.
In February 2025, our Board of Directors approved an additional increase in our base quarterly dividend from $0.21 per share to $0.22 per share beginning in the first quarter of 2025. The following table presents our dividends paid on our common stock for the year ended December 31, 2024 and 2023.
Gain (Loss) on Sale of Assets The increase in gain (loss) on sale of assets is due to the sale of certain non-core oil and gas properties and other equipment.
Merger related expense decreased $12 million as the accrual for employee-related severance and termination benefits associated with the Cimarex merger transition employees was completed in 2023. Gain (Loss) on Sale of Assets The decrease in gain (loss) on sale of assets is due to the sale of certain non-core oil and gas properties and other equipment in 2023.
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.
Direct operations consisted of lease operating expense and workover expense as follows: Year Ended December 31, Per Boe (In millions, except per Boe) 2024 2023 Variance 2024 2023 Direct Operations Lease operating expense $ 554 $ 472 $ 82 $ 2.24 $ 1.94 Workover expense 104 90 14 0.42 0.37 $ 658 $ 562 $ 96 $ 2.66 $ 2.31 Lease operating expense increased primarily due to higher production levels and higher operating costs driven by our production mix related to higher production in fields with higher operating costs, primarily in the Permian Basin, and higher equipment and field service costs.
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.
RESULTS OF OPERATIONS 2024 and 2023 Compared Operating Revenues Year Ended December 31, Variance (In millions) 2024 2023 Amount Percent Oil $ 2,953 $ 2,667 $ 286 11 % Natural gas 1,693 2,292 (599) (26) % NGL 738 644 94 15 % Gain (loss) on derivative instruments (3) 230 (233) (101) % Other 77 81 (4) (5) % $ 5,458 $ 5,914 $ (456) (8) % Production Revenues Our production revenues are derived from sales of our oil, natural gas and NGL production.
In addition, fluctuations in cash flow may result in an increase or decrease in our capital expenditures. Net cash provided by operating activities in 2023 decreased by $1.8 billion compared to 2022.
Operating cash flow fluctuations are substantially driven by changes in commodity prices, production volumes and operating expenses. As discussed above, commodity prices have historically been volatile. Fluctuations in cash flow may result in an increase or decrease in our planned capital expenditures. Net cash provided by operating activities decreased by $863 million in 2024 compared to 2023.
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.
There were no exploratory dry hole costs in 2023 and 2022. In 2024, our capital program focused on the Permian Basin, Anadarko Basin, and Marcellus Shale, where we drilled 313 gross wells (159.4 net) and completed 290 gross wells (143.8 net), of which 92 gross wells (62.8 net) were drilled but uncompleted in prior years.
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.
This decrease was primarily due to $335 million of lower cash paid for capital expenditures, partially offset by $31 million lower proceeds from asset sales. Financing Activities. Cash flows provided by financing activities increased by $1.6 billion in 2024 compared to 2023.
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.
This decrease was partially offset by higher production in the Permian and Anadarko Basins. 43 Table of Contents NGL Revenues Year Ended December 31, Variance Increase (Decrease) (In millions) 2024 2023 Amount Percent Volume (MMBbl) 37.0 32.9 4.1 12 % $ 80 Price ($/Bbl) $ 19.95 $ 19.56 $ 0.39 2 % 14 Total $ 94 NGL revenues increased $94 million primarily due to higher NGL volumes in the Permian Basin and Anadarko Basin and slightly higher NGL prices.
The following table reflects our operating costs and expenses for the years indicated and a discussion of the operating costs and expenses follows.
Our costs for services began to stabilize at the end of 2023 despite on-going demand and the latent effects of inflation and supply chain disruptions and continued to remain stable throughout 2024. The following table reflects our operating costs and expenses for the years indicated and a discussion of the operating costs and expenses follows.
Our debt is currently rated as investment grade by the three leading rating agencies, and there are no “rating triggers” in any of our debt agreements that would accelerate the scheduled maturities should our debt rating fall below a certain level.
As of the date hereof, our debt is currently rated as investment grade by the three leading rating agencies.
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).
Approximately 70 percent of capital expenditures will be invested in the Permian Basin, 11 percent in the Marcellus Shale, 10 percent in the Anadarko Basin and remaining percent for gathering systems infrastructure, saltwater disposal and other spend.
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.
We will continue to assess the commodity price environment and may increase or decrease our capital expenditures accordingly. 42 Table of Contents Contractual Obligations We have various contractual obligations in the normal course of our operations.
Stock-based compensation 45 Table of Contents expense decreased $27 million primarily due to higher stock-based compensation costs during 2022 related to the accelerated vesting of employee performance shares and vesting of certain other awards, and a gain related to our deferred compensation plan associated with the liquidation of the Coterra stock in the plan in 2023.
Stock-based compensation expense increased $3 million primarily due to the impact of the liquidation of our common stock from our deferred compensation plan that resulted in a $7 million gain that decreased stock-based compensation expense in the first half of 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
Biggest changeAs of December 31, 2024, we had the following outstanding financial commodity derivatives: 50 Table of Contents 2025 2026 Fair Value Asset (Liability) (In millions) Oil First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter WTI oil collars $ 7 Volume (MBbl) 5,040 5,096 4,232 4,232 900 910 920 920 Weighted average floor ($/Bbl) $ 61.79 $ 61.79 $ 61.63 $ 61.63 $ — $ — $ — $ — Weighted average ceiling ($/Bbl) $ 79.36 $ 79.36 $ 78.64 $ 78.64 $ — $ — $ — $ — WTI oil swaps $ (4) Volume (MBbl) 1,710 1,729 1,748 1,748 900 910 920 920 Weighted average price ($/Bbl) $ 69.18 $ 69.18 $ 69.18 $ 69.18 $ 66.14 $ 66.14 $ 66.14 $ 66.14 WTI Midland oil basis swaps $ 2 Volume (MBbl) 6,300 6,370 5,520 5,520 1,800 1,820 1,840 1,840 Weighted average differential ($/Bbl) $ 1.07 $ 1.07 $ 1.02 $ 1.02 $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 5 2025 2026 Fair Value Asset (Liability) (In millions) Natural Gas First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter NYMEX gas collars $ (13) Volume (MMBtu) 45,000,000 45,500,000 46,000,000 46,000,000 27,000,000 Weighted average floor ($/MMBtu) $ 2.85 $ 2.85 $ 2.85 $ 2.85 $ 2.75 Weighted average ceiling ($/MMBtu) $ 4.51 $ 4.07 $ 4.07 $ 5.55 $ 7.66 Transco Leidy gas basis swaps $ — Volume (MMBtu) 18,000,000 18,200,000 18,400,000 18,400,000 — Weighted average differential ($/MMBtu) $ (0.70) $ (0.70) $ (0.70) $ (0.70) $ — Transco Zone 6 Non-NY gas basis swaps $ (1) Volume (MMBtu) 9,000,000 9,100,000 9,200,000 9,200,000 $ — Weighted average differential ($/MMBtu) $ (0.29) $ (0.29) $ (0.29) $ (0.29) $ — $ (14) In January 2025, the Company entered into the following financial commodity derivatives: 2025 2026 Natural Gas First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter NYMEX gas collars Volume (MMBtu) 5,900,000 9,100,000 9,200,000 9,200,000 22,500,000 22,750,000 23,000,000 23,000,000 Weighted average floor ($/MMBtu) $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 3.00 Weighted average ceiling ($/MMBtu) $ 4.46 $ 4.46 $ 4.46 $ 4.46 $ 5.79 $ 5.79 $ 5.79 $ 5.79 51 Table of Contents A significant portion of our production for 2025 and beyond is currently unhedged and directly exposed to the volatility in oil and natural gas prices, whether favorable or unfavorable.
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.
The fair value of our senior notes is based on quoted market prices. 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.
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.
Our counterparties are primarily commercial banks and financial service institutions that our 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.
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.
Interest Rate Risk At December 31, 2024, we had total debt of $3.5 billion (with a principal amount of $3.5 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.
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
The carrying amount and estimated fair value of debt is as follows: December 31, 2024 December 31, 2023 (In millions) Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Total debt $ 3,535 $ 3,395 $ 2,161 $ 2,015 Current maturities — — (575) (565) Long-term debt, excluding current maturities $ 3,535 $ 3,395 $ 1,586 $ 1,450 52 Table of Contents
Derivative Instruments and Risk Management Activities Our risk management strategy is designed to reduce the risk of commodity price volatility for our production in the oil and natural gas markets through the use of financial commodity derivatives. A committee that consists of members of senior management oversees our risk management activities.
To mitigate the volatility in commodity prices, we may enter into derivative instruments to hedge a portion of our production. Derivative Instruments and Risk Management Activities Our commodity price risk management strategy is designed to reduce the risk of commodity price volatility for our production in the oil and natural gas markets through the use of financial commodity derivatives.
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.
Except as otherwise indicated, the following quantitative and qualitative information is provided for financial instruments to which we were party to as of December 31, 2024 and from which we may incur future gains or losses from changes in commodity prices or interest rates.
All of our financial derivatives are used for risk management purposes and are not held for trading purposes. Under the collar agreements, if the index price rises above the ceiling price, we pay the counterparty. If the index price falls below the floor price, the counterparty pays us.
Periodically, we enter into financial commodity derivatives, including collar, swap, and basis swap agreements, to protect against exposure to commodity price declines. All of our financial derivatives are used for risk management purposes and are not held for trading purposes. Under the collar agreements, if the index price rises above the ceiling price, we pay the counterparty.
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.
During 2024, oil collars with floor prices ranging from $60.00 to $70.00 per Bbl and ceiling prices ranging from $80.55 to $93.65 per Bbl covered 13.5 MMBbls, or 34 percent, of oil production at a weighted-average price of $76.30 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.
Gas basis swaps covered 1.5 Bcf, or less than one percent of natural gas production at a weighted-average differential of $(0.46) per MMBtu. We are exposed to market risk on financial commodity derivative instruments to the extent of changes in market prices of the related commodity.
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.
During 2024, natural gas collars with floor prices ranging from $2.50 to $3.00 per MMBtu and ceiling prices ranging from $2.85 to $5.67 per MMBtu covered 156.5 Bcf, or 15 percent of natural gas production at a weighted-average price of $2.84 per MMBtu.
Realized prices are mainly driven by the worldwide price for oil and spot market prices for North American natural gas and NGL production. These prices have been volatile and unpredictable. To mitigate the volatility in commodity prices, we may enter into derivative instruments to hedge a portion of our production.
Commodity Price Risk Our most significant market risk exposure is pricing applicable to our oil, natural gas and NGL production. Realized prices are mainly driven by the worldwide price for oil and spot market prices for North American natural gas and NGL production. As noted above, these prices have been volatile and unpredictable.
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.
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.
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.
Further, if any of our counterparties defaulted, this protection might be limited as we might not receive the full benefit of our financial commodity 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.
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.
Our revolving credit and term loan agreements provide for variable interest rate borrowings; however, we did not have any borrowings outstanding as of December 31, 2024 and, therefore, no related exposure to interest rate risk.
Our financial commodity derivatives generally cover a portion of our production and, while protecting us in the event of price declines, limit the benefit to us in the event of price increases. Further, if any of our counterparties defaulted, this protection might be limited as we might not receive the full benefit of our financial commodity derivatives.
A committee that consists of members of senior management oversees our risk management activities. Our financial commodity derivatives generally cover a portion of our production and, while protecting us in the event of price declines, limit the benefit to us in the event of price increases.
Added
If the index price falls below the floor price, the counterparty pays us. Under 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.
Added
Oil basis swaps covered 15.5 MMBbls, or 39 percent, of oil production at a weighted-average differential of $1.14 per Bbl.

Other CTRA 10-K year-over-year comparisons