UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




FORM			10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, ~~2019~~2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission file number 1-10447




CABOT OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)



Delaware						04-3072771
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

Three Memorial City Plaza

840 Gessner Road,Suite 1400,Houston,Texas77024

(Address of principal executive offices including ZIP code)

(~~281~~) (281) 589-4600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	COG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer		☒			Accelerated filer		☐

~~Large accelerated filer~~		☒	~~Accelerated filer~~	☐

Non-accelerated filer	☐		Smaller reporting company			☐

					Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~23, 2019,~~28, 2020, there were ~~407,924,673~~398,579,881 shares of Common Stock, Par Value $0.10 Per Share, outstanding.

Table of Contents

CABOT OIL & GAS CORPORATION

INDEX TO FINANCIAL STATEMENTS



		Page
Part I. Financial Information

Item 1.	Financial Statements

Condensed Consolidated Balance Sheet (Unaudited) at September 30, ~~2019~~2020 and December 31, ~~2018~~2019		3

Condensed Consolidated Statement of Operations (Unaudited) for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019		4



Condensed Consolidated Statement of Cash Flows (Unaudited) for the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019		5

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019		6

Notes to the Condensed Consolidated Financial Statements		7



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1916

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2725

Item 4.	Controls and Procedures	2826

Part II. Other Information

Item 1.	Legal Proceedings	2826

Item 1A.	Risk Factors	2927

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2927

Item 6.	Exhibits	3028

Signatures		3129

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.Financial Statements

CABOT OIL & GAS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)


(In thousands, except share amounts)	September 30, 2019			December 31, 2018			(In thousands, except share amounts)	September 30, 2020		December 31, 2019
ASSETS							ASSETS
Current assets							Current assets
Cash and cash equivalents	$	82,316		$	2,287		Cash and cash equivalents	$	170	$	200,227
Restricted cash							Restricted cash	11,578		13,556
Accounts receivable, net	159,239			362,403			Accounts receivable, net	136,738		209,023
Income taxes receivable	133,028			109,251			Income taxes receivable	156,815		129,795
Inventories	18,195			11,076			Inventories	14,929		13,932
Derivative instruments	25,700			57,665

Other current assets	3,201			1,863			Other current assets	2,322		1,715
Total current assets	421,679			544,545			Total current assets	322,552		568,248
Properties and equipment, net (Successful efforts method)	3,787,581			3,463,606			Properties and equipment, net (Successful efforts method)	4,034,680		3,855,706
Equity method investments	169,086			163,181

Other assets	64,319			27,497			Other assets	62,073		63,291
								$	4,419,305	$	4,487,245
	$	4,442,665		$	4,198,829
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities							Current liabilities
Accounts payable	$	172,732		$	241,939		Accounts payable	$	151,662	$	189,811
Current portion of long-term debt	87,000			—			Current portion of long-term debt	188,000		87,000
Accrued liabilities	27,780			25,227			Accrued liabilities	28,396		31,290
Interest payable	7,273			20,098			Interest payable	6,242		19,933

Derivative instruments							Derivative instruments	11,628		0

Total current liabilities	294,785			287,264			Total current liabilities	385,928		328,034
Long-term debt, net	1,132,790			1,226,104			Long-term debt, net	973,712		1,133,025

Deferred income taxes	647,473			458,597			Deferred income taxes	748,489		702,104
Asset retirement obligations	56,968			50,622			Asset retirement obligations	83,670		71,598

Postretirement benefits	29,427			27,912			Postretirement benefits	33,749		32,713
Other liabilities	67,646			60,171			Other liabilities	75,269		68,284
Total liabilities	2,229,089			2,110,670			Total liabilities	2,300,817		2,335,758

Commitments and contingencies							Commitments and contingencies

Stockholders' equity							Stockholders' equity
Common stock:							Common stock:
Authorized — 960,000,000 shares of $0.10 par value in 2019 and 2018, respectively
Issued — 476,881,612 shares and 476,094,551 shares in 2019 and 2018, respectively	47,688			47,610
Authorized — 960,000,000 shares of $0.10 par value in 2020 and 2019, respectively							Authorized — 960,000,000 shares of $0.10 par value in 2020 and 2019, respectively
Issued — 477,537,199 shares and 476,881,991 shares in 2020 and 2019, respectively							Issued — 477,537,199 shares and 476,881,991 shares in 2020 and 2019, respectively	47,754		47,688
Additional paid-in capital	1,775,579			1,763,142			Additional paid-in capital	1,800,002		1,782,427
Retained earnings	2,037,066			1,607,658			Retained earnings	2,093,004		2,143,213
Accumulated other comprehensive income	4,027			4,437			Accumulated other comprehensive income	929		1,360
Less treasury stock, at cost:							Less treasury stock, at cost:
68,957,318 shares and 53,409,705 shares in 2019 and 2018, respectively	(1,650,784		)	(1,334,688		)
78,957,318 shares and 78,957,318 shares in 2020 and 2019, respectively							78,957,318 shares and 78,957,318 shares in 2020 and 2019, respectively	(1,823,201)		(1,823,201)
Total stockholders' equity	2,213,576			2,088,159			Total stockholders' equity	2,118,488		2,151,487
	$	4,442,665		$	4,198,829			$	4,419,305	$	4,487,245

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

Table of Contents

CABOT OIL & GAS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	2019			2018			2019			2018			(In thousands, except per share amounts)	2020		2019		2020		2019
OPERATING REVENUES													OPERATING REVENUES
Natural gas	$	418,133		$	440,835		$	1,521,789		$	1,217,603		Natural gas	$	333,256	$	418,133	$	991,882	$	1,521,789
Crude oil and condensate	—			—			—			48,722
Gain (loss) on derivative instruments	11,060			(3,537		)	82,966			(1,628		)
Brokered natural gas	—			105,849			—			203,375
(Loss) gain on derivative instruments													(Loss) gain on derivative instruments	(42,253)		11,060		17,783		82,966
Other	(82		)	2,026			154			3,775			Other	38		(82)		181		154
	429,111			545,173			1,604,909			1,471,847				291,041		429,111		1,009,846		1,604,909
OPERATING EXPENSES													OPERATING EXPENSES
Direct operations	19,181			17,030			55,608			52,757			Direct operations	20,197		19,181		54,864		55,608
Transportation and gathering	145,681			129,534			424,703			355,848			Transportation and gathering	146,982		145,681		425,563		424,703
Brokered natural gas	—			93,405			—			178,437
Taxes other than income	4,607			2,852			14,094			15,434			Taxes other than income	3,615		4,607		10,705		14,094
Exploration	4,481			10,049			15,029			68,166			Exploration	3,900		4,481		10,669		15,029
Depreciation, depletion and amortization	110,889			121,172			299,294			288,210			Depreciation, depletion and amortization	99,649		110,889		294,406		299,294

General and administrative	18,391			20,724			72,370			66,013			General and administrative	24,262		18,391		80,857		72,370
	303,230			394,766			881,098			1,024,865				298,605		303,230		877,064		881,098
Earnings (loss) on equity method investments	3,860			(11		)	11,194			(1,009		)	Earnings (loss) on equity method investments	0		3,860		(59)		11,194
Gain (loss) on sale of assets	36			25,655			(1,464		)	(14,850		)	Gain (loss) on sale of assets	31		36		(139)		(1,464)
INCOME FROM OPERATIONS	129,777			176,051			733,541			431,123
(LOSS) INCOME FROM OPERATIONS													(LOSS) INCOME FROM OPERATIONS	(7,533)		129,777		132,584		733,541
Interest expense, net	13,554			14,191			40,302			57,577			Interest expense, net	14,389		13,554		43,143		40,302

Other expense	143			115			430			347			Other expense	57		143		171		430
Income before income taxes	116,080			161,745			692,809			373,199
Income tax expense	25,722			39,408			158,679			91,201
NET INCOME	$	90,358		$	122,337		$	534,130		$	281,998
(Loss) income before income taxes													(Loss) income before income taxes	(21,979)		116,080		89,270		692,809
Income tax (benefit) expense													Income tax (benefit) expense	(7,018)		25,722		19,947		158,679
NET (LOSS) INCOME													NET (LOSS) INCOME	$	(14,961)	$	90,358	$	69,323	$	534,130

Earnings per share
(Loss) earnings per share													(Loss) earnings per share
Basic	$	0.22		$	0.28		$	1.27		$	0.63		Basic	$	(0.04)	$	0.22	$	0.17	$	1.27
Diluted	$	0.22		$	0.28		$	1.27		$	0.62		Diluted	$	(0.04)	$	0.22	$	0.17	$	1.27

Weighted-average common shares outstanding													Weighted-average common shares outstanding
Basic	412,456			440,772			419,199			450,445			Basic	398,580		412,456		398,500		419,199
Diluted	414,462			443,110			421,101			452,313			Diluted	398,580		414,462		400,628		421,101

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

Table of Contents

CABOT OIL & GAS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)


	Nine Months Ended September 30,							Nine Months Ended September 30,
(In thousands)	2019			2018			(In thousands)	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES							CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	534,130		$	281,998		Net income	$	69,323	$	534,130
Adjustments to reconcile net income to cash provided by operating activities:							Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization	299,294			288,210			Depreciation, depletion and amortization	294,406		299,294

Deferred income tax expense	188,997			131,799			Deferred income tax expense	46,513		188,997
Loss on sale of assets	1,464			14,850			Loss on sale of assets	139		1,464
Exploratory dry hole cost	16			56,425			Exploratory dry hole cost	2,011		16
(Gain) loss on derivative instruments	(82,966		)	1,628
Net cash received (paid) in settlement of derivative instruments	114,931			(20,354		)
(Earnings) loss on equity method investments	(11,194		)	1,009
Gain on derivative instruments							Gain on derivative instruments	(17,783)		(82,966)
Net cash received in settlement of derivative instruments							Net cash received in settlement of derivative instruments	33,529		114,931
Loss (earnings) on equity method investments							Loss (earnings) on equity method investments	59		(11,194)
Distribution of earnings from equity method investments	12,610			—			Distribution of earnings from equity method investments	0		12,610
Amortization of debt issuance costs	3,219			3,521			Amortization of debt issuance costs	2,234		3,219
Stock-based compensation and other	22,720			16,472			Stock-based compensation and other	34,204		22,720
Changes in assets and liabilities:							Changes in assets and liabilities:
Accounts receivable, net	203,164			(7,345		)	Accounts receivable, net	72,285		203,164
Income taxes	(16,746		)	(14,447		)	Income taxes	(27,020)		(16,746)
Inventories	(7,119		)	(5,326		)	Inventories	(1,433)		(7,119)
Other current assets	(1,338		)	104			Other current assets	(637)		(1,338)
Accounts payable and accrued liabilities	(43,413		)	32,192			Accounts payable and accrued liabilities	(25,118)		(43,413)
Interest payable	(12,825		)	(18,474		)	Interest payable	(13,691)		(12,825)
Other assets and liabilities	(22,133		)	26,590			Other assets and liabilities	1,372		(22,133)

Net cash provided by operating activities	1,182,811			788,852			Net cash provided by operating activities	470,393		1,182,811

CASH FLOWS FROM INVESTING ACTIVITIES							CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(620,696		)	(647,503		)	Capital expenditures	(478,422)		(620,696)

Proceeds from sale of assets	2,401			675,525			Proceeds from sale of assets	335		2,401
Investment in equity method investments	(8,977		)	(72,866		)	Investment in equity method investments	(35)		(8,977)
Distribution of investment from equity method investments	1,656			—			Distribution of investment from equity method investments	0		1,656
Proceeds from sale of equity method investments							Proceeds from sale of equity method investments	(9,424)		0
Net cash used in investing activities	(625,616		)	(44,844		)	Net cash used in investing activities	(487,546)		(625,616)

CASH FLOWS FROM FINANCING ACTIVITIES							CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from debt	95,000			—			Borrowings from debt	123,000		95,000
Repayments of debt	(102,000		)	(237,000		)	Repayments of debt	(182,000)		(102,000)
Treasury stock repurchases	(347,446		)	(581,725		)	Treasury stock repurchases	0		(347,446)

Dividends paid	(104,722		)	(81,185		)	Dividends paid	(119,532)		(104,722)

Tax withholdings on vesting of stock awards	(10,587		)	(8,068		)	Tax withholdings on vesting of stock awards	(6,350)		(10,587)
Capitalized debt issuance costs	(7,411		)	—			Capitalized debt issuance costs	0		(7,411)

Net cash used in financing activities	(477,166		)	(907,978		)	Net cash used in financing activities	(184,882)		(477,166)
Net increase (decrease) in cash and cash equivalents	80,029			(163,970		)
Cash and cash equivalents, beginning of period	2,287			480,047
Cash and cash equivalents, end of period	$	82,316		$	316,077

Net (decrease) increase in cash, cash equivalents and restricted cash							Net (decrease) increase in cash, cash equivalents and restricted cash	(202,035)		80,029
Cash, cash equivalents and restricted cash, beginning of period							Cash, cash equivalents and restricted cash, beginning of period	213,783		2,287
Cash, cash equivalents and restricted cash, end of period							Cash, cash equivalents and restricted cash, end of period	$	11,748	$	82,316

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

Table of Contents

CABOT OIL & GAS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)


(In thousands, except per share amounts)																				(In thousands, except per share amounts)	Common Shares	Common Stock Par		Treasury Shares	Treasury Stock		Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
Balance at December 31, 2019																				Balance at December 31, 2019	476,882	$	47,688	78,957	$	(1,823,201)	$	1,782,427	$	1,360	$	2,143,213	$	2,151,487
Net income																				Net income	—	—		—	—		—		—		53,910		53,910

Stock amortization and vesting																				Stock amortization and vesting	651	65		—	—		2,886		—		—		2,951

(In thousands, except per share amounts)	Common Shares	Common Stock Par		Treasury Shares	Treasury Stock			Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance at December 31, 2018	476,095	$	47,610	53,410	$	(1,334,688	)	$	1,763,142		$	4,437		$	1,607,658		$	2,088,159

Cash dividends at $0.10 per share																				Cash dividends at $0.10 per share	—	—		—	—		—		—		(39,817)		(39,817)
Other comprehensive loss																				Other comprehensive loss	—	—		—	—		—		(136)		—		(136)

Balance at March 31, 2020																				Balance at March 31, 2020	477,533	$	47,753	78,957	$	(1,823,201)	$	1,785,313	$	1,224	$	2,157,306	$	2,168,395
Net income	—	—		—	—			—			—			262,763			262,763			Net income	—	—		—	—		—		—		30,374		30,374

Stock amortization and vesting	682	68		—	—			(281		)	—			—			(213		)	Stock amortization and vesting	2	1		—	—		7,218		—		—		7,219
Purchase of treasury stock	—	—		—	(28		)	—			—			—			(28		)
Cash dividends at $0.07 per share	—	—		—	—			—			—			(29,605		)	(29,605		)

Cash dividends at $0.10 per share																				Cash dividends at $0.10 per share	—	—		—	—		—		—		(39,858)		(39,858)
Other comprehensive loss	—	—		—	—			—			(137		)	—			(137		)	Other comprehensive loss	—	—		—	—		—		(151)		—		(151)
Balance at March 31, 2019	476,777	$	47,678	53,410	$	(1,334,716	)	$	1,762,861		$	4,300		$	1,840,816		$	2,320,939
Net income	—	—		—	—			—			—			181,009			181,009

Balance at June 30, 2020																				Balance at June 30, 2020	477,535	$	47,754	78,957	$	(1,823,201)	$	1,792,531	$	1,073	$	2,147,822	$	2,165,979
Net loss																				Net loss	—	—		—	—		—		—		(14,961)		(14,961)

Stock amortization and vesting	102	10		—	—			6,334			—			—			6,344			Stock amortization and vesting	2	—		—	—		7,471		—		—		7,471
Purchase of treasury stock	—	—		5,081	(125,260		)	—			—			—			(125,260		)
Cash dividends at $0.09 per share	—	—		—	—			—			—			(38,092		)	(38,092		)

Cash dividends at $0.10 per share																				Cash dividends at $0.10 per share	—	—		—	—		—		—		(39,857)		(39,857)
Other comprehensive loss	—	—		—	—			—			(136		)	—			(136		)	Other comprehensive loss	—	—		—	—		—		(144)		—		(144)
Balance at June 30, 2019	476,879	$	47,688	58,491	$	(1,459,976	)	$	1,769,195		$	4,164		$	1,983,733		$	2,344,804
Net income	—	—		—	—			—			—			90,358			90,358
Stock amortization and vesting	3	—		—	—			6,384			—			—			6,384
Purchase of treasury stock	—	—		10,466	(190,808		)	—			—			—			(190,808		)
Cash dividends at $0.09 per share	—	—		—	—			—			—			(37,025		)	(37,025		)
Other comprehensive loss	—	—		—	—			—			(137		)	—			(137		)
Balance at September 30, 2019	476,882	$	47,688	68,957	$	(1,650,784	)	$	1,775,579		$	4,027		$	2,037,066		$	2,213,576

Balance at September 30, 2020																				Balance at September 30, 2020	477,537	$	47,754	78,957	$	(1,823,201)	$	1,800,002	$	929	$	2,093,004	$	2,118,488


(In thousands, except per share amounts)																			(In thousands, except per share amounts)	Common Shares	Common Stock Par		Treasury Shares	Treasury Stock		Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
Balance at December 31, 2018																			Balance at December 31, 2018	476,095	$	47,610	53,410	$	(1,334,688)	$	1,763,142	$	4,437	$	1,607,658	$	2,088,159
Net income																			Net income	—	—		—	—		—		—		262,763		262,763

(In thousands, except per share amounts)	Common Shares	Common Stock Par		Treasury Shares	Treasury Stock			Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance at December 31, 2017	475,547	$	47,555	14,936	$	(430,576	)	$	1,742,419	$	2,077		$	1,162,430		$	2,523,905
Stock amortization and vesting																			Stock amortization and vesting	682	68		—	—		(281)		—		—		(213)

Purchase of treasury stock																			Purchase of treasury stock	—	—		—	(28)		—		—		—		(28)
Cash dividends at $0.07 per share																			Cash dividends at $0.07 per share	—	—		—	—		—		—		(29,605)		(29,605)
Other comprehensive loss																			Other comprehensive loss	—	—		—	—		—		(137)		—		(137)

Balance at March 31, 2019																			Balance at March 31, 2019	476,777	$	47,678	53,410	$	(1,334,716)	$	1,762,861	$	4,300	$	1,840,816	$	2,320,939
Net income	—	—		—	—			—		—			117,231			117,231			Net income	—	—		—	—		—		—		181,009		181,009

Stock amortization and vesting																			Stock amortization and vesting	102	10		—	—		6,334		—		—		6,344

Purchase of treasury stock																			Purchase of treasury stock	—	—		5,081	(125,260)		—		—		—		(125,260)
Cash dividends at $0.09 per share																			Cash dividends at $0.09 per share	—	—		—	—		—		—		(38,092)		(38,092)
Other comprehensive loss																			Other comprehensive loss	—	—		—	—		—		(136)		—		(136)

Balance at June 30, 2019																			Balance at June 30, 2019	476,879	$	47,688	58,491	$	(1,459,976)	$	1,769,195	$	4,164	$	1,983,733	$	2,344,804
Net income																			Net income	—	—		—	—		—		—		90,358		90,358

Stock amortization and vesting	534	53		—	—			249		—			—			302			Stock amortization and vesting	3	—		—	—		6,384		—		—		6,384
Purchase of treasury stock	—	—		8,328	(207,135		)	—		—			—			(207,135		)	Purchase of treasury stock	—	—		10,466	(190,808)		—		—		—		(190,808)
Cash dividends at $0.06 per share	—	—		—	—			—		—			(27,647		)	(27,647		)
Other comprehensive income	—	—		—	—			—		306			—			306
Cumulative impact from accounting change	—	—		—	—			—		—			(446		)	(446		)
Balance at March 31, 2018	476,081	$	47,608	23,264	$	(637,711	)	$	1,742,668	$	2,383		$	1,251,568		$	2,406,516
Net income	—	—		—	—			—		—			42,431			42,431
Exercise of stock appreciation rights	3	1		—	—			—		—			—			1
Stock amortization and vesting	2	—		—	—			6,769		—			—			6,769
Purchase of treasury stock	—	—		11,646	(274,337		)	—		—			—			(274,337		)
Cash dividends at $0.06 per share	—	—		—	—			—		—			(27,071		)	(27,071		)
Cash dividends at $0.09 per share																			Cash dividends at $0.09 per share	—	—		—	—		—		—		(37,025)		(37,025)
Other comprehensive loss	—	—		—	—			—		(135		)	—			(135		)	Other comprehensive loss	—	—		—	—		—		(137)		—		(137)
Balance at June 30, 2018	476,086	$	47,609	34,910	$	(912,048	)	$	1,749,437	$	2,248		$	1,266,928		$	2,154,174
Net income	—	—		—	—			—		—			122,337			122,337
Exercise of stock appreciation rights	2	—		—	—			—		—			—			—
Stock amortization and vesting	1	—		—	—			6,900		—			—			6,900
Purchase of treasury stock	—	—		7,170	(162,660		)	—		—			—			(162,660		)
Cash dividends at $0.06 per share	—	—		—	—			—		—			(26,468		)	(26,468		)
Other comprehensive loss	—	—		—	—			—		(136		)	—			(136		)
Balance at September 30, 2018	476,089	$	47,609	42,080	$	(1,074,708	)	$	1,756,337	$	2,112		$	1,362,797		$	2,094,147
Balance at September 30, 2019																			Balance at September 30, 2019	476,882	$	47,688	68,957	$	(1,650,784)	$	1,775,579	$	4,027	$	2,037,066	$	2,213,576

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

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CABOT OIL & GAS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Financial Statement Presentation

During interim periods, Cabot Oil & Gas Corporation (the Company) follows the same accounting policies disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (Form 10-K) filed with the Securities and Exchange Commission (SEC), except for any new accounting pronouncements adopted during the period as discussed below. The interim financial statements should be read in conjunction with the notes to the consolidated financial statements and information presented in the Form 10-K. In management’s opinion, the accompanying interim condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary for a fair statement. The results for any interim period are not necessarily indicative of the expected results for the entire year.

Certain reclassifications have been made to prior year statements to conform with the current year presentation. These reclassifications have no impact on previously reported stockholders' equity, net income (loss) or cash flows.

Cash and Cash Equivalents

From time to time, the Company may be in the position of a book overdraft in which outstanding checks exceed cash and cash equivalents. The Company classified book overdrafts in accounts payable in the Condensed Consolidated Balance Sheet, and classified the change in accounts payable associated with book overdrafts as an operating activity in the Condensed Consolidated Statement of Cash Flows. As of September 30, 2020, the book overdraft included within accounts payable was $7.8 million. There was 0 book overdraft within accounts payable as of December 31, 2019.

Recently Adopted Accounting Pronouncements

~~Leases.~~Financial Instruments: Credit Losses. In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. ~~2016-02, Leases (Topic 842)~~2016-13, Financial Instruments: Credit Losses, which replaces the incurred loss impairment methodology used for certain financial instruments with a methodology that reflects current expected credit losses (CECL). ASU No. 2016-13, along with subsequently issued codification improvements, was effective for the Company on January 1, 2020, and was applied using a modified retrospective approach. The ~~new lease guidance supersedes Topic 840.~~Company's historical credit losses have not been material, and future expected credit losses under the CECL model are not expected to be material. The ~~core principle~~adoption of ASU No. 2016-13 did not have a material effect on the ~~guidance is that entities should recognize the assets and liabilities that arise from leases. This ASU does~~Company's financial position, results of operations or cash flows; however, it modified certain disclosure requirements which were not apply to leases to explore for or use minerals, oil, natural gas and similar nonregenerative resources, including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained.material.

Fair Value Measurements. In ~~July~~August 2018, the FASB issued ASU No. ~~2018-11, Leases~~2018-13, Fair Value Measurement (Topic ~~842)~~820): Targeted Improvements, which provides entities with an optional transition method that permits an entity to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustmentDisclosure Framework - Changes to the ~~opening balance of retained earnings in~~Disclosure Requirements for Fair Value Measurement, which modifies the ~~period of adoption. The guidance is effective~~disclosure requirements by adding, removing and modifying certain required disclosures for ~~interim~~fair value measurements for assets and ~~annual periods beginning after December 15, 2018. This ASU was adopted using a modified retrospective approach.~~liabilities disclosed within the fair value hierarchy. The Company adopted ~~this guidance~~ASU No. 2018-13 effective January 1, ~~2019 by applying the optional transition approach as of the beginning of the period of adoption. Comparative periods, including the disclosures related to those periods, were not restated.~~

~~On the adoption date, the Company elected the following practical expedients which are provided in the lease standard:~~

an election not to apply the recognition requirements in the lease standard to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise);

~~a package of practical expedients to not reassess whether a contract is or contains a lease, lease classification and initial direct costs;~~

~~a practical expedient to use hindsight when determining the lease term;~~

~~a practical expedient that permits combining lease and non-lease components in a contract and accounting for the combination as a lease (elected by asset class); and~~

~~a practical expedient to not reassess certain land easements in existence prior to January 1, 2019.~~

On January 1, 2019, the Company recognized a right of use asset for operating leases and an operating lease liability of $44.6 million, representing the present value of the future minimum lease payment obligations associated with office leases, drilling rig commitments, surface use agreements and other leases.2020. The adoption of ~~this guidance~~ASU No. 2018-13 did not have ~~an impact~~any effect on the ~~Company’s~~Company's financial position, results of operations or cash ~~flows.~~flows; however, it modified certain disclosure requirements which were not material.

~~Refer to Note 8 for more details regarding leases.~~

2. Properties and Equipment, Net

Properties and equipment, net are comprised of the following:

(In thousands) September 30,
2019 December 31,
2018
Proved oil and gas properties $ 6,339,234
$ 5,717,145
Unproved oil and gas properties 164,100
194,435
Land, buildings and other equipment 101,901
94,797
6,605,235
6,006,377
Accumulated depreciation, depletion and amortization (2,817,654 ) (2,542,771 )
$ 3,787,581
$ 3,463,606


(In thousands)	September 30, 2020		December 31, 2019
Proved oil and gas properties	$	6,983,502	$	6,508,443
Unproved oil and gas properties	58,329		133,475
Land, buildings and other equipment	108,325		104,700
	7,150,156		6,746,618
Accumulated depreciation, depletion and amortization	(3,115,476)		(2,890,912)
	$	4,034,680	$	3,855,706

At September 30, ~~2019,~~2020, the Company did not have any projects that had exploratory well costs capitalized for a period of greater than one year after drilling.

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3. Equity Method Investments

~~The Company holds a 25 percent equity interest in Constitution Pipeline Company, LLC (Constitution) and a 20 percent equity interest in Meade Pipeline Co LLC (Meade).~~ Activity related to ~~these~~the Company's equity method investments is as follows:

Constitution Meade Total
Nine Months Ended September 30,
(In thousands) 2019 2018 2019 2018 2019 2018
Balance at beginning of period $ —
$ 732
$ 163,181
$ 85,345
$ 163,181
$ 86,077
Contributions 500
250
8,477
72,616
8,977
72,866
Distributions —
—
(14,266 ) —
(14,266 ) —
Earnings (loss) on equity method investments (500 ) (982 ) 11,694
(27 ) 11,194
(1,009 )
Balance at end of period $ —
$ —
$ 169,086
$ 157,934
$ 169,086
$ 157,934


	Constitution				Meade				Total
	Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019		2020		2019
Balance at beginning of period	$	0	$	0	$	0	$	163,181	$	0	$	163,181
Contributions	35		500		0		8,477		35		8,977
Distributions	0		0		0		(14,266)		0		(14,266)
(Loss) earnings on equity method investments	(35)		(500)		(24)		11,694		(59)		11,194
Sale of investment	0		0		24		0		24		0
Balance at end of period	$	0	$	0	$	0	$	169,086	$	0	$	169,086

For further information regarding the Company’s equity method investments, refer to Note 4 of the Notes to the Consolidated Financial Statements in the Form 10-K.

Constitution Pipeline Company, LLC

~~In August 2019,~~On February 10, 2020, the ~~Federal Energy Regulatory Committee issued an order concluding the New York Department of Environmental Conservation has waived~~Company sold its ~~authority under Section 401~~25 percent equity interest in Constitution Pipeline Company, LLC (Constitution) to Williams Partners Operating LLC (Williams). The Company did not receive any proceeds and paid Williams $9.4 million that was previously accrued. Upon closing of the Clean Water Act "to issue or deny a water quality certification" for the proposed Constitution pipeline. This decision removed one of the major remaining regulatory hurdles for the continuation of the project. In light of this decision, in September 2019,sale, the Company the other members of Constitution and Williams Partners L.P., the project sponsor, resumed discussions regarding the construction of the project, including evaluating the commercial feasibility of the project, the remaining legal and regulatory hurdles, projected costs and capital requirements and other aspects of the development and construction of the pipeline. The Company remains committedhas no further obligations with respect to ~~continuing the process of evaluating the next steps for advancing~~ the project.

~~Meade Pipeline Co LLC~~

In September 2019, the Company entered into an agreement to sell its 20 percent ownership interest in Meade to a subsidiary of NextEra Energy Partners, LP for $256.0 million. This transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions and adjustments.

4. Debt and Credit Agreements

The Company’s debt and credit agreements consisted of the following:


(In thousands)	September 30, 2020		December 31, 2019
6.51% weighted-average senior notes(1)	$	37,000	$	124,000
5.58% weighted-average senior notes(2)	175,000		175,000
3.65% weighted-average senior notes(3)	925,000		925,000
Revolving credit facility	28,000		0
Unamortized debt issuance costs	(3,288)		(3,975)
	$	1,161,712	$	1,220,025

(In thousands) September 30,
2019 December 31,
2018
6.51% weighted-average senior notes⁽¹⁾
$ 124,000
$ 124,000
5.58% weighted-average senior notes 175,000
175,000
3.65% weighted-average senior notes 925,000
925,000
Revolving credit facility —
7,000
Unamortized debt issuance costs (4,210 ) (4,896 )
$ 1,219,790
$ 1,226,104

~~_______________________________________________________________________________~~(1)Includes $87.0 million of current portion of long-term debt at December 31, 2019, which the Company repaid in July 2020.


~~(1)~~	~~Includes $87.0 million of current portion of long-term debt at September 30, 2019 due in July 2020.~~

(2)Includes $88.0 million of current portion of long-term debt at September 30, 2020 due in January 2021.

(3)Includes $100.0 million of current portion of long-term debt at September 30, 2020 due in September 2021.

At September 30, ~~2019,~~2020, the Company was in compliance with all restrictive financial covenants for both its revolving credit facility and senior notes.

Revolving Credit Agreement

~~On April 22, 2019,~~The borrowing base under the ~~Company entered into a second amended and restated credit agreement (revolving credit facility). The~~terms of the Company's revolving credit facility is ~~unsecured and the borrowing base is~~ redetermined annually ~~on April 1.~~in April. In addition, either the Company or the banks may request an interim redetermination twice a year or in connection with certain acquisitions or divestitures of oil and gas properties. ~~The Company’s~~Effective April 23, 2020, the borrowing base and available commitments ~~under the revolving credit facility~~ were reaffirmed at $3.2 billion and $1.5 billion, respectively. The maximum revolving credit available to the Company is the lesser of the available commitments or the difference of the borrowing base less outstanding senior notes. The Company's revolving credit facility matures in April 2024 and can be extended by one year upon the agreement of the Company and lenders holding at least 50 percent of the commitments under the revolving credit facility.

Interest rates under the revolving credit facility are based on LIBOR or ABR indications, plus a margin which ranges from 150 to 225 basis points for LIBOR loans and from 50 to 125 basis points for ABR loans when not in an Investment Grade Period (as defined in the amended and restated credit agreement) and from 112.5 to 175 basis points for LIBOR loans and from 12.5 to 75 basis points for ABR loans during an Investment Grade Period. The revolving credit facility also provides for a commitment fee on the unused available balance and is calculated at annual rates ranging from 30 to 42.5 basis points when not in an Investment Grade Period and from 12.5 to 27.5 basis points during an Investment Grade Period. The Company is currently not in an Investment Grade Period.

~~The revolving credit facility contains various customary covenants, which include the following (with all calculations based on definitions contained in the amended and restated credit agreement):~~

~~Maintenance of a minimum asset coverage ratio of 1.75 to 1.0;~~

~~Maintenance of a minimum annual coverage ratio of consolidated cash flow to interest expense for the trailing four quarters of 2.8 to 1.0; and~~

~~Maintenance of a minimum current ratio of 1.0 to 1.0.~~

At September 30, ~~2019,~~2020, the Company had 0 $28.0 million of borrowings outstanding under its revolving credit facility at a weighted-average interest rate of 4.0 percent and had unused commitments of $1.5 billion. The Company's weighted-average effective interest rate for the revolving credit facility was approximately 4.0 percent for both the three and nine months ended September 30, 2020.

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The Company incurred $7.4 million of debt issuance costs in connection with the amended and restated credit agreement, which were capitalized and will be amortized over the term of the amended and restated agreement. The remaining unamortized costs of $3.4 million will also be amortized over the term of the amended and restated agreement in accordance with ASC 470-50, Debt Modifications and Extinguishments.

5. Derivative Instruments

As of September 30, ~~2019,~~2020, the Company had the following outstanding financial commodity derivatives:


			Collars
			Floor				Ceiling				Swaps
Type of Contract	Volume (Mmbtu)	Contract Period	Range ($/Mmbtu)		Weighted-Average ($/Mmbtu)		Range ($/Mmbtu)		Weighted-Average ($/Mmbtu)		Weighted-Average ($/Mmbtu)
Natural gas (NYMEX)	9,300,000	Oct. 2020									$	2.25
Natural gas (NYMEX)	15,500,000	Oct. 2020	$1.90 - $2.15		$	2.05	$2.10 - $2.38		$	2.24
Natural gas (NYMEX)	18,250,000	Jan. 2021-Dec. 2021									$	2.74
Natural gas (NYMEX)	127,750,000	Jan. 2021-Dec. 2021	$2.50 - $2.80		$	2.64	$2.83 - $3.50		$	3.02
Natural gas (NYMEX)	10,700,000	Apr. 2021-Oct. 2021	$	—	$	2.50	$	—	$	2.80

Swaps Basis Swaps
Type of Contract Volume (Mmbtu) Contract Period Weighted-Average ($/Mmbtu)
Weighted-Average ($/Mmbtu)

Natural gas (IFERC TRANSCO Z6 non-NY) 2,760,000
Oct. 2019 - Dec. 2019 $ 0.41
Natural gas (IFERC TRANSCO Z6 non-NY) 4,650,000
Oct. 2019 $ 2.61

Natural gas (IFERC TRANSCO Leidy Line Receipts) 13,800,000
Oct. 2019 - Dec. 2019 $ (0.53 )
Natural gas (NYMEX) 10,850,000
Oct. 2019 $ 2.85

Natural gas (NYMEX) 27,600,000
Oct. 2019 - Dec. 2019 $ 2.86

In October 2020, the Company entered into the following financial commodity derivatives:

Collars

Floor

Ceiling

Type of Contract

Volume (Mmbtu)

Contract Period

Range
($/Mmbtu)

Weighted-Average
($/Mmbtu)

Range
($/Mmbtu)

Weighted-Average
($/Mmbtu)

Natural gas (NYMEX)

36,500,000

Jan. 2021-Dec. 2021

$2.80 - $2.85

2.83

$3.00 - $3.94

3.32

Effect of Derivative Instruments on the Condensed Consolidated Balance Sheet


		Derivative Assets				Derivative Liabilities						Derivative Assets				Derivative Liabilities
(In thousands)	Balance Sheet Location	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		(In thousands)	Balance Sheet Location	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Commodity contracts	Derivative instruments (current)	$	25,700	$	57,665	$	—	$	—	Commodity contracts	Other current assets (current)	$	0	$	31	$	0	$	0
Commodity contracts										Commodity contracts	Derivative instruments (current)	0		0		11,628		0
Commodity contracts										Commodity contracts	Accrued liabilities (current)	0		0		0		9
Commodity contracts										Commodity contracts	Other liabilities (non-current)	0		0		4,095		0
		$	25,700	$	57,665	$	—	$	—			$	0	$	31	$	15,723	$	9

Offsetting of Derivative Assets and Liabilities in the Condensed Consolidated Balance Sheet


(In thousands)	September 30, 2020		December 31, 2019
Derivative assets
Gross amounts of recognized assets	$	1,682	$	47
Gross amounts offset in the condensed consolidated balance sheet	(1,682)		(16)
Net amounts of assets presented in the condensed consolidated balance sheet	0		31
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet	0		0
Net amount	$	0	$	31

Derivative liabilities
Gross amounts of recognized liabilities	$	17,405	$	25
Gross amounts offset in the condensed consolidated balance sheet	(1,682)		(16)
Net amounts of liabilities presented in the condensed consolidated balance sheet	15,723		9
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet	0		0
Net amount	$	15,723	$	9

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(In thousands) September 30,
2019 December 31,
2018
Derivative assets

Gross amounts of recognized assets $ 25,700
$ 60,105
Gross amounts offset in the statement of financial position —
(2,440 )
Net amounts of assets presented in the statement of financial position 25,700
57,665
Gross amounts of financial instruments not offset in the statement of financial position —
—
Net amount $ 25,700
$ 57,665

Derivative liabilities

Gross amounts of recognized liabilities $ —
$ 2,440
Gross amounts offset in the statement of financial position —
(2,440 )
Net amounts of liabilities presented in the statement of financial position —
—
Gross amounts of financial instruments not offset in the statement of financial position —
—
Net amount $ —
$ —

Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2019			2018			2019			2018			(In thousands)	2020		2019		2020		2019
Cash received (paid) on settlement of derivative instruments													Cash received (paid) on settlement of derivative instruments
Gain (loss) on derivative instruments	$	46,555		$	(41	)	$	114,931		$	(20,354	)
(Loss) gain on derivative instruments													(Loss) gain on derivative instruments	$	14,106	$	46,555	$	33,529	$	114,931
Non-cash gain (loss) on derivative instruments													Non-cash gain (loss) on derivative instruments
Gain (loss) on derivative instruments	(35,495		)	(3,496		)	(31,965		)	18,726
(Loss) gain on derivative instruments													(Loss) gain on derivative instruments	(56,359)		(35,495)		(15,746)		(31,965)
	$	11,060		$	(3,537	)	$	82,966		$	(1,628	)		$	(42,253)	$	11,060	$	17,783	$	82,966

6. Fair Value Measurements

The Company follows the authoritative guidance for measuring fair value of assets and liabilities in its financial statements. For further information regarding the fair value hierarchy, refer to Note 1 of the Notes to the Consolidated Financial Statements in the Form 10-K.

Financial Assets and Liabilities

The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:


(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at September 30, 2020
Assets
Deferred compensation plan	$	19,882	$	0	$	0	$	19,882
Derivative instruments	0		1,381		301		1,682
	$	19,882	$	1,381	$	301	$	21,564
Liabilities
Deferred compensation plan	$	28,489	$	0	$	0	$	28,489
Derivative instruments	0		3,270		14,135		17,405
	$	28,489	$	3,270	$	14,135	$	45,894

(In thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)
Balance at
September 30, 2019
Assets

Deferred compensation plan $ 17,080
$ —
$ —
$ 17,080
Derivative instruments —
16,542
9,158
25,700
$ 17,080
$ 16,542
$ 9,158
$ 42,780
Liabilities

Deferred compensation plan $ 25,791
$ —
$ —
$ 25,791
Derivative instruments —
—
—
—
$ 25,791
$ —
$ —
$ 25,791

(In thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)
Balance at
December 31, 2018
Assets

Deferred compensation plan $ 14,699
$ —
$ —
$ 14,699
Derivative instruments —
35,689
24,416
60,105
$ 14,699
$ 35,689
$ 24,416
$ 74,804
Liabilities

Deferred compensation plan $ 25,780
$ —
$ —
$ 25,780
Derivative instruments —
—
2,440
2,440
$ 25,780
$ —
$ 2,440
$ 28,220


(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2019
Assets
Deferred compensation plan	$	18,381	$	0	$	0	$	18,381
Derivative instruments	0		44		3		47
	$	18,381	$	44	$	3	$	18,428
Liabilities
Deferred compensation plan	$	27,012	$	0	$	0	$	27,012
Derivative instruments	0		0		25		25
	$	27,012	$	0	$	25	$	27,037

The Company's investments associated with its deferred compensation plan consist of mutual funds and deferred shares of the Company's common stock that are publicly traded and for which market prices are readily available.

The derivative instruments were measured based on quotes from the Company's counterparties ~~and/~~or internal models. Such quotes and models have been derived using an income approach that considers various inputs including current market and contractual prices for the underlying instruments, quoted forward commodity prices, basis differentials, volatility factors and interest rates ~~such as a LIBOR curve~~ for a similar length of time as the derivative contract term as applicable. Estimates are derived from or verified using relevant NYMEX futures contracts ~~and/or~~and are compared to multiple quotes obtained from counterparties for reasonableness. The determination of the fair values presented above also incorporates a credit adjustment for non-performance risk. The

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Company measured the non-performance risk of its counterparties by reviewing credit default swap spreads for the various financial institutions with which it has derivative transactions while non-performance risk of the Company is evaluated using a market credit spread provided by the Company's ~~bank.~~banks. The Company has not incurred any losses related to non-performance risk of its counterparties and does not anticipate any material impact on its financial results due to non-performance by third parties.

The most significant unobservable inputs relative to the Company's Level 3 derivative contracts are ~~basis differentials.~~volatility factors. An increase (decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively. The Company does not have access to the specific assumptions used in its counterparties' valuation models. Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy:

Nine Months Ended
September 30,
(In thousands) 2019 2018
Balance at beginning of period $ 21,976
$ (28,398 )
Total gain (loss) included in earnings 24,931
6,333
Settlement (gain) loss (37,749 ) 17,114
Balance at end of period $ 9,158
$ (4,951 )

Change in unrealized gains (losses) relating to assets and liabilities still held at the end of the period $ 7,388
$ (6,685 )

~~There were no transfers between Level 1, Level 2 and Level 3 fair value measurements for the nine months ended September 30, 2019 and 2018.~~


	Nine Months Ended September 30,
(In thousands)	2020		2019
Balance at beginning of period	$	(22)	$	21,976
Total gain (loss) included in earnings	2,866		24,931
Settlement (gain) loss	(16,678)		(37,749)
Transfers in and/or out of Level 3	0		0
Balance at end of period	$	(13,834)	$	9,158

Change in unrealized gains (losses) relating to assets and liabilities still held at the end of the period	$	(13,733)	$	7,388

Non-Financial Assets and Liabilities

The Company discloses or recognizes its non-financial assets and liabilities, such as impairments or acquisitions, at fair value on a nonrecurring basis. As NaN of the Company’s other non-financial assets and liabilities were measured at fair value as of September 30, ~~2019,~~2020, additional disclosures were not required.

The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy.

Fair Value of Other Financial Instruments

The estimated fair value of other financial instruments is the ~~price that would~~amount at which the instrument could be ~~received to sell an asset or paid to transfer a liability in an orderly transaction~~exchanged currently between ~~market participants at the measurement date.~~willing parties. The carrying ~~amount~~amounts reported in the Condensed Consolidated Balance Sheet for cash, ~~and~~ cash equivalents ~~approximates~~and restricted cash approximate fair value due to the short-term maturities of these instruments. Cash, ~~and~~ cash equivalents and restricted cash are classified as Level 1 in the fair value hierarchy and the remaining financial instruments are classified as Level 2.

The Company uses available market data and valuation methodologies to estimate the fair value of debt. The fair value of debt is the estimated amount the Company would have to pay a third party to assume the debt, including a credit spread for the difference between the issue rate and the period end market rate. The credit spread is the Company’s default or repayment risk. The credit spread (premium or discount) is determined by comparing the Company’s senior notes and revolving credit facility to new issuances (secured and unsecured) and secondary trades of similar size and credit statistics for both public and private debt. The fair value of all senior notes and the revolving credit facility is based on interest rates currently available to the Company. The Company’s debt is valued using an income approach and classified as Level 3 in the fair value hierarchy.

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The carrying amount and fair value of debt is as follows:


	September 30, 2019						December 31, 2018					September 30, 2020				December 31, 2019
(In thousands)	Carrying Amount			Estimated Fair Value			Carrying Amount		Estimated Fair Value		(In thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Long-term debt	$	1,219,790		$	1,258,674		$	1,226,104	$	1,202,994	Long-term debt	$	1,161,712	$	1,213,402	$	1,220,025	$	1,260,259
Current maturities	(87,000		)	(89,210		)	—		—		Current maturities	(188,000)		(189,501)		(87,000)		(88,704)
Long-term debt, excluding current maturities	$	1,132,790		$	1,169,464		$	1,226,104	$	1,202,994	Long-term debt, excluding current maturities	$	973,712	$	1,023,901	$	1,133,025	$	1,171,555

7. Asset Retirement Obligations

Activity related to the Company’s asset retirement obligations is as follows:

(In thousands) Nine Months Ended
September 30, 2019
Balance at beginning of period⁽¹⁾
$ 51,622
Liabilities incurred 4,776
Liabilities settled (1,232 )
Liabilities divested (187 )
Accretion expense 2,489
Balance at end of period⁽²⁾
$ 57,468

~~_______________________________________________________________________________~~


~~(1)~~(In thousands)	~~Includes $1.0 million~~	Nine Months Ended September 30, 2020
Balance at beginning of period		$	72,098
Liabilities incurred		8,976
Liabilities settled		(8)



Accretion expense		3,104
Balance at end of period		84,170
Less: current asset retirement obligations ~~included in accrued liabilities at December 31, 2018.~~

			(500)
~~(2)~~			~~Includes $0.5 million of current~~Noncurrent asset retirement obligations ~~included in accrued liabilities at September 30, 2019.~~				$	83,670

8. Commitments and Contingencies

Contractual Obligations

The Company has various contractual obligations in the normal course of its operations. There have been no material changes to the Company’s contractual obligations described under “Transportation and Gathering Agreements” as disclosed in Note 9 of the Notes to Consolidated Financial Statements in the Form 10-K.

Lease Commitments ~~(Topic 840)~~

~~Future minimum rental commitments~~There have been no material changes to the Company’s operating lease obligations described under ~~non-cancelable leases~~“Lease Commitments” as disclosed in ~~effect at December 31, 2018 are as follows:~~Note 9 of the Notes to Consolidated Financial Statements in the Form 10-K.

(In thousands)
2019 $ 5,571
2020 5,684
2021 4,777
2022 1,659
2023 1,691
Thereafter 2,852
$ 22,234

Legal Matters

Pennsylvania Office of Attorney General Matter

~~The table above was prepared under~~In June 2020, the ~~guidance~~Office of ~~Topic 840. As discussed in~~ ~~Note 1~~ ~~above,~~Attorney General of the Commonwealth of Pennsylvania informed the Company ~~adopted~~that it will pursue certain misdemeanor and felony charges against the ~~guidance~~Company related to alleged violations of ~~Topic 842 effective January 1, 2019.~~

~~Leases (Topic 842)~~

the Pennsylvania Clean Streams Law, which prohibits discharge of industrial wastes. The Company ~~determines if an arrangement~~ is vigorously defending itself against such charges; however, the proceedings could result in fines or ~~contains, a lease at inception based on whether that contract conveys~~penalties against the right to control the use of an identified asset in exchange for consideration for a period of time. Operating leases are included in operating lease right-of-use assets (ROU assets) and operating lease liabilities (current and noncurrent) on the Condensed Consolidated Balance Sheet. The Company does not have any finance leases at ~~September 30, 2019~~.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of minimum lease payments over the lease term. Most leases do not provide an implicit interest rate; therefore, the Company used its incremental borrowing rate based on the information available at the inception date to determine the present value of the lease payments. Lease terms include options to extend the lease whenCompany. At this time, it is not possible to estimate the amount of any fines or penalties, or the range of such fines or penalties, that are reasonably certain that the Company will exercise that option. Lease cost for lease payments is recognized on a straight-line basis over the lease term. Certain leases have payment terms that vary based on the usage of the underlying assets. Variable lease payments are not includedpossible in ~~ROU assets and lease liabilities.~~this case.

~~For all operating leases, lease and non-lease components are accounted for as a single lease component.~~

The Company has operating leases for office space, drilling rig commitments, surface use agreements, compressor services and other leases. The leases have remaining terms ranging from two months to 26.3 years, including options to extend leases that the Company is reasonably certain to exercise. During the ~~nine~~ ~~months ended~~ ~~September 30, 2019, the Company recognized operating lease cost and variable lease cost of $9.0 million and $3.7 million, respectively.~~

~~Short-term leases.~~ ~~The Company leases drilling rigs, fracturing and other equipment under lease terms ranging from 30 days to one year. Lease cost of $224.0 million was recognized on short-term leases during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2019~~. Certain lease costs are capitalized and included in Properties and equipment, net in the Condensed Consolidated Balance Sheet because they relate to drilling and completion activities, while other costs are expensed because they relate to production and administrative activities.

~~As of September 30, 2019, the Company’s future undiscounted minimum cash payment obligations for its operating lease liabilities are as follows:~~

(In thousands) Year Ending December 31,
2019 (excluding the nine months ended September 30, 2019) $ 2,419
2020 4,819
2021 4,755
2022 4,577
2023 4,613
Thereafter 29,824
Total undiscounted lease payments 51,007
Present value adjustment (13,401 )
Net operating lease liabilities $ 37,606

~~Supplemental cash flow information related to leases was as follows:~~

(In thousands) Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 1,149
$ 3,395
Investing cash flows from operating leases $ 1,831
$ 5,433

~~Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases is summarized below:~~



	~~September 30, 2019~~
~~Weighted-average remaining lease term (in years)~~
~~Operating leases~~	~~11.9~~
~~Weighted-average discount rate~~
~~Operating leases~~	~~5.0~~	%

~~Legal Matters~~Other

The Company is a defendant in various other legal proceedings arising in the normal course of business. All known liabilities are accrued when management determines they are probable based on its best estimate of the potential loss. While the outcome and impact of these legal proceedings on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will not have a material effect on the ~~Company’s~~Company's financial position, results of operations or cash flows.

Contingency ~~Reserves.~~Reserves

When deemed necessary, the Company establishes reserves for certain legal proceedings. The establishment of a reserve is based on an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible that the Company could incur additional losses with respect to those matters for which reserves have been established. The Company believes that any

such amount above the

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amounts accrued would not be material to the Condensed Consolidated Financial Statements. Future changes in facts and circumstances not currently foreseeable could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.

9. Revenue Recognition

Disaggregation of Revenue

The following table presents revenues from contracts with customers disaggregated by product:

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2019 2018 2019 2018
OPERATING REVENUES
   Natural gas $ 418,133
$ 440,835
$ 1,521,789
$ 1,217,603
   Crude oil and condensate —
—
—
48,722
   Brokered natural gas —
105,849
—
203,375
   Other (82 ) 2,026
154
3,775
Total revenue from contracts with customers 418,051
548,710
1,521,943
1,473,475
   Gain (loss) on derivative instruments 11,060
(3,537 ) 82,966
(1,628 )
$ 429,111
$ 545,173
$ 1,604,909
$ 1,471,847


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019

Natural gas	$	333,256	$	418,133	$	991,882	$	1,521,789
Other	38		(82)		181		154
	$	333,294	$	418,051	$	992,063	$	1,521,943

All of the Company’s revenues from contracts with customers represent products transferred at a point in time as control is transferred to the customer and generated in the United States of America.

Transaction Price Allocated to Remaining Performance Obligations

A significant number of the Company’s product sales contracts are short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

As of September 30, ~~2019,~~2020, the Company has ~~$9.7~~$9.1 billion of unsatisfied performance obligations related to natural gas sales that have a fixed pricing component and a contract term greater than one year. The Company expects to recognize these obligations over periods ranging from three~~four~~ to 19 18 years.

Contract Balances

Receivables from contracts with customers are recorded when the right to consideration becomes unconditional, generally when control of the product has been transferred to the customer. Receivables from contracts with customers were ~~$159.2~~$136.7 million and ~~$363.0~~$209.2 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and are reported in accounts receivable, net on the Condensed Consolidated Balance Sheet. The Company currently has no assets or liabilities related to its revenue contracts, including no upfront payments or rights to deficiency payments.

10. ~~Capital Stock~~

~~Treasury Stock~~

~~In July 2019, the Board of Directors authorized an increase of 25.0 million shares to the Company’s share repurchase program. During~~ ~~the firstninemonths of2019, the Company repurchased~~ ~~15.5 million shares for a total cost of $316.1 million.~~ ~~As ofSeptember 30, 2019,~~ ~~21.0 million shares were available for repurchase under the share repurchase program.~~

~~Dividends~~

In April 2019, the Board of Directors approved an increase in the quarterly dividend on the Company's common stock from $0.07 per share to $0.09 per share. In October 2019, the Board of Directors approved an additional increase in the quarterly dividend on the Company's common stock from $0.09 per share to $0.10 per share.

~~11. Stock-based~~Stock-Based Compensation

General

The Company grants certain stock-based compensation awards, including restricted stock awards, restricted stock units and performance share awards. Stock-based compensation expense associated with these awards was ~~$2.1~~$11.4 million and ~~$6.5~~$2.1 million in the third quarter of ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$24.0~~$36.0 million and ~~$17.6~~$24.0 million during the first nine months of

~~2019~~ 2020 and ~~2018,~~2019, respectively. Stock-based compensation expense is included in general and administrative expense in the Condensed Consolidated Statement of Operations.

For the first nine months of 2019, the Company recorded a decrease to tax expense of $0.9 million as a result of federal and state tax deductions exceeding the book compensation expense for employee stock-based compensation awards that vested during the period. For the first nine months of 2018, the Company recorded an increase to tax expense of $0.3 million as a result of book compensation expense exceeding the federal and state tax deductions for employee stock-based compensation awards that vested during the period.

Refer to Note 1314 of the Notes to the Consolidated Financial Statements in the Form 10-K for further description of the various types of stock-based compensation awards and the applicable award terms.

Restricted Stock Units

During the first nine months of ~~2019, 80,675~~2020, 127,165 restricted stock units were granted to non-employee directors of the Company with a weighted-average grant date value of ~~$24.96~~$15.80 per unit. The fair value of these units is measured based on the closing stock price on grant date and compensation expense is recorded immediately. These units immediately vest and are issued when the director ceases to be a director of the Company.

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Performance Share Awards

The performance period for the awards granted during the first nine months of ~~2019~~2020 commenced on January 1, ~~2019~~2020 and ends on December 31, ~~2021.~~2022. The Company used an annual forfeiture rate assumption ranging from 0 ~~percent~~ to ~~7 percent~~5 for purposes of recognizing stock-based compensation expense for its performance share awards.

Performance Share Awards Based on Internal Performance Metrics

The fair value of performance share award grants based on internal performance metrics is based on the closing stock price on the grant date. Each performance share award represents the right to receive up to 100 percent of the award in shares of common stock. Based on the Company’s probability assessment at September 30, ~~2019,~~2020, it is considered probable that the criteria for all performance awards based on internal metrics awards will be met.

Employee Performance Share Awards. During the first nine months of ~~2019, 526,730~~2020, 722,500 Employee Performance Share Awards were granted at a grant date value of ~~$24.95~~$15.60 per share. The 2020 awards vest 100 percent on the third anniversary, provided that the Company averages $100 million or more of operating cash flow during the three-year performance ~~metrics are~~period, as set by the Company’s compensation ~~committee and are based~~committee. If the Company does not meet the performance metric for the applicable period, then the performance shares that would have been issued on the ~~Company’s average production, average finding costs and average reserve replacement over a three-year performance period.~~anniversary date will be forfeited.

Hybrid Performance Share Awards. During the first nine months of ~~2019, 315,029~~2020, 506,412 Hybrid Performance Share Awards were granted at a grant date value of ~~$24.95~~$15.60 per share. The ~~2019~~2020 awards vest 25 percent on each of the first and second anniversary dates and 50 percent on the third anniversary, provided that the Company has $100 million or more of operating cash flow for the year preceding the vesting date, as set by the Company’s compensation committee. If the Company does not meet the performance metric for the applicable period, then the portion of the performance shares that would have been issued on that anniversary date will be forfeited.

Performance Share Awards Based on Market Conditions

These awards have both an equity and liability component, with the right to receive up to the first 100 percent of the award in shares of common stock and the right to receive up to an additional 100 percent of the value of the award in excess of the equity component in cash. The equity portion of these awards is valued on the grant date and is not marked to market, while the liability portion of the awards is valued as of the end of each reporting period on a mark-to-market basis. The Company calculates the fair value of the equity and liability portions of the awards using a Monte Carlo simulation model.

TSR Performance Share Awards. During the first nine months of ~~2019, 536,673~~2020, 862,180 TSR Performance Share Awards were granted and are earned, or not earned, based on the comparative performance of the Company’s common stock measured against a predetermined group of companies in the Company’s peer group over a three-year performance period.

The following assumptions were used to determine the grant date fair value of the equity component (February 19, ~~2019)~~2020) and the period-end fair value of the liability component of the TSR Performance Share Awards:

Grant Date September 30, 2019
Fair value per performance share award $ 20.63
$7.92-$16.23
Assumptions:

Stock price volatility 31.3 % 29.0%-37.1%
Risk free rate of return 2.46 % 1.61%-1.87%


	Grant Date			September 30, 2020
Fair value per performance share award	$	13.79		$13.28 - $17.30
Assumptions:
Stock price volatility	29.5		%	36.8% - 48.4%
Risk free rate of return	1.39		%	0.10% - 0.14%

~~12.~~11. Earnings per Common Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS is similarly calculated except that the common shares outstanding for the period is increased using the treasury stock method to reflect the potential dilution that could occur if outstanding stock awards were vested at the end of the applicable period. Anti-dilutive shares represent potentially dilutive securities that are excluded from the computation of diluted income or loss per share as their impact would be anti-dilutive.

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The following is a calculation of basic and diluted weighted-average shares outstanding:

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Weighted-average shares - basic 412,456
440,772
419,199
450,445
Dilution effect of stock awards at end of period 2,006
2,338
1,902
1,868
Weighted-average shares - diluted 414,462
443,110
421,101
452,313


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2020	2019	2020	2019
Weighted-average shares - basic	398,580	412,456	398,500	419,199
Dilution effect of stock awards at end of period	0	2,006	2,128	1,902
Weighted-average shares - diluted	398,580	414,462	400,628	421,101

The following is a calculation of weighted-average shares excluded from diluted EPS due to the anti-dilutive effect:

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect calculated using the treasury stock method 484
1
633
1


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2020	2019	2020	2019
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect due to net loss	3,009	0	0	0
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect calculated using the treasury stock method	0	484	51	633
	3,009	484	51	633

~~13.~~12. Additional Balance Sheet Information

Certain balance sheet amounts are comprised of the following:


(In thousands)	September 30, 2019			December 31, 2018			(In thousands)	September 30, 2020		December 31, 2019
Accounts receivable, net							Accounts receivable, net
Trade accounts	$	159,167		$	362,973		Trade accounts	$	136,740	$	209,200
Joint interest accounts	393			101

Other accounts	863			567			Other accounts	1,037		1,007
	160,423			363,641				137,777		210,207
Allowance for doubtful accounts	(1,184		)	(1,238		)	Allowance for doubtful accounts	(1,039)		(1,184)
	$	159,239		$	362,403			$	136,738	$	209,023

Other assets							Other assets
Deferred compensation plan	$	17,080		$	14,699		Deferred compensation plan	$	19,882	$	18,381��
Debt issuance costs	9,450			4,572			Debt issuance costs	7,391		8,938
Income taxes receivable	—			8,165

Operating lease right-of-use assets	37,715			—			Operating lease right-of-use assets	34,721		35,916
Other accounts	74			61			Other accounts	79		56
	$	64,319		$	27,497			$	62,073	$	63,291

Accounts payable							Accounts payable
Trade accounts	$	29,157		$	30,033		Trade accounts	$	20,789	$	21,663

Royalty and other owners	30,242			61,507			Royalty and other owners	25,836		36,191
Accrued transportation	50,795			50,540			Accrued transportation	50,999		55,586
Accrued capital costs	44,643			43,207			Accrued capital costs	27,850		40,337
Taxes other than income	13,105			19,824			Taxes other than income	10,262		16,971
Income taxes payable	—			1,134

Other accounts	4,790			35,694			Other accounts	15,926		19,063
								$	151,662	$	189,811
	$	172,732		$	241,939
Accrued liabilities							Accrued liabilities
Employee benefits	$	18,411		$	21,761		Employee benefits	$	19,822	$	22,727
Taxes other than income	3,660			1,472			Taxes other than income	3,243		3,850

Operating lease liabilities	4,280			—			Operating lease liabilities	4,027		3,124
Asset retirement obligations	500			1,000

Other accounts	929			994			Other accounts	1,304		1,589
								$	28,396	$	31,290
	$	27,780		$	25,227
Other liabilities							Other liabilities
Deferred compensation plan	$	25,791		$	25,780		Deferred compensation plan	$	28,489	$	27,012
Derivative instruments							Derivative instruments	4,095		0
Operating lease liabilities	33,326			—			Operating lease liabilities	30,594		32,677
Other accounts	8,529			34,391			Other accounts	12,091		8,595
	$	67,646		$	60,171			$	75,269	$	68,284

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following review of operations for the three and nine month periods ended September 30, ~~2019~~2020 and ~~2018~~2019 should be read in conjunction with our Condensed Consolidated Financial Statements and the Notes included in this Quarterly Report on Form 10-Q (Form 10-Q) and with the Consolidated Financial Statements, Notes and Management’s Discussion and Analysis included in the Cabot Oil & Gas Corporation Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (Form 10-K).

OVERVIEW

Financial and Operating Overview

Financial and operating results for the nine months ended September 30, ~~2019~~2020 compared to the nine months ended September 30, ~~2018~~2019 are as follows:

•Natural gas production ~~increased 115.7~~decreased 0.1 Bcf from 639.3 Bcf, or ~~22 percent, from 523.6 Bcf in 2018 to 639.3 Bcf~~2,342 Mmcf per day, in 2019 ~~as a result~~to 639.2 Bcf, or 2,333 Mmcf per day, in 2020. The slight decrease was driven by strategic curtailments of production during the third quarter of 2020 due to weaker natural gas prices offset by higher production during the period prior to such strategic curtailment due to the timing of our drilling and completion activities in ~~Pennsylvania.~~the Marcellus Shale in 2020.

Equivalent production increased 110.7 Bcfe, or 21 percent, from 528.6 Bcfe, or 1,936.4 Mmcfe per day, in 2018 to 639.3 Bcfe, or 2,341.8 Mmcfe per day, in 2019. The increase is primarily due to drilling and completion activities in Pennsylvania, partially offset by the sale of our Eagle Ford Shale assets in south Texas in February 2018.

•Average realized natural gas price was ~~$2.56~~$1.60 per Mcf, 1038 percent ~~higher~~lower than the ~~$2.32~~$2.56 per Mcf realized in the comparable period of the prior year.

•Total capital expenditures were ~~$622.1~~$463.9 million compared to ~~$593.1~~$622.1 million in the comparable period of the prior year.

•Drilled 55 gross wells (49.2 net) with a success rate of 100 percent compared to 71 gross wells (71.0 net) with a success rate of 100 percent ~~compared to 60 gross wells (60.0 net) with a success rate of 91.7 percent~~ for the comparable period of the prior year.

•Completed 71 gross wells (62.3 net) in 2020 compared to 71 gross wells (71.0 net) in ~~2019 compared to 61 gross wells (61.0 net) in 2018.~~2019.

•Average rig count during ~~2019~~2020 was approximately ~~3.1~~2.3 rigs in the Marcellus Shale, compared to an average rig count ~~in the Marcellus Shale~~ of approximately ~~3.3~~3.1 rigs ~~and approximately 0.7 rigs~~during 2019.

•Repaid $87.0 million of our 6.51% weighted-average senior notes, which matured in ~~other areas during 2018.~~


•	~~Repurchased 15.5 million shares of our common stock for a total cost of~~ ~~$316.1 million~~ ~~in 2019.~~July 2020.

Market Conditions and Commodity Prices

Our financial results depend on many factors, particularly commodity prices and our ability to market our production on economically attractive terms. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by pipeline capacity constraints, inventory storage levels, basis differentials, weather conditions and other factors. ~~In addition, our~~Our realized prices are also further impacted by our hedging activities.

Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing commodity prices, particularly natural gas prices. Since substantially all of our production and reserves are natural gas, significant declines in natural gas prices could have a material adverse effect on our operating results, financial condition, liquidity and ability to obtain financing. Lower natural gas prices also may reduce the amount of natural gas that we can produce economically. In addition, in periods of low natural gas prices, we may elect to curtail a portion of our production, such as late in the third quarter of 2020, when we anticipate a more favorable price environment in which to produce our curtailed volumes. Historically, natural gas prices have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile. As a result, we cannot accurately predict future commodity prices and, therefore, cannot determine with any degree of certainty what effect increases or decreases in these prices will have on our capital program, production volumes or revenues. ~~We expect commodity prices to remain volatile.~~ In addition to commodity prices and production volumes, ~~and commodity prices,~~ finding and developing sufficient amounts of natural gas ~~and crude oil~~ reserves at economical costs are critical to our long-term success. ~~For information about the impact of realized commodity prices on our revenues, refer to “Results of Operations” below.~~

We account for our derivative instruments on a mark-to-market basis with changes in fair value recognized in operating revenues in the Condensed Consolidated Statement of Operations. As a result of these mark-to-market adjustments associated with our derivative instruments, we will experience volatility in our earnings due to commodity price volatility. Refer to “~~Impact~~“Impact of Derivative Instruments on Operating ~~Revenues~~”Revenues” below and Note 5 of the Notes to the Condensed Consolidated Financial Statements for more information.

The ongoing coronavirus (COVID-19) outbreak, which the World Health Organization (WHO) declared as a pandemic on March 11, 2020, has reached more than 200 countries and territories and there continues to be considerable uncertainty regarding the extent to which COVID-19 will continue to spread, the development and availability of effective treatments and

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~~Commodity~~vaccines and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus and alleviate strain on the healthcare system and the economic impact of such actions. One of the impacts of the COVID-19 pandemic has been a significant reduction in demand for crude oil, and to a lesser extent, natural gas. The supply/demand imbalance driven by the COVID-19 pandemic, as well as production disagreements among members of the Organization of Petroleum Exporting Countries and other producer countries (OPEC+), has led to significant global economic contraction generally and continues to have disruptive impacts on the oil and gas industry. While subsequent negotiations between members of OPEC+ led to an agreement to reduce production volumes in an effort to stabilize crude oil prices, crude oil prices remain at depressed levels, as the oversupply and lack of demand in the market persist. Natural gas prices have ~~been and are expected~~continued to remain ~~volatile.~~ low compared to 2019 and remained challenged during the third quarter of 2020, in part, due to lower seasonal demand during the shoulder season of 2020 and storage levels nearing capacity. In response to the weakness of natural gas prices, we have strategically curtailed our production during the last 13 days of the third quarter of 2020, resulting in an estimated average daily curtailment of approximately 372 Mmcfe per day of gross production.

Meanwhile, NYMEX natural gas futures prices have shown improvements since the implementation of pandemic-related restrictions and OPEC+ price disagreements. The improvements in natural gas futures prices are based on market expectations that declines in future natural gas supplies due to a substantial reduction of associated gas related to the curtailment of operations in oil basins throughout the United States will more than offset the lower demand recently experienced with the COVID-19 pandemic. While the current outlook on natural gas prices is favorable and our operations have not been significantly impacted in the short-term, in the event these disruptions continue for an extended period of time, our operations could be adversely impacted, commodity prices could continue to decline further and our costs may increase. While we are unable to predict future commodity prices, at current natural gas price levels, we do not believe that an impairment of our oil and gas properties is reasonably likely to occur in the near future; however, in the event that commodity prices significantly decline from current levels, management would evaluate the recoverability of the carrying value of our oil and gas properties.

We have implemented preventative measures and developed response plans intended to minimize unnecessary risk of exposure and prevent infection among our employees and the communities in which we operate. We also have modified certain business practices (including those related to non-operational employee work locations and the cancellation of physical participation in meetings, events and conferences) to conform to government restrictions and best practices encouraged by the Centers for Disease Control and Prevention, the WHO and other governmental and regulatory authorities. In addition, we are continuing to work with our customers and service providers to understand the potential impacts to our operations, including to mitigate any disruptions and to plan for longer-term emergency response protocols. We will continue to monitor developments affecting our workforce, our customers, our service providers and the communities in which we operate, including any resurgence in COVID-19 transmission and infection, and take additional precautions as we believe are warranted.

Our efforts to respond to the challenges presented by the on-going pandemic, as well as certain operational decisions we previously implemented such as our maintenance capital program, have helped to minimize the impact, and any resulting disruptions, of the pandemic to our business and operations. We have not required any funding under any federal or other governmental programs to support our operations, and we do not expect to have to utilize any such funding. As a result, we currently believe that we are well-positioned to manage the challenges presented in a ~~volatile~~lower commodity pricing environment and can endure the current cyclical downturn in the energy industry and continued volatility in current and future commodity prices by:

•Continuing to exercise discipline in our capital program with the expectation of funding our capital expenditures with cash on hand, operating cash flows, and if required, borrowings under our revolving credit facility.

•Continuing to manage our portfolio by strategically curtailing production in periods of weaker natural gas prices.

•Continuing to optimize our drilling, completion and operational efficiencies, resulting in lower operating costs per unit of production.

•Continuing to manage our balance sheet, which we believe provides sufficient availability under our revolving credit facility and existing cash balances to meet our capital requirements and maintain compliance with our debt covenants.

•Continuing to manage price risk by strategically hedging our production.

~~While we are unable~~The impact that COVID-19 will have on our business, cash flows, liquidity, financial condition and results of operations will depend on future developments, including, among others, the duration, ultimate geographic spread and severity of the virus, any resurgence in COVID-19 transmission and infection in affected regions after they have begun to ~~predict future~~experience an improvement, the consequences of governmental and other measures designed to mitigate the spread of the virus and alleviate strain on the healthcare system, the development of effective treatments, actions taken by governmental authorities, customers,

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suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

For information about the impact of realized commodity prices ~~in the event that commodity prices significantly decline, management would test the recoverability~~on our revenues, refer to “Results of ~~the carrying value of its oil and gas properties and, if necessary, record an impairment charge.~~Operations” below.

Outlook

Our ~~2019~~2020 capital program is expected to be approximately ~~$800.0~~$575.0 million, ~~to $820.0~~a 27 percent reduction from our 2019 capital program of $783.3 million. We expect to fund these capital expenditures with our ~~cash on hand,~~ operating cash flow and, if required, borrowings under our revolving credit facility. At the beginning of 2020, we reduced our planned capital program as a result of the lower natural gas price environment. During the third quarter of 2020, we elected to strategically curtail production in the Marcellus Shale due to weaker natural gas prices; however, we anticipate an increase in production in the fourth quarter of 2020 over the third quarter as a result of an increase in demand during the winter months.

In ~~2018,~~2019, we drilled 9796 gross wells ~~(95.1~~(94.0 net) and completed 9499 gross wells ~~(93.0~~(97.0 net), of which 2729 gross wells ~~(27.0~~(29.0 net) were drilled but uncompleted in prior years. For the full year of ~~2019,~~2020, our capital program will focus on the Marcellus Shale, where we expect to drill, ~~and~~ complete ~~approximately 90.0 net wells~~ and place on production approximately 9070 net ~~wells on production.~~wells. We will continue to assess the natural gas price environment ~~along with our liquidity position~~ and may increase or decrease our capital expenditures ~~accordingly.~~in response to the macro-environment and outlook. This may from time to time also include curtailing a portion of our production.

Financial Condition

Capital Resources and Liquidity

Our primary ~~sources~~source of cash for the nine months ended September 30, ~~2019 were~~2020 was from the sale of natural gas ~~production.~~production and net borrowings under our revolving credit facility. These cash flows were used to fund our capital expenditures, principal and interest payments on debt and payment of ~~dividends, repurchases of shares of common stock and contributions to our equity method investments.~~dividends. See below for additional discussion and analysis of our cash ~~flow.~~flows.

~~On April 22, 2019, we entered into a second amended and restated credit agreement (revolving credit facility) .~~ The borrowing base under the terms of our revolving credit facility is redetermined annually in April. In addition, either we or the banks may request an interim redetermination twice a year or in connection with certain acquisitions or divestitures of oil and gas properties. ~~As of~~Effective April 23, 2020, the borrowing base and available commitments were reaffirmed at $3.2 billion and $1.5 billion, respectively. At September 30, ~~2019, there were~~ no2020, we had $28.0 million of borrowings outstanding under our revolving credit facility and our unused commitments were $1.5 billion. Refer to Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information.

A decline in commodity prices could result in the future reduction of our borrowing base and related commitments under our revolving credit facility. Unless commodity prices decline significantly from current levels, we do not believe that any such reductions would have a significant impact on our ability to service our debt and fund our drilling program and related operations.

We strive to manage our debt at a level below the available credit line in order to maintain borrowing capacity. Our revolving credit facility includes a covenant limiting our total debt. We believe that, with operating cash flow ~~cash on hand~~ and availability under our revolving credit facility, we have the capacity to fund our spending plans.

At September 30, ~~2019,~~2020, we were in compliance with all restrictive financial covenants for both ~~the~~our revolving credit facility and senior notes. ~~See~~Refer to our Form 10-K for further discussion of our restrictive financial covenants.

Cash Flows

Our cash flows from operating activities, investing activities and financing activities are as follows:


	Nine Months Ended September 30,							Nine Months Ended September 30,
(In thousands)	2019			2018			(In thousands)	2020		2019
Cash flows provided by operating activities	$	1,182,811		$	788,852		Cash flows provided by operating activities	$	470,393	$	1,182,811
Cash flows used in investing activities	(625,616		)	(44,844		)	Cash flows used in investing activities	(487,546)		(625,616)
Cash flows used in financing activities	(477,166		)	(907,978		)	Cash flows used in financing activities	(184,882)		(477,166)
Net increase (decrease) in cash and cash equivalents	$	80,029		$	(163,970	)
Net (decrease) increase in cash, cash equivalents and restricted cash							Net (decrease) increase in cash, cash equivalents and restricted cash	$	(202,035)	$	80,029

Operating Activities. Operating cash flow fluctuations are substantially driven by commodity prices, changes in our production volumes and operating expenses. Commodity prices have historically been volatile, primarily as a result of supply

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and demand for natural gas, ~~and crude oil,~~ pipeline infrastructure constraints, basis differentials, inventory storage levels, seasonal influences and ~~seasonal influences.~~other factors. In addition, fluctuations in cash flow may result in an increase or decrease in our capital expenditures.

Our working capital is substantially influenced by the variables discussed above and fluctuates based on the timing and amount of borrowings and repayments under our revolving credit facility, repayments of debt, the timing of cash collections and payments on our trade accounts receivable and payable, respectively, payment of dividends, repurchases of our securities and changes in the fair value of our commodity derivative activity. 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 September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had a working capital deficit of $63.4 million and a surplus of ~~$126.9 million and $257.3~~$240.2 million, respectively. We believe that we have adequate liquidity and availability under our revolving credit facility to meet our working capital requirements over the next twelve months.

Net cash provided by operating activities in the first nine months of ~~2019 increased~~2020 decreased by ~~$394.0~~$712.4 million compared to the first nine months of ~~2018.~~2019. This ~~increase~~decrease was primarily due to ~~higher operating~~lower natural gas revenues, lower derivative settlement gains and ~~favorable~~unfavorable changes in working capital ~~partially offset by higher operating expenses.~~compared to the prior year. The ~~increase~~decrease in ~~operating~~natural gas revenues was primarily due to ~~higher equivalent production and higher~~lower realized natural gas ~~prices.~~prices and marginally lower natural gas production. Average realized natural gas prices ~~increased~~decreased by 1038 percent for the first nine months of ~~2019~~2020 compared to the first nine months of ~~2018. Equivalent~~2019. Natural gas production ~~increased by 21 percent~~decreased slightly for the first nine months of ~~2019~~2020 compared to the first nine months of ~~2018~~2019 due to ~~higher~~strategic curtailments of production during the third quarter of 2020 due to weaker natural gas prices offset by higher production during the period prior to such strategic curtailment due to the timing of our drilling and completion activities in the Marcellus ~~Shale.~~Shale in 2020.

~~See~~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~~decreased by ~~$580.8~~$138.1 million for the first nine months of ~~2019~~2020 compared to the first nine months of ~~2018.~~2019. The ~~increase~~decrease was primarily due to ~~$673.1~~$142.3 million of lower capital expenditures as a result of the implementation of our maintenance capital program in 2020. This decrease was partially offset by an increase in net cash outflows of $2.1 million related to the sale of our equity method investments and a decrease in proceeds from the sale of ~~assets. This increase was partially offset by $26.8 million lower capital expenditures and $63.9 million lower capital contributions associated with our equity method investments.~~assets of $2.1 million.

Financing Activities. Cash flows used in financing activities decreased by ~~$430.8~~$292.3 million for the first nine months of ~~2019~~2020 compared to the first nine months of ~~2018.~~2019. This decrease was primarily due to ~~$234.3~~$347.4 million of lower repurchases of our common stock in 2020 compared to 2019, $7.4 million of lower debt issuance costs associated with the amendment of our revolving credit facility in 2019 and ~~$230.0~~$4.2 million of lower tax withholdings on vesting of stock awards. These decreases were partially offset by $52.0 million higher net repayments of debt ~~primarily related to maturities of certain of our senior notes during 2018. This decrease was partially offset by $23.5~~and $14.8 million higher dividend payments related to an increase in our quarterly dividend rate from ~~$0.18 per share in the first nine months of 2018 to~~ $0.25 per share in the first nine months of 2019 ~~a $7.4 million increase~~to $0.30 per share in ~~debt issuance costs related to amending our revolving credit facility in early 2019 and $2.5 million higher tax withholdings on vesting stock awards. Treasury stock repurchases for~~ the first nine months ~~ended September 30,~~of 2020. Share repurchases in 2019 include $31.4 million of share repurchases that were accrued in 2018 and paid in 2019.

Capitalization

Information about our capitalization is as follows:


(In thousands)	September 30, 2020			December 31, 2019
Debt (1)	$	1,161,712		$	1,220,025
Stockholders' equity	2,118,488			2,151,487
Total capitalization	$	3,280,200		$	3,371,512
Debt to total capitalization	35		%	36		%
Cash and cash equivalents	$	170		$	200,227

(In thousands) September 30,
2019 December 31,
2018
Debt ⁽¹⁾
$ 1,219,790
$ 1,226,104
Stockholders' equity 2,213,576
2,088,159
Total capitalization $ 3,433,366
$ 3,314,263
Debt to total capitalization 36 % 37 %
Cash and cash equivalents $ 82,316
$ 2,287

~~_______________________________________________________________________________~~(1)Includes $188.0 million and $87.0 million of current portion of long-term debt at September 30, 2020 and December 31, 2019, respectively. Includes $28.0 million of borrowings outstanding under our revolving credit facility as of September 30, 2020. There were no borrowings outstanding under our revolving credit facility as of December 31, 2019.


~~(1)~~	~~Includes $87.0 million of current portion of long-term debt at September 30, 2019. Includes $7.0 million of borrowings outstanding under our revolving credit facility as of December 31, 2018.~~

We did not repurchase any shares of our common stock during the first nine months of 2020. During the first nine months of 2019, ~~and 2018,~~ we repurchased 15.5 million shares of our common stock for $316.1 ~~million and 27.1 million shares of our common stock for $644.2 million, respectively.~~million. During the first nine months of 2020 and

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2019, ~~and 2018,~~ we paid dividends of $119.5 million ($0.30 per share) and $104.7 million ($0.25 ~~per share) and $81.2 million ($0.18~~ per share), respectively, on our common stock.

In April 2019, the Board of Directors approved an increase in the quarterly dividend on our common stock from $0.07 per share to $0.09 per share. In October 2019, the Board of Directors approved an additional increase in the quarterly dividend on our common stock from $0.09 per share to $0.10 per share.

Capital and Exploration Expenditures

On an annual basis, we generally fund most of our capital expenditures, excluding any significant property acquisitions, with cash on hand, cash generated from operations, and if required, borrowings under our revolving credit facility. We budget these expenditures based on our projected cash flows for the year.

The following table presents major components of our capital and exploration expenditures:

Nine Months Ended
September 30,
(In thousands) 2019 2018
Capital expenditures

Drilling and facilities $ 605,938
$ 551,351
Leasehold acquisitions 5,261
27,487
Other 10,917
14,260
622,116
593,098
Exploration expenditures⁽¹⁾
15,029
68,166
$ 637,145
$ 661,264


	Nine Months Ended September 30,
(In thousands)	2020		2019
Capital expenditures
Drilling and facilities	$	449,045	$	605,938
Leasehold acquisitions	3,258		5,261


Other	11,622		10,917
	463,925		622,116
Exploration expenditures(1)	10,669		15,029
	$	474,594	$	637,145


~~(1)~~	Exploratory dry hole expenditures included in exploration expenditures for the first nine months of 2019 were not significant. Exploration expenditures include $56.4 million of exploratory dry hole expenditures for the first nine months of 2018.

(1)Exploration expenditures include $2.0 million of exploratory dry hole cost for the first nine months of 2020. Exploratory dry hole cost for the first nine months of 2019 was not significant.

For the full year of ~~2019,~~2020, we plan to allocate substantially all of our capital ~~program will focus on~~to the Marcellus Shale, where we expect to drill, ~~and~~ complete ~~approximately 90.0 net wells~~ and place on production approximately 9070 net ~~wells on production. In 2019, our drilling~~wells. Our 2020 capital program ~~includes~~is expected to be approximately ~~$800.0 million~~$575.0 million. Refer to ~~$820.0 million in total capital expenditures compared to $816.1 million in 2018. See “Outlook~~”“Outlook” for additional information regarding the current year drilling program. We will continue to assess the commodity price environment and may increase or decrease our capital expenditures accordingly.

Contractual Obligations

We have various contractual obligations in the normal course of our operations. There have been no material changes to our contractual obligations described under “Transportation and Gathering Agreements” and “Lease Commitments” as disclosed in Note 9 of the Notes to the Consolidated Financial Statements and the obligations described under “Contractual Obligations” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. ~~See~~Refer to our Form 10-K for further discussion of our critical accounting policies.

Recently Adopted Accounting Pronouncements

Refer to Note 1 of the Notes to the Condensed Consolidated Financial Statements, “Financial Statement Presentation,” for a discussion of ~~new~~recently adopted accounting pronouncements that affect us.

Results of Operations

Third Quarters of ~~2019~~2020 and ~~2018~~2019 Compared

We reported a net ~~income~~loss in the third quarter of ~~2019~~2020 of $15.0 million, or $0.04 per share, compared to net income of $90.4 million, or $0.22 per share, ~~compared to net income of $122.3 million, or $0.28 per share,~~ in the third quarter of ~~2018.~~2019. The decrease in net income was primarily due to lower operating revenues, ~~and gain on sale of assets,~~ partially offset by lower operating expenses and income tax expense.

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Revenue, Price and Volume Variances

Our revenues vary from year to year as a result of changes in commodity prices and production volumes. Below is a discussion of revenue, price and volume variances.

Three Months Ended September 30, Variance
(In thousands) 2019 2018 Amount Percent
Operating Revenues
   Natural gas $ 418,133
$ 440,835
$ (22,702 ) (5 )%
   Gain (loss) on derivative instruments 11,060
(3,537 ) 14,597
413 %
   Brokered natural gas —
105,849
(105,849 ) (100 )%
   Other (82 ) 2,026
(2,108 ) (104 )%
$ 429,111
$ 545,173
$ (116,062 ) (21 )%

Three Months Ended September 30, Variance
Increase
(Decrease)
(In thousands)
2019 2018 Amount Percent
Price Variances

Natural gas $ 1.89
$ 2.36
$ (0.47 ) (20 )% $ (103,414 )
Volume Variances

Natural gas (Bcf) 220.7
186.5
34.2
18 % $ 80,712
Total

$ (22,702 )


	Three Months Ended September 30,				Variance
(In thousands)	2020		2019		Amount		Percent
Operating Revenues
Natural gas	$	333,256	$	418,133	$	(84,877)	(20)	%

(Loss) gain on derivative instruments	(42,253)		11,060		(53,313)		(482)	%
Other	38		(82)		120		(146)	%
	$	291,041	$	429,111	$	(138,070)	(32)	%

Natural Gas Revenues


	Three Months Ended September 30,				Variance				Increase (Decrease) (In thousands)
	2020		2019		Amount		Percent
Price variance ($/Mcf)	$	1.51	$	1.89	$	(0.38)	(20)	%	$	(86,200)
Volume variance (Bcf)	221.4		220.7		0.7		—	%	1,323
Total									$	(84,877)

The decrease in natural gas revenues of ~~$22.7~~$84.9 million was primarily due to lower natural gas prices, partially offset by ~~higher production. The~~a slight increase in ~~production was~~production. Production increased slightly as a result of ~~an increase in~~the timing of our drilling and completion activities in ~~Pennsylvania.~~the Marcellus Shale in 2020 offset by strategic curtailments of production during the third quarter of 2020 due to weaker natural gas prices.

Impact of Derivative Instruments on Operating Revenues


	Three Months Ended September 30,
(In thousands)	2020		2019
Cash received (paid) on settlement of derivative instruments
(Loss) gain on derivative instruments	$	14,106	$	46,555
Non-cash gain (loss) on derivative instruments
(Loss) gain on derivative instruments	(56,359)		(35,495)
	$	(42,253)	$	11,060

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Three Months Ended
September 30,
(In thousands) 2019 2018
Cash received (paid) on settlement of derivative instruments

Gain (loss) on derivative instruments $ 46,555
$ (41 )
Non-cash gain (loss) on derivative instruments

Gain (loss) on derivative instruments (35,495 ) (3,496 )
$ 11,060
$ (3,537 )

~~Brokered Natural Gas~~

~~Brokered natural gas decreased $105.8 million. There was no brokered natural gas activity in the current period.~~

Operating and Other Expenses


	Three Months Ended September 30,					Variance						Three Months Ended September 30,				Variance
(In thousands)	2019		2018			Amount			Percent		(In thousands)	2020		2019		Amount		Percent
Operating and Other Expenses											Operating and Other Expenses
Direct operations	$	19,181	$	17,030		$	2,151		13	%	Direct operations	$	20,197	$	19,181	$	1,016	5	%
Transportation and gathering	145,681		129,534			16,147			12	%	Transportation and gathering	146,982		145,681		1,301		1	%
Brokered natural gas	—		93,405			(93,405		)	(100	)%
Taxes other than income	4,607		2,852			1,755			62	%	Taxes other than income	3,615		4,607		(992)		(22)	%
Exploration	4,481		10,049			(5,568		)	(55	)%	Exploration	3,900		4,481		(581)		(13)	%
Depreciation, depletion and amortization	110,889		121,172			(10,283		)	(8	)%	Depreciation, depletion and amortization	99,649		110,889		(11,240)		(10)	%

General and administrative	18,391		20,724			(2,333		)	(11	)%	General and administrative	24,262		18,391		5,871		32	%
	$	303,230	$	394,766		$	(91,536	)	(23	)%		$	298,605	$	303,230	$	(4,625)	(2)	%

Earnings (loss) on equity method investments	$	3,860	$	(11	)	$	3,871		35,191	%
Earnings on equity method investments											Earnings on equity method investments	$	—	$	3,860	$	(3,860)	(100)	%
Gain on sale of assets	36		25,655			(25,619		)	(100	)%	Gain on sale of assets	31		36		(5)		(14)	%

Interest expense, net	13,554		14,191			(637		)	(4	)%	Interest expense, net	14,389		13,554		835		6	%
Other expense	143		115			28			24	%	Other expense	57		143		(86)		(60)	%
Income tax expense	25,722		39,408			(13,686		)	(35	)%
Income tax (benefit) expense											Income tax (benefit) expense	(7,018)		25,722		(32,740)		(127)	%

Total costs and expenses from operations decreased by ~~$91.5~~$4.6 million ~~or 23 percent,~~ in the third quarter of ~~2019~~2020 compared to the same period of ~~2018.~~2019. The primary reasons for this fluctuation are as follows:

•Direct operations increased ~~$2.2~~$1.0 million primarily driven by higher ~~Marcellus Shale production.~~workover expense.

•Transportation and gathering increased ~~$16.1~~$1.3 million due to higher ~~Marcellus Shale production.~~demand charges.

~~Brokered natural gas decreased $93.4 million. There was no brokered natural gas activity in the current period.~~

~~Taxes other than income increased $1.8 million primarily due to $2.0 million higher drilling impact fees as a result of an increase in drilling activity in Pennsylvania.~~

~~Exploration decreased $5.6 million due to a decrease in exploratory dry hole costs of $5.3 million. The exploratory dry hole costs in 2018 were related to our activities in west Texas.~~

•Depreciation, depletion and amortization decreased ~~$10.3~~$11.2 million primarily due to lower amortization of unproved properties of ~~$16.5~~$14.0 million, partially offset by higher DD&A of ~~$6.1~~$2.3 million in the third quarter of 2020 compared to 2019. Amortization of unproved properties decreased due to lower amortization rates. The increase in DD&A was primarily due to an increase of ~~$15.9~~$2.0 million ~~related to higher production volumes in the Marcellus Shale, partially offset by a $9.8 million decrease~~ due to a ~~lower~~higher DD&A rate of $0.43 per Mcfe in the third quarter of 2020 compared to $0.42 per Mcfe for the third quarter of ~~2019 compared to $0.46 per Mcfe for the third quarter of 2018.~~2019. The ~~lower~~higher DD&A rate was due to ~~positive~~higher cost reserve ~~revisions related to our year end reserve estimation process. Amortization of unproved properties decreased due to lower amortization rates as a result of a decrease in exploratory activities.~~additions.

•General and administrative ~~decreased $2.3~~increased $5.9 million primarily due to ~~$4.4~~$9.3 million ~~lower~~higher stock-based compensation expense associated with certain of our market-based performance awards ~~in the third quarter of 2019. This decrease was~~ partially offset by a $1.2 million decrease in hardware and software costs. The remaining changes in other general and administrative expenses ~~that~~ were not individually significant.

Earnings ~~(Loss)~~ on Equity Method Investments

Earnings on equity method investments ~~increased~~decreased $3.9 million as a result of an increase in our proportionate share of net income from our equity method investments during the third quarter of 2019 compared to the third quarter of 2018 primarily from our investment in Meade, which commenced operations in late 2018.

~~Gain on Sale of Assets~~

~~There were no significant sales of assets in the third quarter of 2019. During the third quarter of 2018, we recognized a net aggregate gain of $25.7~~ million primarily due to the sale of ~~certain of~~ our ~~oil~~investments in Meade Pipeline Co LLC (Meade) in November 2019 and ~~gas assets~~Constitution Pipeline Company, LLC (Constitution) in ~~east Texas.~~

~~Interest Expense, net~~

Interest expense, net decreased $0.6 million due to $2.2 million lower interest expense resulting from the repayment of $237.0 million of our 6.51% weighted-average senior notes which matured in July 2018 and $67.0 million of our 9.78% senior notes which matured in December 2018 and a decrease in commitment fees on our revolving credit facility of $0.9 million. These decreases are offset by a decrease in reversals of interest expense related to certain income tax reserves of $1.9 million and a $1.0 million decrease in interest income.February 2020.

Income Tax (Benefit) Expense

Income tax expense decreased ~~$13.7~~$32.7 million due to lower pre-tax income and a ~~lower~~higher effective tax rate. The effective tax rates for the third quarter of 2020 and 2019 ~~and 2018~~ were ~~22.2~~31.9 percent and ~~24.4~~22.2 percent, respectively. The effective tax rate was ~~lower~~higher for the third quarter of 2020, where we recorded an income tax benefit, compared to the third quarter of 2019, where we recorded an income tax expense, due to the impact of non-recurring discrete items related to additional tax credits recorded during the third quarter of ~~2019 as compared to the third quarter of 2018.~~2020.

First Nine Months of ~~2019~~2020 and ~~2018~~2019 Compared

We reported net income in the first nine months of ~~2019~~2020 of ~~$534.1~~$69.3 million, or ~~$1.27~~$0.17 per share, compared to net income of ~~$282.0~~$534.1 million, or ~~$0.63~~$1.27 per share, in the first nine months of ~~2018.~~2019. The ~~increase~~decrease in net income was primarily due to ~~higher~~lower operating revenues and earnings on equity method investments, ~~and lower operating expenses, interest expense and loss on sale of assets,~~ partially offset by ~~higher~~lower income tax expense.

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Revenue, Price and Volume Variances

Our revenues vary from year to year as a result of changes in commodity prices and production volumes. Below is a discussion of revenue, price and volume variances.

Nine Months Ended September 30, Variance
(In thousands) 2019 2018 Amount Percent
Operating Revenues
   Natural gas $ 1,521,789
$ 1,217,603
$ 304,186
25 %
   Crude oil and condensate —
48,722
(48,722 ) (100 )%
   Gain (loss) on derivative instruments 82,966
(1,628 ) 84,594
5,196 %
   Brokered natural gas —
203,375
(203,375 ) (100 )%
   Other 154
3,775
(3,621 ) (96 )%
$ 1,604,909
$ 1,471,847
$ 133,062
9 %

Nine Months Ended September 30, Variance
Increase
(Decrease)
(In thousands)
2019 2018 Amount Percent
Price Variances

Natural gas $ 2.38
$ 2.33
$ 0.05
2 % $ 34,605
Crude oil and condensate $ —
$ 64.68
$ (64.68 ) (100 )% —
Total

$ 34,605
Volume Variances

Natural gas (Bcf) 639.3
523.6
115.7
22 % $ 269,581
Crude oil and condensate (Mbbl) —
754
(754 ) (100 )% (48,722 )
Total

$ 220,859


	Nine Months Ended September 30,				Variance
(In thousands)	2020		2019		Amount		Percent
Operating Revenues
Natural gas	$	991,882	$	1,521,789	$	(529,907)	(35)	%

Gain on derivative instruments	17,783		82,966		(65,183)		(79)	%
Other	181		154		27		18	%
	$	1,009,846	$	1,604,909	$	(595,063)	(37)	%

Natural Gas Revenues


	Nine Months Ended September 30,				Variance				Increase (Decrease) (In thousands)
	2020		2019		Amount		Percent
Price variance ($/Mcf)	$	1.55	$	2.38	$	(0.83)	(35)	%	$	(529,770)

Volume variance (Bcf)	639.2		639.3		(0.1)		—	%	(137)
Total									$	(529,907)

The ~~increase~~decrease in natural gas revenues of ~~$304.2~~$529.9 million was primarily due to lower natural gas prices and, to a lesser extent, slightly lower production. The slight decrease in production was due to ~~an increase in~~strategic curtailments of production ~~and higher~~during the third quarter of 2020 due to weaker natural gas ~~prices. The increase in~~prices offset by higher production ~~was a result~~during the period prior to such strategic curtailment due to the timing of ~~an increase in~~ our drilling and completion activities in ~~Pennsylvania.~~the Marcellus Shale in 2020.

~~Crude Oil and Condensate Revenues~~

~~The decrease in crude oil and condensate revenues of $48.7 million was primarily due to the sale of our Eagle Ford Shale assets in February 2018.~~

Impact of Derivative Instruments on Operating Revenues


	Nine Months Ended September 30,							Nine Months Ended September 30,
(In thousands)	2019			2018			(In thousands)	2020		2019
Cash received (paid) on settlement of derivative instruments							Cash received (paid) on settlement of derivative instruments
Gain (loss) on derivative instruments	$	114,931		$	(20,354	)
(Loss) gain on derivative instruments							(Loss) gain on derivative instruments	$	33,529	$	114,931
Non-cash gain (loss) on derivative instruments							Non-cash gain (loss) on derivative instruments
Gain (loss) on derivative instruments	(31,965		)	18,726
(Loss) gain on derivative instruments							(Loss) gain on derivative instruments	(15,746)		(31,965)
	$	82,966		$	(1,628	)		$	17,783	$	82,966

~~Brokered Natural Gas~~

~~Brokered natural gas decreased $203.4 million. There was no brokered natural gas activity in the current period.~~

Operating and Other Expenses


	Nine Months Ended September 30,				Variance
(In thousands)	2020		2019		Amount		Percent
Operating and Other Expenses
Direct operations	$	54,864	$	55,608	$	(744)	(1)	%
Transportation and gathering	425,563		424,703		860		—	%
Taxes other than income	10,705		14,094		(3,389)		(24)	%
Exploration	10,669		15,029		(4,360)		(29)	%
Depreciation, depletion and amortization	294,406		299,294		(4,888)		(2)	%

General and administrative	80,857		72,370		8,487		12	%
	$	877,064	$	881,098	$	(4,034)	—	%

(Loss) earnings on equity method investments	$	(59)	$	11,194	$	(11,253)	(101)	%
Gain (loss) on sale of assets	(139)		(1,464)		(1,325)		(91)	%
Interest expense, net	43,143		40,302		2,841		7	%

Other expense	171		430		(259)		(60)	%
Income tax expense	19,947		158,679		(138,732)		(87)	%

Nine Months Ended September 30, Variance
(In thousands) 2019 2018 Amount Percent
Operating and Other Expenses

   Direct operations $ 55,608
$ 52,757
$ 2,851
5 %
   Transportation and gathering 424,703
355,848
68,855
19 %
   Brokered natural gas —
178,437
(178,437 ) (100 )%
   Taxes other than income 14,094
15,434
(1,340 ) (9 )%
   Exploration 15,029
68,166
(53,137 ) (78 )%
   Depreciation, depletion and amortization 299,294
288,210
11,084
4 %
   General and administrative 72,370
66,013
6,357
10 %
$ 881,098
$ 1,024,865
$ (143,767 ) (14 )%

Earnings (loss) on equity method investments $ 11,194
$ (1,009 ) $ 12,203
1,209 %
Loss on sale of assets (1,464 ) (14,850 ) (13,386 ) (90 )%
Interest expense, net 40,302
57,577
(17,275 ) (30 )%
Other expense 430
347
83
24 %
Income tax expense 158,679
91,201
67,478
74 %

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Total costs and expenses from operations decreased by ~~$143.8~~$4.0 million ~~or 14 percent,~~ in the first nine months of ~~2019~~2020 compared to the same period of ~~2018.~~2019. The primary reasons for this fluctuation are as follows:


•	•Direct operations increased $2.9 million primarily driven by $13.0 million higher operating costs due to higher Marcellus Shale production partially offset by lower operating costs of $10.2 million primarily as a result of the the sale ~~of our Eagle Ford Shale assets in February 2018~~.

~~Transportation and gathering increased $68.9 million largely due to higher Marcellus Shale production.~~

~~Brokered natural gas~~ decreased ~~$178.4 million. There was no brokered natural gas activity in the current period.~~

Taxes other than income decreased $1.3 million primarily due to $2.4 million lower production taxes resulting from the sale of our Eagle Ford Shale assets in February 2018 partially offset by $1.5 million higher drilling impact fees due to increased drilling activity in Pennsylvania.

~~Exploration decreased $53.1~~$0.7 million due to a decrease in production and continued efficiencies in our operations in the Marcellus Shale. This decrease was offset by higher workover expenses during the period.

•Transportation and gathering increased $0.9 million due to higher demand charges.

•Taxes other than income decreased $3.4 million primarily due to $3.1 million lower drilling impact fees driven by a decrease in rates associated with lower natural gas prices and a decrease in drilling activities during 2020.

•Exploration decreased $4.4 million primarily due to a $3.6 million decrease in geological and geophysical expenses and a $1.4 million decrease in employee costs. These decreases were partially offset by higher in exploratory dry hole costs of ~~$56.4 million, partially offset by an increase of $4.7 million in geological and geophysical expenses. The exploratory dry hole costs in 2018 were related to our activities in west Texas.~~$2.0 million.

•Depreciation, depletion and amortization ~~increased $11.1~~decreased $4.9 million primarily due to ~~higher DD&A of $31.3 million, partially offset by~~ lower amortization of unproved properties of ~~$20.9~~$17.0 million, partially offset by higher DD&A of $11.1 million. Amortization of unproved properties decreased due to lower amortization rates. The increase in DD&A was ~~primarily~~

due to ~~an increase of $49.8 million related to~~a higher ~~production volumes in the Marcellus Shale, partially offset by a decrease of $18.5 million related to a lower~~ DD&A rate of $0.44 per Mcfe for the first nine months of 2020 compared to $0.42 per Mcfe for the first nine months of ~~2019 compared to $0.45 per Mcfe for the first nine months of 2018.~~2019. The ~~lower~~higher DD&A rate was due to ~~positive~~higher cost reserve ~~revisions related to our year end reserve estimation process. Amortization of unproved properties decreased due to lower amortization rates as a result of a decrease in exploratory activities.~~additions.

•General and administrative increased ~~$6.4~~$8.5 million primarily due to higher stock-based compensation expense of ~~$6.3~~$12.0 million associated with certain of our market-based performance awards ~~$2.5~~and a $1.8 million ~~of severance costs and $2.6 million of higher employee costs.~~increase in legal expenses. These increases were partially offset by ~~$6.3~~$2.5 million of lower ~~professional services~~severance costs that were incurred in the third quarter of 2019 and ~~legal fees.~~a $1.7 million decrease in employee-related expenses. The remaining changes in other general and administrative expenses were not individually significant.

(Loss) Earnings ~~(Loss)~~ on Equity Method Investments

Earnings on equity method investments increased $12.2 million as a result of an increase in our proportionate share of net income from our equity method investments in the first nine months of 2019 compared to the first nine months of 2018 primarily from our investment in Meade, which commenced operations in late 2018.

~~Gain (Loss) on Sale of Assets~~

~~There were no significant asset sales during the first nine months of 2019. During the first nine months of 2018, we recognized a net aggregate loss of $14.9~~decreased $11.3 million primarily due to the sale of our ~~Eagle Ford Shale assets, partially offset by a gain on the sale of oil~~investments in Meade in November 2019 and ~~gas properties~~Constitution in ~~east Texas.~~February 2020.

Interest Expense, net

Interest expense, net ~~decrease~~d ~~$17.3~~increased $2.8 million primarily due to ~~$13.0 million lower~~the reversal of interest expense ~~resulting from the repayment of $237.0 million of our 6.51% weighted-average senior notes which matured~~ in ~~July 2018 and $67.0 million of our 9.78% senior notes that matured in December 2018 and a $6.7 million decrease~~2019 related to certain income tax ~~reserves. These decreases are partially offset by a $3.2 million decrease~~reserves recorded in ~~interest income.~~prior periods.

Income Tax Expense

Income tax expense ~~increased $67.5~~decreased $138.7 million due to ~~higher~~lower pre-tax income ~~partially offset by~~and a lower effective tax rate. The effective tax rates for the first nine months of 2020 and 2019 ~~and 2018~~ were ~~22.9~~22.3 percent and ~~24.4~~22.9 percent, respectively. The effective tax rate was ~~higher~~lower for the first nine months of ~~2018 due~~2020 compared to an increase in the blended state statutory tax rate as a result of changes in our state apportionment factors attributable to the Eagle Ford Shale asset divestiture in February 2018. There were no significant apportionment changes recorded during the first nine months of ~~2019.~~2019 due to the impact of non-recurring discrete items related to additional tax credits recorded in 2020 partially offset by an increase in tax expense as a result of book compensation expense exceeding the federal and state tax deductions for employee stock-based compensation awards that vested during the period.

Forward-Looking Information

The statements regarding future financial and operating performance and results, strategic pursuits and goals, market prices, future hedging and risk management activities, and other statements that are not historical facts contained in this report are forward-looking statements. The words “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “budget,” “plan,” “forecast,” “target,” “predict,” “may,” “should,” “could,” “will”"expect," "project," "estimate," "believe," "anticipate," "intend," "budget," "plan," "forecast," "target," "predict," "may," "should," "could," "will" and similar expressions are also intended to identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, the continuing effects of the COVID-19 pandemic and the impact thereof on our business, financial condition and results of operations, the availability of cash on hand and other sources of liquidity to fund our capital expenditures, actions by, or disputes among or between, members of OPEC+, market factors, market prices (including geographic basis differentials) of natural gas, ~~and crude oil,~~ results of future drilling and marketing activity, future production and costs, ~~pipeline projects,~~ legislative and regulatory initiatives, electronic, cyber or physical security breaches and other factors detailed herein and in our other Securities and Exchange Commission filings. ~~See~~Refer to “Risk Factors” in Item 1A of ~~the~~our Form 10-K and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 for additional information about these risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Our primary market risk is exposure to natural gas prices. Realized prices are mainly driven by spot market prices for North American natural gas production, which can be volatile and unpredictable.

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 natural gas markets through the use of 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 provide only partial price protection by limiting the benefit to us of increases in prices, while protecting us in the event of 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 6 of the Notes to the Consolidated Financial Statements in our Form 10-K for a more detailed discussion of our derivative instruments.

Periodically, we enter into financial commodity derivatives including collar ~~swap~~ and ~~basis~~ swap agreements, to protect against exposure to commodity price declines related to our natural gas production. Our credit agreement restricts our ability to enter into financial commodity derivatives other than to hedge or mitigate risks to which we have actual or projected exposure or as permitted under our risk management policies and not subjecting us to material speculative risks. 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. Under the swap agreements, we receive a fixed price on a notional quantity of natural gas in exchange for paying a variable price based on a market-based index, such as the NYMEX natural gas futures.

As of September 30, ~~2019,~~2020, we had the following outstanding financial commodity derivatives:


			Collars										Estimated Fair Value Asset (Liability) (In thousands)
			Floor				Ceiling				Swaps
Type of Contract	Volume (Mmbtu)	Contract Period	Range ($/Mmbtu)		Weighted-Average ($/Mmbtu)		Range ($/Mmbtu)		Weighted-Average ($/Mmbtu)		Weighted-Average ($/Mmbtu)
Natural gas (NYMEX)	9,300,000	Oct. 2020									$	2.25	$	1,387
Natural gas (NYMEX)	15,500,000	Oct. 2020	$1.90 - $2.15		$	2.05	$2.10 - $2.38		$	2.24			303
Natural gas (NYMEX)	18,250,000	Jan. 2021-Dec. 2021									$	2.74	(3,291)
Natural gas (NYMEX)	127,750,000	Jan. 2021-Dec. 2021	$2.50 - $2.80		$	2.64	$2.83 - $3.50		$	3.02			(12,507)
Natural gas (NYMEX)	10,700,000	Apr. 2021-Oct. 2021	$	—	$	2.50	$	—	$	2.80			(1,736)
													$	(15,844)

Swaps Basis Swaps
Estimated
Fair Value
Asset (Liability)
(In thousands)

Type of Contract Volume (Mmbtu) Contract Period Weighted-Average ($/Mmbtu) Weighted-Average ($/Mmbtu)
Natural gas (IFERC TRANSCO Z6 non-NY) 2,760,000
Oct. 2019 - Dec. 2019 $ 0.41
$ 1,477
Natural gas (IFERC TRANSCO Z6 non-NY) 4,650,000
Oct. 2019 $ 2.61
5,253
Natural gas (IFERC TRANSCO Leidy Line Receipts) 13,800,000
Oct. 2019 - Dec. 2019 $ (0.53 ) 2,429
Natural gas (NYMEX) 10,850,000
Oct. 2019 $ 2.85
4,553
Natural gas (NYMEX) 27,600,000
Oct. 2019 - Dec. 2019 $ 2.86
11,993
$ 25,705
In October 2020, the Company entered into the following financial commodity derivatives:

Collars

Floor

Ceiling

Type of Contract

Volume (Mmbtu)

Contract Period

Range
($/Mmbtu)

Weighted-Average
($/Mmbtu)

Range
($/Mmbtu)

Weighted-Average
($/Mmbtu)

Natural gas (NYMEX)

36,500,000

Jan. 2021-Dec. 2021

$2.80 - $2.85

2.83

$3.00 - $3.94

3.32

The amounts set forth in the table above represent our total unrealized derivative position at September 30, ~~2019~~2020 and exclude the impact of non-performance risk. Non-performance risk is considered in the fair value of our derivative instruments that are recorded in our Condensed Consolidated Financial Statements and is primarily evaluated by reviewing credit default swap spreads for the various financial institutions with which we have derivative contracts, while our non-performance risk is evaluated using a market credit spread provided by ~~one~~several of our banks.

A significant portion of our expected natural gas production for 2020 and beyond is currently unhedged and directly exposed to the volatility in natural gas prices, whether favorable or unfavorable.

During the first nine months of ~~2019,~~2020, natural gas ~~basis~~collars with floor prices ranging from $1.90 to $2.15 per Mmbtu and ceiling prices ranging from $2.10 to $2.38 per Mmbtu covered 77.2 Bcf, or twelve percent of natural gas production at a

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weighted-average price of $2.09 per Mmbtu. Natural gas swaps covered ~~47.7~~44.5 Bcf, or seven percent of natural gas production at ~~an average~~a weighted-average price of ~~$2.36~~$2.24 per ~~Mcf. Natural gas swaps covered 184.2 Bcf, or 29 percent, of natural gas production at an average price of $3.39 per Mcf.~~Mmbtu.

We are exposed to market risk on financial commodity derivative instruments to the extent of changes in market prices of natural gas. However, the market risk exposure on these derivative contracts is generally offset by the gain or loss recognized upon the ultimate sale of the commodity. Although notional contract amounts are used to express the volume of natural gas agreements, the amounts that can be subject to credit risk in the event of non-performance by third parties are substantially smaller. Our counterparties are primarily commercial banks and financial service institutions that management believes present minimal credit risk and our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. We perform both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable. We have not incurred any losses related to non-performance risk of our counterparties and we do not anticipate any material impact on our financial results due to non-performance by third parties. However, we cannot be certain that we will not experience such losses in the future.

The preceding paragraphs contain forward-looking information concerning future production and projected gains and losses, which may be impacted both by production and by changes in the future commodity prices. ~~See~~Refer to “Forward-Looking Information” for further details.

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 amount reported in the Condensed Consolidated Balance Sheet for cash, ~~and~~ cash equivalents and restricted cash approximates fair value due to the short-term maturities of these instruments.

We use available market data and valuation methodologies to estimate the fair value of debt. The fair value of debt is the estimated amount we would have to pay a third party to assume the debt, including a credit spread for the difference between the issue rate and the period end market rate. The credit spread is our default or repayment risk. The credit spread (premium or discount) is determined by comparing our senior notes and revolving credit facility to new issuances (secured and unsecured) and secondary trades of similar size and credit statistics for both public and private debt. The fair value of all senior notes and the revolving credit facility is based on interest rates currently available to us.

The carrying amount and fair value of debt is as follow:


	September 30, 2020				December 31, 2019
(In thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Long-term debt	$	1,161,712	$	1,213,402	$	1,220,025	$	1,260,259
Current maturities	(188,000)		(189,501)		(87,000)		(88,704)
Long-term debt, excluding current maturities	$	973,712	$	1,023,901	$	1,133,025	$	1,171,555

September 30, 2019 December 31, 2018
(In thousands)
Carrying
Amount

Estimated Fair
Value

Carrying
Amount

Estimated Fair
Value
Long-term debt $ 1,219,790
$ 1,258,674
$ 1,226,104
$ 1,202,994
Current maturities (87,000 ) (89,210 ) —
—
Long-term debt, excluding current maturities $ 1,132,790
$ 1,169,464
$ 1,226,104
$ 1,202,994

ITEM 4. Controls and Procedures

As of September 30, ~~2019,~~2020, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective, in all material respects, with respect to the recording, processing, summarizing and reporting, within the time periods specified in the Commission’s rules and forms, of information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

There were no changes in ~~the Company's~~ internal control over financial reporting that occurred during the third quarter of ~~2019~~2020 that have materially affected, or are reasonably likely to ~~materially~~have a material effect on, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

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Legal Matters

The information set forth under the heading “Legal Matters” in Note 8 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q is incorporated by reference in response to this item.

Environmental Matters

On June 17, 2019, we received two proposed Consent Order and Agreements ~~(“CO&A”)~~(CO&A) from the Pennsylvania Department of Environmental Protection (PaDEP) relating to gas migration allegations in areas surrounding several wells owned and operated by us in Susquehanna County, Pennsylvania. The allegations relating to these wells were initially raised by residents in the area in March and June 2017, respectively, in the form of complaints about their drinking water supply. Since then, we have been engaged with the PaDEP in investigating the incidents and have performed appropriate remediation efforts, including the provision of alternative sources of drinking water to the affected residents. We received Notices of Violation ~~(“NOV”)~~(NOV) from the PaDEP in June and November, 2017, respectively, for failure to prevent the migration of gas into fresh groundwater sources in the area surrounding these wells. With regard to the June 2017 NOV, we believe these water quality complaints have been resolved, and we are working with the PaDEP to reach agreement on the disposition of this matter. The proposed CO&A is the culmination of this effort and, if finalized, would result in the payment of a civil monetary penalty in an amount likely to exceed $100,000, up to approximately $215,000. We will continue to work with the PaDEP to finalize the CO&A, and to bring this matter to a close. With regard to the November 2017 NOV, ~~The~~the proposed CO&A, if finalized as drafted, would require Cabot to submit a detailed written remediation plan, continue water sampling and other investigative measures and restore or replace affected water supplies and would result in the payment of a civil monetary penalty in an amount likely to exceed $100,000, up to approximately $355,000. We will continue to work with the PaDEP to finalize the CO&A, and to complete the ongoing investigation and remediation.

From time to time we receive notices of violation from governmental and regulatory authorities in areas in which we operate relating to alleged violations of environmental statutes or the rules and regulations promulgated thereunder. While we cannot predict with certainty whether these notices of violation will result in fines and/or penalties, if fines and/or penalties are imposed, they may result in monetary sanctions, individually or in the aggregate, in excess of $100,000.

ITEM 1A. Risk Factors

For additional information about the risk factors that affect us, see Item 1A of Part I of our ~~Annual Report on~~ Form 10-K for the fiscal year ended December 31, ~~2018.~~2019 and Item 1A of Part II of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. Additional risks and uncertainties, including risks and uncertainties not presently known to us, or that we currently deem immaterial, could also have an adverse effect on our business, financial condition and/or results of operations.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Our Board of Directors has authorized a share repurchase program under which we may purchase shares of common stock in the open market or in negotiated transactions. There is no expiration date associated with the authorization. ~~In July 2019, our Board~~There were no repurchases during the quarter ended September 30, 2020. The maximum number of ~~Directors authorized an increase of 25.0 million~~remaining shares tothat may be purchased under our share repurchase program. After this authorization, the total number of shares available for repurchase was 31.5 million shares. The shares included in the table below were purchased on the open market and were held as treasury stockprogram as of September 30, ~~2019.~~2020 was 11.0 million shares.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 2019 4,200,000
$ 19.22
4,200,000
27,299,362
August 2019 6,259,780
$ 17.53
6,259,780
21,039,582
September 2019 6,900
$ 16.99
6,900
21,032,682
Total 10,466,680
10,466,680

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ITEM 6. Exhibits


Exhibit Number		Description

~~Exhibit~~ ~~Number~~31.1		~~Description~~

~~31.1~~	302 Certification — Chairman, President and Chief Executive Officer.

31.2		302 Certification —Executive Vice President and Chief Financial Officer.

32.1		906 Certification.

101.INS		XBRL Instance Document. TheThe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	CABOT OIL & GAS CORPORATION
	(Registrant)

October ~~25, 2019~~30, 2020	By:	/s/ DAN O. DINGES
		Dan O. Dinges
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

October ~~25, 2019~~30, 2020	By:	/s/ SCOTT C. SCHROEDER
		Scott C. Schroeder
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

October ~~25, 2019~~30, 2020	By:	/s/ TODD M. ROEMER
		Todd M. Roemer
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

3129



			Swaps		Basis Swaps
Type of Contract	Volume (Mmbtu)	Contract Period	Weighted-Average ($/Mmbtu)		Weighted-Average ($/Mmbtu)
Natural gas (IFERC TRANSCO Z6 non-NY)	2,760,000	Oct. 2019 - Dec. 2019			$	0.41
Natural gas (IFERC TRANSCO Z6 non-NY)	4,650,000	Oct. 2019	$	2.61
Natural gas (IFERC TRANSCO Leidy Line Receipts)	13,800,000	Oct. 2019 - Dec. 2019			$	(0.53	)
Natural gas (NYMEX)	10,850,000	Oct. 2019	$	2.85
Natural gas (NYMEX)	27,600,000	Oct. 2019 - Dec. 2019	$	2.86



(In thousands)	Nine Months Ended September 30, 2019
Balance at beginning of period⁽¹⁾	$	51,622
Liabilities incurred	4,776
Liabilities settled	(1,232		)
Liabilities divested	(187		)
Accretion expense	2,489
Balance at end of period⁽²⁾	$	57,468



(In thousands)
2019	$	5,571
2020	5,684
2021	4,777
2022	1,659
2023	1,691
Thereafter	2,852
	$	22,234



(In thousands)	Year Ending December 31,
2019 (excluding the nine months ended September 30, 2019)	$	2,419
2020	4,819
2021	4,755
2022	4,577
2023	4,613
Thereafter	29,824
Total undiscounted lease payments	51,007
Present value adjustment	(13,401		)
Net operating lease liabilities	$	37,606



(In thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,149	$	3,395
Investing cash flows from operating leases	$	1,831	$	5,433



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 2019	4,200,000	$	19.22	4,200,000	27,299,362
August 2019	6,259,780	$	17.53	6,259,780	21,039,582
September 2019	6,900	$	16.99	6,900	21,032,682
Total	10,466,680			10,466,680