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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2021
       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, Texas 77024
(Address of principal executive offices, including ZIP code)
(281) 589-4600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.10 per shareCOGNew 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.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of July 28, 2021, there were 399,664,181 shares of Common Stock, Par Value $0.10 Per Share, outstanding.


Table of Contents
CABOT OIL & GAS CORPORATION
INDEX TO FINANCIAL STATEMENTS
  Page
 
   
 
   
   
   
   
   
   
   
   
 
   
   
   
  
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands, except share amounts)June 30,
2021
December 31,
2020
ASSETS  
Current assets  
Cash and cash equivalents$158,147 $140,113 
Restricted cash10,767 11,578 
Accounts receivable, net182,700 214,724 
Income taxes receivable22,424 6,171 
Inventories 17,395 15,270 
Derivative instruments 26,209 
Other current assets4,633 1,650 
Total current assets 396,066 415,715 
Properties and equipment, net (Successful efforts method) 4,150,791 4,044,606 
Other assets 63,710 63,211 
$4,610,567 $4,523,532 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities  
Accounts payable $166,256 $162,081 
Current portion of long-term debt100,000 188,000 
Accrued liabilities 20,080 22,374 
Interest payable15,149 17,771 
Derivative instruments77,199  
Total current liabilities 378,684 390,226 
Long-term debt, net946,316 945,924 
Deferred income taxes 788,811 774,195 
Asset retirement obligations89,307 85,489 
Postretirement benefits31,633 30,713 
Other liabilities 75,921 81,278 
Total liabilities2,310,672 2,307,825 
Commitments and contingencies
Stockholders' equity  
Common stock:  
Authorized — 960,000,000 shares of $0.10 par value in 2021 and 2020, respectively
  
Issued — 478,621,499 shares and 477,828,813 shares in 2021 and 2020, respectively
47,862 47,783 
Additional paid-in capital 1,815,770 1,804,354 
Retained earnings 2,257,320 2,184,352 
Accumulated other comprehensive income2,144 2,419 
Less treasury stock, at cost:  
78,957,318 shares and 78,957,318 shares in 2021 and 2020, respectively
(1,823,201)(1,823,201)
Total stockholders' equity 2,299,895 2,215,707 
 $4,610,567 $4,523,532 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
 Three Months Ended 
June 30,
Six Months Ended 
June 30,
(In thousands, except per share amounts)2021202020212020
OPERATING REVENUES    
   Natural gas $411,718 $288,286 $884,577 $658,626 
   (Loss) gain on derivative instruments(87,121)43,974 (100,358)60,036 
   Other 70 88 129 143 
 324,667 332,348 784,348 718,805 
OPERATING EXPENSES    
   Direct operations16,154 17,423 33,030 34,667 
   Transportation and gathering133,488 135,249 270,190 278,581 
   Taxes other than income 4,183 3,352 8,988 7,090 
   Exploration 2,368 4,579 4,995 6,769 
   Depreciation, depletion and amortization 91,549 94,622 185,697 194,757 
   General and administrative 23,037 23,166 52,193 56,595 
 270,779 278,391 555,093 578,459 
Loss on equity method investments   (59)
Gain (loss) on sale of assets 20 (241)91 (170)
INCOME FROM OPERATIONS 53,908 53,716 229,346 140,117 
Interest expense, net12,558 14,543 24,935 28,754 
Other expense46 48 92 114 
Income before income taxes 41,304 39,125 204,319 111,249 
Income tax expense10,840 8,751 47,501 26,965 
NET INCOME$30,464 $30,374 $156,818 $84,284 
Earnings per share    
Basic $0.08 $0.08 $0.39 $0.21 
Diluted$0.08 $0.08 $0.39 $0.21 
Weighted-average common shares outstanding     
Basic399,586 398,576 399,355 398,460 
Diluted 402,206 401,279 401,740 400,219 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
 Six Months Ended 
June 30,
(In thousands)20212020
CASH FLOWS FROM OPERATING ACTIVITIES  
  Net income $156,818 $84,284 
  Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation, depletion and amortization185,697 194,757 
Deferred income tax expense14,695 52,089 
(Gain) loss on sale of assets(91)170 
Exploratory dry hole cost 2,011 
Loss (gain) on derivative instruments100,358 (60,036)
Net cash received in settlement of derivative instruments3,050 19,423 
Loss on equity method investments 59 
Amortization of debt issuance costs1,424 1,501 
Stock-based compensation and other14,702 23,463 
  Changes in assets and liabilities:  
Accounts receivable, net32,024 91,106 
Income taxes(16,253)(25,547)
Inventories(2,125)(4,452)
Other current assets(2,983)(1,663)
Accounts payable and accrued liabilities(11,872)(36,453)
Interest payable(2,622)(97)
Other assets and liabilities(3,353)718 
Net cash provided by operating activities469,469 341,333 
CASH FLOWS FROM INVESTING ACTIVITIES  
Capital expenditures(274,939)(331,183)
Proceeds from sale of assets112 275 
Investment in equity method investments (35)
Proceeds from sale of equity method investments (9,424)
Net cash used in investing activities(274,827)(340,367)
CASH FLOWS FROM FINANCING ACTIVITIES  
Repayments of debt(88,000) 
Dividends paid(83,850)(79,675)
Tax withholdings on vesting of stock awards(5,569)(6,332)
Net cash used in financing activities(177,419)(86,007)
Net increase (decrease) in cash, cash equivalents and restricted cash17,223 (85,041)
Cash, cash equivalents and restricted cash, beginning of period151,691 213,783 
Cash, cash equivalents and restricted cash, end of period$168,914 $128,742 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CABOT OIL & GAS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
(In thousands, except per share amounts)Common SharesCommon Stock ParTreasury SharesTreasury StockPaid-In CapitalAccumulated Other Comprehensive IncomeRetained EarningsTotal
Balance at December 31, 2020477,829 $47,783 78,957 $(1,823,201)$1,804,354 $2,419 $2,184,352 $2,215,707 
Net income— — — — — — 126,354 126,354 
Stock amortization and vesting548 55 — — 3,878 — — 3,933 
Cash dividends at $0.10 per share
— — — — — — (39,887)(39,887)
Other comprehensive loss— — — — — (137)— (137)
Balance at March 31, 2021478,377 $47,838 78,957 $(1,823,201)$1,808,232 $2,282 $2,270,819 $2,305,970 
Net income— — — — — — 30,464 30,464 
Stock amortization and vesting244 24 — — 7,538 — — 7,562 
Cash dividends at $0.11 per share
— — — — — — (43,963)(43,963)
Other comprehensive loss— — — — — (138)— (138)
Balance at June 30, 2021478,621 $47,862 78,957 $(1,823,201)$1,815,770 $2,144 $2,257,320 $2,299,895 

(In thousands, except per share amounts)Common SharesCommon Stock ParTreasury SharesTreasury StockPaid-In CapitalAccumulated Other Comprehensive IncomeRetained EarningsTotal
Balance at December 31, 2019476,882 $47,688 78,957 $(1,823,201)$1,782,427 $1,360 $2,143,213 $2,151,487 
Net income— — — — — — 53,910 53,910 
Stock amortization and vesting651 65 — — 2,886 — — 2,951 
Cash dividends at $0.10 per share
— — — — — — (39,817)(39,817)
Other comprehensive loss— — — — — (136)— (136)
Balance at March 31, 2020477,533 $47,753 78,957 $(1,823,201)$1,785,313 $1,224 $2,157,306 $2,168,395 
Net income— — — — — — 30,374 30,374 
Stock amortization and vesting2 1 — — 7,218 — — 7,219 
Cash dividends at $0.10 per share
— — — — — — (39,858)(39,858)
Other comprehensive loss— — — — — (151)— (151)
Balance at June 30, 2020477,535 $47,754 78,957 $(1,823,201)$1,792,531 $1,073 $2,147,822 $2,165,979 

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, 2020 (Form 10-K) filed with the Securities and Exchange Commission (SEC), except for any new accounting pronouncements adopted during the period. 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.
2. Acquisitions
Pending Merger
On May 23, 2021, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with Cimarex Energy Co. (Cimarex) to combine via an all-stock merger transaction (Merger). Cimarex is an independent oil and gas exploration and production company with operations located primarily in Texas, New Mexico and Oklahoma. Under terms of the Merger Agreement, each share of Cimarex common stock will be converted automatically into the right to receive 4.0146 shares of common stock of the Company at closing. No fractional shares of common stock of the Company will be issued in the Merger, and holders of shares of Cimarex common stock will instead receive cash in lieu of fractional shares of common stock of the Company, if any. The respective Boards of Directors of the Company and Cimarex unanimously approved the Merger, which is still subject to the approval of the stockholders of each of the Company and Cimarex. The Merger Agreement includes certain restrictions on the conduct of the business of the Company until the closing, such as a requirement to operate in the ordinary course of business and limitations on, among other things, dividends, stock repurchases and debt repurchases. If the Merger does not occur, and under certain circumstances, the Company or Cimarex may be required to pay the other party a termination fee of $250.0 million or an expense reimbursement of $40.0 million. Until the approval by stockholders and subsequent closing, the Company must continue to operate as a stand-alone company.
The Merger is expected to close in the fourth quarter of 2021, subject to stockholder approvals and other customary closing conditions.
3. Properties and Equipment, Net
Properties and equipment, net are comprised of the following:
(In thousands)June 30,
2021
December 31,
2020
Proved oil and gas properties$7,359,138 $7,068,605 
Unproved oil and gas properties 45,667 49,829 
Land, buildings and other equipment 94,353 92,566 
 7,499,158 7,211,000 
Accumulated depreciation, depletion and amortization(3,348,367)(3,166,394)
 $4,150,791 $4,044,606 
At June 30, 2021, the Company did not have any projects with exploratory well costs capitalized for a period of greater than one year after drilling.
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4. Debt and Credit Agreements
The Company’s debt and credit agreements consisted of the following:
(In thousands)June 30,
2021
December 31,
2020
6.51% weighted-average senior notes
$37,000 $37,000 
5.58% weighted-average senior notes(1)
87,000 175,000 
3.65% weighted-average senior notes(2)
925,000 925,000 
Unamortized debt issuance costs(2,684)(3,076)
$1,046,316 $1,133,924 
________________________________________________________
(1)Includes $88.0 million of current portion of long-term debt at December 31, 2020, which the Company repaid in January 2021.
(2)Includes $100.0 million of current portion of long-term debt at June 30, 2021 and December 31, 2020 due in September 2021.
At June 30, 2021, the Company was in compliance with all financial and other covenants applicable to its revolving credit facility and senior notes.
Revolving Credit Agreement
The borrowing base under the terms of the Company's revolving credit facility is redetermined annually 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. Effective April 21, 2021, the borrowing base and available commitments were reaffirmed at $3.2 billion and $1.5 billion, respectively.
On June 17, 2021, the Company entered into an amendment to the credit agreement relating to its revolving credit facility to, among other things, remove the requirement that certain of the Company’s restricted subsidiaries become guarantors under the credit agreement, expand the permissible indebtedness that may be held or incurred by a restricted subsidiary and make certain other changes to permit the Company and Cimarex to complete the Merger. The effectiveness of the credit agreement amendment is conditioned upon, among other things, the completion of the Merger.
At June 30, 2021, the Company had no borrowings outstanding under its revolving credit facility and had unused commitments of $1.5 billion.
5. Derivative Instruments
As of June 30, 2021, the Company had the following outstanding financial commodity derivatives:
Collars
   FloorCeilingSwaps
Type of ContractVolume (Mmbtu)Contract PeriodRange
($/Mmbtu)
Weighted-Average
($/Mmbtu)
Range
($/Mmbtu)
Weighted-Average
($/Mmbtu)
Weighted-Average
($/Mmbtu)
Natural gas (NYMEX)9,200,000Jul. 2021-Dec. 2021$2.74 
Natural gas (NYMEX)82,800,000Jul. 2021-Dec. 2021
$2.50 - $2.85
$2.68 
$2.88 - $3.80
$3.05 
Natural gas (NYMEX)6,150,000Jul. 2021-Oct. 2021$ $2.50 $ $2.80 
Natural gas (NYMEX)12,300,000Jul. 2021-Oct. 2021$2.78 
In July 2021, the Company entered into the following financial commodity derivatives:
   Swaps
Type of ContractVolume (Mmbtu)Contract PeriodWeighted-Average
($/Mmbtu)
Natural gas (NYMEX)9,200,000Oct. 2021-Dec. 2021$4.01 
Natural gas (NYMEX)9,150,000Nov. 2021-Dec. 2021$4.02 
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Effect of Derivative Instruments on the Condensed Consolidated Balance Sheet
  Derivative AssetsDerivative Liabilities
(In thousands)Balance Sheet LocationJune 30,
2021
December 31,
2020
June 30,
2021
December 31,
2020
Commodity contractsDerivative instruments (current)$ $26,209 $77,199 $ 

Offsetting of Derivative Assets and Liabilities in the Condensed Consolidated Balance Sheet
(In thousands)June 30,
2021
December 31,
2020
Derivative assets  
Gross amounts of recognized assets$ $26,354 
Gross amounts offset in the condensed consolidated balance sheet (145)
Net amounts of assets presented in the condensed consolidated balance sheet 26,209 
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet  
Net amount$ $26,209 
Derivative liabilities   
Gross amounts of recognized liabilities$77,199 $145 
Gross amounts offset in the condensed consolidated balance sheet (145)
Net amounts of liabilities presented in the condensed consolidated balance sheet77,199  
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet  
Net amount$77,199 $ 

Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
 Three Months Ended 
June 30,
Six Months Ended 
June 30,
(In thousands)2021202020212020
Cash received (paid) on settlement of derivative instruments    
(Loss) gain on derivative instruments$(347)$19,423 $3,050 $19,423 
Non-cash gain (loss) on derivative instruments    
(Loss) gain on derivative instruments(86,774)24,551 (103,408)40,613 
 $(87,121)$43,974 $(100,358)$60,036 

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.
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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  
June 30, 2021
Assets    
Deferred compensation plan$25,820 $ $ $25,820 
Derivative instruments    
$25,820 $ $ $25,820 
Liabilities   
Deferred compensation plan$34,477 $ $ $34,477 
Derivative instruments 18,825 58,374 77,199 
$34,477 $18,825 $58,374 $111,676 
(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, 2020
Assets    
Deferred compensation plan$22,510 $ $ $22,510 
Derivative instruments 2,647 23,707 26,354 
$22,510 $2,647 $23,707 $48,864 
Liabilities   
Deferred compensation plan$30,581 $ $ $30,581 
Derivative instruments  145 145 
$30,581 $ $145 $30,726 
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 or internal models. Such quotes and models have been derived using an income approach that considers various inputs, including current market and contractual prices for the underlying instruments, quoted forward commodity prices, basis differentials, volatility factors and interest rates for a similar length of time as the derivative contract term as applicable. Estimates are derived from or verified using relevant NYMEX futures contracts and 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 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 market credit spreads provided by several of the Company's banks. The Company has not incurred any losses related to non-performance risk of its counterparties and does not anticipate any material impact on its financial results due to non-performance by third parties.
The most significant unobservable inputs relative to the Company's Level 3 derivative contracts are volatility factors. An increase (decrease) in these unobservable inputs would result in an increase (decrease) in fair value, respectively. The Company does not have access to the specific assumptions used in its counterparties' valuation models. Consequently, additional disclosures regarding significant Level 3 unobservable inputs were not provided.
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The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy:
Six Months Ended 
June 30,
(In thousands)20212020
Balance at beginning of period$23,562 $(22)
Total gain (loss) included in earnings(78,164)31,721 
Settlement (gain) loss(3,772)(10,314)
Transfers in and/or out of Level 3  
Balance at end of period$(58,374)$21,385 
Change in unrealized gains (losses) relating to assets and liabilities still held at the end of the period$(63,794)$21,647 
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 none of the Company’s other non-financial assets and liabilities were measured at fair value as of June 30, 2021, additional disclosures were not required.
The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy.
Fair Value of Other Financial Instruments
The estimated fair value of other financial instruments is the amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the Condensed Consolidated Balance Sheet for cash and cash equivalents and restricted cash approximate fair value, due to the short-term maturities of these instruments. Cash and cash equivalents and restricted cash are classified as Level 1 in the fair value hierarchy and the remaining financial instruments are classified as Level 2.
The 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 outstanding debt to new issuances (secured and unsecured) and secondary trades of similar size and credit statistics for both public and private debt. The estimated fair value of the Company's outstanding debt 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.
The carrying amount and estimated fair value of debt is as follows:
 June 30, 2021December 31, 2020
(In thousands)Carrying
Amount
Estimated Fair
Value
Carrying
Amount
Estimated Fair
Value
Long-term debt$1,046,316 $1,118,321 $1,133,924 $1,213,811 
Current maturities(100,000)(100,444)(188,000)(189,332)
Long-term debt, excluding current maturities$946,316 $1,017,877 $945,924 $1,024,479 

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7. Asset Retirement Obligations
Activity related to the Company’s asset retirement obligations is as follows:
(In thousands)Six Months Ended 
June 30, 2021
Balance at beginning of period$85,989 
Liabilities incurred1,544 
Accretion expense2,274 
Balance at end of period89,807 
Less: current asset retirement obligations(500)
Noncurrent asset retirement obligations$89,307 
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” and "Lease Commitments" as disclosed in Note 9 of the Notes to Consolidated Financial Statements in the Form 10-K.
Legal Matters
Pennsylvania Office of Attorney General Matter
On June 16, 2020, the Office of Attorney General of the Commonwealth of Pennsylvania informed the Company that it will pursue certain misdemeanor and felony charges in a Susquehanna County Magisterial District Court against the Company related to alleged violations of the Pennsylvania Clean Streams Law, which prohibits discharge of industrial wastes. The Company is vigorously defending itself against such charges; however, the proceedings could result in fines or penalties against the Company. 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 possible in this case.
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 financial position, results of operations or cash flows.
Contingency Reserves
When deemed necessary, the Company establishes reserves for certain legal proceedings. The establishment of a reserve is based on an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible that the Company could incur additional losses with respect to those matters for which reserves have been established. The Company believes that any such amount above the amounts accrued would not be material to the Condensed Consolidated Financial Statements. Future changes in facts and circumstances not currently known or foreseeable could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.
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9. Revenue Recognition
Disaggregation of Revenue
The following table presents revenues from contracts with customers disaggregated by product:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2021202020212020
Natural gas $411,718 $288,286 $884,577 $658,626 
Other 70 88 129 143 
$411,788 $288,374 $884,706 $658,769 
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 June 30, 2021, the Company has $8.0 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 two to 17 years.
Contract Balances
Receivables from contracts with customers are recorded when the right to consideration becomes unconditional, which is generally when control of the product has been transferred to the customer. Receivables from contracts with customers were $183.2 million and $215.3 million as of June 30, 2021 and December 31, 2020, 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
Dividends
In April 2021, the Board of Directors approved an increase in the quarterly dividend on the Company's common stock from $0.10 per share to $0.11 per share.
11. 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 $4.3 million and $8.3 million in the second quarter of 2021 and 2020, respectively, and $16.0 million and $24.6 million in the first six months of 2021 and 2020, respectively. Stock-based compensation expense is included in general and administrative expense in the Condensed Consolidated Statement of Operations.
Refer to Note 14 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 six months of 2021, the Company granted 105,335 restricted stock units, with a weighted-average grant date value of $18.54 per unit, to the Company's non-employee directors. 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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Also during the first six months of 2021, the Company issued 244,433 shares of common stock in connection with the vesting of restricted stock units with a weighted-average grant date value of $14.08 upon the retirement of one of the Company's non-employee directors in the second quarter of 2021.
Performance Share Awards
The performance period for the awards granted during the first six months of 2021 commenced on January 1, 2021 and ends on December 31, 2023. The Company used an annual forfeiture rate assumption ranging from zero percent to four percent 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 June 30, 2021, 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 six months of 2021, the Company granted 696,280 Employee Performance Share Awards at a grant date value of $18.58 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 period, as set by the compensation committee of the Company's Board of Directors. If the Company does not meet the performance metric for the applicable period, then the performance shares that would have been issued on the anniversary date will be forfeited.
Hybrid Performance Share Awards. During the first six months of 2021, the Company granted 423,171 Hybrid Performance Share Awards at a grant date value of $18.58 per share. The 2021 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 compensation committee of the Company's Board of Directors. 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 six months of 2021, the Company granted 723,224 TSR Performance Share Awards which are earned, or not earned, based on the comparative performance of the Company’s common stock measured against a predetermined group of companies in the Company’s peer group over a three-year performance period. The Company incorporated a new feature in the 2021 TSR awards that will reduce the potential cash component of the award if the actual performance is negative over the three-year period and the base calculation indicates an above-target payout.
The following assumptions were used to determine the grant date fair value of the equity component on February 17, 2021 and the period-end fair value of the liability component of the TSR Performance Share Awards:
 Grant DateJune 30,
2021
Fair value per performance share award $16.07 
$1.45 - $6.94
Assumptions:   
     Stock price volatility39.8 %
36.1% - 47.5%
     Risk free rate of return0.20 %
0.06% - 0.35%
12. 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 
June 30,
Six Months Ended 
June 30,
(In thousands)2021202020212020
Weighted-average shares - basic399,586 398,576 399,355 398,460 
Dilution effect of stock awards at end of period2,620 2,703 2,385 1,759 
Weighted-average shares - diluted402,206 401,279 401,740 400,219 
The following table presents weighted-average shares excluded from diluted EPS due to the anti-dilutive effect:
Three Months Ended 
June 30,
Six Months Ended 
June 30,
(In thousands)2021202020212020
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect calculated using the treasury stock method1  1,358 942 
13. Additional Balance Sheet Information
Certain balance sheet amounts are comprised of the following:
(In thousands)June 30,
2021
December 31,
2020
Accounts receivable, net  
Trade accounts $183,174 $215,301 
Other accounts 565 462 
 183,739 215,763 
Allowance for doubtful accounts (1,039)(1,039)
 $182,700 $214,724 
Other assets  
Deferred compensation plan $25,820 $22,510 
Debt issuance costs5,844 6,875 
Operating lease right-of-use assets32,002 33,741 
Other accounts44 85 
 $63,710 $63,211 
Accounts payable  
Trade accounts $18,595 $12,896 
Royalty and other owners 28,206 37,243 
Accrued transportation47,898 52,238 
Accrued capital costs 52,994 37,872 
Taxes other than income 8,805 13,736 
Other accounts9,758 8,096 
 $166,256 $162,081 
Accrued liabilities  
Employee benefits $11,882 $14,270 
Taxes other than income 2,965 3,026 
Operating lease liabilities3,951 3,991 
Other accounts 1,282 1,087 
 $20,080 $22,374 
Other liabilities  
Deferred compensation plan $34,477 $30,581 
Operating lease liabilities 27,935 29,628 
Other accounts13,509 21,069 
 $75,921 $81,278 
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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 six month periods ended June 30, 2021 and 2020 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, 2020 (Form 10-K).
OVERVIEW
Announced Merger Involving Cimarex
On May 23, 2021, we entered into an Agreement and Plan of Merger (Merger Agreement) with Cimarex Energy Co. (Cimarex) to combine via an all-stock merger transaction (Merger). Cimarex is an independent oil and gas exploration and production company with operations located primarily in Texas, New Mexico and Oklahoma. Under terms of the Merger Agreement, each share of Cimarex common stock will be converted automatically into the right to receive 4.0146 shares of our common stock at closing. No fractional shares of our common stock will be issued in the Merger, and holders of shares of Cimarex common stock will instead receive cash in lieu of fractional shares of our common stock, if any. The respective Boards of Directors of Cabot and Cimarex unanimously approved the Merger, which is still subject to the approval of the stockholders of each of Cabot and Cimarex. The Merger Agreement includes certain restrictions on the conduct of Cabot's business until the closing, such as a requirement to operate in the ordinary course of business and limitations on, among other things, dividends, stock repurchases and debt repurchases. If the Merger does not occur, and under certain circumstances, Cabot or Cimarex may be required to pay the other party a termination fee of $250.0 million or an expense reimbursement of $40.0 million. Until the approval by stockholders and subsequent closing, we must continue to operate as a stand-alone company.
The Merger is expected to close in the fourth quarter of 2021, subject to stockholder approvals and other customary closing conditions.
Merger-related Lawsuits
In June and July 2021, four putative stockholders of Cimarex filed separate lawsuits related to the Merger against Cimarex and its Board of Directors. Three of the lawsuits were filed in the United States District Court for the Southern District of New York and are captioned Wang v. Cimarex, et al., Case No. 1:21-cv-05672, Graff v. Cimarex, et al., Case No. 1:21-cv-05804, and Elliot v. Cimarex, et. al., Case No. 1:21-cv-06315. The other lawsuit was filed in the United States District Court for the District of Colorado and is captioned Woodyard v. Cimarex, et al., Case No. 1:21-cv-01850. Each of the actions is asserted only on behalf of the named plaintiff.
All four actions allege violations of Section 14(a) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule 14a-9 promulgated thereunder based on various alleged omissions of material information from the registration statement on Form S-4 filed in connection with the Merger. One of the actions (Elliot) also asserts claims that the members of the Cimarex Board of Directors breached fiduciary duties in connection with the Merger and that Cimarex aided and abetted those alleged breaches. Each action names as defendants Cimarex and each of its directors, and seeks, among other things, to enjoin the Merger (or, in the alternative, rescission or an award for rescissory damages in the event the Merger is completed), an award of costs and attorneys’ and experts’ fees, and such other and further relief as the court may deem just and proper. We believe that the actions are without merit.
Financial and Operating Overview
Financial and operating results for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 reflect the following:
Natural gas production decreased 11.4 Bcf from 417.8 Bcf, or 2,296 Mmcf per day, in the 2020 period to 406.4 Bcf, or 2,245 Mmcf per day, in the 2021 period. The decrease was driven by reduced capital spending during 2020 related to our maintenance capital program and the timing of our drilling and completion activities in the Marcellus Shale in 2021.
Average realized natural gas price was $2.18 per Mcf, 35 percent higher than the $1.62 per Mcf realized in the corresponding period of the prior year.
Total capital expenditures were $290.1 million compared to $335.6 million in the corresponding period of the prior year.
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Drilled 56 gross wells (53.1 net) with a success rate of 100 percent compared to 41 gross wells (36.2 net) with a success rate of 100 percent for the corresponding period of the prior year. Wells drilled represents wells drilled to total depth during the period.
Completed 41 gross wells (37.1 net) in 2021 compared to 49 gross wells (44.2 net) in the corresponding period of 2020. Wells completed includes wells completed during the period, regardless of when they were drilled.
Average rig count during 2021 was approximately 3.1 rigs in the Marcellus Shale, compared to an average rig count of approximately 2.4 rigs during the corresponding period of 2020.
Repaid $88.0 million of our 5.58% weighted-average senior notes, which matured in January 2021.
Impact of the COVID-19 Pandemic
The ongoing coronavirus (COVID-19) outbreak, which the World Health Organization (WHO) declared as a pandemic in March 2020, has reached more than 200 countries and territories and there continues to be considerable uncertainty regarding the extent to which COVID-19 and its variants will continue to spread, the global availability and efficacy of treatments and recently deployed 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 impacts of those actions.
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. Beginning in March 2020, we modified certain business practices (including those related to nonoperational 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 implemented and provided training on a COVID-19 Safety Policy containing personal safety protocols; provided additional personal protective equipment to our workforce; implemented rigo