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Table of Contents
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, 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, 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 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 | ☐
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 July 29, 2020, there were 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 June 30, 2020 and December 31, 2019 | 3
Condensed Consolidated Statement of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019 | 4
Condensed Consolidated Statement of Cash Flows (Unaudited) for the Six Months Ended June 30, 2020 and 2019 | 5
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019 | 6
Notes to the Condensed Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 25
Item 4. | Controls and Procedures | 26
Part II. Other Information |
Item 1. | Legal Proceedings | 26
Item 1A. | Risk Factors | 27
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28
Item 6. | Exhibits | 28
Signatures | 29

2

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) |  | June 30, 2020 |  | December 31, 2019
ASSETS |  |  |  |  |  |
Current assets |  |  |  |  |  |
Cash and cash equivalents |  | $ | 117,164 |  |  | $ | 200,227 |
Restricted cash |  | 11,578 |  |  | 13,556 |
Accounts receivable, net |  | 117,918 |  |  | 209,023 |
Income taxes receivable |  | 155,343 |  |  | 129,795 |
Inventories |  | 17,948 |  |  | 13,932 |
Derivative instruments |  | 40,636 |  |  | 31 |
Other current assets |  | 3,347 |  |  | 1,684 |
Total current assets |  | 463,934 |  |  | 568,248 |
Properties and equipment, net (Successful efforts method) |  | 4,002,492 |  |  | 3,855,706 |
Other assets |  | 61,444 |  |  | 63,291 |
|  | $ | 4,527,870 |  |  | $ | 4,487,245 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |
Current liabilities |  |  |  |  |  |
Accounts payable |  | $ | 161,657 |  |  | $ | 189,811 |
Current portion of long-term debt |  | 175,000 |  |  | 87,000 |
Accrued liabilities |  | 24,895 |  |  | 31,290 |
Interest payable |  | 19,836 |  |  | 19,933 |
Total current liabilities |  | 381,388 |  |  | 328,034 |
Long-term debt, net |  | 1,045,495 |  |  | 1,133,025 |
Deferred income taxes |  | 754,108 |  |  | 702,104 |
Asset retirement obligations |  | 79,351 |  |  | 71,598 |
Postretirement benefits |  | 33,506 |  |  | 32,713 |
Other liabilities |  | 68,043 |  |  | 68,284 |
Total liabilities |  | 2,361,891 |  |  | 2,335,758 |
Commitments and contingencies |  |  |  |
Stockholders' equity |  |  |  |  |  |
Common stock: |  |  |  |  |  |
Authorized — 960,000,000 shares of $0.10 par value in 2020 and 2019, respectively |  |  |  |  |  |
Issued — 477,535,499 shares and 476,881,991 shares in 2020 and 2019, respectively |  | 47,754 |  |  | 47,688 |
Additional paid-in capital |  | 1,792,531 |  |  | 1,782,427 |
Retained earnings |  | 2,147,822 |  |  | 2,143,213 |
Accumulated other comprehensive income |  | 1,073 |  |  | 1,360 |
Less treasury stock, at cost: |  |  |  |  |  |
78,957,318 shares and 78,957,318 shares in 2020 and 2019, respectively |  | (1,823,201 | ) |  | (1,823,201 | )
Total stockholders' equity |  | 2,165,979 |  |  | 2,151,487 |
|  | $ | 4,527,870 |  |  | $ | 4,487,245 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
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) |  | 2020 |  | 2019 |  | 2020 |  | 2019
OPERATING REVENUES |  |  |  |  |  |  |  |  |  |  |  |
Natural gas |  | $ | 288,286 |  |  | $ | 470,482 |  |  | $ | 658,626 |  |  | $ | 1,103,656 |
Gain on derivative instruments |  | 43,974 |  |  | 63,649 |  |  | 60,036 |  |  | 71,906 |
Other |  | 88 |  |  | (14 | ) |  | 143 |  |  | 236 |
|  | 332,348 |  |  | 534,117 |  |  | 718,805 |  |  | 1,175,798 |
OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |  |
Direct operations |  | 17,423 |  |  | 18,093 |  |  | 34,667 |  |  | 36,427 |
Transportation and gathering |  | 135,249 |  |  | 141,689 |  |  | 278,581 |  |  | 279,022 |
Taxes other than income |  | 3,352 |  |  | 3,640 |  |  | 7,090 |  |  | 9,487 |
Exploration |  | 4,579 |  |  | 4,504 |  |  | 6,769 |  |  | 10,548 |
Depreciation, depletion and amortization |  | 94,622 |  |  | 96,147 |  |  | 194,757 |  |  | 188,405 |
General and administrative |  | 23,166 |  |  | 22,889 |  |  | 56,595 |  |  | 53,979 |
|  | 278,391 |  |  | 286,962 |  |  | 578,459 |  |  | 577,868 |
Earnings (loss) on equity method investments |  | — |  |  | 3,650 |  |  | (59 | ) |  | 7,334 |
Loss on sale of assets |  | (241 | ) |  | — |  |  | (170 | ) |  | (1,500 | )
INCOME FROM OPERATIONS |  | 53,716 |  |  | 250,805 |  |  | 140,117 |  |  | 603,764 |
Interest expense, net |  | 14,543 |  |  | 14,567 |  |  | 28,754 |  |  | 26,748 |
Other expense |  | 48 |  |  | 143 |  |  | 114 |  |  | 287 |
Income before income taxes |  | 39,125 |  |  | 236,095 |  |  | 111,249 |  |  | 576,729 |
Income tax expense |  | 8,751 |  |  | 55,086 |  |  | 26,965 |  |  | 132,957 |
NET INCOME |  | $ | 30,374 |  |  | $ | 181,009 |  |  | $ | 84,284 |  |  | $ | 443,772 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.08 |  |  | $ | 0.43 |  |  | $ | 0.21 |  |  | $ | 1.05 |
Diluted |  | $ | 0.08 |  |  | $ | 0.43 |  |  | $ | 0.21 |  |  | $ | 1.05 |
Weighted-average common shares outstanding |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 398,576 |  |  | 422,141 |  |  | 398,460 |  |  | 422,626 |
Diluted |  | 401,279 |  |  | 424,349 |  |  | 400,219 |  |  | 424,550 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

|  | Six Months Ended June 30,
(In thousands) |  | 2020 |  | 2019
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 84,284 |  |  | $ | 443,772 |
Adjustments to reconcile net income to cash provided by operating activities: |  |  |  |  |  |
Depreciation, depletion and amortization |  | 194,757 |  |  | 188,405 |
Deferred income tax expense |  | 52,089 |  |  | 152,647 |
Loss on sale of assets |  | 170 |  |  | 1,500 |
Exploratory dry hole cost |  | 2,011 |  |  | 16 |
Gain on derivative instruments |  | (60,036 | ) |  | (71,906 | )
Net cash received in settlement of derivative instruments |  | 19,423 |  |  | 68,377 |
Loss (earnings) on equity method investments |  | 59 |  |  | (7,334 | )
Distribution of earnings from equity method investments |  | — |  |  | 8,750 |
Amortization of debt issuance costs |  | 1,501 |  |  | 2,464 |
Stock-based compensation and other |  | 23,463 |  |  | 21,058 |
Changes in assets and liabilities: |  |  |  |  |  |
Accounts receivable, net |  | 91,106 |  |  | 179,027 |
Income taxes |  | (25,547 | ) |  | (5,577 | )
Inventories |  | (4,452 | ) |  | (8,305 | )
Other current assets |  | (1,663 | ) |  | (2,263 | )
Accounts payable and accrued liabilities |  | (36,453 | ) |  | (35,867 | )
Interest payable |  | (97 | ) |  | (216 | )
Other assets and liabilities |  | 718 |  |  | (22,611 | )
Net cash provided by operating activities |  | 341,333 |  |  | 911,937 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |
Capital expenditures |  | (331,183 | ) |  | (421,500 | )
Proceeds from sale of assets |  | 275 |  |  | 2,346 |
Investment in equity method investments |  | (35 | ) |  | (5,131 | )
Distribution of investment from equity method investments |  | — |  |  | 758 |
Proceeds from sale of equity method investments |  | (9,424 | ) |  | — |
Net cash used in investing activities |  | (340,367 | ) |  | (423,527 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |
Borrowings from debt |  | — |  |  | 95,000 |
Repayments of debt |  | — |  |  | (102,000 | )
Treasury stock repurchases |  | — |  |  | (156,638 | )
Dividends paid |  | (79,675 | ) |  | (67,697 | )
Tax withholdings on vesting of stock awards |  | (6,332 | ) |  | (10,557 | )
Capitalized debt issuance costs |  | — |  |  | (7,411 | )
Net cash used in financing activities |  | (86,007 | ) |  | (249,303 | )
Net (decrease) increase in cash, cash equivalents and restricted cash |  | (85,041 | ) |  | 239,107 |
Cash, cash equivalents and restricted cash, beginning of period |  | 213,783 |  |  | 2,287 |
Cash, cash equivalents and restricted cash, end of period |  | $ | 128,742 |  |  | $ | 241,394 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)

(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 |  | 476,882 |  |  | $ | 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 vesting |  | 651 |  |  | 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, 2020 |  | 477,533 |  |  | 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 vesting |  | 2 |  |  | 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, 2020 |  | 477,535 |  |  | $ | 47,754 |  |  | 78,957 |  |  | $ | (1,823,201 | ) |  | $ | 1,792,531 |  |  | $ | 1,073 |  |  | $ | 2,147,822 |  |  | $ | 2,165,979 |

(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 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 262,763 |  |  | 262,763 |
Stock amortization and vesting |  | 682 |  |  | 68 |  |  | — |  |  | — |  |  | (281 | ) |  | — |  |  | — |  |  | (213 | )
Purchase of treasury stock |  | — |  |  | — |  |  | — |  |  | (28 | ) |  | — |  |  | — |  |  | — |  |  | (28 | )
Cash dividends at $0.07 per share |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (29,605 | ) |  | (29,605 | )
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (137 | ) |  | — |  |  | (137 | )
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 |
Stock amortization and vesting |  | 102 |  |  | 10 |  |  | — |  |  | — |  |  | 6,334 |  |  | — |  |  | — |  |  | 6,344 |
Purchase of treasury stock |  | — |  |  | — |  |  | 5,081 |  |  | (125,260 | ) |  | — |  |  | — |  |  | — |  |  | (125,260 | )
Cash dividends at $0.09 per share |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (38,092 | ) |  | (38,092 | )
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (136 | ) |  | — |  |  | (136 | )
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 |

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, 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.
Recently Adopted Accounting Pronouncements
Financial Instruments: Credit Losses. In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 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 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 adoption of ASU No. 2016-13 did not have a material effect on the Company's financial position, results of operations or cash flows; however, it modified certain disclosure requirements which were not material.
Fair Value Measurements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements by adding, removing and modifying certain required disclosures for fair value measurements for assets and liabilities disclosed within the fair value hierarchy. The Company adopted ASU No. 2018-13 effective January 1, 2020. The adoption of ASU No. 2018-13 did not have any effect on the Company's financial position, results of operations or cash flows; however, it modified certain disclosure requirements which were not material.
2. Properties and Equipment, Net
Properties and equipment, net are comprised of the following:

(In thousands) |  | June 30, 2020 |  | December 31, 2019
Proved oil and gas properties |  | $ | 6,850,435 |  |  | $ | 6,508,443 |
Unproved oil and gas properties |  | 62,732 |  |  | 133,475 |
Land, buildings and other equipment |  | 107,108 |  |  | 104,700 |
|  | 7,020,275 |  |  | 6,746,618 |
Accumulated depreciation, depletion and amortization |  | (3,017,783 | ) |  | (2,890,912 | )
|  | $ | 4,002,492 |  |  | $ | 3,855,706 |

At June 30, 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
Activity related to the Company's equity method investments is as follows:

|  | Constitution |  | Meade |  | Total
|  | Six Months Ended June 30,
(In thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Balance at beginning of period |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 163,181 |  |  | $ | — |  |  | $ | 163,181 |
Contributions |  | 35 |  |  | 500 |  |  | — |  |  | 4,631 |  |  | 35 |  |  | 5,131 |
Distributions |  | — |  |  | — |  |  | — |  |  | (9,508 | ) |  | — |  |  | (9,508 | )
Earnings (loss) on equity method investments |  | (35 | ) |  | (500 | ) |  | (24 | ) |  | 7,834 |  |  | (59 | ) |  | 7,334 |
Sale of investment |  | — |  |  | — |  |  | 24 |  |  | — |  |  | 24 |  |  | — |
Balance at end of period |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 166,138 |  |  | $ | — |  |  | $ | 166,138 |

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
On February 10, 2020, the Company sold its 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 sale, the Company has no further obligations with respect to the project.
4. Debt and Credit Agreements
The Company’s debt and credit agreements consisted of the following:

(In thousands) |  | June 30, 2020 |  | December 31, 2019
6.51% weighted-average senior notes(1) |  | $ | 124,000 |  |  | $ | 124,000 |
5.58% weighted-average senior notes(2) |  | 175,000 |  |  | 175,000 |
3.65% weighted-average senior notes |  | 925,000 |  |  | 925,000 |
Revolving credit facility |  | — |  |  | — |
Unamortized debt issuance costs |  | (3,505 | ) |  | (3,975 | )
|  | $ | 1,220,495 |  |  | $ | 1,220,025 |

_______________________________________________________________________________

(1) | Includes $87.0 million of current portion of long-term debt at June 30, 2020 and December 31, 2019, respectively, due in July 2020.

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

At June 30, 2020, the Company was in compliance with all restrictive financial covenants for both its revolving credit facility and senior notes.
Subsequent Event. In July 2020, the Company repaid $87.0 million of maturities associated with its 6.51% weighted-average 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 23, 2020, the borrowing base and available commitments were reaffirmed at $3.2 billion and $1.5 billion, respectively.
At June 30, 2020, the Company had no borrowings outstanding under its revolving credit facility and had unused commitments of $1.5 billion.
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5. Derivative Instruments
As of June 30, 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) |  | 36,900,000 |  | Jul. 2020 - Oct. 2020 |  |  |  |  |  |  |  |  |  | $ | 2.25 |
Natural gas (NYMEX) |  | 61,500,000 |  | Jul. 2020 - Oct. 2020 |  | $1.90 - $2.15 |  | $ | 2.05 |  |  | $2.10 - $2.38 |  | $ | 2.24 |  |  |  |

Effect of Derivative Instruments on the Condensed Consolidated Balance Sheet

|  |  |  | Derivative Assets |  | Derivative Liabilities
(In thousands) |  | Balance Sheet Location |  | June 30, 2020 |  | December 31, 2019 |  | June 30, 2020 |  | December 31, 2019
Commodity contracts |  | Derivative instruments (current) |  | $ | 40,636 |  |  | $ | 31 |  |  | $ | — |  |  | $ | — |
Commodity contracts |  | Accrued liabilities (current) |  | — |  |  | — |  |  | — |  |  | 9 |
|  |  |  | $ | 40,636 |  |  | $ | 31 |  |  | $ | — |  |  | $ | 9 |

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

(In thousands) |  | June 30, 2020 |  | December 31, 2019
Derivative assets |  |  |  |  |  |
Gross amounts of recognized assets |  | $ | 40,636 |  |  | $ | 47 |
Gross amounts offset in the condensed consolidated balance sheet |  | — |  |  | (16 | )
Net amounts of assets presented in the condensed consolidated balance sheet |  | 40,636 |  |  | 31 |
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet |  | — |  |  | — |
Net amount |  | $ | 40,636 |  |  | $ | 31 |
Derivative liabilities |  |  |  |  |  |
Gross amounts of recognized liabilities |  | $ | — |  |  | $ | 25 |
Gross amounts offset in the condensed consolidated balance sheet |  | — |  |  | (16 | )
Net amounts of liabilities presented in the condensed consolidated balance sheet |  | — |  |  | 9 |
Gross amounts of financial instruments not offset in the condensed consolidated balance sheet |  | — |  |  | — |
Net amount |  | $ | — |  |  | $ | 9 |

Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Cash received (paid) on settlement of derivative instruments |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on derivative instruments |  | $ | 19,423 |  |  | $ | 15,397 |  |  | $ | 19,423 |  |  | $ | 68,377 |
Non-cash gain (loss) on derivative instruments |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on derivative instruments |  | 24,551 |  |  | 48,252 |  |  | 40,613 |  |  | 3,529 |
|  | $ | 43,974 |  |  | $ | 63,649 |  |  | $ | 60,036 |  |  | $ | 71,906 |

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, 2020
Assets |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan |  | $ | 18,537 |  |  | $ | — |  |  | $ | — |  |  | $ | 18,537 |
Derivative instruments |  | — |  |  | 19,251 |  |  | 21,385 |  |  | 40,636 |
|  | $ | 18,537 |  |  | $ | 19,251 |  |  | $ | 21,385 |  |  | $ | 59,173 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan |  | $ | 27,055 |  |  | $ | — |  |  | $ | — |  |  | $ | 27,055 |
Derivative instruments |  | — |  |  | — |  |  | — |  |  | — |
|  | $ | 27,055 |  |  | $ | — |  |  | $ | — |  |  | $ | 27,055 |

(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 |  |  | $ | — |  |  | $ | — |  |  | $ | 18,381 |
Derivative instruments |  | — |  |  | 44 |  |  | 3 |  |  | 47 |
|  | $ | 18,381 |  |  | $ | 44 |  |  | $ | 3 |  |  | $ | 18,428 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan |  | $ | 27,012 |  |  | $ | — |  |  | $ | — |  |  | $ | 27,012 |
Derivative instruments |  | — |  |  | — |  |  | 25 |  |  | 25 |
|  | $ | 27,012 |  |  | $ | — |  |  | $ | 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 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 a market credit spread provided by the Company's bank. 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) |  | 2020 |  | 2019
Balance at beginning of period |  | $ | (22 | ) |  | $ | 21,976 |
Total gain (loss) included in earnings |  | 31,721 |  |  | 17,080 |
Settlement (gain) loss |  | (10,314 | ) |  | (26,433 | )
Transfers in and/or out of Level 3 |  | — |  |  | — |
Balance at end of period |  | $ | 21,385 |  |  | $ | 12,623 |
Change in unrealized gains (losses) relating to assets and liabilities still held at the end of the period |  | $ | 21,647 |  |  | $ | 7,252 |

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, 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 amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the Condensed Consolidated Balance Sheet for cash, cash equivalents and restricted cash approximate fair value due to the short-term maturities of these instruments. Cash, 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.
The carrying amount and fair value of debt is as follows:

|  | June 30, 2020 |  | December 31, 2019
(In thousands) |  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Long-term debt |  | $ | 1,220,495 |  |  | $ | 1,230,456 |  |  | $ | 1,220,025 |  |  | $ | 1,260,259 |
Current maturities |  | (175,000 | ) |  | (176,058 | ) |  | (87,000 | ) |  | (88,704 | )
Long-term debt, excluding current maturities |  | $ | 1,045,495 |  |  | $ | 1,054,398 |  |  | $ | 1,133,025 |  |  | $ | 1,171,555 |

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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, 2020
Balance at beginning of period |  | $ | 72,098 |
Liabilities incurred |  | 5,725 |
Accretion expense |  | 2,028 |
Balance at end of period |  | 79,851 |
Less: current asset retirement obligations |  | (500 | )
Noncurrent asset retirement obligations |  | $ | 79,351 |

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
There have been no material changes to the Company’s operating lease obligations described under “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
In June 2020, the Office of Attorney General of the Commonwealth of Pennsylvania informed the Company that it will pursue certain misdemeanor and felony charges against the Company related to alleged violations of the Pennsylvania Clean Streams Law, which prohibits discharge of industrial wastes. The Company intends to defend 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 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) |  | 2020 |  | 2019 |  | 2020 |  | 2019
OPERATING REVENUES |  |  |  |  |  |  |  |
Natural gas |  | $ | 288,286 |  |  | $ | 470,482 |  |  | $ | 658,626 |  |  | $ | 1,103,656 |
Other |  | 88 |  |  | (14 | ) |  | 143 |  |  | 236 |
Total revenue from contracts with customers |  | $ | 288,374 |  |  | $ | 470,468 |  |  | $ | 658,769 |  |  | $ | 1,103,892 |

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, 2020, the Company has $9.2 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 four to 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 $118.0 million and $209.2 million as of June 30, 2020 and December 31, 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. 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 $8.3 million and $6.7 million in the second quarter of 2020 and 2019, respectively, and $24.6 million and $21.9 million during the first six months of 2020 and 2019, 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 2020, 124,012 restricted stock units were granted to non-employee directors of the Company with a weighted-average grant date value of $15.75 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.
Performance Share Awards
The performance period for the awards granted during the first six months of 2020 commenced on January 1, 2020 and ends on December 31, 2022. The Company used an annual forfeiture rate assumption ranging from zero percent to five percent for purposes of recognizing stock-based compensation expense for its performance share awards.
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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, 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 six months of 2020, 722,500 Employee Performance Share Awards were granted at a grant date value of $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 period, as set by the Company’s compensation 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 anniversary date will be forfeited.
Hybrid Performance Share Awards. During the first six months of 2020, 506,412 Hybrid Performance Share Awards were granted at a grant date value of $15.60 per share. The 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 six months of 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, 2020) and the period-end fair value of the liability component of the TSR Performance Share Awards:

|  | Grant Date |  | June 30, 2020
Fair value per performance share award |  | $ | 13.79 |  |  | $12.66- $15.28
Assumptions: |  |  |  |  |
Stock price volatility |  | 29.5 | % |  | 39.2% - 63.5%
Risk free rate of return |  | 1.39 | % |  | 0.16% - 0.18%

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.
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) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Weighted-average shares - basic |  | 398,576 |  |  | 422,141 |  |  | 398,460 |  |  | 422,626 |
Dilution effect of stock awards at end of period |  | 2,703 |  |  | 2,208 |  |  | 1,759 |  |  | 1,924 |
Weighted-average shares - diluted |  | 401,279 |  |  | 424,349 |  |  | 400,219 |  |  | 424,550 |

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The following is a calculation of 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) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Weighted-average stock awards excluded from diluted EPS due to the anti-dilutive effect calculated using the treasury stock method |  | — |  |  | 14 |  |  | 942 |  |  | 948 |

12. Additional Balance Sheet Information
Certain balance sheet amounts are comprised of the following:

(In thousands) |  | June 30, 2020 |  | December 31, 2019
Accounts receivable, net |  |  |  |  |  |
Trade accounts |  | $ | 117,971 |  |  | $ | 209,200 |
Other accounts |  | 993 |  |  | 1,007 |
|  | 118,964 |  |  | 210,207 |
Allowance for doubtful accounts |  | (1,046 | ) |  | (1,184 | )
|  | $ | 117,918 |  |  | $ | 209,023 |
Other assets |  |  |  |  |  |
Deferred compensation plan |  | $ | 18,537 |  |  | $ | 18,381 |
Debt issuance costs |  | 7,907 |  |  | 8,938 |
Operating lease right-of-use assets |  | 34,948 |  |  | 35,916 |
Other accounts |  | 52 |  |  | 56 |
|  | $ | 61,444 |  |  | $ | 63,291 |
Accounts payable |  |  |  |  |  |
Trade accounts |  | $ | 28,373 |  |  | $ | 21,663 |
Royalty and other owners |  | 23,442 |  |  | 36,191 |
Accrued transportation |  | 48,115 |  |  | 55,586 |
Accrued capital costs |  | 46,734 |  |  | 40,337 |
Taxes other than income |  | 6,828 |  |  | 16,971 |
Other accounts |  | 8,165 |  |  | 19,063 |
|  | $ | 161,657 |  |  | $ | 189,811 |
Accrued liabilities |  |  |  |  |  |
Employee benefits |  | $ | 16,455 |  |  | $ | 22,727 |
Taxes other than income |  | 3,255 |  |  | 3,850 |
Operating lease liabilities |  | 3,665 |  |  | 3,124 |
Other accounts |  | 1,520 |  |  | 1,589 |
|  | $ | 24,895 |  |  | $ | 31,290 |
Other liabilities |  |  |  |  |  |
Deferred compensation plan |  | $ | 27,055 |  |  | $ | 27,012 |
Operating lease liabilities |  | 31,182 |  |  | 32,677 |
Other accounts |  | 9,806 |  |  | 8,595 |
|  | $ | 68,043 |  |  | $ | 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 six month periods ended June 30, 2020 and 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, 2019 (Form 10-K).
OVERVIEW
Financial and Operating Overview
Financial and operating results for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 are as follows:

• | Natural gas production decrease d 0.8 Bcf, or less than 1 percent, from 418.6 Bcf, or 2,313 Mmcf per day, in 2019 to 417.8 Bcf, or 2,296 Mmcf per day, in 2020, as a result of the timing of our drilling and completion activities in the Marcellus Shale in 2020.

• | Average realized natural gas price was $1.62 per Mcf, 42 percent lower than the $2.80 per Mcf realized in the comparable period of the prior year.

• | Total capital expenditures were $335.6 million compared to $424.7 million in the comparable period of the prior year.

• | Drilled 41 gross wells (36.2 net) with a success rate of 100 percent compared to 49 gross wells (49.0 net) with a success rate of 100 percent for the comparable period of the prior year.

• | Completed 49 gross wells (44.2 net) in 2020 compared to 42 gross wells (42.0 net) in 2019.

• | Average rig count during 2020 was approximately 2.4 rigs in the Marcellus Shale, compared to an average rig count of approximately 3.2 rigs during 2019.

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. 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. 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. In addition to commodity prices and production volumes, finding and developing sufficient amounts of natural gas reserves at economical costs are critical to our long-term success.
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 of Derivative Instruments on Operating Revenues” below and Note 5 of the Notes to the Condensed Consolidated Financial Statements for more information.
Natural gas prices have continued to remain low and have declined compared to 2019. 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 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, such as quarantines, shelter-in-place orders and business and government shutdowns 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
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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 is continuing to have disruptive impacts on the oil and gas industry. Subsequent negotiations between members of OPEC+ led to an agreement to reduce production volumes in an effort to stabilize crude oil prices. While crude oil prices have recovered from the lows experienced in April 2020, they remain at depressed levels, as the oversupply and lack of demand in the market persist. 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 its 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 after the loosening of shelter in place orders, 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 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 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.

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 ultimate geographic spread and severity of the virus, any resurgence in COVID-19 transmission and infection in affected regions after they have begun to 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, the duration of the outbreak, actions taken by governmental authorities, customers, 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 on our revenues, refer to “Results of Operations” below.
Outlook
Our 2020 capital program is expected to be approximately $575.0 million, a 27 percent reduction from our 2019 capital program of $783.3 millio n. At the beginning of 2020, we reduced our planned capital program as a result of the lower natural
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gas price environment. We expect to fund these capital expenditures with our cash on hand, operating cash flow and, if required, borrowings under our revolving credit facility.
In 2019, we drilled 96 gross wells (94.0 net) and completed 99 gross wells (97.0 net), of which 29 gross wells (29.0 net) were drilled but uncompleted in prior years. For the full year of 2020, our capital program will focus on the Marcellus Shale, where we expect to drill, complete and place on production 60 to 70 net wells. We will continue to assess the natural gas price environment and may increase or decrease our capital expenditures accordingly.
Financial Condition
Capital Resources and Liquidity
Our primary source of cash for the six months ended June 30, 2020 was from the sale of natural gas production. These cash flows were used to fund our capital expenditures, interest payments on debt and payment of dividends. See below for additional discussion and analysis of cash flow.
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. Effective April 23, 2020, the borrowing base and available commitments were reaffirmed at $3.2 billion and $1.5 billion, respectively. There were no borrowings outstanding under our revolving credit facility as of June 30, 2020 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 June 30, 2020, we were in compliance with all restrictive financial covenants for both the revolving credit facility and senior notes. Refer to our Form 10-K for further discussion of our restrictive financial covenants.
In July 2020, we repaid $87.0 million of maturities associated with our 6.51% weighted-average senior notes.
Cash Flows
Our cash flows from operating activities, investing activities and financing activities are as follows:

|  | Six Months Ended June 30,
(In thousands) |  | 2020 |  | 2019
Cash flows provided by operating activities |  | $ | 341,333 |  |  | $ | 911,937 |
Cash flows used in investing activities |  | (340,367 | ) |  | (423,527 | )
Cash flows used in financing activities |  | (86,007 | ) |  | (249,303 | )
Net (decrease) increase in cash, cash equivalents and restricted cash |  | $ | (85,041 | ) |  | $ | 239,107 |

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 and demand for natural gas, pipeline infrastructure constraints, basis differentials, inventory storage levels, seasonal influences and 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 June 30, 2020 and December 31, 2019, we had a working capital surplus of $82.5 million and $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.
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Net cash provided by operating activities in the first six months of 2020 decrease d by $570.6 million compared to the first six months of 2019. This decrease was primarily due to lower natural gas revenues, lower derivative settlement gains and unfavorable changes in working capital compared to the prior year. The decrease in natural gas revenues was primarily due to lower realized natural gas prices and marginally lower equivalent production. Average realized natural gas prices decrease d by 42 percent for the first six months of 2020 compared to the first six months of 2019. Equivalent production decrease d by less than 1 percent for the first six months of 2020 compared to the first six months of 2019 as a result of the timing of our drilling and completion activities in the Marcellus Shale in 2020.
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 decrease d by $83.2 million for the first six months of 2020 compared to the first six months of 2019. The decrease was primarily due to $90.3 million lower capital expenditures as a result of the implementation of our maintenance capital program in 2020. This decrease was partially offset by a decrease in contributions and proceeds of $4.3 million related to the sale of our equity method investments and a decrease in proceeds from the sale of assets of $2.1 million.
Financing Activities. Cash flows used in financing activities decrease d by $163.3 million for the first six months of 2020 compared to the first six months of 2019. This decrease was primarily due to $156.6 million of lower repurchases of our common stock in 2020 compared to 2019, $7.0 million of lower net repayments of debt, $7.4 million of lower debt issuance costs associated with the amendment of our revolving credit facility in 2019 and $4.2 million of lower tax withholdings on vesting of stock awards. These decreases were partially offset by higher dividend payments of $12.0 million related to an increase in our quarterly dividend rate from $0.16 per share in the first six months of 2019 to $0.20 per share in the first six months 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) |  | June 30, 2020 |  | December 31, 2019
Debt (1) |  | $ | 1,220,495 |  |  | $ | 1,220,025 |
Stockholders' equity |  | 2,165,979 |  |  | 2,151,487 |
Total capitalization |  | $ | 3,386,474 |  |  | $ | 3,371,512 |
Debt to total capitalization |  | 36 | % |  | 36 | %
Cash and cash equivalents |  | $ | 117,164 |  |  | $ | 200,227 |

_______________________________________________________________________________

(1) | Includes $175.0 million and $87.0 million of current portion of long-term debt at June 30, 2020 and December 31, 2019, respectively. There were no borrowings outstanding under our revolving credit facility as of June 30, 2020 and December 31, 2019.

We did not repurchase any shares of our common stock during the first six months of 2020. During the first six months of 2019, we repurchased 5.1 million shares of our common stock for $125.3 million. During the first six months of 2020 and 2019, we paid dividends of $79.7 million ($0.20 per share) and $67.7 million ($0.16 per share), respectively, on our common stock.
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.
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The following table presents major components of our capital and exploration expenditures:

|  | Six Months Ended June 30,
(In thousands) |  | 2020 |  | 2019
Capital expenditures |  |  |  |  |  |
Drilling and facilities |  | $ | 329,843 |  |  | $ | 415,431 |
Leasehold acquisitions |  | 1,331 |  |  | 3,246 |
Other |  | 4,395 |  |  | 5,975 |
|  | 335,569 |  |  | 424,652 |
Exploration expenditures(1) |  | 6,769 |  |  | 10,548 |
|  | $ | 342,338 |  |  | $ | 435,200 |

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

For the full year of 2020, we plan to allocate substantially all of our capital to the Marcellus Shale, where we expect to drill, complete and place on production 60 to 70 net wells. Our 2020 capital program is expected to be approximately $575.0 million. Refer to “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. 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 accounting pronouncements that affect us.
Results of Operations
Second Quarter s of 2020 and 2019 Compared
We reported net income in the second quarter of 2020 of $30.4 million, or $0.08 per share, compared to net income of $181.0 million, or $0.43 per share, in the second quarter of 2019. The decrease in net income was primarily due to lower operating revenues, 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 June 30, |  | Variance
(In thousands) |  | 2020 |  | 2019 |  | Amount |  | Percent
Operating Revenues |  |  |  |  |  |  |  |
Natural gas |  | $ | 288,286 |  |  | $ | 470,482 |  |  | $ | (182,196 | ) |  | (39 | )%
Gain on derivative instruments |  | 43,974 |  |  | 63,649 |  |  | (19,675 | ) |  | (31 | )%
Other |  | 88 |  |  | (14 | ) |  | 102 |  |  | 729 | %
|  | $ | 332,348 |  |  | $ | 534,117 |  |  | $ | (201,769 | ) |  | (38 | )%

Natural Gas Revenues

|  | Three Months Ended June 30, |  | Variance |  | Increase (Decrease) (In thousands)
|  | 2020 |  | 2019 |  | Amount |  | Percent |
Price variance (Mcf) |  | $ | 1.42 |  |  | $ | 2.20 |  |  | $ | (0.78 | ) |  | (35 | )% |  | $ | (158,262 | )
Volume variance (Bcf) |  | 202.9 |  |  | 213.8 |  |  | (10.9 | ) |  | (5 | )% |  | (23,934 | )
Total |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (182,196 | )

The decrease in natural gas revenues of $182.2 million was due to lower natural gas prices and lower production. The decrease in production was a result of the timing of our drilling and completion activities in the Marcellus Shale in 2020.
Impact of Derivative Instruments on Operating Revenues

|  | Three Months Ended June 30,
(In thousands) |  | 2020 |  | 2019
Cash received (paid) on settlement of derivative instruments |  |  |  |  |  |
Gain (loss) on derivative instruments |  | $ | 19,423 |  |  | $ | 15,397 |
Non-cash gain (loss) on derivative instruments |  |  |  |  |  |
Gain (loss) on derivative instruments |  | 24,551 |  |  | 48,252 |
|  | $ | 43,974 |  |  | $ | 63,649 |

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Operating and Other Expenses

|  | Three Months Ended June 30, |  | Variance
(In thousands) |  | 2020 |  | 2019 |  | Amount |  | Percent
Operating and Other Expenses |  |  |  |  |  |  |  |  |  |  |  |
Direct operations |  | $ | 17,423 |  |  | $ | 18,093 |  |  | $ | (670 | ) |  | (4 | )%
Transportation and gathering |  | 135,249 |  |  | 141,689 |  |  | (6,440 | ) |  | (5 | )%
Taxes other than income |  | 3,352 |  |  | 3,640 |  |  | (288 | ) |  | (8 | )%
Exploration |  | 4,579 |  |  | 4,504 |  |  | 75 |  |  | 2 | %
Depreciation, depletion and amortization |  | 94,622 |  |  | 96,147 |  |  | (1,525 | ) |  | (2 | )%
General and administrative |  | 23,166 |  |  | 22,889 |  |  | 277 |  |  | 1 | %
|  | $ | 278,391 |  |  | $ | 286,962 |  |  | $ | (8,571 | ) |  | (3 | )%
Earnings on equity method investments |  | $ | — |  |  | $ | 3,650 |  |  | $ | (3,650 | ) |  | (100 | )%
Loss on sale of assets |  | (241 | ) |  | — |  |  | 241 |  |  | 100 | %
Interest expense, net |  | 14,543 |  |  | 14,567 |  |  | (24 | ) |  | — | %
Other expense |  | 48 |  |  | 143 |  |  | (95 | ) |  | (66 | )%
Income tax expense |  | 8,751 |  |  | 55,086 |  |  | (46,335 | ) |  | (84 | )%

Total costs and expenses from operations decrease d by $8.6 million in the second quarter of 2020 compared to the same period of 2019. The primary reasons for this fluctuation are as follows:

• | Direct operations decrease d $0.7 million primarily driven by lower Marcellus Shale production.

• | Transportation and gathering decrease d $6.4 million due to lower Marcellus Shale production.

• | Depreciation, depletion and amortization decrease d $1.5 million primarily due to lower amortization of unproved properties of $2.1 million, partially offset by higher DD&A of $0.2 million in the second quarter of 2020 compared to 2019. The increase in DD&A was primarily due to an increase of $4.8 million due to a higher DD&A rate of $0.44 per Mcfe in the second quarter of 2020 compared to $0.42 per Mcfe for the second quarter of 2019, partially offset by $4.6 million related to lower production volumes in the Marcellus Shale. The higher DD&A rate was due to higher cost reserve additions.

• | General and administrative increase d $0.3 million primarily due to $1.6 million higher stock-based compensation expense associated with certain of our market-based performance awards and a $1.1 million increase in hardware and software costs. These increases were partially offset by $2.1 million of severance costs incurred in the second quarter of 2019. The remaining changes in other general and administrative expenses were not individually significant.

Earnings on Equity Method Investments
Earnings on equity method investments decreased $3.7 million primarily due to the sale of our investments in Meade Pipeline Co LLC (Meade) in November 2019 and Constitution Pipeline Company, LLC (Constitution) in February 2020.
Income Tax Expense
Income tax expense decrease d $46.3 million due to lower pre-tax income and a lower effective tax rate. The effective tax rates for the second quarter of 2020 and 2019 were 22.4 percent and 23.3 percent, respectively. The effective tax rate was lower for the second quarter of 2020 compared to the second quarter of 2019 due to the reimbursement of sequestration charges on AMT credits refunded in prior years that was recorded in the second quarter of 2020.
First Six Months of 2020 and 2019 Compared
We reported net income in the first six months of 2020 of $84.3 million, or $0.21 per share, compared to net income of $443.8 million, or $1.05 per share, in the first six months of 2019. The decrease in net income was primarily due to lower operating revenues and earnings on equity method investments, partially offset by 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.

|  | Six Months Ended June 30, |  | Variance
(In thousands) |  | 2020 |  | 2019 |  | Amount |  | Percent
Operating Revenues |  |  |  |  |  |  |  |
Natural gas |  | $ | 658,626 |  |  | $ | 1,103,656 |  |  | $ | (445,030 | ) |  | (40 | )%
Gain on derivative instruments |  | 60,036 |  |  | 71,906 |  |  | (11,870 | ) |  | (17 | )%
Other |  | 143 |  |  | 236 |  |  | (93 | ) |  | (39 | )%
|  | $ | 718,805 |  |  | $ | 1,175,798 |  |  | $ | (456,993 | ) |  | (39 | )%

Natural Gas Revenues

|  | Six Months Ended June 30, |  | Variance |  | Increase (Decrease) (In thousands)
|  | 2020 |  | 2019 |  | Amount |  | Percent |
Price variance (Mcf) |  | $ | 1.58 |  |  | $ | 2.64 |  |  | $ | (1.06 | ) |  | (40 | )% |  | $ | (443,115 | )
Volume variance (Bcf) |  | 417.8 |  |  | 418.6 |  |  | (0.8 | ) |  | — | % |  | (1,915 | )
Total |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (445,030 | )

The decrease in natural gas revenues of $445.0 million was due to lower natural gas prices coupled with a decrease in production. The decrease in production was a result of the timing of our drilling and completion activities in the Marcellus Shale in 2020.
Impact of Derivative Instruments on Operating Revenues

|  | Six Months Ended June 30,
(In thousands) |  | 2020 |  | 2019
Cash received (paid) on settlement of derivative instruments |  |  |  |  |  |
Gain (loss) on derivative instruments |  | $ | 19,423 |  |  | $ | 68,377 |
Non-cash gain (loss) on derivative instruments |  |  |  |
Gain (loss) on derivative instruments |  | 40,613 |  |  | 3,529 |
|  | $ | 60,036 |  |  | $ | 71,906 |

Operating and Other Expenses

|  | Six Months Ended June 30, |  | Variance
(In thousands) |  | 2020 |  | 2019 |  | Amount |  | Percent
Operating and Other Expenses |  |  |  |  |  |  |  |  |  |  |  |
Direct operations |  | $ | 34,667 |  |  | $ | 36,427 |  |  | $ | (1,760 | ) |  | (5 | )%
Transportation and gathering |  | 278,581 |  |  | 279,022 |  |  | (441 | ) |  | — | %
Taxes other than income |  | 7,090 |  |  | 9,487 |  |  | (2,397 | ) |  | (25 | )%
Exploration |  | 6,769 |  |  | 10,548 |  |  | (3,779 | ) |  | (36 | )%
Depreciation, depletion and amortization |  | 194,757 |  |  | 188,405 |  |  | 6,352 |  |  | 3 | %
General and administrative |  | 56,595 |  |  | 53,979 |  |  | 2,616 |  |  | 5 | %
|  | $ | 578,459 |  |  | $ | 577,868 |  |  | $ | 591 |  |  | — | %
(Loss) earnings on equity method investments |  | $ | (59 | ) |  | $ | 7,334 |  |  | $ | (7,393 | ) |  | (101 | )%
Loss on sale of assets |  | (170 | ) |  | (1,500 | ) |  | (1,330 | ) |  | (89 | )%
Interest expense, net |  | 28,754 |  |  | 26,748 |  |  | 2,006 |  |  | 7 | %
Other expense |  | 114 |  |  | 287 |  |  | (173 | ) |  | (60 | )%
Income tax expense |  | 26,965 |  |  | 132,957 |  |  | (105,992 | ) |  | (80 | )%

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Total costs and expenses from operations increase d by $0.6 million in the first six months of 2020 compared to the same period of 2019. The primary reasons for this fluctuation are as follows:

• | Direct operations decrease d $1.8 million due to a decrease in production and continued efficiencies in our operations in the Marcellus Shale.

• | Transportation and gathering decrease d $0.4 million due to lower Marcellus Shale production.

• | Taxes other than income decrease d $2.4 million due to $2.2 million lower drilling impact fees driven by a decrease in rates associated with lower natural gas prices.

• | Exploration decrease d $3.8 million due to a $3.1 million decrease in geological and geophysical expenses and a $1.4 million decrease in employee costs, partially offset by an increase in exploratory dry hole costs of $2.0 million.

• | Depreciation, depletion and amortization increase d $6.4 million primarily due to higher DD&A of $8.8 million, partially offset by lower amortization of unproved properties of $3.0 million. The increase in DD&A was due to an increase of $9.1 million due to a higher DD&A rate of $0.44 per Mcfe for the first six months of 2020 compared to $0.42 per Mcfe for the first six months of 2019. The higher DD&A rate was due to higher cost reserve additions. Amortization of unproved properties decreased due to lower amortization rates.

• | General and administrative increase d $2.6 million primarily due to higher stock-based compensation expense of $2.7 million associated with certain of our market-based performance awards, a $1.9 million increase in legal expenses and a $1.1 million increase in hardware and software costs. These increases were partially offset by $2.1 million of severance costs incurred in the second quarter of 2019 and a $1.4 million decrease in employee-related expenses. The remaining changes in other general and administrative expenses were not individually significant.

(Loss) Earnings on Equity Method Investments
Earnings on equity method investments decrease d $7.4 million primarily due to the sale of our investments in Meade in November 2019 and Constitution in February 2020.
Interest Expense, net
Interest expense, net increase d $2.0 million primarily due to the reversal of interest expense in 2019 related to certain income tax reserves recorded in prior periods.
Income Tax Expense
Income tax expense decrease d $106.0 million due to lower pre-tax income, partially offset by a higher effective tax rate. The effective tax rates for the first six months of 2020 and 2019 were 24.2 percent and 23.1 percent, respectively. The effective tax rate was higher for the first six months of 2020 compared to the first six months of 2019 due to 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" 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, results of future drilling and marketing activity, future production and costs, legislative and regulatory initiatives, electronic, cyber or physical security breaches and other factors detailed herein and in our other Securities and Exchange Commission filings. Refer to “Risk Factors” in Item 1A of the Form 10-K, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in this Quarterly Report on Form 10-Q 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 June 30, 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) |  | 36,900,000 |  | Jul. 2020 - Oct. 2020 |  |  |  |  |  |  |  |  |  | $2.25 |  | $ | 19,259 |
Natural gas (NYMEX) |  | 61,500,000 |  | Jul. 2020 - Oct. 2020 |  | $1.90 - $2.15 |  | $ | 2.05 |  |  | $2.10 - $2.38 |  | $ | 2.24 |  |  |  |  | 21,395 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 40,654 |

The amounts set forth in the table above represent our total unrealized derivative position at June 30, 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 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 six months of 2020, natural gas 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 32.5 Bcf, or eight percent of natural gas production at a weighted-average price of $2.06 per Mmbtu. Natural gas swaps covered 17.7 Bcf, or four percent of natural gas production at a weighted-average price of $2.23 per 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.
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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. 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, 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:

|  | June 30, 2020 |  | December 31, 2019
(In thousands) |  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Long-term debt |  | $ | 1,220,495 |  |  | $ | 1,230,456 |  |  | $ | 1,220,025 |  |  | $ | 1,260,259 |
Current maturities |  | (175,000 | ) |  | (176,058 | ) |  | (87,000 | ) |  | (88,704 | )
Long-term debt, excluding current maturities |  | $ | 1,045,495 |  |  | $ | 1,054,398 |  |  | $ | 1,133,025 |  |  | $ | 1,171,555 |

ITEM 4. Controls and Procedures
As of June 30, 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 internal control over financial reporting that occurred during the second quarter of 2020 that have materially affected, or are reasonably likely to have a material effect on, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
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.
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Environmental Matters
On June 17, 2019, we received two proposed Consent Order and Agreements (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) 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 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
The risk factors below should be read in conjunction with the risk factors previously discussed in Item 1A of Part I of our Form 10-K for the fiscal year ended December 31, 2019 and in Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which risk factors could also be affected by the potential effects of the outbreak of COVID-19 discussed below. 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.
Business disruptions from unexpected events, including pandemics, health crises and natural disasters, may increase our cost of doing business or disrupt our operations.
The occurrence of one or more unexpected events, including a public health crisis, pandemic and epidemic, war or civil unrest, a weather event, an earthquake or other catastrophe could adversely affect our business, financial condition and results of operations. For example, the ongoing COVID-19 outbreak, which the WHO declared as a pandemic on March 11, 2020, has reached more than 200 countries and territories and has continued to be a rapidly evolving economic and public health situation. The pandemic has resulted in widespread adverse impacts on the global economy, and there is considerable uncertainty regarding the extent to which COVID-19 will continue to spread 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, such as quarantines, shelter-in-place orders and business and government shutdowns (whether through a continuation of existing measures or the re-imposition of prior measures). We have taken precautionary measures intended to help minimize the risk to our employees, our business and the communities in which we operate, and we are actively assessing and planning for various operational contingencies in the event one or more of our operational employees experiences any symptoms consistent with COVID-19. However, if a significant portion of our employees or contractors were unable to work due to illness or if our field operations were suspended or temporarily restricted due to control measures designed to contain the outbreak, that could adversely affect our business, financial condition and results of operations, and we cannot guarantee that any precautionary actions taken by us will be effective in preventing disruptions to our business.
We regularly monitor the creditworthiness of our customers and derivative contract counterparties. Although we have not received notices from our customers or counterparties regarding non-performance issues or delays resulting from the COVID-19 pandemic, to the extent we or any of our material suppliers or customers are unable to operate due to government restrictions or otherwise, we may have to temporarily shut down or reduce production, which could result in significant downtime and have significant adverse consequences for our business, financial condition and results of operations. In addition, most of our non-operational employees are now working remotely, which could increase the risk of security breaches or other cyber-incidents or attacks, loss of data, fraud and other disruptions.
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Furthermore, the impact of the pandemic, including a resulting reduction in demand for oil and natural gas, coupled with the sharp decline in commodity prices following the announcement of price reductions and production increases in March 2020 by members of OPEC+ has led to significant global economic contraction generally and in our industry in particular. While an agreement to cut production has since been announced by OPEC+ and its allies, the situation, coupled with the impact of COVID-19, has continued to result in a significant downturn in the oil and gas industry. We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on our business, financial condition and results of operations at this time due to numerous uncertainties. For example, although the negative effects on crude oil pricing have been more significant than effects on natural gas to date, the operations of our midstream service providers, on whom we rely for the transmission, gathering and processing of a significant portion of our produced natural gas may be disrupted or suspended in response to containing the outbreak, and/or the economic challenges may lead to a reduction in capacity or closing of the facilities and infrastructure of our midstream service providers, which may result in substantial discounts in the prices we receive for our produced natural gas or result in the shut-in of producing wells or the delay or discontinuance of development plans for our properties. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread and severity of the virus, any resurgence in COVID-19 transmission and infection in affected regions after they have begun to 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, the duration of the outbreak, further actions taken by members of OPEC+, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.
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. There were no repurchases during the quarter ended June 30, 2020. The maximum number of remaining shares that may be purchased under our share repurchase program as of June 30, 2020 was 11.0 million shares.
ITEM 6. Exhibits

Exhibit Number |  | 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. T he 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).

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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)
July 31, 2020 | By: | /s/ DAN O. DINGES
|  | Dan O. Dinges
|  | Chairman, President and Chief Executive Officer
|  | (Principal Executive Officer)
July 31, 2020 | By: | /s/ SCOTT C. SCHROEDER
|  | Scott C. Schroeder
|  | Executive Vice President and Chief Financial Officer
|  | (Principal Financial Officer)
July 31, 2020 | By: | /s/ TODD M. ROEMER
|  | Todd M. Roemer
|  | Vice President and Chief Accounting Officer
|  | (Principal Accounting Officer)

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