Coterra Energy Inc.CTRA
Coterra Energy Inc. Commitments Disclosure
Commitments and Contingencies
Gathering, Processing and Transportation Agreements
As of December 31, 2025, the Company’s future minimum obligations under gathering, processing and transportation agreements are as follows:
| (In millions) | Gathering and Transportation | Gas Processing | Volume Delivery | Water Delivery | ||||||||||||||||||||||
| Year Ending December 31, | ||||||||||||||||||||||||||
| 2026 | $ | 193 | $ | 84 | $ | 21 | $ | 7 | ||||||||||||||||||
| 2027 | 231 | 80 | 17 | 7 | ||||||||||||||||||||||
| 2028 | 190 | 72 | 13 | 6 | ||||||||||||||||||||||
| 2029 | 182 | 26 | — | 6 | ||||||||||||||||||||||
| 2030 | 169 | 23 | — | 5 | ||||||||||||||||||||||
| Thereafter | 888 | 36 | — | — | ||||||||||||||||||||||
| Total | $ | 1,853 | $ | 321 | $ | 51 | $ | 31 | ||||||||||||||||||
Gathering, Processing and Transportation Commitments
The Company has entered into certain gathering and transportation agreements with various pipeline carriers. Under certain of these agreements, the Company is obligated to ship minimum daily quantities, or pay for any deficiencies at a specified rate. The Company’s forecasted production to be shipped on these pipelines is expected to exceed minimum daily quantities provided in the agreements. The Company is also obligated under certain of these arrangements to pay a demand charge for firm capacity rights on pipeline systems regardless of the amount of pipeline capacity utilized by the Company. If the Company does not utilize the capacity, it can release it to others, thus reducing its potential liability.
Gas Processing Commitments
The Company has entered into certain gas processing agreements. Under certain of these agreements, the Company is obligated to process minimum daily quantities, or pay for any deficiencies at a specified rate. The Company’s forecasted production to be processed under most of these agreements is expected to exceed minimum daily quantities provided in the agreements.
Volume Delivery Commitments
The Company also has minimum volume delivery commitments associated with agreements to reimburse connection costs to various pipelines. Under certain of these agreements, the Company is obligated to deliver minimum daily quantities, or pay for any deficiencies at a specified rate. The Company’s forecasted production to be delivered under most of these agreements is expected to exceed minimum daily quantities provided in the agreements.
Water Delivery Commitments
The Company has minimum volume water delivery commitments associated with a water services agreement that expires in 2030. The Company is obligated to deliver minimum daily quantities or pay for any deficiencies at a specified rate.
As of December 31, 2025, the Company had an accrued liability of $13 million associated with this commitment, representing the present value of estimated amounts payable due to insufficient forecasted delivery volumes.
Power Purchase Commitments
The Company has entered into certain agreements to purchase electrical power. Under certain of these agreements, the Company is obligated to purchase minimum quantities at a fixed rate, or pay for any deficiencies at a specified rate.
As of December 31, 2025, the Company’s future minimum obligations under electric power purchase agreements are as follows:
| (In millions) | Amount | |||||||
| Year Ending December 31, | ||||||||
| 2026 | $ | 6 | ||||||
| 2027 | 23 | |||||||
| 2028 | 28 | |||||||
| 2029 | 7 | |||||||
| Total | $ | 64 | ||||||
Lease Commitments
The Company has operating leases for office space, surface use agreements, compressor services, electric hydraulic fracturing services and other leases. The leases have remaining terms ranging from one month to 20 years, including options to extend leases that the Company is reasonably certain to exercise. During the year ended December 31, 2025, the Company recognized operating lease cost and variable lease cost of $120 million and $561 million, respectively. During the year ended December 31, 2024, the Company recognized operating lease cost and variable lease cost of $131 million and $245 million, respectively.
Short-term leases. The Company leases drilling rigs, fracturing and other equipment under lease terms ranging from 30 days to one year. Lease cost of $686 million and $387 million was recognized on short-term leases during the year ended December 31, 2025 and 2024, respectively. Certain lease costs are capitalized and included in properties and equipment, net in the Consolidated Balance Sheet because they relate to drilling and completion activities, while other costs are expensed because they relate to production and administrative activities.
As of December 31, 2025, the Company’s future undiscounted minimum cash payment obligations for its operating lease liabilities are as follows:
| (In millions) | Amount | |||||||
Year Ending December 31, | ||||||||
| 2026 | $ | 75 | ||||||
| 2027 | 39 | |||||||
| 2028 | 30 | |||||||
| 2029 | 17 | |||||||
| 2030 | 14 | |||||||
| Thereafter | 38 | |||||||
| Total undiscounted future lease payments | 213 | |||||||
| Present value adjustment | (25) | |||||||
| Net operating lease liabilities | $ | 188 | ||||||
Supplemental cash flow information related to leases was as follows:
| Year Ended December 31, | ||||||||||||||
| (In millions) | 2025 | 2024 | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash flows from operating leases | $ | 128 | $ | 137 | ||||||||||
The Company’s financing lease matured in August 2025. For the year ended December 31, 2024, financing cash flows from financing leases was $5 million.
Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases is summarized below:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Weighted-average remaining lease term (in years) | 5.0 | 4.1 | ||||||||||||
| Weighted-average discount rate | 4.8 | % | 4.2 | % | ||||||||||
The Company’s financing lease matured in August 2025. For the year ended December 31, 2024, the weighted-average remaining lease term for financing leases was 0.7 years and the weighted-average discount rate for financing leases was 3.2 percent.
Legal Matters
The Company is a defendant in various legal proceedings arising in the normal course of business. 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. All known liabilities for legal matters are accrued when management determines they are probable and the potential loss is estimable. 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 Consolidated Financial Statements. Future changes in facts and circumstances not currently known or foreseeable could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.