On May 4, 2023, the Company’s stockholders approved the Coterra Energy Inc. 2023 Equity Incentive Plan (the “2023 Plan”) which replaced the then-existing Cabot Oil & Gas Corporation 2014 Incentive Plan (the “2014 Plan”) and Cimarex Energy Co. Amended and Restated 2019 Equity Incentive Plan (the “2019 Plan”). Under the 2023 Plan, permitted awards include, but are not limited to, options, stock appreciation rights, restricted stock, restricted stock units, performance stock units and other cash and stock-based awards. A total of 22.95 million shares of common stock may be issued under the 2023 Plan. The 2023 Plan expires on February 21, 2033. No additional awards may be granted under the 2014 Plan or the 2019 Plan on or after May 4, 2023. Awards outstanding under any of the Company’s prior plans will remain outstanding and vest in accordance with their original terms and conditions. At December 31, 2024, approximately 18.4 million shares are available for issuance under the 2023 Plan.


	Year Ended December 31,
(In millions)	2024		2023		2022

Restricted stock units - employees and non-employee directors	$	47	$	37	$	38
Restricted stock awards	6		14		24
Performance share awards (1)	9		15		22
Deferred performance shares (2)	—		(7)		2

Total stock-based compensation expense	$	62	$	59	$	86
Income tax benefit	$	12	$	7	$	20

(2) During 2023, 495,774 shares of the Company’s common stock representing vested performance share awards previously deferred into the deferred compensation plan were sold and invested in other investment options. The sale of the Company’s common stock resulted in a $7 million decrease to the deferred compensation liability and a corresponding decrease in stock-based compensation expense. Refer to Note 11 for further discussion of the Company’s deferred compensation plan.

Restricted stock units are granted to employees of the Company. The fair value of restricted stock unit grants is based on the closing stock price on the grant date. Restricted stock units generally vest at the end of a three-year service period. The restricted stock units are settled in shares of the Company’s common stock on the vesting date.

For awards that vest at the end of the service period, expense is recognized ratably using a straight-line approach over the service period. For most restricted stock units, vesting is dependent upon the employees’ continued service with the Company, with the exception of employment termination due to death, disability or, if applicable, retirement. If retirement protection is included in the grant award, the Company accelerates the vesting period for retirement-eligible employees for purposes of recognizing compensation expense in accordance with the vesting provisions of the Company’s stock-based compensation programs.

The Company used an annual forfeiture rate assumption ranging from zero to five percent for purposes of recognizing stock-based compensation expense for these restricted stock units. The annual forfeiture rates were based on the Company’s actual forfeiture history and expectations for this type of award.


	Year Ended December 31, 2024

	Shares	Weighted- Average Grant Date Fair Value per Unit
Outstanding at beginning of period	5,024,915	$	24.73
Granted	2,196,947	25.87
Vested	(874,411)	20.46
Forfeited	(181,477)	25.83
Outstanding at end of period	6,165,974	$	25.71

Restricted stock units are granted to non-employee directors of the Company. The fair value of the restricted stock units is based on the closing stock price on the grant date. Awards that were granted prior to 2022 vested on the grant date, compensation expense was recorded immediately, and the shares of the Company’s common stock will be issued when the director ceases to be a director of the Company. The 2022 grants vested in 2023 and compensation expense was recognized ratably over the service period and Company stock was issued on the vesting date. Grants awarded after 2022 vest one year from the grant date or upon the director’s separation from the Company, as applicable, and accordingly the Company recognizes compensation expense immediately.

The Company assumed a zero percent annual forfeiture rate for purposes of recognizing stock-based compensation expense for these restricted stock units, based on the Company’s actual forfeiture history and expectations for this type of award.


	Year Ended December 31, 2024
	Shares	Weighted- Average Grant Date Fair Value per Unit
Outstanding at beginning of period	319,491	$	21.34

Granted	64,107	28.08
Vested	(57,239)	24.46

Outstanding at end of period	326,359	$	22.12

On October 1, 2021, the Company granted 3,364,354 shares of restricted stock, with a grant date value of $22.25 per share. These awards were replacement awards granted to Cimarex employees in connection with the merger with Cimarex. The fair value of these awards was measured based on the closing stock price on the closing date of the merger (grant date). As of December 31, 2024, there are no restricted stock awards outstanding.

The following table is a summary of restricted stock award activity:


	Year Ended December 31, 2024

	Shares	Weighted- Average Grant Date Fair Value per Share
Outstanding at beginning of period	1,096,596	$	22.25

Vested	(1,076,523)	22.25
Forfeited	(20,073)	22.25
Outstanding at end of period	—	$	—

The Company grants performance share awards that are based on performance conditions measured against the Company’s internal performance metrics (“Employee Performance Share Awards”) or based on the Company’s performance relative to a predetermined peer group and industry-related indices (“TSR Performance Share Awards”). The performance period for these awards generally commences on February 1 of the respective year in which the award was granted and extends over a three-year performance period. For most performance share awards, vesting is dependent upon the employees’ continued service with the Company, with the exception of employment termination due to death, disability or, if applicable, retirement. For all outstanding performance share awards, the Company used an annual forfeiture rate of zero for purposes of recognizing stock-based compensation expense. The annual forfeiture rate assumption was based on the Company’s actual forfeiture history and expectations for this type of award.

The Company assumed a zero percent annual forfeiture rate for purposes of recognizing stock-based compensation for these awards based on the Company’s actual forfeiture history and expectations for this type of award.

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.

Employee Performance Share Awards. The Employee Performance Share Awards vest at the end of the three-year performance period and the performance metric are set by the Company’s Compensation Committee. An employee will earn 100 percent of the award on the third anniversary, provided that the Company averages $100 million or more of annual operating cash flow during the three-year performance period. During the year ended December 31, 2024, 73,314 awards with a grant date fair value of $20.46 per share vested and were issued. As of December 31, 2024 there were no Employee Performance Share Awards outstanding.

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. The TSR Performance Share Awards granted 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 and certain industry-related indices over a three-year performance period. The Company’s TSR Performance Share Awards also include a feature that will reduce the potential cash component of the award if the actual performance is negative over the three-year period and the base calculation indicates an above-target payout.


	Year Ended December 31, 2024

	Shares	Weighted- Average Grant Date Fair Value per Unit (1)
Outstanding at beginning of period	1,698,595	$	17.79
Granted	541,865	19.38

Forfeited	(37,966)	17.56
Outstanding at end of period	2,202,494	$	18.19

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The following assumptions were used to determine the grant date fair value of the equity component of the TSR Performance Share Awards for the respective periods:


	Year Ended December 31,
	2024	2023	2022
Fair value per performance share award granted during the period	$19.38	$17.18 - $20.20	$9.01
Assumptions
Stock price volatility	38.0%	40.6% - 44.8%	42.6%
Risk free rate of return	4.4%	4.4% - 4.8%	4.4%

The following assumptions were used to determine the fair value of the liability component of the TSR Performance Share Awards for the respective periods:


	December 31,
	2024	2023	2022
Fair value per performance share award at the end of the period	$0.89 - $7.48	$7.57 - $10.67	$14.92
Assumptions
Stock price volatility	23.5% - 28.2%	29.1% - 38.8%	42.6%
Risk free rate of return	4.1% - 4.4%	4.2% - 4.7%	4.4%

The stock price volatility was calculated using historical closing stock price data for the Company for the period associated with the expected term through the grant date of each award. The risk free rate of return percentages are based on the continuously compounded equivalent of the U.S. Treasury within the expected term as measured on the grant date.

Subsequent Event. On January 31, 2025, the performance period ended for the TSR Performance Share Awards that were granted in 2022, and 1,103,157 shares with a grant date fair value of $20 million vested based on the Company’s ranking relative to a predetermined peer group. Cash payments associated with these awards of approximately $1 million were also made in February 2025. The calculation of the award payout was certified by the Compensation Committee on February 10, 2025.


	Unrecognized Stock-Based Compensation (In Millions)		Weighted-Average Period For Recognition (Years)
Restricted stock units - employees and non-employee directors	$	78	1.5

Performance share awards	10		1.5
	$	88

On October 1, 2021, the Company granted stock option awards to purchase 1,577,554 shares of the Company’s common stock with exercise prices ranging from $8.47 to $28.72 per share. These awards were replacement awards granted to Cimarex employees in connection with the merger with Cimarex and were fully vested on the grant date.


	Year Ended December 31, 2024
	Shares	Weighted- Average Strike Price
Outstanding at beginning of period	304,883	$	15.66

Exercised	(83,603)	20.31
Forfeited or Expired	(27,700)	23.00
Outstanding at end of period(1)	193,580	12.59
Exercisable at end of period(1)	193,580	$	12.59

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