The following review of operations for the three and nine month periods ended September 30, 2009 and 2008 should be read in conjunction with our Condensed Consolidated Financial Statements and the Notes included in this Form 10-Q and with the Consolidated Financial Statements, Notes and Management's Discussion and Analysis included in the Cabot Oil & Gas Annual Report on Form 10-K for the year ended December 31, 2008 (Form 10-K).

Certain prior year amounts have been reclassified to reflect changes in presenting the geographic areas for which we conduct our operations. These areas consist of the North (comprised of the East and Rocky Mountain areas), South (comprised of the Gulf Coast and Anadarko areas) and Canada. In previous periods, we presented the geographic areas as East, Gulf Coast, West and Canada.

Overview

On an equivalent basis, our production level for the nine months ended September 30, 2009 increased by 10% compared to the nine months ended September 30, 2008. For the nine months ended September 30, 2009, we produced
76.7 Bcfe compared to production of 69.6 Bcfe for the nine months ended September 30, 2008. Natural gas production was 73.0 Bcf and oil production was 607 Mbbls for the first nine months of 2009. Natural gas production increased by 10% when compared to the first nine months of 2008, which had production of 66.1 Bcf. This increase was primarily a result of increased production in the North region associated with the increased drilling program in Susquehanna County, Pennsylvania as well as increased natural gas production in the South region associated with the properties we acquired in east Texas in August 2008 and drilling in the County Line field. Partially offsetting these production gains were decreases in production in Canada due to the sale of our Canadian properties in April 2009, as well as reduced drilling activity in Canada, Oklahoma and Wyoming. Oil production increased by five percent, from 580 Mbbls in the first nine months of 2008 to 607 Mbbls produced in the first nine months of 2009. This was primarily the result of increased production in the South region associated with the properties we acquired in east Texas in August 2008, partially offset by a decrease in production in Canada due to the sale of our Canadian properties in April 2009.

Our average realized natural gas price for the first nine months of 2009 was $7.39 per Mcf, 14% lower than the $8.64 per Mcf price realized in the first nine months of 2008. Our average realized crude oil price for the first nine months of 2009 was $82.48 per Bbl, 13% lower than the $94.93 per Bbl price realized in the first nine months of 2008. These realized prices include realized gains and losses resulting from commodity derivatives (zero-cost collars or swaps). For information about the impact of these derivatives on realized prices, refer to "Results of Operations" below. Commodity prices are determined by many factors that are outside of our control. Historically, commodity prices have been volatile, and we expect them to remain volatile. Commodity prices are affected by changes in market supply and demand, which are impacted by overall economic activity, weather, pipeline capacity constraints, inventory storage levels, basis differentials and other factors. As a result, we cannot accurately predict future natural gas, NGL and crude oil prices and, therefore, we cannot determine with any degree of certainty what effect increases or decreases will have on our future revenues, capital program or production volumes.

Operating revenues for the nine months ended September 30, 2009 decreased by $67.5 million, or nine percent, from the nine months ended September 30, 2008 as the lower commodity prices noted above more than offset the higher equivalent production. Natural gas production revenues decreased by $31.0 million, or five percent, for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 due to the decrease in realized natural gas prices, partially offset by the increase in natural gas production. Crude oil and condensate revenues decreased by $5.1 million, or nine percent, for the first nine months of 2009 as compared to the first nine months of 2008, due to a decrease in realized crude oil prices, partially offset by the increase in crude oil production. Brokered natural gas revenues decreased by $32.5 million, or 38%, due to a decrease in sales price, partially offset by an increase in brokered volumes.

In addition to production volumes and commodity prices, finding and developing sufficient amounts of crude oil and natural gas reserves at economical costs are critical to our long-term success. For 2009, we expect to spend approximately $580 million in capital and exploration expenditures, increased from $500 million disclosed at June 30, 2009, due primarily to our lease acquisition efforts in the highly competitive Marcellus shale basin. We believe our cash on hand and operating cash flow in 2009 will be sufficient to fund our budgeted capital and exploration spending. Any additional needs will be funded by borrowings from our credit facility. We will continue to assess

the natural gas and crude oil price environment and our liquidity position and may increase or decrease the capital and exploration expenditures accordingly. For the nine months ended September 30, 2009, approximately $367.1 million has been invested in our exploration and development efforts.

During the first nine months of 2009, we drilled 119 gross wells (107 development, six exploratory and six extension wells) with a success rate of 98% compared to 333 gross wells (318 development, 12 exploratory and three extension wells) with a success rate of 99% for the comparable period of the prior year. For the full year of 2009, we plan to drill approximately 153 gross wells.

We remain focused on our strategies of pursuing lower risk drilling opportunities that provide more predictable results on our accumulated acreage position. Additionally, we intend to maintain spending discipline and manage our balance sheet in an effort to ensure sufficient liquidity, including cash resources and available credit. We believe these strategies are appropriate for our portfolio of projects and the current industry environment and will continue to add shareholder value over the long-term.

In April 2009, we sold our Canadian properties to a private Canadian company (see Note 2 of the Notes to the Condensed Consolidated Financial Statements for further details). In April 2009, we also entered into a new revolving credit facility and terminated our prior credit facility (see Note 4 of the Notes to the Condensed Consolidated Financial Statements for further details).

The preceding paragraphs, discussing our strategic pursuits and goals, contain forward-looking information. Please read "Forward-Looking Information" for further details.

Financial Condition

Capital Resources and Liquidity

Our primary sources of cash for the nine months ended September 30, 2009 were funds generated from the sale of natural gas and crude oil production and, to a lesser extent, the sales of properties during the period, as disclosed in Note 2 of the Notes to the Condensed Consolidated Financial Statements. These cash flows were primarily used to fund our development and exploratory expenditures, in addition to payments for debt service, debt issuance costs, contributions to our pension plan and dividends. See below for additional discussion and analysis of cash flow.

We generate cash from the sale of natural gas and crude oil. Operating cash flow fluctuations are substantially driven by commodity prices and changes in our production volumes. Prices for crude oil and natural gas have historically been volatile, including seasonal influences characterized by peak demand and higher prices in the winter heating season; however, the impact of other risks and uncertainties, as described in our Form 10-K and other filings with the Securities and Exchange Commission, have also influenced prices throughout the recent years. Commodity prices have recently experienced increased volatility due to adverse market conditions in the economy. In addition, fluctuations in cash flow may result in an increase or decrease in our capital and exploration expenditures. See "Results of Operations" for a review of the impact of prices and volumes on sales.

Our working capital is also substantially influenced by variables discussed above. From time to time, our working capital will reflect a surplus, while at other times it will reflect a deficit. This fluctuation is not unusual. The recent financial and credit crisis has reduced credit availability and liquidity for some companies; however, we believe we have adequate credit availability and liquidity to meet our working capital requirements.

                                                                  Nine Months Ended
                                                                    September 30,
(In thousands)                                                 2009              2008
Cash Flows Provided by Operating Activities                 $  417,130       $    424,728
Cash Flows Used in Investing Activities                       (345,997 )       (1,181,953 )
Cash Flows (Used in) / Provided by Financing Activities        (63,564 )          786,101

Net Increase in Cash and Cash Equivalents                   $    7,569       $     28,876

Operating Activities. Key components impacting net operating cash flows are commodity prices, production volumes and operating costs. Net cash provided by operating activities in the first nine months of 2009 decreased by $7.6 million over the first nine months of 2008. This decrease was mainly due to an increase in working capital changes as a result of lower trade accounts receivable balances due to lower commodity prices and lower accounts payable due to lower capital expenditures and lower commodity prices. Average realized natural gas prices decreased by 14% for the first nine months of 2009 compared to the first nine months of 2008 and average realized crude oil prices decreased by 13% compared to the same period. Equivalent production volumes increased by 10% for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 as a result of higher natural gas and crude oil production. 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. Realized prices may continue to decline during 2009.

For 2009, we have natural gas price swaps covering 16.1 Bcf of our 2009 gas production at an average price of $12.18 per Mcf and natural gas price collars covering 47.3 Bcf of our 2009 gas production, with a weighted-average floor of $9.40 per Mcf and a weighted-average ceiling of $12.39 per Mcf. As of September 30, 2009, we have natural gas price swaps covering 19.3 Bcf of our 2010 gas production at an average price of $11.43 per Mcf, and no natural gas price collars. Accordingly, based on our current hedge position, we will be more subject to the effects of natural gas price volatility in 2010 than in 2009. In addition, given the current market for derivatives, if we were to hedge all our 2010 production, we would expect our realized prices to be lower than our 2009 realized prices.

Investing Activities. The primary uses of cash in investing activities were capital spending and exploration expenses. We established the budget for these amounts based on our current estimate of future commodity prices. Due to the volatility of commodity prices and new opportunities which may arise, our capital expenditures may be periodically adjusted during any given year. Cash flows used in investing activities decreased by $836.0 million from the first nine months of 2008 compared to the first nine months of 2009. The decrease was due to a decrease of $769.5 million in acquisitions and capital expenditures and an increase of $79.0 million of proceeds from the sale of assets, partially offset by an increase of $12.5 million in exploration expenditures. In August 2008, we completed the acquisition of producing properties, leasehold acreage and a natural gas gathering infrastructure in east Texas for total net cash consideration of approximately $604.0 million.

Financing Activities. Cash flows provided by financing activities decreased by $849.7 million from the first nine months of 2008 to the first nine months of 2009. This was primarily due to a decrease in borrowings from debt of $645 million, partially offset by a decrease in repayments of debt of $118 million, and a decrease in net proceeds from the sale of common stock of $316.1 million primarily due to our June 2008 issuance of 5,002,500 shares of common stock in a public offering for net proceeds of $313.5 million. Common stock proceeds and debt borrowings in 2008 were largely used to finance the acquisition of East Texas properties and undeveloped acreage. Cash paid for capitalized debt issuance costs and dividends increased by a total of $8.6 million, partially offset by an increase of $2.1 million in the tax benefit associated with stock-based compensation.

At September 30, 2009, we had $128 million of borrowings outstanding under our unsecured credit facility at a weighted-average interest rate of 3.7%. In April 2009, we entered into a new revolving credit facility and terminated our prior credit facility (see Note 4 to the Condensed Consolidated Financial Statements for further details). The new credit facility provides for an available credit line of $500 million and contains an accordion feature allowing us to increase the available credit line to $600 million, if any one or more of the existing banks or new banks agree to provide such increased commitment amount. The available credit line is subject to adjustment on the basis of the present value of estimated future net cash flows from proved oil and gas reserves (as determined by the banks based on our reserve reports and engineering reports) and certain other assets and the outstanding principal balance of our senior notes. We strive to manage our debt at a level below the available credit line in order to maintain excess borrowing capacity. Our revolving credit facility includes a covenant limiting our total debt. Management believes that, with internally generated cash, existing cash and availability under our revolving credit facility, we have the capacity to finance our spending plans and maintain our strong financial position. At the same time, we will closely monitor the capital markets.

Capitalization

Information about our capitalization is as follows:



                                        September 30,        December 31,
           (Dollars in millions)            2009                 2008
           Debt(1)                     $         810.0      $        867.0
           Stockholders' Equity                1,823.8             1,790.6

           Total Capitalization        $       2,633.8      $      2,657.6


           Debt to Capitalization                   31 %                33 %

           Cash and Cash Equivalents   $          35.7      $         28.1

(1) Includes $20 million and $35.9 million of current portion of long-term debt at September 30, 2009 and December 31, 2008, respectively. Includes $128 million and $185 million of borrowings outstanding under our revolving credit facility at September 30, 2009 and December 31, 2008, respectively.

During the nine months ended September 30, 2009, we paid dividends of $9.3 million ($0.03 per share) on our common stock. A regular dividend has been declared for each quarter since we became a public company in 1990.

Capital and Exploration Expenditures

On an annual basis, we generally fund most of our capital and exploration activities, excluding any significant oil and gas property acquisitions, with cash generated from operations and, when necessary, our revolving credit facility. We budget these capital expenditures based on our projected cash flows for the year.

The following table presents major components of capital and exploration expenditures for the nine months ended September 30, 2009 and 2008:

                                                 Nine Months Ended
                                                   September 30,
                  (In millions)                  2009        2008
                  Capital Expenditures
                  Drilling and Facilities(1)   $   294.7   $   415.5
                  Leasehold Acquisitions            20.8       106.0
                  Acquisitions                       0.4       624.4
                  Pipeline and Gathering            15.3        25.4
                  Other                              4.6         7.5

                                                   335.8     1,178.8
                  Exploration Expense               31.3        18.8

                  Total                        $   367.1   $ 1,197.6

(1) Includes Canadian currency translation effects of $4.6 million and $(9.2) million in 2009 and 2008, respectively.

For the full year of 2009, we plan to drill approximately 153 gross (127.3 net) wells. This 2009 drilling program includes approximately $580 million in total capital and exploration expenditures. See the "Overview" discussion for additional information regarding the current year drilling program. We will continue to assess the natural gas and crude oil price environment and our liquidity position and may increase or decrease the capital and exploration expenditures accordingly.

Contractual Obligations

At September 30, 2009, we were obligated to make future payments under drilling rig commitments and firm gas transportation agreements. For further information, please refer to "Firm Gas Transportation Agreements" and "Drilling Rig Commitments" under Note 6 in the Notes to the Condensed Consolidated Financial Statements and 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 condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted and adopted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. See our Form 10-K for further discussion of our critical accounting policies.

Recently Adopted Accounting Standards

In July 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 105, "Generally Accepted Accounting Principles," establishing the accounting standards codification and the hierarchy of generally accepted accounting principles (GAAP) as the sole source of authoritative non-governmental U.S. GAAP. The Codification was not intended to change U.S. GAAP; however, references to various accounting pronouncements and literature will now differ from what was previously being used in practice. Authoritative literature is now referenced by topic rather than by type of standard. As of July 1, 2009, the FASB no longer issues Statements, Interpretations, Staff Positions or EITF Abstracts. The FASB now communicates new accounting standards by issuing an Accounting Standards Update (ASU). All guidance in the Codification has an equal level of authority. ASC 105 is effective for financial statements that cover interim and annual periods ending after September 15, 2009, and supersedes all accounting standards in U.S. GAAP, aside from those issued by the SEC. There was no impact on our financial position, results of operations or cash flows as a result of the Codification.

In February 2008, the FASB issued an amendment to ASC 820, "Fair Value Measurements and Disclosures," which granted a one year deferral (to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years) for certain non-financial assets and liabilities measured on a nonrecurring basis to comply with ASC 820. Effective January 1, 2009, we applied these amendments of ASC 820 discussed above and there was no material impact on our financial statements. For further information, please refer to Note 7 of the Notes to the Condensed Consolidated Financial Statements.

Effective January 1, 2009, we adopted amendments that the FASB made to ASC 260, "Earnings Per Share," regarding determining whether instruments granted in share-based payment transactions are participating securities. The adoption of these amendments did not have a material impact on our financial statements. For further information, please refer to Note 5 of the Notes to the Condensed Consolidated Financial Statements.

In March 2008, the FASB amended the disclosure requirements prescribed in ASC 815, "Derivatives and Hedging." We adopted these amendments as of January 1, 2009. The principal impact was to require the expansion of our disclosure regarding our derivative instruments. For further information, please refer to "Derivative Instruments and Hedging Activity" in Note 7 of the Notes to the Condensed Consolidated Financial Statements.

In April 2009, the FASB amended guidance in ASC 820 regarding determining fair value when the volume and level of activity for an asset or liability has significantly decreased and identifying transactions that are not orderly. If an entity determines that either the volume or level of activity for an asset or liability has significantly decreased from normal conditions, or that price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. The objective in fair value measurement remains unchanged from what is prescribed in ASC 820 and should be reflective of the current exit price. Disclosures in interim and annual periods must include inputs and valuation techniques used to measure fair value, along with any changes in valuation techniques and related inputs during the period. In addition, disclosures

for debt and equity securities must be provided on a more disaggregated basis. These amendments became effective for interim and annual reporting periods ending after June 15, 2009 and did not have a material impact on our financial position, results of operations or cash flows.

In April 2009, the FASB amended ASC 825, "Financial Instruments," to require disclosures about fair value of financial instruments for publicly traded companies for both interim and annual periods. Historically, these disclosures were only required annually. The interim disclosures are intended to provide financial statement users with more timely and transparent information about the effects of current market conditions on an entity's financial instruments that are not otherwise reported at fair value. These amendments became effective for interim reporting periods ending after June 15, 2009, and we have provided interim disclosures regarding the fair value of debt instruments in Note 4 of the Notes to the Condensed Consolidated Financial Statements. Comparative disclosures are only required for periods ending after the initial adoption. There was no material impact on our financial position, results of operations or cash flows as a result of the adoption.

In April 2009, the FASB amended the other-than-temporary impairment guidance for debt securities in ASC 320, "Investments-Debt and Equity Securities," to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. There were no amendments made to the recognition and measurement guidance for equity securities, but a new method of recognizing and reporting for debt securities was established. Disclosure requirements for impaired debt and equity securities have been expanded significantly and are now required quarterly, as well as annually. These amendments became effective for interim and annual reporting periods ending after June 15, 2009 and did not have a material impact on our financial position, results of operations or cash flows. Comparative disclosures are only required for periods ending after the initial adoption.

In June 2009, the FASB amended ASC 855, "Subsequent Events," to require entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. In addition, a new concept of financial statements being "available to be issued" was introduced. These amendments became effective for interim and annual periods ending after June 15, 2009 and did not have any impact on our financial position, results of operations or cash flows.

In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, "Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value," which provides clarification on measuring liabilities at fair value when a quoted price in an active market is not available. ASU No. 2009-05 specifies that in cases where a quoted price in an active market is not available, a valuation technique should be applied that uses either the quote of the liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique consistent with existing fair value measurement guidance. Valuation methods discussed include using an income approach, such as a present value technique, or a market approach based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. Entities are not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. ASU No. 2009-05 is codified in ASC 820-10 and is effective for the first reporting period (including interim periods) beginning after issuance. There was no impact on our financial position, results of operations or cash flows as a result of the adoption of ASU No. 2009-05.

Recently Issued Accounting Pronouncements

In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 166, "Accounting for Transfers of Financial Assets." SFAS No. 166 has not yet been codified, but revises ASC 860, "Transfers and Servicing," and will require entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets. SFAS No. 166 will be effective at the beginning of the first fiscal year beginning after November 15, 2009. As we do not anticipate having any of these types of transactions in the near future, SFAS No. 166 is not expected to have any impact on our financial position, results of operations or cash flows.

In December 2008, the SEC issued Release No. 33-8995, "Modernization of Oil and Gas Reporting," which amends the oil and gas disclosures for oil and gas producers contained in Regulations S-K and S-X, as well as adding a section to Regulation S-K (Subpart 1200) to codify the revised disclosure requirements in Securities Act Industry

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