Cabot Oil & Gas (COG)

ITEM 1. Legal Proceedings

The information set forth under the caption “West Virginia Royalty Litigation” in Note 6 of the Notes to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated by reference in response to this item.

ITEM 1. Legal Proceedings

The information set forth under the captions “West Virginia Royalty Litigation,” “Texas Title Litigation” and “Raymondville Area” in Note 6 of the Notes to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated by reference in response to this item.

ITEM 1. Legal Proceedings

The information set forth under the captions “West Virginia Royalty Litigation,” “Texas Title Litigation” and “Raymondville Area” in Note 6 of the Notes to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated by reference in response to this item.

ITEM 1. Legal Proceedings

The information set forth under the captions “West Virginia Royalty Litigation,” “Texas Title Litigation” and “Raymondville Area” in Note 6 of the Notes to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated by reference in response to this item.

ITEM 3. LEGAL PROCEEDINGS

We are a defendant in various legal proceedings arising in the normal course of our business. All known liabilities are accrued based on management’s best estimate of the potential loss. While the outcome and impact of such legal proceedings on us cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on our consolidated financial position or cash flow. Operating results, however, could be significantly impacted in the reporting periods in which such matters are resolved.

Wyoming Royalty Litigation

In January 2002, we were sued by 13 overriding royalty owners in Wyoming federal district court, as reported in previous filings. The plaintiffs made claims pertaining to deductions from their overriding royalty and claims concerning penalties for improper reporting. As a result of several decisions by the Court favorable to us, the case was settled in September 2005 with no payment from us and a dismissal with prejudice of all claims by plaintiffs. The settlement included provisions for reporting and payment going forward. In the third quarter of 2005, management reversed the reserve we had recorded regarding this case, which did not have a material impact on our consolidated financial statements.

West Virginia Royalty Litigation

In December 2001, we were sued by two royalty owners in West Virginia state court for an unspecified amount of damages. The plaintiffs have requested class certification and allege that we failed to pay royalty based upon the wholesale market value of the gas, that we had taken improper deductions from the royalty and failed to properly inform royalty owners of the deductions. The plaintiffs also claimed that they are entitled to a 1/8th royalty share of the gas sales contract settlement that we reached with Columbia Gas Transmission Corporation in 1995 bankruptcy proceedings.

Discovery and pleadings necessary to place the class certification issue before the state court have been ongoing. The Court entered an order on June 1, 2005 granting the motion for class certification. The parties have negotiated a modification to the order which will result in the dismissal of the claims related to the gas sales contract settlement in connection with the Columbia Gas Transmission bankruptcy proceedings and that will limit the claims to those arising on and after December 17, 1991. The Court has postponed the trial date from April 17, 2006, in light of a case pending before the West Virginia Supreme Court of Appeals which may decide issues of law that may apply to the issue of deductibility of post-production expenses. We intend to challenge the class certification order by filing a Petition for Writ of Prohibition with the West Virginia Supreme Court of Appeals.

We are vigorously defending the case. We have established a reserve that management believes is adequate based on their estimate of the probable outcome of this case.

Texas Title Litigation

On January 6, 2003, we were served with Plaintiffs’ Second Amended Original Petition in Romeo Longoria, et al. v. Exxon Mobil Corporation, et al. in the 79th Judicial District Court of Brooks County, Texas. Plaintiffs filed their Second Supplemental Original Petition on November 12, 2004 and their Third Supplemental Original Petition on February 22, 2005 (which added Wynn-Crosby 1996, Ltd. and Dominion Oklahoma Texas Exploration & Production, Inc.). Plaintiffs allege that they are the owners of a one-half undivided mineral interest in and to certain lands in Brooks County, Texas. Cody Energy, LLC, our subsidiary, acquired certain leases and wells in 1997 and 1998.

The plaintiffs allege that they are entitled to be declared the rightful owners of an undivided interest in minerals and all improvements on the lands on which we acquired these leases. The plaintiffs also assert claims for trespass to try title, action to remove a cloud on the title, failure to properly account for royalty, fraud, trespass, conversion, all for unspecified actual and exemplary damages. Plaintiffs claim that they acquired title to the property by adverse possession. Plaintiffs also assert the discovery rule and a claim of fraudulent concealment to avoid the affirmative defense of limitations. In August 2005, the case was abated until late February 2006, during which time the parties are allowed to amend pleadings or add additional parties to the litigation. Due to the abatement of the case, we have

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not had the opportunity to conduct discovery in this matter. We estimate that production revenue from this field since Cody Energy, LLC acquired title is approximately $15.7 million, and that the carrying value of this property is approximately $33.6 million.

Although the investigation into this claim continues, we intend to vigorously defend the case. Should we receive an adverse ruling in this case, an impairment review would be assessed to determine whether the carrying value of the property is recoverable. Management cannot currently determine the likelihood of an unfavorable outcome or range of any potential loss should the outcome be unfavorable. Accordingly, we have not established a reserve for this matter.

Raymondville Area

In April 2004, our wholly owned subsidiary, Cody Energy, LLC, filed suit in state court in Willacy County, Texas against certain of its co-working interest owners in the Raymondville Area, located in Kenedy and Willacy Counties. In early 2003, Cody had proposed a new prospect under the terms of the Joint Operating Agreement. Some of the co-working interest owners elected not to participate. The initial well was successful and subsequent wells have been drilled to exploit the discovery made in the first well.

The working interest owners who elected not to participate notified Cody that they believed that they had the right to participate in wells drilled after the initial well. Cody contends that the working interest owners that elected not to participate are required to assign their interest in the prospect to those who elected to participate. The defendants have filed a counter claim against the Company, and one of the defendants has filed a lien against Cody’s interest in the leases in the Raymondville area.

Cody has signed a settlement agreement with certain of the defendants representing approximately 3% of the interest in the area. Cody and the remaining defendant filed cross motions for summary judgment. In August 2005, the trial judge entered an order granting Cody’s Motion for Summary Judgment requiring the remaining defendant to assign to Cody all of its interest in the prospect and to remove the lien filed against Cody’s interest. The defendant has filed a Motion for Reconsideration and Opposition to Proposed Order. The Court has not yet made a decision on these two motions.

Commitment and Contingency Reserves

We have established reserves for certain legal proceedings. The establishment of a reserve involves 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 we could incur approximately $10.2 million of additional loss with respect to those matters in which reserves have been established. Future changes in the facts and circumstances could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.

While the outcome and impact on us cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on our consolidated financial position or cash flow. Operating results, however, could be significantly impacted in the reporting periods in which such matters are resolved.

ITEM 1. Legal Proceedings

The information set forth under the captions “Wyoming Royalty Litigation” and “Raymondville Area” in Note 7 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated by reference in response to this item.

ITEM 3. LEGAL PROCEEDINGS

We are a party to various legal proceedings arising in the normal course of our business. All known liabilities are fully accrued based on management’s best estimate of the potential loss. While the outcome and impact on us cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on our consolidated financial position. Operating results and cash flow, however, could be significantly impacted in the reporting periods in which such matters are resolved.

Wyoming Royalty Litigation

In June 2000, we were sued by two overriding royalty owners in Wyoming state court for unspecified damages. The plaintiffs requested class certification and alleged that we had improperly deducted costs of production from royalty payments to the plaintiffs and other similarly situated persons. Additionally, the suit claimed that we had failed to properly inform the plaintiffs and other similarly situated persons of the deductions taken from royalties. At a mediation held in April 2003, the plaintiffs in this case claimed total damages of $9.5 million plus attorney fees. We settled the case for a total of $2.25 million and the State District Court Judge entered his order approving the settlement in the fourth quarter of 2003. The class included all private fee royalty and overriding royalty owners of the Company in the State of Wyoming except those in the suit discussed below and one owner who opted out of the settlement. It also includes provisions for the method of valuation of gas for royalty payment purposes going forward and for reporting of royalty payments, which should prevent further litigation of these issues by the class members.

In January 2002, 13 overriding royalty owners sued us in Wyoming federal district court. The plaintiffs in the federal case have made the same general claims pertaining to deductions from their overriding royalty as the plaintiffs in the Wyoming state court case but have not asked for class certification.

The federal district court judge certified two questions of state law for decision by the Wyoming State Supreme Court, which recently answered both questions. The Wyoming Supreme Court ruled that certain deductions taken by us from the plaintiffs were not proper and that the statutes of limitations advanced by us are discovery statutes and accordingly do not begin to run until the plaintiffs knew, or had reason to know, of the violation. We believe we have properly reported to the plaintiffs and, that if we did not, the plaintiffs knew or should have known the reporting was improper and the nature of the deductions, thus triggering the statutes of limitations. We still intend to raise defenses to the alleged failure to report claims. There is also a dispute as to how the interest should be calculated.

The federal judge refused to certify a question relating to the issue of the proper calculation of damages for failure to provide certain information required by statute on overriding royalty owner check stubs that had been decided adversely to our position in a state district court letter decision in a separate case. After the federal judge’s refusal to certify this issue, the plaintiffs reduced the damages they were claiming. Based upon recent communication from the plaintiffs, they are now claiming $26.2 million in total damages which consists of $20.3 million for alleged violations of the check stub reporting statute and $5.9 million for all other damages.

In the opinion of our outside counsel, Brown, Drew & Massey, LLP, the likelihood of the plaintiffs recovering $20.3 million for the check stub reporting statute is remote. However, a reserve that management believes is adequate to provide for the check stub reporting statute and all other damages has been established based on management’s estimate at this time of the probable outcome of this case.

West Virginia Royalty Litigation

In December 2001, we were sued by two royalty owners in West Virginia state court for an unspecified amount of damages. The plaintiffs have requested class certification under the West Virginia Rules of Civil Procedure and allege that we failed to pay royalty based upon the wholesale market value of the gas produced, that it had taken improper deductions from the royalty and failed to properly inform the plaintiffs and other similarly situated persons of deductions taken from the royalty. The plaintiffs have also claimed that they are entitled to a  ¹/8th royalty share of the gas sales contract settlement that we reached with Columbia Gas Transmission Corporation in the 1995 Columbia Gas Transmission Corporation bankruptcy proceeding.

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Discovery and pleadings necessary to place the class certification issue before the state court have been ongoing. A hearing on the plaintiffs’ motion for class certification was held on October 20, 2003, and proposed findings of fact and conclusions of law were submitted to the court on December 5, 2003. A status conference was held with the court and the court advised it intends to issue a ruling on the class certification motion. The court was expected to rule by December 2004, and we are still awaiting a decision. Discovery is proceeding on the claims pending the ruling on the class certification motion. Discovery is to be completed by April 1, 2005, and the trial is currently scheduled for August 15, 2005. If a class is certified it is expected this trial date will be continued to a later date.

The investigation into this claim continues and it is in the discovery phase. We are vigorously defending the case. We have a reserve that management believes is adequate based on its estimate at this time of the probable outcome of this case.

Texas Title Litigation

On January 6, 2003, we were served with Plaintiffs’ Second Amended Original Petition in Romeo Longoria, et al. v. Exxon Mobil Corporation, et al. in the 79th Judicial District Court of Brooks County, Texas. Plaintiffs filed their First Supplemental Original Petition on March 17, 2004 and their Second Supplemental Petition on November 12, 2004. The significant change in the second Supplemental Petition is that plaintiffs appear to limit their claim to the mineral estate, rather than making claims to both the surface and mineral estate. The plaintiffs allege that they are the rightful owners of a one-half undivided mineral interest in and to certain lands in Brooks County, Texas. As Cody Energy, LLC, we acquired certain leases and wells from Wynn-Crosby 1996, Ltd. in 1997 and 1998 and we subsequently acquired a 320 acre lease from Hector and Gloria Lopez in 2001. The plaintiffs allege that they are entitled to be declared the rightful owners of an undivided interest in minerals and all improvements on the lands on which we acquired these leases. The plaintiffs also assert claims for trespass to try title, action to remove a cloud on the title, failure to properly account for royalty, fraud, trespass, conversion, all for unspecified actual and exemplary damages. The original trial date of May 19, 2003 was cancelled and a new trial date has not been set. We have not had the opportunity to conduct discovery in this matter. We estimate that production revenue from this field since its predecessor, Cody Energy, LLC, acquired title and since we acquired its lease is approximately $14.9 million. The carrying value of this property is approximately $34 million. Co-defendants Shell Oil Company and Shell Western E&P filed a motion for summary judgment seeking dismissal of plaintiffs’ causes of action on multiple grounds. The original plaintiffs’ attorneys asked permission from the Court to withdraw from the representation. The Court granted that request, and new attorneys for some, but not all of the plaintiffs have recently entered the case. The motion for summary judgment was reset and a hearing was held in December of 2003. We joined in the motion. After a second hearing, the Court denied the motion for summary judgment. The defendants have moved to add parties whose title interests are being challenged by the plaintiffs, and who are therefore necessary to the case, or in the alternative, abate the proceeding until the plaintiffs join all parties whose interests may be affected by plaintiffs’ claims.

Although the investigation into this claim is in its early stages, we intend to vigorously defend the case. Should we receive an adverse ruling in this case, an impairment review would be assessed to ensure the carrying value of the property is recoverable. Management cannot currently determine the likelihood of an unfavorable outcome or range of any potential loss should the outcome be unfavorable. Accordingly, there has been no reserve established for this matter.

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Raymondville Area

In April 2004, our wholly owned subsidiary, Cody Energy, LLC, filed suit in Willacy County, Texas against certain of our co-working interest owners in the Raymondville Area, located in Kenedy and Willacy Counties. In early 2003, Cody had proposed a new prospect to certain of these co-working interest owners located within jointly owned oil and gas leases. Some of the co-working interest owners elected to participate and some did not. The initial well was successful and subsequent wells have been drilled to exploit the discovery made in the first well.

In December 2003, certain of the co-working interest owners who elected not to participate in the initial well notified Cody that they believed that they had the right to participate in subsequent wells. Cody contends that, under the terms of the agreements between the parties, the co-working interest owners that elected not to participate in the initial well in the prospect were required to assign their interest in the proposed prospect to those who elected to participate. Alternatively, Cody contends that such owners lost their right to participate in subsequent wells within a 1,200 foot radius of the initial well.

The defendants have filed a counter claim against us and one of the defendants has filed a lien against Cody’s interest in the leases in the Raymondville Area. Cody contends that this lien is improper and has sought damages for its filing. Cody is vigorously prosecuting this case which is in its early stage of discovery. No trial date has been set by the court.

Certain of the defendants filed a Motion for Partial Summary Judgment contending that they did not have adequate notice of the prospect proposal. Cody is contesting this Motion. In addition, in late December 2004, Cody filed a Motion for Final Summary Judgment asking the court to find that, under the terms of the agreements, Cody and the participating working interest owners are entitled to an assignment of the interests of the co-working interest owners who elected not to participate in the prospect. No hearing date has been set by the court.

Management cannot currently determine the likelihood of an unfavorable outcome or range of any potential loss should the outcome be unfavorable. Accordingly, there has been no reserve established for this matter.

Commitment and Contingency Reserves

We have established reserves for certain legal proceedings. The establishment of a reserve involves 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 we could incur approximately $11.1 million of additional loss with respect to those matters in which reserves have been established. Future changes in the facts and circumstances could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.

While the outcome and impact on us cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on our consolidated financial position. Operating results and cash flow, however, could be significantly impacted in the reporting periods in which such matters are resolved.