What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-07-27 compared with 2020-05-07 · 206 added, 113 removed, 359 unchanged (47% of the section changed)

2 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS (UNAUDITED)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(Thousands, except per share amounts)

1 unchanged sentence

Sales of natural gas, natural gas liquids and oil $ 498,772 $ 900,527 $ 1,213,973 $ 2,172,140

Gain (loss) on derivatives not designated as hedges 389,436 ( 131,996 )

Gain on derivatives not designated as hedges 26,426 407,635 415,862 275,639

Net marketing services and other 1,876 2,090 4,296 5,646

7 unchanged sentences

Amortization of intangible assets 7,477 10,342 14,955 20,684

Loss on exchange of long-lived assets 48,852 —

Loss on sale/exchange of long-lived assets 49,207 — 98,059 —

Impairment and expiration of leases 41,279 48,584 95,047 78,118

Proxy, transaction and reorganization — 4,089

Transaction, proxy and reorganization 4,745 21,518 4,745 25,607

Total operating expenses 913,986 1,014,222 1,897,685 1,981,939

Operating income 123,358 175,456

Operating (loss) income ( 386,912 ) 296,030 ( 263,554 ) 471,486

Gain on Equitrans Share Exchange — — ( 187,223 ) —

Loss (gain) on investment in Equitrans Midstream Corporation 390,628 ( 89,055 )

(Gain) loss on investment in Equitrans Midstream Corporation ( 82,983 ) 104,741 307,645 15,686

Dividend and other income ( 3,590 ) ( 23,645 ) ( 28,304 ) ( 44,632 )

2 unchanged sentences

(Loss) income before income taxes ( 366,078 ) 164,431 ( 500,395 ) 393,356

Income tax expense 32,822 38,234

Income tax (benefit) expense ( 103,003 ) 38,865 ( 70,181 ) 77,099

Net (loss) income $ ( 263,075 ) $ 125,566 $ ( 430,214 ) $ 316,257

Earnings per share of common stock:

(Loss) earnings per share of common stock:

Weighted average common stock outstanding 255,524 255,099 255,477 254,975

5 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net (loss) income $ ( 263,075 ) $ 125,566 $ ( 430,214 ) $ 316,257

Other comprehensive income (loss), net of tax:

Net change in interest rate cash flow hedges, net of tax expense:

Other post-retirement benefits liability adjustment, net of tax expense:

$ 24 and $ 26

Change in accounting principle (a) — ( 496 )

Net change in interest rate cash flow hedges (a) — 42 — 84

Other post-retirement benefits liability adjustment (b) 72 76 84 152

Change in accounting principle (c) — — — ( 496 )

Other comprehensive income (loss) 72 118 84 ( 260 )

Comprehensive (loss) income $ ( 263,003 ) $ 125,684 $ ( 430,130 ) $ 315,997

(a) Related to adoption of Accounting Standards Update (ASU) 2018-02.

(a) Net of tax expense of $ 10 and $ 20 for the three and six months ended June 30, 2019.

(b) Net of tax expense of $ 24 and $ 26 for the three months ended June 30, 2020 and 2019, respectively, and $ 48 and $ 52 for the six months ended June 30, 2020 and 2019, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1 unchanged sentence

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Amortization of intangible assets 14,955 20,684

Impairment of long-lived assets and leases 102,620 29,534

Impairment of leases and loss on sale/exchange of long-lived assets 193,106 78,118

Gain on Equitrans Share Exchange ( 187,223 ) —

Loss (gain) on investment in Equitrans Midstream Corporation 390,628 ( 89,055 )

Loss on investment in Equitrans Midstream Corporation 307,645 15,686

Loss on debt extinguishment 16,963 —

1 unchanged sentence

Amortization, accretion and other 12,614 12,408

(Gain) loss on derivatives not designated as hedges ( 389,436 ) 131,996

Gain on derivatives not designated as hedges ( 415,862 ) ( 275,639 )

Cash settlements received (paid) on derivatives not designated as hedges 561,129 ( 10,490 )

Net premiums (paid) received on derivative instruments ( 53,473 ) 26,406

Changes in other assets and liabilities:

6 unchanged sentences

Capital expenditures ( 512,095 ) ( 765,781 )

Proceeds from sale of assets 110,937 —

Cash received for Equitrans Share Exchange 52,323 —

5 unchanged sentences

Proceeds from issuance of debt 2,250,000 1,000,000

Debt issuance costs ( 15,662 ) —

Debt issuance costs and Capped Call Transactions (See Note 6) ( 65,102 ) ( 913 )

Repayments and retirements of debt ( 2,507,074 ) ( 702,298 )

12 unchanged sentences

Increase in asset retirement costs and obligations 6,596 2,456

Capitalization of non-cash equity share-based compensation 1,611 —

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Current assets:

44 unchanged sentences

Common Stock Accumulated Other

Comprehensive (Loss) Income

Comprehensive Loss

Shares No Par Value Treasury Stock Retained Earnings Total Equity

(Thousands, except per share amounts)

Balance at April 1, 2019 254,999 $ 7,817,227 $ ( 39,665 ) $ 3,367,810 $ ( 5,784 ) $ 11,139,588

Comprehensive income, net of tax:

Net income 125,566 125,566

Net change in interest rate cash flow hedges, net of tax expense:

Other postretirement benefits liability adjustment, net of tax expense:

Dividends ($ 0.03 per share)

( 7,665 ) ( 7,665 )

Share-based compensation plans 19 4,983 355 5,338

Other ( 222 ) ( 14,470 ) ( 14,470 )

Balance at June 30, 2019 254,796 $ 7,807,740 $ ( 39,310 ) $ 3,485,711 $ ( 5,666 ) $ 11,248,475

Balance at April 1, 2020 255,262 $ 7,821,631 $ ( 30,852 ) $ 1,848,286 $ ( 5,187 ) $ 9,633,878

Comprehensive loss, net of tax:

Net loss ( 263,075 ) ( 263,075 )

Other postretirement benefits liability adjustment, net of tax expense:

Share-based compensation plans 28 3,796 511 4,307

Equity component of convertible senior notes (See Note 6) 63,645 63,645

Balance at June 30, 2020 255,290 $ 7,889,072 $ ( 30,341 ) $ 1,585,211 $ ( 5,115 ) $ 9,438,827

Common shares authorized:

320,000 shares.

Preferred shares authorized:

3,000 shares.

There are no preferred shares issued or outstanding.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED EQUITY (UNAUDITED)

Common Stock Accumulated Other

Comprehensive Loss

Shares No Par Value Treasury Stock Retained Earnings Total Equity

(Thousands, except per share amounts)

Balance at January 1, 2019 254,472 $ 7,828,554 $ ( 49,194 ) $ 3,184,275 $ ( 5,406 ) $ 10,958,229

7 unchanged sentences

Change in accounting principle (a) 496 ( 496 ) —

Balance at March 31, 2019 254,999 $ 7,817,227 $ ( 39,665 ) $ 3,367,810 $ ( 5,784 ) $ 11,139,588

Other ( 222 ) ( 14,470 ) ( 14,470 )

Balance at June 30, 2019 254,796 $ 7,807,740 $ ( 39,310 ) $ 3,485,711 $ ( 5,666 ) $ 11,248,475

Balance at January 1, 2020 255,171 $ 7,818,205 $ ( 32,507 ) $ 2,023,089 $ ( 5,199 ) $ 9,803,588

Comprehensive income, net of tax:

Comprehensive loss, net of tax:

Net loss ( 430,214 ) ( 430,214 )

3 unchanged sentences

Share-based compensation plans 119 7,222 2,166 9,388

Balance at March 31, 2020 255,262 $ 7,821,631 $ ( 30,852 ) $ 1,848,286 $ ( 5,187 ) $ 9,633,878

Equity component of convertible senior notes (See Note 6) 63,645 63,645

Balance at June 30, 2020 255,290 $ 7,889,072 $ ( 30,341 ) $ 1,585,211 $ ( 5,115 ) $ 9,438,827

Common shares authorized:

10 unchanged sentences

Accordingly, they do not include all information and notes required by GAAP for complete financial statements.

In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of March 31, 2020 and December 31, 2019, the results of its operations, cash flows and equity for the three month periods ended March 31, 2020 and 2019.

In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of June 30, 2020 and December 31, 2019, the results of its operations and equity for the three and six month periods ended June 30, 2020 and 2019 and its cash flows for the six month periods ended June 30, 2020 and 2019.

Certain previously reported amounts have been reclassified to conform to the current year presentation.

23 unchanged sentences

The Company adopted this ASU prospectively on January 1, 2020, at which point onward applicable costs were capitalized to the Condensed Consolidated Balance Sheet rather than expensed to selling, general and administrative expense in the Statement of Condensed Consolidated Operations.

For the three months ended March 31, 2020, such capitalized costs were approximately $ 1 million.

For the three and six months ended June 30, 2020, such capitalized costs were approximately $ 3 million and $ 4 million, respectively.

In December 2019, the FASB issued ASU 2019-12, Income Taxes:

1 unchanged sentence

This ASU simplifies accounting for income taxes by eliminating certain exceptions to ASC 740, Income Taxes, related to the general approach for intraperiod tax allocation, methodology for calculating income taxes in an interim period and recognition of deferred taxes when there are investment ownership changes.

In addition, this ASU simplifies aspects of accounting for franchise taxes and interim period effects of enacted changes in tax laws or rates and provides clarification on accounting for transactions that result in a step up in the tax basis of goodwill and allocation of consolidated income tax expense to separate financial statements of

EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

entities not subject to income tax.

in a step up in the tax basis of goodwill and allocation of consolidated income tax expense to separate financial statements of entities not subject to income tax.

This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted.

11 unchanged sentences

When selling natural gas, NGLs and oil on behalf of royalty or working interest owners, the Company is acting as an agent and, thus, reports the revenue on a net basis.

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recognized amounts due from contracts with customers of $ 277.2 million and $ 384.0 million in accounts receivable in the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively.

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $ 197.7 million and $ 384.0 million in accounts receivable in the Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively.

The table below provides disaggregated information on the Company's revenues.

2 unchanged sentences

Derivative contracts are also outside the scope of ASU 2014-09.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Revenues from contracts with customers:

4 unchanged sentences

Other sources of revenue:

Gain (loss) on derivatives not designated as hedges 389,436 ( 131,996 )

Gain on derivatives not designated as hedges 26,426 407,635 415,862 275,639

Net marketing services and other 1,876 2,090 4,296 5,646

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of March 31, 2020.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of March 31, 2020.

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of June 30, 2020.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of June 30, 2020.

2020 (a) 2021 2022 2023 Total

Natural gas sales $ 17,694 $ 178,100 $ 8,158 $ 6,794 $ 210,746

(a) April 1 through December 31.

(a) July 1 through December 31.

Derivative Instruments

17 unchanged sentences

Settlements of derivative commodity instruments are reported as a component of cash flows from operating activities in the Statements of Condensed Consolidated Cash Flows.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of production and portions of its basis exposure covering approximately 1,846 Bcf and 1,644 Bcf of natural gas as of March 31, 2020 and December 31, 2019, respectively.

The open positions at both March 31, 2020 and December 31, 2019 had maturities extending through December 2024.

When the net fair value of any of the Company's swap agreements represents a liability to the Company that is in excess of the agreed-upon threshold between the Company and the counterparty, the counterparty has the right to require the Company to remit funds as a margin deposit in an amount equal to the portion of the derivative liability that is in excess of the threshold amount.

The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets.

When the net fair value of any of the Company's swap agreements represents an asset to the Company that is in excess of the agreed-upon threshold between the Company and the counterparty, the Company has the right to require the counterparty to remit funds as a margin deposit in an amount equal to the portion of the derivative asset that is in excess of the threshold amount.

The Company records these amounts as a current liability in the Condensed Consolidated Balance Sheets.

There were no such deposits recorded in the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of production and portions of its basis exposure covering approximately 1,583 Bcf and 1,644 Bcf of natural gas as of June 30, 2020 and December 31, 2019, respectively.

The open positions at both June 30, 2020 and December 31, 2019 had maturities extending through December 2024.

Certain of the Company's OTC derivative instrument contracts provide that, if the Company's credit rating assigned by Moody's Investors Service, Inc.

(Moody's) or S&P Global Ratings (S&P) is below the agreed-upon credit rating threshold (typically, below investment grade), and if the associated derivative liability exceeds the agreed-upon dollar threshold for such credit rating, the counterparty to such contract can require the Company to deposit collateral.

Similarly, if such counterparty's credit rating assigned by Moody's or S&P is below the agreed-upon credit rating threshold, and if the associated derivative liability exceeds the agreed-upon dollar threshold for such credit rating, the Company can require the counterparty to deposit collateral with the Company.

Such collateral can be up to 100 % of the derivative liability.

Investment grade refers to the quality of a company's credit as assessed by one or more credit rating agencies.

To be considered investment grade, a company must be rated "Baa3" or higher by Moody's, "BBB–" or higher by S&P and "BBB–" or higher by Fitch Rating Service (Fitch).

Anything below these ratings is considered non-investment grade.

As of June 30, 2020, the Company's senior notes were rated "Ba3" by Moody's and "BB–" by S&P.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

When the net fair value of any of the Company's OTC derivative instrument contracts represents a liability to the Company that is in excess of the agreed-upon dollar threshold for the Company's then-applicable credit rating, the counterparty has the right to require the Company to remit funds as a margin deposit in an amount equal to the portion of the derivative liability that is in excess of the dollar threshold amount.

The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets.

As of June 30, 2020, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $ 6.2 million, for which the Company deposited and recorded as a current asset $ 2.4 million.

As of December 31, 2019, there were no such deposits recorded in the Condensed Consolidated Balance Sheet.

When the net fair value of any of the Company's OTC derivative instrument contracts represents an asset to the Company that is in excess of the agreed-upon dollar threshold for the counterparty's then-applicable credit rating, the Company has the right to require the counterparty to remit funds as a margin deposit in an amount equal to the portion of the derivative asset that is in excess of the dollar threshold amount.

The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets.

As of June 30, 2020 and December 31, 2019, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

When the Company enters into exchange traded natural gas contracts, exchanges may require the Company to remit funds to the corresponding broker as good-faith deposits to guard against the risks associated with changing market conditions.

2 unchanged sentences

When the fair value of such contracts is in a net asset position, the broker may remit funds to the Company.

The Company records these amounts as a current liability in the Condensed Consolidated Balance Sheets.

The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets.

The initial margin requirements are established by the exchanges based on the price, volatility and the time to expiration of the contract.

The margin requirements are subject to change at the exchanges' discretion.

There were $ 1.1 million and $ 12.6 million of such deposits recorded as a current asset as of March 31, 2020 and December 31, 2019, respectively, and $ 20.0 million recorded as a current liability as of March 31, 2020 in the Condensed Consolidated Balance Sheets.

As of June 30, 2020 and December 31, 2019, the Company recorded $ 6.9 million and $ 12.6 million, respectively, of such deposits as a current asset.

As of June 30, 2020, the Company recorded $ 13.6 million of such deposits as a current liability.

As of December 31, 2019, there were no such deposits recorded as a current liability.

Refer to Note 9 for a discussion of the derivative liability recorded in connection with the Equitrans Share Exchange (defined in Note 9).

The Company has netting agreements with financial institutions and its brokers that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities.

The table below reflects the impact of netting agreements and margin deposits on gross derivative assets and liabilities.

The table below summarizes the impact of netting agreements and margin deposits on gross derivative assets and liabilities.

Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets Derivative instruments subject to

master netting agreements Margin requirements with counterparties Net derivative instruments

March 31, 2020

June 30, 2020

Asset derivative instruments, at fair value $ 915,441 $ ( 441,923 ) $ ( 13,609 ) $ 459,909

5 unchanged sentences

312,696 ( 226,116 ) ( 12,606 ) 73,974

Certain of the Company's OTC derivative instrument contracts provide that, if the Company's credit rating assigned by Moody's Investors Service, Inc.

(Moody's) or S&P Global Ratings (S&P) is below investment grade, additional collateral must be deposited with the counterparty if the associated derivative liability exceeds certain thresholds.

The additional collateral can be up to 100 % of the derivative liability.

Investment grade refers to the quality of a company's credit as assessed by one or more credit rating agencies.

To be considered investment grade, a company must be rated "Baa3" or higher by Moody's, "BBB–" or higher by S&P and "BBB–" or higher by Fitch Rating Service (Fitch).

Anything below these ratings is considered non-investment grade.

As of March 31, 2020, the Company's senior notes were rated "Ba1" by Moody's and "BB+" by S&P.

Margin deposits on the Company's derivative instruments are also subject to factors other than credit rating, such as natural gas prices and credit thresholds set forth in the agreements between hedging counterparties and the Company.

As of March 31, 2020, the aggregate fair value of all OTC derivative instruments with credit risk-related contingent features that were in a net liability position was $ 44.7 million, for which the Company had no collateral posted.

In April 2020, Moody's and S&P downgraded the Company's senior notes credit rating to "Ba3" and "BB–," respectively.

As a result, as of May 1, 2020, the Company posted approximately $ 19 million of margin deposits with counterparties pursuant to the Company's derivative instruments.

Refer to Note 6 for a discussion of margin deposit and other collateral exposure.

The Company has not executed any interest rate swaps since 2011.

21 unchanged sentences

(Level 2) Significant unobservable inputs

March 31, 2020

June 30, 2020

Asset derivative instruments, at fair value $ 915,441 $ 133,817 $ 781,624 $ —

13 unchanged sentences

Because not all of the Company's senior notes are actively traded, their fair value is a Level 2 fair value measurement.

As of March 31, 2020 and December 31, 2019, the Company's senior notes had a fair value of approximately $ 3.2 billion and $ 3.9 billion, respectively, and a carrying value of approximately $ 4.1 billion and $ 3.9 billion, respectively, inclusive of any current portion.

As of June 30, 2020 and December 31, 2019, the Company's senior notes had a fair value of approximately $ 4.4 billion and $ 3.9 billion, respectively, and a carrying value of approximately $ 4.5 billion and $ 3.9 billion, respectively, inclusive of any current portion.

The fair value of the Company's note payable to EQM Midstream Partners, LP (EQM) is estimated using an income approach model with a market-

2 unchanged sentences

based discount rate and is a Level 3 fair value measurement.

As of March 31, 2020 and December 31, 2019, the Company's note payable to EQM had a fair value of approximately $ 125 million and $ 128 million, respectively, and a carrying value of approximately $ 109 million and $ 110 million, respectively, inclusive of any current portion.

As of June 30, 2020 and December 31, 2019, the Company's note payable to EQM had a fair value of approximately $ 132 million and $ 128 million, respectively, and a carrying value of approximately $ 108 million and $ 110 million, respectively, inclusive of any current portion.

See Note 6 for further discussion of the Company's debt.

1 unchanged sentence

There were no transfers between Levels 1, 2 and 3 during the periods presented.

See Notes 9 and 10 for a discussion of the fair value measurement of the Equitrans Share Exchange and 2020 Asset Exchange Transactions, respectively.

See Note 9 for a discussion of the fair value measurement of the Equitrans Share Exchange and Note 10 for a discussion of the fair value measurement of the 2020 Asset Exchange Transactions and 2020 Divestiture (each defined in Note 10).

See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the fair value of assets related to the impairment and expiration of leases.

For the three months ended March 31, 2020 and 2019, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period.

There were no material changes to the Company's methodology for determining unrecognized tax benefits during the three months ended March 31, 2020.

The Company recorded income tax expense at an effective tax rate of ( 24.4 )% and 16.7 % for the three months ended March 31, 2020 and 2019, respectively.

The Company's effective tax rate for the three months ended March 31, 2020 was lower compared to the U.S.

federal statutory rate due primarily to valuation allowances provided against federal and state deferred tax assets for the additional unrealized losses on the Company's investment in Equitrans Midstream incurred in the first quarter of 2020 that, if such investment is sold, would become capital losses.

For the six months ended June 30, 2020 and 2019, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period.

There were no material changes to the Company's methodology for determining unrecognized tax benefits during the six months ended June 30, 2020.

The Company recorded income tax benefit at an effective tax rate of 14.0 % for the six months ended June 30, 2020 and income tax expense at an effective tax rate of 19.6 % for the six months ended June 30, 2019.

The Company's effective tax rate for the six months ended June 30, 2020 was lower compared to the U.S.

federal statutory rate due primarily to valuation allowances provided against federal and state deferred tax assets for the additional unrealized losses on the Company's investment in Equitrans Midstream incurred in the first half of 2020 that, if such investment is sold, would become capital losses.

The Company believes it is more likely than not that such additional unrealized losses will not be realized for tax purposes.

The Company's effective tax rate for the three months ended March 31, 2019 was lower compared to the U.S.

federal statutory rate due primarily to the Company's reversal of its valuation allowance related to Alternative Minimum Tax (AMT) refund sequestration as a result of an Internal Revenue Service (IRS) announcement that reversed the IRS's prior position that 6.2 % of AMT refunds are subject to sequestration by the U.S.

The Company's effective tax rate for the six months ended June 30, 2019 was lower compared to the U.S.

federal statutory rate due primarily to the Company's reversal of its valuation allowances related to state net operating losses utilization against future taxable income and Alternative Minimum Tax (AMT) refund sequestration.

The Company's reversal of its AMT refund valuation allowance resulted from a first quarter 2019 Internal Revenue Service (IRS) announcement that reversed the IRS's prior position that 6.2 % of AMT refunds are subject to sequestration by the U.S.

federal government.

1 unchanged sentence

Congress enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act).

The CARES Act accelerated the Company's ability to claim federal refunds of AMT credits, increasing the Company's expected, collectable refund in 2020 by $ 94.8 million to $ 379.3 million, which is recorded in tax receivable in the Condensed Consolidated Balance Sheet as of March 31, 2020.

The CARES Act accelerated the Company's ability to claim federal refunds of AMT credits, increasing the Company's expected, collectable refund in 2020 by $ 94.8 million to $ 379.3 million, of which $ 189.6 million was received during the three months ended June 30, 2020 and the remainder is recorded in tax receivable in the Condensed Consolidated Balance Sheet as of June 30, 2020.

The CARES Act also increased the interest expense limitation from 30% to 50% of adjusted taxable income (ATI) and provides the Company the option to use its 2019 ATI in 2020.

Further, the CARES Act modified certain net operating loss (NOL) rules, including allowing five year carrybacks for NOL's arising in 2018, 2019 and 2020 and temporarily removing the 80% taxable income NOL utilization limit for those periods.

Further, the CARES Act modified certain net operating loss (NOL) rules, including allowing five year carrybacks for NOLs arising in 2018, 2019 and 2020 and temporarily removing the 80% taxable income NOL utilization limit for those periods.

The Company does not expect any other tax-related provisions of the CARES Act to have a material impact on its financial statements and related disclosures.

1 unchanged sentence

The Company has a $ 2.5 billion credit facility that expires in July 2022.

The Company had $ 0.7 billion of letters of credit outstanding under its credit facility as of March 31, 2020 and no letters of credit outstanding under its credit facility as of December 31, 2019.

As of May 1, 2020, the Company had sufficient unused borrowing capacity, net of letters of credit, under its credit facility to satisfy any requests for margin deposit or other collateral that its counterparties are permitted to request of the Company pursuant to the Company's derivative instruments, midstream services contracts and other contracts.

As of May 1, 2020, such assurances could be up to approximately $ 1.1 billion, inclusive of letters of credit, margin deposits and other collateral posted of approximately $ 0.9 billion in the aggregate.

Under the Company's credit facility, for the three months ended March 31, 2020 and 2019, the maximum amounts of outstanding borrowings were $ 0.4 billion and $ 1.1 billion, respectively, the average daily balances were approximately $ 0.1 billion and $ 0.6 billion, respectively, and interest was incurred at weighted average annual interest rates of 3.2 % and 4.0 %, respectively.

As a result of the downgrades of the Company's senior notes credit rating discussed below, the margin on base rate loans increased

The Company had $ 0.8 billion of letters of credit outstanding under its credit facility as of June 30, 2020 and no letters of credit outstanding under its credit facility as of December 31, 2019.

Under the Company's credit facility, for the three months ended June 30, 2020 and 2019, the maximum amounts of outstanding borrowings were $ 173 million and $ 572 million, respectively, the average daily balances were approximately $ 35 million and $ 276 million, respectively, and interest was incurred at weighted average annual interest rates of 2.4 % and 4.0 %, respectively.

Under the Company's credit facility, for the six months ended June 30, 2020 and 2019, the maximum amounts of outstanding borrowings were $ 356 million and $ 1,108 million, respectively, the average daily balances were approximately $ 60 million and $ 459 million, respectively, and interest was incurred at weighted average annual interest rates of 2.9 % and 4.0 %, respectively.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

from 0.75 % as of March 31, 2020 to 1.00 %, and the margin on Eurodollar rate loans increased from 1.75 % as of March 31, 2020 to 2.00 %.

Based on the Company's senior notes credit rating as of June 30, 2020, the margin on base rate loans under the Company's credit facility was 1.00 % and the margin on Eurodollar rate loans was 2.00 %.

Term loan facility.

Effective May 2019, the Company has a $ 1.0 billion term loan facility that matures in May 2021.

For the three months ended March 31, 2020, interest was incurred on the Company's term loan facility borrowings at a weighted average annual interest rate of 2.8 %.

As of March 31, 2020 and December 31, 2019 the margins on the Company's term loan facility borrowings were 1.25 % and 1.00 %, respectively.

As a result of the downgrades of the Company's senior notes credit rating discussed below, the margin on the Company's term loan facility borrowings increased to 1.50 %.

Senior notes.

The Company had a $ 1.0 billion term loan facility that was scheduled to mature in May 2021.

During the second quarter 2020, the Company used proceeds from the offering of its Convertible Notes (see below), income tax refunds received during the quarter (see Note 5) and proceeds from the 2020 Divestiture (see Note 10) to fully repay its term loan facility.

For the three and six months ended June 30, 2020, the average daily balances were approximately $ 431 million and $ 692 million, respectively, and interest was incurred on the Company's term loan facility borrowings at a weighted average annual interest rate of 2.2 % and 2.6 %, respectively.

As of June 30, 2019, the Company had $ 1.0 billion of outstanding borrowings under its term loan facility.

For the period May 31, 2019 through June 30, 2019, interest was incurred on the Company's term loan facility borrowings at a weighted average annual interest rate of 3.4 %.

Based on the Company's senior notes credit rating as of June 30, 2020 and December 31, 2019, the margin on the Company's term loan facility borrowings was 1.50 % and 1.00 %, respectively.

Adjustable Rate Notes.

On January 21, 2020, the Company issued $ 1.0 billion aggregate principal amount of 6.125 % senior notes due February 1, 2025 and $ 750 million aggregate principal amount of 7.000 % senior notes due February 1, 2030 (together, the Adjustable Rate Notes).

The Company used the net proceeds from the Adjustable Rate Notes to repay $ 500 million aggregate principal amount of the Company's floating rate notes, $ 500 million aggregate principal amount of the Company's 2.50 % senior notes, $ 500 million aggregate principal amount of the Company's 4.875 % senior notes and $ 200 million of the Company's term loan facility borrowings.

The Company's floating rate notes and 2.50 % senior notes were fully redeemed at a price of 100 % and 100.446 % (inclusive of a make whole call premium), respectively, plus accrued but unpaid interest of $ 1.2 million and $ 4.2 million, respectively.

The Company fully redeemed its floating rate notes and 2.50 % senior notes at a price of 100 % and 100.446 % (inclusive of a make whole call premium), respectively, of each note's principal amount plus accrued but unpaid interest of $ 1.2 million and $ 4.2 million, respectively.

This resulted in the payment of make whole call premiums of $ 2.2 million related to the Company's 2.50 % senior notes.

The $ 500 million aggregate principal amount of the Company's 4.875 % senior notes was redeemed at a total cost of $ 517.4 million, inclusive of a tender premium of $ 10.0 million and accrued but unpaid interest of $ 7.4 million.

As a result of downgrades of the Company's senior notes credit rating that occurred subsequent to the issuance of the Adjustable Rate Notes, including those discussed below, the interest rate on the 6.125 % senior notes will increase to 7.875 % and the interest rate on the 7.000 % senior notes will increase to 8.750 % beginning with the interest payment period that starts on August 1, 2020.

Interest rate adjustments under the Adjustable Rate Notes cannot exceed 2 % of the interest rate first set forth on the face of the senior notes.

Subsequent events .

In April 2020, Moody's and S&P downgraded the Company's senior notes credit rating to "Ba3" and "BB–," respectively.

In addition, in April 2020, the Company repurchased approximately $ 4.6 million aggregate principal amount of its 4.875 % senior notes pursuant to privately negotiated open market purchases.

In addition, in April 2020, the Company repurchased $ 4.6 million aggregate principal amount of its 4.875 % senior notes pursuant to open market purchases.

As a result of downgrades of the Company's senior notes credit rating that occurred subsequent to the issuance of the Adjustable Rate Notes, the interest rate on the 6.125 % senior notes will increase to 7.875 % and the interest rate on the 7.000 % senior notes will increase to 8.750 % beginning with the interest payment period that starts on August 1, 2020.

The adjusted interest rate under the Adjustable Rate Notes cannot exceed 2 % of the original interest rate first set forth on the face of the senior notes.

Convertible Notes .

On April 28, 2020, the Company issued $ 500 million aggregate principal amount of 1.75 % convertible senior notes (the Convertible Notes) due May 1, 2026 unless earlier redeemed, repurchased or converted.

The Convertible Notes were issued in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

Upon conversion of the Convertible Notes, which may not occur prior to May 5, 2023, the Company may satisfy its conversion obligation by paying or delivering to the holder of the Convertible Notes, cash, EQT common stock or a combination thereof, at the Company's election.

The Company used $ 32.5 million of the net proceeds from the offering to pay the cost of the Capped Call Transactions described below and $ 450 million of the net proceeds to repay a portion of the Company's term loan facility borrowings.

As of May 1, 2020, the Company had approximately $ 350 million in term loan facility borrowings outstanding.

The Company intends to use the remainder of the net proceeds to repay or redeem other outstanding indebtedness and for general corporate purposes.

In connection with the Convertible Notes offering, the Company entered into privately negotiated capped call transactions (the Capped Call Transactions), the purpose of which is to reduce the potential dilution to EQT common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such converted notes, with such reduction and offset subject to a cap.

The Capped Call Transactions have a strike price of $ 15.00 per share of EQT common stock and a capped price of $ 18.75 per share of EQT common stock.

Earnings Per Share (EPS)

The Company reported a net loss for the three months ended March 31, 2020;

therefore, all potentially dilutive securities, composed of restricted stock and performance awards of 1,909,165 , were excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on EPS.

For the three months ended March 31, 2019, potentially dilutive securities included in the calculation of diluted weighted average shares outstanding were 347,237 .

After deducting offering costs of $ 16.9 million and Capped Call Transactions (defined and described below) costs of $ 32.5 million, the net proceeds from the offering of $ 450.6 million were used to repay $ 450 million of the Company's term loan facility borrowings as well as for general corporate purposes.

Interest under the Convertible Notes is payable semiannually in arrears on May 1 and November 1 of each year beginning on November 1, 2020.

Holders of the Convertible Notes may convert their Convertible Notes, at their option, at any time prior to the close of business on January 30, 2026 under the following circumstances:

• during any quarter commencing after the quarter ended June 30, 2020 as long as the last reported price of EQT common stock for at least 20 trading days (consecutive or otherwise) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130 % of the conversion price on each such trading day;

• during the five -business-day period after any five -consecutive-trading-day period (the measurement period) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period is less than 98 % of the product of the last reported price of EQT common stock and the conversion rate for the Convertible Notes on each such trading day;

• if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding such redemption date;

• upon the occurrence of certain corporate events set forth in the Convertible Notes indenture.

On or after February 1, 2026, holders of the Convertible Notes may convert their Convertible Notes, at their option, at any time until the close of business on the second scheduled trading date immediately preceding May 1, 2026.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the three months ended March 31, 2020 and 2019, options to purchase common stock of 3,554,729 and 1,775,429 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

For the three months ended March 31, 2020, stock appreciation rights of 1,240,000 were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

Upon conversion of the Convertible Notes, the Company intends to use a combined settlement approach to satisfy its obligation by paying or delivering to holders of the Convertible Notes cash equal to the principal amount of the obligation and EQT common stock for amounts that exceed the principal amount of the obligation.

The Company may not redeem the Convertible Notes prior to May 5, 2023.

On or after May 5, 2023 and prior to February 1, 2026, the Company may redeem for cash all or any portion of the Convertible Notes, at its option, at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest up to the redemption date as long as the last reported price per share of EQT common stock has been at least 130 % of the conversion price in effect for at least 20 trading days (consecutive or otherwise) during any 30 -consecutive-trading-day period ending on the trading day immediately preceding the date on which the Company delivers notice of redemption.

A sinking fund is not provided for the Convertible Notes.

The initial conversion rate for the Convertible Notes is 66.6667 shares of EQT common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of $ 15.00 per share of EQT common stock.

The initial conversion price represents a premium of 20 % to the $ 12.50 per share closing price of EQT common stock on April 23, 2020.

The conversion rate is subject to adjustment under certain circumstances.

In addition, following certain corporate events that occur prior to May 1, 2026 or if the Company delivers notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or notice of redemption.

In connection with the Convertible Notes offering, the Company entered into privately negotiated capped call transactions (the Capped Call Transactions), the purpose of which is to reduce the potential dilution to EQT common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such obligation, with such reduction and offset subject to a cap.

The Capped Call Transactions have an initial strike price of $ 15.00 per share of EQT common stock and an initial capped price of $ 18.75 per share of EQT common stock, each of which are subject to certain customary adjustments.

For accounting purposes, the Company separated the Convertible Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar debt instruments that do not have associated convertible features.

The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the principal value of the Convertible Notes.

The equity component is not remeasured as long as it continues to meet the condition for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the debt discount) will be amortized to interest expense over the term of the Convertible Notes, which is approximately 6 years, at an effective interest rate of 8.4 %.

At inception, the Company recorded the Convertible Notes at fair value of approximately $ 358.1 million, a net deferred tax liability of $ 41.0 million and an equity component of $ 100.9 million.

Issuance costs were allocated to the liability and equity components of the Convertible Notes based on their relative fair values.

Issuance costs attributable to the liability component of $ 12.1 million were recorded as a reduction to the liability component of the Convertible Notes and will be amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 8.4 %.

Issuance costs attributable to the equity component of $ 4.8 million, representing the conversion option, were netted with the equity component.

The Capped Call Transactions are separate from the Convertible Notes.

The Capped Call Transactions were recorded in shareholders' equity and were not accounted for as derivatives.

The cost to purchase the Capped Call Transactions were recorded as a reduction to equity and will not be remeasured.

As of June 30, 2020, the net carrying amount of the Convertible Notes liability component consisted of principal of $ 500 million less the unamortized debt discount of $ 138.7 million and unamortized issuance costs of $ 11.9 million.

During the three and six months ended June 30, 2020, the Company recognized interest expense related to the Convertible Notes of $ 4.9 million, consisting of contractual interest expense of $ 1.5 million, amortization of the debt discount of $ 3.2 million and amortization of issuance costs of $ 0.2 million.

For the three months ended June 30, 2020, the Convertible Notes had a net shareholders' equity impact of $ 63.6 million, which consisted of the conversion option equity component of $ 100.9 million less the Capped Call Transactions costs of $ 32.5 million and issuance costs attributable to the equity component of $ 4.8 million.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Surety Bonds .

During the three months ended June 30, 2020, the Company issued approximately $ 93 million in surety bonds in response to its recent credit downgrades by Moody's, S&P and Fitch.

Earnings Per Share (EPS)

In periods when the Company reports a net loss, all options, restricted stock, performance awards and stock appreciation rights are excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on loss per share.

As a result, for the three and six months ended June 30, 2020, all securities, totaling 6,769,822 and 6,739,305 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

For the three and six months ended June 30, 2019, potentially dilutive securities included in the calculation of diluted weighted average shares outstanding were 124,250 and 235,743 , respectively.

For both the three and six months ended June 30, 2019, options to purchase common stock of 1,885,529 were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

As discussed in Note 6, the Company issued the Convertible Notes during the second quarter of 2020 and, upon conversion of the Convertible Notes, intends to use a combined settlement approach to satisfy its obligation under the Convertible Notes.

As such, there is no adjustment to the diluted EPS numerator for the cash-settled portion of the instrument.

In addition, for the three and six months ended June 30, 2020, the conversion premium of 6,666,670 shares was excluded from potentially dilutive securities because of its anti-dilutive effect on EPS.

Changes in Accumulated OCI (Loss) by Component

4 unchanged sentences

net of tax Accumulated OCI (loss),

April 1, 2019 $ ( 345 ) $ ( 5,439 ) $ ( 5,784 )

Losses reclassified from accumulated OCI, net of tax 42 (a) 76 (b) 118

June 30, 2019 $ ( 303 ) $ ( 5,363 ) $ ( 5,666 )

April 1, 2020 $ — $ ( 5,187 ) $ ( 5,187 )

Losses reclassified from accumulated OCI, net of tax — 72 (b)

June 30, 2020 $ — $ ( 5,115 ) $ ( 5,115 )

January 1, 2019 $ ( 387 ) $ ( 5,019 ) $ ( 5,406 )

1 unchanged sentence

Change in accounting principle — ( 496 ) (c) ( 496 )

March 31, 2019 $ ( 345 ) $ ( 5,439 ) $ ( 5,784 )

June 30, 2019 $ ( 303 ) $ ( 5,363 ) $ ( 5,666 )

January 1, 2020 $ — $ ( 5,199 ) $ ( 5,199 )

Losses reclassified from accumulated OCI, net of tax — 84 (b)

March 31, 2020 $ — $ ( 5,187 ) $ ( 5,187 )

June 30, 2020 $ — $ ( 5,115 ) $ ( 5,115 )

(a) Losses, net of tax, related to interest rate cash flow hedges were reclassified from accumulated OCI into interest expense.

(b) Losses, net of tax, related to other postretirement benefits liability adjustment are attributable to net actuarial losses and net prior service costs.

(b) Losses, net of tax, related to other postretirement benefits liability adjustments are attributable to net actuarial losses and net prior service costs.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Equitrans Share Exchange

2 unchanged sentences

The rate relief was effected through the execution of the Consolidated GGA (defined herein).

As of March 31, 2020, the Company owned approximately 11 % of the outstanding shares of Equitrans Midstream's common stock.

On February 26, 2020 (the Consolidated GGA Effective Date), the Company entered into a gas gathering and compression agreement (the Consolidated GGA) with an affiliate of EQM, pursuant to which, among other things, EQM agreed to provide to the Company gas gathering services in the Marcellus and Utica Shales of Pennsylvania and West Virginia, and the Company committed to an initial annual minimum volume commitment of 3.0 Bcf per day and an acreage dedication in Pennsylvania and West Virginia.

As of June 30, 2020, the Company owned 25,299,751 shares of Equitrans Midstream's common stock.

On February 26, 2020, the Company entered into a gas gathering and compression agreement (the Consolidated GGA) with an affiliate of EQM, pursuant to which, among other things, EQM agreed to provide to the Company gas gathering services in the Marcellus and Utica Shales of Pennsylvania and West Virginia, and the Company committed to an initial annual minimum volume commitment of 3.0 Bcf per day and an acreage dedication in Pennsylvania and West Virginia.

The Consolidated GGA is effective through December 31, 2035 and will renew annually thereafter unless terminated by the Company or EQM.

The Consolidated GGA provides for additional cash bonus payments (the Henry Hub Cash Bonus) made by the Company to EQM during the period beginning on the first day of the quarter in which the Mountain Valley Pipeline (MVP) is placed in service and ending on the earlier of 36 months thereafter or December 31, 2024.

The Consolidated GGA provides for additional cash bonus payments (the Henry Hub Cash Bonus) payable by the Company to EQM during the period beginning on the first day of the quarter in which the Mountain Valley Pipeline (MVP) is placed in service and ending on the earlier of 36 months thereafter or December 31, 2024.

Such payments are conditioned upon the quarterly average of the NYMEX Henry Hub natural gas settlement price exceeding certain price thresholds.

In addition, the Consolidated GGA provides a cash payment option that grants the Company the right to receive payments from EQM in the event that the MVP in-service date has not occurred prior to January 1, 2022.

On the Share Purchase Closing Date, the Company recorded in the Condensed Consolidated Balance Sheet a contract asset representing the estimated fair value of the rate relief provided by the Consolidated GGA of $ 410 million, of which $ 26.7 million was classified as current, a derivative liability related to the Henry Hub Cash Bonus of approximately $ 117 million and a decrease in the Company's investment in Equitrans Midstream of approximately $ 158 million.

The resulting gain of approximately

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

$ 187 million was recorded in the Statement of Condensed Consolidated Operations.

On the Share Purchase Closing Date, the Company recorded in the Condensed Consolidated Balance Sheet a contract asset representing the estimated fair value of the rate relief provided by the Consolidated GGA of $ 410 million, of which $ 54.5 million was classified as current as of June 30, 2020, a derivative liability related to the Henry Hub Cash Bonus of approximately $ 117 million and a decrease in the Company's investment in Equitrans Midstream of approximately $ 158 million.

The resulting gain of approximately $ 187 million was recorded in the Statement of Condensed Consolidated Operations.

Beginning in the first quarter of 2021, the Company will recognize amortization of the contract asset over a period of four years in a manner consistent with the expected timing of the Company's realization of the economic benefits of the rate relief provided by the Consolidated GGA.

As of June 30, 2020, the derivative liability related to the Henry Hub Cash Bonus was approximately $ 130 million.

The fair value of the contract asset was based on significant inputs that are not observable in the market and, as such, is a Level 3 fair value measurement.

Key assumptions used in the fair value calculation included an estimated production volume forecast and a market-based discount rate.

The fair value of the derivative liability for the Henry Hub Cash Bonus was based on significant inputs that were interpolated from observable market data and, as such, is a Level 2 fair value measurement.

The fair value of the derivative liability related to the Henry Hub Cash Bonus was based on significant inputs that were interpolated from observable market data and, as such, is a Level 2 fair value measurement.

See Note 4 for a description of the fair value hierarchy.

2020 Asset Transactions

2020 Asset Exchange Transactions .

During the first quarter of 2020, the Company closed on various acreage trade agreements (collectively, the 2020 Asset Exchange Transactions), pursuant to which the Company exchanged approximately 5,000 aggregate net revenue interest acres for approximately 5,000 aggregate net revenue interest acres, all of which are located primarily in Greene County, Pennsylvania.

As a result of the 2020 Asset Exchange Transactions, the Company recognized a loss of $ 48.9 million in loss on exchange of long-lived assets in the Statement of Condensed Consolidated Operations for the three months ended March 31, 2020.

During the first and second quarters of 2020, the Company closed on various acreage trade agreements (collectively, the 2020 Asset Exchange Transactions), pursuant to which the Company exchanged approximately 11,700 aggregate net revenue interest acres across Greene, Allegheny and Westmoreland Counties, Pennsylvania and Wetzel and Marshall Counties, West Virginia for approximately 11,700 aggregate net revenue interest acres across Greene and Washington Counties, Pennsylvania and Wetzel County, West Virginia.

As a result of the 2020 Asset Exchange Transactions, the Company recognized a loss of $ 6.7 million and $ 55.6 million in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the three and six months ended June 30, 2020, respectively.

The fair value of leases acquired were based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement.

1 unchanged sentence

Key assumptions used in the fair value calculation included market-based prices for comparable acreage.

2020 Divestiture.

On May 11, 2020, the Company closed a transaction to sell certain non-strategic assets located in Pennsylvania and West Virginia (the 2020 Divestiture) for an aggregate purchase price of approximately $ 125 million in cash, subject to customary purchase price adjustments and the Contingent Consideration defined and discussed below.

Pennsylvania assets sold included 80 Marcellus wells and approximately 33 miles of gathering lines;

West Virginia assets sold included 809 conventional wells and approximately 154 miles of gathering lines.

In addition, the 2020 Divestiture relieved the Company of approximately

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

$ 49 million in asset retirement obligations and other liabilities associated with the sold assets.

Proceeds from the sale were used to pay down the Company's term loan facility.

The purchase and sale agreement for the 2020 Divestiture provides for additional cash bonus payments (the Contingent Consideration) payable to the Company of up to $ 20 million.

Such Contingent Consideration is conditioned upon the three-month average of the NYMEX Henry Hub natural gas settlement price relative to stated floor and target price thresholds beginning on August 31, 2020 and ending on November 30, 2022.

The Contingent Consideration represents an embedded derivative that had no fair value as of both May 11, 2020 and June 30, 2020.

The fair value of the Contingent Consideration was based on significant inputs that were interpolated from observable market data and, as such, is a Level 2 fair value measurement.

See Note 4 for a description of the fair value hierarchy.

As a result of the 2020 Divestiture, the Company recognized a loss of $ 42.5 million in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the second quarter of 2020.

Share-based Compensation Plans

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements