What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-10-22 compared with 2020-07-27 · 121 added, 110 removed, 330 unchanged (41% of the section changed)

43 unchanged sentences

Consolidated Results of Operations

Net loss for the three months ended June 30, 2020 was $263.1 million, $1.03 per diluted share, compared to net income for the same period in 2019 of $125.6 million, $0.49 per diluted share.

The decrease was attributable primarily to decreased operating revenues, the loss on sale/exchange of long-lived assets, decreased dividend and other income and increased interest expense, partly offset by a gain on investment in Equitrans Midstream, increased income tax benefit, decreased depreciation and depletion expense and decreased selling, general and administrative expense.

Net loss for the six months ended June 30, 2020 was $430.2 million, $1.68 per diluted share, compared to net income for the same period in 2019 of $316.3 million, $1.24 per diluted share.

The decrease was attributable primarily to decreased operating revenues, a loss on investment in Equitrans Midstream and the loss on sale/exchange of long-lived assets, partly offset by the gain on the Equitrans Share Exchange (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements), increased income tax benefit, decreased depreciation and depletion expense and decreased selling, general and administrative expense.

Net loss for the three months ended September 30, 2020 was $600.6 million, $2.35 per diluted share, compared to net loss for the same period in 2019 of $361.0 million, $1.41 per diluted share.

The decrease was attributable primarily to decreased operating revenues, increased interest expense and decreased dividend and other income, partly offset by the gain on investment in Equitrans Midstream, increased income tax benefit, decreased transaction, proxy and reorganization expense, decreased depreciation and depletion expense and decreased selling, general and administrative expense.

Net loss for the nine months ended September 30, 2020 was $1,030.9 million, $4.03 per diluted share, compared to net loss for the same period in 2019 of $44.8 million, $0.18 per diluted share.

The decrease was attributable primarily to decreased operating revenues, increased loss on sale/exchange of long-lived assets, increased interest expense and decreased dividend and other income, partly offset by increased income tax benefit, the gain on the Equitrans Share Exchange (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements), decreased depreciation and depletion expense, decreased transaction, proxy and reorganization expense and decreased selling, general and administrative expense.

See "Sales Volumes and Revenues," "Production-Related Operating Expenses" and "Other Operating Expenses" for discussions of items affecting operating income and "Other Income Statement Items" for a discussion of other income statement items.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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Average realized price ($/Mcfe) $ 2.33 $ 2.47 $ 2.39 $ 2.74

(a) The Company's volume weighted New York Mercantile Exchange (NYMEX) natural gas price (actual average NYMEX natural gas price ($/MMBtu)) was $1.72 and $2.64 for the three months ended June 30, 2020 and 2019, respectively, and $1.83 and $2.89 for the six months ended June 30, 2020 and 2019, respectively.

(a) The Company's volume weighted New York Mercantile Exchange (NYMEX) natural gas price (actual average NYMEX natural gas price ($/MMBtu)) was $1.98 and $2.23 for the three months ended September 30, 2020 and 2019, respectively, and $1.88 and $2.67 for the nine months ended September 30, 2020 and 2019, respectively.

(b) Basis represents the difference between the ultimate sales price for natural gas and the NYMEX natural gas price.

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

2 unchanged sentences

Deduct (add):

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

Net cash settlements received (paid) on derivatives not designated as hedges 315,393 53,144 561,129 (10,490)

Premiums received (paid) for derivatives that settled during the period 2,076 4,769 (1,479) 7,206

Loss (gain) on derivatives not designated as hedges 427,182 (180,313) 11,320 (455,952)

Net cash settlements received on derivatives not designated as hedges 252,089 162,639 813,218 152,149

Premiums received for derivatives that settled during the period 2,083 9,405 604 16,611

Net marketing services and other (317) (1,636) (4,613) (7,282)

5 unchanged sentences

Sales Volumes and Revenues

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 % 2020 2019 %

8 unchanged sentences

Sales of natural gas, NGLs and oil $ 598,992 $ 769,627 (22.2) $ 1,812,965 $ 2,941,767 (38.4)

Gain on derivatives not designated as hedges

26,426 407,635 (93.5) 415,862 275,639 50.9

(Loss) gain on derivatives not designated as hedges (427,182) 180,313 (336.9) (11,320) 455,952 (102.5)

Net marketing services and other 317 1,636 (80.6) 4,613 7,282 (36.7)

2 unchanged sentences

(b) NGLs, ethane and oil were converted to Mcfe at a rate of six Mcfe per barrel.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil decreased for the three months ended June 30, 2020 compared to the same period in 2019 due to a lower average realized price and lower sales volumes.

Average realized price decreased due to lower NYMEX prices and lower liquids prices, partly offset by higher cash settled derivatives.

For the three months ended June 30, 2020 and 2019, the Company received $315.4 million and $53.1 million, respectively, of net cash settlements on derivatives not designated as hedges, which are included in average realized price but may not be included in operating revenues.

Sales volumes decreased due primarily to the Company's strategic decision to temporarily curtail approximately 1.4 Bcfe per day of gross production, equivalent to approximately 1.0 Bcfe per day of net production, beginning on May 16, 2020 (the Strategic Production Curtailments).

Gain on derivatives not designated as hedges.

For the three months ended June 30, 2020 and 2019, the Company recognized a gain of $26.4 million and $407.6 million, respectively, on derivatives not designated as hedges.

The gains for 2020 and 2019 were related primarily to increases in the fair market value of the Company's NYMEX swaps and options due to decreases in NYMEX forward prices.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil decreased for the six months ended June 30, 2020 compared to the same period in 2019 due to a lower average realized price and lower sales volumes.

Average realized price decreased due to lower NYMEX prices and lower liquids prices, partly offset by higher cash settled derivatives.

For the six months ended June 30, 2020 and 2019, the Company received $561.1 million and paid $10.5 million, respectively, of net cash settlements on derivatives not designated as hedges, which are included in average realized price but may not be included in operating revenues.

Sales volumes decreased due primarily to the Strategic Production Curtailments.

Gain on derivatives not designated as hedges.

For the six months ended June 30, 2020 and 2019, the Company recognized a gain of $415.9 million and $275.6 million, respectively, on derivatives not designated as hedges.

Sales of natural gas, NGLs and oil decreased for the three months ended September 30, 2020 compared to the same period in 2019 due to a lower average realized price and lower sales volumes.

Average realized price decreased due to lower NYMEX prices and unfavorable differential, partly offset by higher cash settled derivatives.

For the three months ended September 30, 2020 and 2019, the Company received $252.1 million and $162.6 million, respectively, of net cash settlements on derivatives not designated as hedges, which are included in average realized price but may not be included in operating revenues.

Sales volumes for the three months ended September 30, 2020 decreased 4% or, excluding sales volumes related to the 2020 Divestiture (defined and discussed in Note 10 to the Condensed Consolidated Financial Statements), 2% compared to the same period in 2019.

This decrease was due primarily to the Company's strategic decisions to temporarily curtail (i) approximately 1.4 Bcf per day of gross production, equivalent to approximately 1.0 Bcf per day of net production, beginning on May 16, 2020 and ended mid-July 2020 and (ii) approximately 0.6 Bcf per day of gross production, equivalent to approximately 0.4 Bcf per day of net production, beginning on September 1, 2020 (collectively, the Strategic Production Curtailments).

(Loss) gain on derivatives not designated as hedges.

For the three months ended September 30, 2020 and 2019, the Company recognized a loss of $427.2 million and a gain of $180.3 million, respectively, on derivatives not designated as hedges.

The loss for 2020 was related primarily to decreases in the fair market value of the Company's NYMEX swaps and options due to increases in NYMEX forward prices.

The gain for 2019 was related primarily to increases in the fair market value of the Company's NYMEX swaps and options due to decreases in NYMEX forward prices.

The gain for 2019 was related primarily to increases in the fair market value of the Company's NYMEX swaps and options due to decreases in NYMEX forward prices, partly offset by decreases in the fair market value of the Company's basis swaps due to increases in basis prices.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil decreased for the nine months ended September 30, 2020 compared to the same period in 2019 due to a lower average realized price and lower sales volumes.

Average realized price decreased due to lower NYMEX prices, lower liquids prices and unfavorable differential, partly offset by higher cash settled derivatives.

For the nine months ended September 30, 2020 and 2019, the Company received $813.2 million and $152.1 million, respectively, of net cash settlements on derivatives not designated as hedges, which are included in average realized price but may not be included in operating revenues.

Sales volumes for the nine months ended September 30, 2020 decreased 3%, or, excluding sales volumes related to the 2020 Divestiture, 2% compared to the same period in 2019 due primarily to the Strategic Production Curtailments.

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(Loss) gain on derivatives not designated as hedges.

For the nine months ended September 30, 2020 and 2019, the Company recognized a loss of $11.3 million and a gain of $456.0 million, respectively, on derivatives not designated as hedges.

The loss for 2020 was related primarily to decreases in the fair market value of the Company's NYMEX swaps and options due to increases in NYMEX forward prices.

Production-Related Operating Expenses

The following table presents information on the Company's production-related operating expenses.

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 % 2020 2019 %

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Production depletion 0.92 1.02 (9.8) 0.92 1.01 (8.9)

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Transportation and processing.

Gathering expense decreased on an absolute basis for the three months ended June 30, 2020 compared to the same period in 2019 due to decreased volumes as a result of the Strategic Production Curtailments, partly offset by a higher gathering rate structure as a result of the Consolidated GGA (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements).

The Company expects to realize fee relief and a lower gathering rate structure as a result of the Consolidated GGA beginning in 2021.

Gathering expense increased on a per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 due primarily to higher gathering rates for the reasons described above as well as the impact of the Strategic Production Curtailments on the mix of volumes gathered and contracted rate structure.

Transmission expense decreased on an absolute and per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 due primarily to released capacity on, and credits received from, the Texas Eastern Transmission Pipeline, partly offset by higher costs associated with additional capacity on the Tennessee Gas Pipeline.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Gathering expense increased on an absolute and per Mcfe basis for the three months ended September 30, 2020 compared to the same period in 2019 due to a higher gathering rate structure as a result of the Consolidated GGA (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements), partly offset by lower gathered volumes as a result of the Strategic Production Curtailments.

The Company expects to realize fee relief and a lower gathering rate structure from the Consolidated GGA beginning in 2021.

Transmission.

Transmission expense decreased on an absolute and per Mcfe basis for the three months ended September 30, 2020 compared to the same period in 2019 due primarily to released capacity on, and credits received from, the Texas Eastern Transmission Pipeline.

The decrease in transmission expense per Mcfe was partly offset by the decrease in sales volumes.

Processing expense increased on an absolute and per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 due primarily to higher NGL transportation fees.

LOE increased on an absolute and per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 due primarily to higher salt water disposal costs as well as higher repairs and maintenance costs as a result of the Company's increased focus on optimizing production from currently producing wells.

Production taxes decreased on an absolute and per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 due primarily to lower

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

severance taxes and Pennsylvania impact fees as a result of lower commodity prices.

LOE and production taxes per Mcfe were unfavorably impacted by the 7% decrease in sales volumes.

LOE increased on an absolute and per Mcfe basis for the three months ended September 30, 2020 compared to the same period in 2019 due primarily to higher repairs and maintenance costs as a result of the Company's increased focus on optimizing production from currently producing wells.

In addition, LOE per Mcfe increased as a result of the decrease in sales volumes.

Production taxes.

Production taxes decreased on an absolute and per Mcfe basis for the three months ended September 30, 2020 compared to the same period in 2019 due primarily to lower Pennsylvania impact fees and severance taxes as a result of lower commodity prices.

The decrease in production taxes per Mcfe was partly offset by the decrease in sales volumes.

Selling, general and administrative.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 as a result of litigation expenses of $37.8 million recognized in 2019 as well as lower personnel costs due to reductions in workforce.

The decrease per Mcfe was partly offset by the 7% decrease in sales volumes.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the three months ended September 30, 2020 compared to the same period in 2019 as a result of decreased litigation expenses, net of settlements received, of $31.9 million as well as lower personnel costs due to reductions in workforce, partly offset by higher short- and long-term incentive compensation costs due to changes in the value of awards.

The decrease in selling, general and administrative expense per Mcfe was partly offset by the decrease in sales volumes.

Depreciation and depletion.

Production depletion decreased on an absolute and per Mcfe basis for the three months ended June 30, 2020 compared to the same period in 2019 due primarily to a lower depletion rate and lower volumes.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Transportation and processing.

Gathering expense decreased on an absolute basis for the six months ended June 30, 2020 compared to the same period in 2019 due to decreased volumes as a result of the Strategic Production Curtailments, partly offset by a higher gathering rate structure as a result of the Consolidated GGA.

The Company expects to realize fee relief and a lower gathering rate structure as a result of the Consolidated GGA beginning in 2021.

Gathering expense increased on a per Mcfe basis for the six months ended June 30, 2020 compared to the same period in 2019 due primarily to higher gathering rates for the reasons described above as well as the impact of the Strategic Production Curtailments on the mix of volumes gathered and contracted rate structure.

Transmission expense decreased on an absolute and per Mcfe basis for the six months ended June 30, 2020 compared to the same period in 2019 due primarily to released capacity on, and credits received from, the Texas Eastern Transmission Pipeline, partly offset by higher costs associated with additional capacity on the Tennessee Gas Pipeline.

LOE increased on an absolute and per Mcfe basis for the six months ended June 30, 2020 compared to the same period in 2019 due primarily to higher salt water disposal costs as well as higher repairs and maintenance costs as a result of the Company's increased focus on optimizing production from currently producing wells.

Production taxes decreased on an absolute and per Mcfe basis for the six months ended June 30, 2020 compared to the same period in 2019 due primarily to lower severance taxes and Pennsylvania impact fees as a result of lower commodity prices.

Production depletion decreased on an absolute and per Mcfe basis for the three months ended September 30, 2020 compared to the same period in 2019 due primarily to a lower annual depletion rate and lower volumes.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Gathering expense increased on an absolute and per Mcfe basis for the nine months ended September 30, 2020 compared to the same period in 2019 due to a higher gathering rate structure as a result of the Consolidated GGA, partly offset by lower gathered volumes as a result of the Strategic Production Curtailments.

The Company expects to realize fee relief and a lower gathering rate structure from the Consolidated GGA beginning in 2021.

Transmission.

Transmission expense decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2020 compared to the same period in 2019 due primarily to released capacity on, and credits received from, the Texas Eastern Transmission Pipeline, partly offset by higher costs associated with additional capacity on the Tennessee Gas Pipeline.

The decrease in transmission expense per Mcfe was partly offset by the decrease in sales volumes.

LOE increased on an absolute and per Mcfe basis for the nine months ended September 30, 2020 compared to the same period in 2019 due primarily to higher repairs and maintenance costs as a result of the Company's increased focus on optimizing production from currently producing wells as well as higher salt water disposal costs.

In addition, LOE per Mcfe increased as a result of the decrease in sales volumes.

Production taxes.

Production taxes decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2020 compared to the same period in 2019 due primarily to lower severance taxes and Pennsylvania impact fees as a result of lower commodity prices.

The decrease in production taxes per Mcfe was partly offset by the decrease in sales volumes.

Selling, general and administrative.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the six months ended June 30, 2020 compared to the same period in 2019 as a result of litigation expenses of $45.8 million recognized in 2019 as well as lower personnel costs due to reductions in workforce.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2020 compared to the same period in 2019 as a result of decreased litigation expenses, net of settlements received, of $77.7 million as well as lower personnel costs due to reductions in workforce, partly offset by higher short- and long-term incentive compensation costs due to changes in the value of awards.

The decrease in selling, general and administrative expense per Mcfe was partly offset by the decrease in sales volumes.

Depreciation and depletion.

Production depletion decreased on an absolute and per Mcfe basis for the six months ended June 30, 2020 compared to the same period in 2019 due primarily to a lower depletion rate and lower volumes.

Production depletion decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2020 compared to the same period in 2019 due primarily to a lower annual depletion rate and lower volumes.

Other Operating Expenses

Amortization of intangible assets.

Amortization of intangible assets for the three months ended June 30, 2020 was $7.5 million compared to $10.3 million for the same period in 2019.

Amortization of intangible assets for the six months ended June 30, 2020 was $15.0 million compared to $20.7 million for the same period in 2019.

Amortization of intangible assets for the three months ended September 30, 2020 was $7.5 million compared to $7.8 million for the same period in 2019.

Amortization of intangible assets for the nine months ended September 30, 2020 was $22.4 million compared to $28.4 million for the same period in 2019.

The decreases were due primarily to the impairment of intangible assets recognized in the third quarter of 2019, which decreased the amortization rate.

Loss on sale/exchange of long-lived assets.

During the six months ended June 30, 2020, the Company recognized a loss on sale/exchange of long-lived assets of $98.1 million, of which $48.9 million related to the first quarter 2020 Asset Exchange Transactions, $42.5 million related to the second quarter 2020 Divestiture and $6.7 million related to the second quarter 2020 Asset Exchange Transactions.

The 2020 Asset Exchange Transactions and 2020 Divestiture are defined and discussed in Note 10 to the Condensed Consolidated Financial Statements.

Impairment and expiration of leases.

Impairment and expiration of leases for the three months ended June 30, 2020 was $41.3 million compared to $48.6 million for the same period in 2019.

The decrease was driven by decreased lease expirations.

Impairment and expiration of leases for the six months ended June 30, 2020 was $95.0 million compared to $78.1 million for the same period in 2019.

The increase was driven by increased lease expirations in the first quarter of 2020 due to the Company's change in strategic focus to core development opportunities as well as changes in market condition.

During the nine months ended September 30, 2020, the Company recognized a loss on sale/exchange of long-lived assets of $102.7 million, of which $67.2 million related to the 2020 Asset Exchange Transactions and $35.5 million related to asset sales.

During the three and nine months ended September 30, 2019, the Company recognized a loss

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

on sale/exchange of long-lived assets of $13.9 million related to the 2019 Asset Exchange Transaction.

The 2020 and 2019 Asset Exchange Transactions and 2020 Divestiture are defined and discussed in Note 10 to the Condensed Consolidated Financial Statements.

Impairment of intangible assets.

For the three months ended September 30, 2019, the Company recognized impairment of $15.4 million of intangible assets associated with non-compete agreements for former Rice Energy Inc.

executives who are now employees of the Company.

Impairment and expiration of leases.

Impairment and expiration of leases for the three months ended September 30, 2020 was $50.4 million compared to $49.6 million for the same period in 2019.

Impairment and expiration of leases for the nine months ended September 30, 2020 was $145.5 million compared to $127.7 million for the same period in 2019.

The increases were driven by increased lease expirations due to the Company's change in strategic focus to core development opportunities as well as changes in market conditions.

Transaction, proxy and reorganization.

Transaction, proxy and reorganization expense for the three and six months ended June 30, 2020 were related to transaction and reorganization costs.

Transaction, proxy and reorganization expense for the three and six months ended June 30, 2019 were related to proxy costs.

Transaction, proxy and reorganization expense for the nine months ended September 30, 2020 were related to transaction and reorganization costs.

Transaction, proxy and reorganization expense for the nine months ended September 30, 2019 were related to reductions in workforce and other strategic alignment initiatives, which resulted in the recognition of severance and other termination benefits of $68.0 million, contract termination fees of $12.6 million and proxy costs of $19.3 million.

Other Income Statement Items

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Changes in fair value are recorded in (gain) loss on investment in Equitrans Midstream Corporation in the Statements of Condensed Consolidated Operations.

The Company's investment in Equitrans Midstream fluctuates with changes in Equitrans Midstream's stock price, which was $8.31 and $13.36 as of June 30, 2020 and December 31, 2019, respectively.

The Company's investment in Equitrans Midstream fluctuates with changes in Equitrans Midstream's stock price, which was $8.46 and $13.36 as of September 30, 2020 and December 31, 2019, respectively.

Note, the effect of the Company's sale of 50% of its ownership of its retained shares of Equitrans Midstream's common stock was recorded as a reduction to the investment in Equitrans Midstream in conjunction with the Company's recognition of the gain on the Equitrans Share Exchange.

1 unchanged sentence

Dividend and other income.

Dividend and other income decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019 due primarily to lower dividends received from the Company's investment in Equitrans Midstream.

Dividend and other income decreased for the three and nine months ended September 30, 2020 compared to the same periods in 2019 due primarily to lower dividends received from the Company's investment in Equitrans Midstream driven by decreased shares of Equitrans Midstream's common stock owned.

Loss on debt extinguishment.

During the three and six months ended June 30, 2020, the Company recognized a loss on debt extinguishment of $0.4 million and $17.0 million, respectively, related to the repayment of the Company's 4.875% senior notes, 2.50% senior notes, floating rate notes and term loan facility.

During the three and nine months ended September 30, 2020, the Company recognized a loss on debt extinguishment of $3.7 million and $20.7 million, respectively, related to the repayment of the Company's 4.875% senior notes, 2.50% senior notes, floating rate notes and term loan facility.

See Note 6 to the Condensed Consolidated Financial Statements.

Interest expense.

Interest expense increased for the three and six months ended June 30, 2020 compared to the same periods in 2019 due to increased interest incurred on new debt, including the senior notes issued in January 2020, borrowings on the Company's term loan facility and the convertible senior notes issued in April 2020 as well as interest incurred on letters of credit issued in 2020.

Interest expense increased for the three and nine months ended September 30, 2020 compared to the same periods in 2019 due to increased interest incurred on new debt, including the senior notes issued in January 2020 and the convertible senior notes issued in April 2020, as well as interest incurred on letters of credit issued in 2020.

These increases were partly offset by lower interest incurred due to the repayment of the Company's 8.125% senior notes, 4.875% senior notes, floating rate notes and 2.50% senior notes and decreased borrowings on the Company's credit facility.

See Note 6 to the Condensed Consolidated Financial Statements.

Income tax (benefit) expense.

Income tax benefit.

See Note 5 to the Condensed Consolidated Financial Statements.

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

In 2020, the Company expects to spend $1.05 billion to $1.10 billion in total capital expenditures, which are expected to be funded by operating cash flow and, if required, borrowings on the Company's credit facility.

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See "Critical Accounting Policies and Estimates" herein and 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 Company's accounting policies and significant assumptions related to impairment of the Company's oil and gas properties.

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

See Item 1A., "Risk Factors – Natural gas, NGLs and oil price declines and changes in our development strategy have resulted in impairment of certain of our assets.

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The energy industry has recently experienced two significant external stimuli that have impacted, and are anticipated to continue impacting, both day-to-day operations and the macro environment.

The novel coronavirus, or COVID-19, outbreak and voluntary and mandatory quarantines, travel restrictions and other restrictions throughout the United States and other parts of the world have resulted in decreased demand for natural gas, NGLs and oil.

The novel coronavirus, or COVID-19, pandemic and voluntary and mandatory quarantines, travel restrictions and other restrictions throughout the United States and other parts of the world have resulted in decreased demand for natural gas, NGLs and oil.

Additionally, in March 2020, the group of oil producing nations known as OPEC+ failed to reach an agreement over proposed oil production cuts stemming from the decrease in global demand for oil in light of the COVID-19 pandemic (the oil price war).

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however, the volatility in the prices for these commodities has substantially increased as a result of recent world developments in 2020.

Oil prices in particular drastically fell in March 2020, and, although prices have since risen from historic lows in April 2020, oil prices continue to be depressed.

Oil prices in particular drastically fell in March 2020, and, although prices have since risen from historic

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

lows in April 2020, oil prices continue to be depressed.

However, forward strip pricing for natural gas has increased meaningfully compared to strip prices prior to the COVID-19 pandemic and oil price war, with the principal contributing factor believed to be the market expectation that supply decreases in associated natural gas (defined as natural gas produced as a byproduct of principally oil production activities) as a result of reduced or curtailed operations in oil basins will more than offset reduced demand for natural gas as a result of the COVID-19 pandemic.

The impact of these recent developments on natural gas prices and the Company's business are unpredictable, and there is no assurance that natural gas prices will remain at recently elevated prices or that any positive impact from the oil price war will outweigh the negative impact from reduced demand for natural gas as a result of the COVID-19 pandemic or other factors.

See Item 1A., "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, as well as Part II, Item 1A., "Risk Factors – The outbreak of the novel coronavirus, or COVID-19, has affected and may materially adversely affect, and any future outbreak of any other highly infectious or contagious diseases may materially adversely affect, our operations, financial performance and condition, operating results and cash flows" in this Quarterly Report on Form 10-Q.

The impact of these recent developments on natural gas prices and the Company's business are unpredictable, and there is no assurance that natural gas prices will remain at elevated prices or that any positive impact from the oil price war will outweigh the negative impact from reduced demand for natural gas as a result of the COVID-19 pandemic or other factors.

See Item 1A., "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, as well as Part II, Item 1A., "Risk Factors – The novel coronavirus, or COVID-19, pandemic has affected and may materially adversely affect, and any future outbreak of any other highly infectious or contagious diseases may materially adversely affect, our operations, financial performance and condition, operating results and cash flows" in this Quarterly Report on Form 10-Q.

Deleveraging Plan

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The Deleveraging Plan contemplates generating targeted proceeds from monetizations of select, non-core exploration and production assets, core mineral assets and/or the Company's retained equity interest in Equitrans Midstream.

Given current market conditions, the Company intends to more selectively pursue non-core asset sales and opportunistically monetize its remaining equity interest in Equitrans Midstream in a strategic manner.

The Company believes that the combination of the anticipated proceeds from monetization transactions, anticipated remaining income tax refunds of $201.9 million (in part

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

accelerated by the Coronavirus Aid, Relief and Economic Security Act (the CARES Act)) and improved realized free cash flow amounts as a result of accelerated well cost reductions will be sufficient to allow the Company to repay or refinance its remaining debt maturing in 2021 by the end of 2020 and begin repaying or refinancing its debt maturing after 2021.

Until the Company's leverage target is achieved, the Company expects to use all free cash flow and divestiture proceeds to reduce its debt.

The Company intends to selectively pursue non-core asset sales and opportunistically monetize its remaining equity interest in Equitrans Midstream in a strategic manner.

The Company believes that the combination of the anticipated proceeds from monetization transactions and improved realized free cash flow amounts as a result of accelerated well cost reductions will be sufficient to allow the Company to repay or refinance its remaining debt maturing in 2021 by the end of 2020 and begin repaying or refinancing its debt maturing after 2021.

Until the Company's leverage target is achieved, the Company expects to use nearly all of its free cash flow and divestiture proceeds to reduce its debt.

As discussed in Note 6 to the Condensed Consolidated Financial Statements, the Company issued the Convertible Notes during the second quarter of 2020.

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Operating Activities

Net cash provided by operating activities was $947 million for the six months ended June 30, 2020 compared to $1,315 million for the same period in 2019.

The decrease was due primarily to lower cash operating revenues and unfavorable timing of working capital payments, partly offset by increased cash settlements received on derivatives not designated as hedges and income tax refunds received of $189.6 million during the six months ended June 30, 2020.

Net cash provided by operating activities was $1,132 million for the nine months ended September 30, 2020 compared to $1,634 million for the same period in 2019.

The decrease was due primarily to lower cash operating revenues and unfavorable timing of working capital payments, partly offset by increased cash settlements received on derivatives not designated as hedges and income tax refunds, plus interest, received of $391.4 million during the nine months ended September 30, 2020.

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company's cash flows from operating activities are affected by movements in the market price for commodities.

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Investing Activities

Net cash used in investing activities was $349 million for the six months ended June 30, 2020 compared to $765 million for the same period in 2019.

Net cash used in investing activities was $623 million for the nine months ended September 30, 2020 compared to $1,256 million for the same period in 2019.

The decrease was due to lower capital expenditures as a result of the Company's change in strategic focus from production growth to capital efficiency as well as cash received from asset sales and the Equitrans Share Exchange.

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following table summarizes the Company's capital expenditures.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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Total capital expenditures 248 475 813 1,417

Deduct (add back):

Non-cash items (a) 28 16 (25) (160)

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Financing Activities

Net cash used in financing activities was $600 million for the six months ended June 30, 2020 compared to $524 million for the same period in 2019.

For the six months ended June 30, 2020, the primary uses of financing cash flows were net repayments of debt and credit facility borrowings, and the primary source of financing cash flows was net proceeds from the issuance of debt.

For the six months ended June 30, 2019, the primary uses of financing cash flows were net repayments of credit facility borrowings and debt, and the primary source of financing cash flows was net proceeds from borrowings under the Company's term loan facility.

Net cash used in financing activities was $500 million for the nine months ended September 30, 2020 compared to $374 million for the same period in 2019.

For the nine months ended September 30, 2020, the primary uses of financing cash flows were net repayments of debt and credit facility borrowings, and the primary source of financing cash flows was net proceeds from the issuance of debt.

For the nine months ended September 30, 2019, the primary uses of financing cash flows were net repayments of credit facility borrowings and debt, and the primary source of financing cash flows was net proceeds from borrowings under the Company's term loan facility.

See Note 6 to the Condensed Consolidated Financial Statements for further discussion of the Company's debt.

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Additionally, the Company plans to dispose of its remaining retained shares of Equitrans Midstream's common stock and use the proceeds to reduce the Company's debt.

Income Tax Receivables

As of June 30, 2020, the Company had a tax receivable of $201.9 million in the Condensed Consolidated Balance Sheet.

The tax receivable includes $189.7 million of expected federal refunds of Alternative Minimum Tax credits, $94.8 million of which was accelerated as a result of the CARES Act, and $12.2 million of expected refunds of 2018 state tax return overpayments.

See Note 5 to the Condensed Consolidated Financial Statements for further discussion of the CARES Act.

EQT Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

Income Tax Receivables

As of September 30, 2020, the Company had a tax receivable of $50.8 million in the Condensed Consolidated Balance Sheet.

The tax receivable included $48.4 million, including interest, of expected federal refunds of Alternative Minimum Tax credits from the settlement of the Company's 2010, 2011 and 2012 audit that the Company expects to receive in the fourth quarter of 2020.

Security Ratings and Financing Triggers

The table below reflects the credit ratings and rating outlooks assigned to the Company's debt instruments as of July 22, 2020.

The table below reflects the credit ratings and rating outlooks assigned to the Company's debt instruments as of October 16, 2020.

The Company's credit ratings and rating outlooks are subject to revision or withdrawal at any time by the assigning rating agency, and each rating should be evaluated independent from any other rating.

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Moody's Investors Service (Moody's) Ba3 Negative

Standard & Poor's Ratings Service (S&P) BB– Negative

Standard & Poor's Ratings Service (S&P) BB– Stable

Fitch Ratings Service (Fitch) BB Positive

Changes in credit ratings may affect the Company's access to the capital markets, the cost of short-term debt through interest rates and fees under the Company's lines of credit, the interest rate on the Adjustable Rate Notes (defined in Note 6 to the Condensed Consolidated Financial Statements), the rates available on new long-term debt, the Company's pool of investors and funding sources, the borrowing costs and margin deposit requirements on the Company's derivative instruments and credit assurance requirements, including collateral, in support of the Company's midstream service contracts, joint venture arrangements or construction contracts.

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 July 22, 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 July 22, 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.

Changes in credit ratings may affect the Company's access to the capital markets, the cost of short-term debt through interest rates and fees under the Company's lines of credit, the interest rate on the Adjustable Rate Notes (defined and discussed in Note 6 to the Condensed Consolidated Financial Statements), the rates available on new long-term debt, the Company's pool of investors and funding sources, the borrowing costs and margin deposit requirements on the Company's over the counter (OTC) derivative instruments and credit assurance requirements, including collateral, in support of the Company's midstream service contracts, joint venture arrangements or construction contracts.

Margin deposits on the Company's OTC 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 October 16, 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 OTC derivative instruments, midstream services contracts and other contracts.

As of October 16, 2020, such assurances could be up to approximately $1.2 billion, inclusive of letters of credit, OTC derivative instrument margin deposits and other collateral posted of approximately $1.1 billion in the aggregate.

The Company's debt agreements and other financial obligations contain various provisions that, if not complied with, could result in default or event of default under the Company's credit facility, mandatory partial or full repayment of amounts outstanding, reduced loan capacity or other similar actions.

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The calculation of this ratio excludes the effects of accumulated other comprehensive income.

As of June 30, 2020, the Company was in compliance with all debt provisions and covenants.

As of September 30, 2020, the Company was in compliance with all debt provisions and covenants.

See Note 6 to the Condensed Consolidated Financial Statements for a discussion of the borrowings on the Company's credit facility.

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The derivative commodity instruments used by the Company are primarily swap, collar and option agreements.

The following table summarizes the approximate volumes and prices of the Company's NYMEX hedge positions through 2024 as of July 22, 2020.

The following table summarizes the approximate volumes and prices of the Company's NYMEX hedge positions through 2024 as of October 16, 2020.

2020 (a) 2021 2022 2023 2024

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Average Price ($/Dth) $ 2.68 $ 2.50 $ 2.38 $ 2.38 $ —

(a) July 1 through December 31.

(a) October 1 through December 31.

(b) The difference between the fixed price and NYMEX price is included in average differential presented in the Company's price reconciliation in "Average Realized Price Reconciliation." The fixed price natural gas sales agreements can be physically or financially settled.

For 2020 (July 1 through December 31), 2021, 2022, 2023 and 2024, the Company has natural gas sales agreements for approximately 6 MMDth, 18 MMDth, 18 MMDth, 88 MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of $3.60, $3.17, $3.17, $2.84 and $3.21, respectively.

For 2020 (October 1 through December 31), 2021, 2022, 2023 and 2024, the Company has natural gas sales agreements for approximately 2 MMDth, 18 MMDth, 18 MMDth, 88 MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of $3.47, $3.17, $3.17, $2.84 and $3.21, respectively.

The Company has also entered into derivative instruments to hedge basis.

The Company may use other contractual agreements to implement its commodity hedging strategy.

During the three months ended June 30, 2020, the Company purchased $54 million of options with the primary purpose of reducing future NYMEX based payments that could be due in 2021, 2022 and 2023 to Equitrans Midstream related to the Henry Hub Cash Bonus (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements) provided for by the Consolidated GGA.

During the second quarter of 2020, the Company purchased $54 million of options with the primary purpose of reducing future NYMEX based payments that could be due in 2021, 2022 and 2023 to Equitrans Midstream related to the Henry Hub Cash Bonus (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements) provided for by the Consolidated GGA.

See Item 3., "Quantitative and Qualitative Disclosures About Market Risk" and Note 3 to the Condensed Consolidated Financial Statements for further discussion of the Company's hedging program.

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Schedule of Contractual Obligations

The following table presents the Company's long-term contractual obligations as of June 30, 2020.

The following table presents the Company's long-term contractual obligations as of September 30, 2020.

Total 2020 (a) 2021 – 2022 2023 – 2024 Thereafter

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Total contractual obligations $ 31,866,984 $ 508,534 $ 5,158,769 $ 4,327,849 $ 21,871,832

(a) July 1 through December 31.

(a) October 1 through December 31.

(b) Purchase obligations are primarily commitments for demand charges under existing long-term contracts and binding precedent agreements with various pipelines, some of which extend up to 20 years or longer.

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(f) Other liabilities are primarily commitments for estimated payouts for various liability stock award plans.

See "Critical Accounting Policies and Estimates" herein, Note 11 to the Condensed Consolidated Financial Statements and Note 13 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 factors that affect the ultimate amount of the payout of these obligations.

See "Critical Accounting Policies and Estimates," Note 11 to the Condensed Consolidated Financial Statements and Note 13 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 factors that affect the ultimate amount of the payout of these obligations.

The Company is currently unable to make reasonably reliable estimates of the period of cash settlement of potential liabilities with taxing authorities related to its total reserve for unrecognized tax benefits;

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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 2. Management’s Discussion and Analysis