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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-10-22 · 162 added, 292 removed, 159 unchanged (74% of the section changed)

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The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto included in this report.

Unless the context otherwise indicates, all references in this report to "EQT," the "Company," "we," "us," or "our" are to EQT Corporation and its subsidiaries, collectively.

CAUTIONARY STATEMENTS

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Statements that do not relate strictly to historical or current facts are forward-looking and are usually identified by the use of words such as "anticipate," "estimate," "could," "would," "will," "may," "forecast," "approximate," "expect," "project," "intend," "plan," "believe" and other words of similar meaning, or the negative thereof, in connection with any discussion of future operating or financial matters.

Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the matters discussed in section "Outlook" herein and the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of EQT Corporation and its subsidiaries (collectively, EQT or the Company), including guidance regarding the Company's strategy to develop its reserves;

drilling plans and programs (including the number, type, depth, spacing, lateral lengths and location of wells to be drilled and the availability of capital to complete these plans and programs);

projections of wells to be drilled per combo-development project;

Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the expectations of our plans, strategies, objectives and growth and anticipated financial and operational performance, including guidance regarding our strategy to develop our reserves;

drilling plans and programs (including availability of capital to complete these plans and programs);

the projected scope and timing of our combo-development projects;

estimated reserves, including potential future downward adjustments of reserves and reserve life;

total resource potential and drilling inventory duration;

projected production and sales volumes and growth rates (including liquids production and sales volumes and growth rates);

changes in basis;

potential impacts to the Company's business and operations resulting from the COVID-19 pandemic;

the effects of the COVID-19 pandemic and actions taken by the Organization of the Petroleum Exporting Countries (OPEC) and other allied countries (collectively known as OPEC+) as it pertains to the global supply and demand of, and prices for, natural gas, NGLs and oil;

the impact of commodity prices on the Company's business;

potential future impairments of the Company's assets;

the Company's ability to reduce its drilling and completions costs, other costs and expenses, and capital expenditures, and the timing of achieving any such reductions;

projected production and sales volume and growth rates (including liquids production and sales volume and growth rates);

natural gas prices;

changes in basis and the impact of commodity prices on our business;

potential future impairments of our assets;

our ability to reduce our well costs and capital expenditures, and the timing of achieving any such reductions;

infrastructure programs;

the cost, capacity, and timing of obtaining regulatory approvals;

the Company's ability to successfully implement and execute the executive management team's operational, organizational and technological initiatives, and achieve the anticipated results of such initiatives;

the projected reduction of the Company's gathering and compression rates resulting from the Company's consolidated gas gathering and compression agreement with EQM Midstream Partners, LP, and the anticipated cost savings and other strategic benefits associated with the execution of such agreement;

monetization transactions, including asset sales, joint ventures or other transactions involving the Company's assets, the timing of such monetization transactions, if at all, the projected proceeds from such monetization transactions and the Company's planned use of such proceeds;

potential acquisition transactions;

the projected capital efficiency savings and other operating efficiencies and synergies resulting from the Company's monetization transactions and acquisition transactions;

the timing and structure of any dispositions of the Company's remaining retained shares of Equitrans Midstream Corporation's (Equitrans Midstream) common stock, and the planned use of the proceeds from any such dispositions;

the amount and timing of any repayments, redemptions or repurchases of EQT common stock, outstanding debt securities or other debt instruments;

the Company's ability to reduce its debt and the timing of such reductions, if any;

our ability to successfully implement and execute our operational, organizational, technological and ESG initiatives, and achieve the anticipated results of such initiatives;

projected reductions of our gathering and compression rates resulting from our consolidated gas gathering and compression agreement with Equitrans Midstream Corporation (Equitrans Midstream), and the anticipated cost savings and other strategic benefits associated with the execution of such agreement;

monetization transactions, including asset sales, joint ventures or other transactions involving our assets, and our planned use of the proceeds from such monetization transactions;

potential acquisition transactions or other strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits from any such transactions;

the timing and structure of any dispositions of our remaining retained shares of Equitrans Midstream's common stock, and the planned use of the proceeds from any such dispositions;

the amount and timing of any repayments, redemptions or repurchases of our common stock, outstanding debt securities or other debt instruments;

our ability to reduce our debt and the timing of such reductions, if any;

projected dividends, if any;

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liquidity and financing requirements, including funding sources and availability;

the Company's ability to maintain or improve its credit ratings, leverage levels and financial profile;

the Company's hedging strategy;

our ability to maintain or improve our credit ratings, leverage levels and financial profile;

our hedging strategy;

the effects of litigation, government regulation and tax position;

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Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

The Company has based these forward-looking statements on current expectations and assumptions about future events, taking into account all information currently known by the Company.

While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond the Company's control.

The risks and uncertainties that may affect the operations, performance and results of the Company's business and forward-looking statements include, but are not limited to, those set forth in Item 1A., "Risk Factors" and elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, as updated by Part II, Item 1A., "Risk Factors" in this Quarterly Report on Form 10-Q and other documents the Company files from time to time with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

We have based these forward-looking statements on current expectations and assumptions about future events, taking into account all information currently known by us.

While we consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond our control.

These risks and uncertainties include, but are not limited to, volatility of commodity prices;

the costs and results of drilling and operations;

access to and cost of capital;

uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future;

the assumptions underlying production forecasts;

the quality of technical data;

our ability to appropriately allocate capital and resources among our strategic opportunities;

inherent hazards and risks normally incidental to drilling for, producing, transporting and storing natural gas, natural gas liquids (NGLs) and oil;

cyber security risks;

availability and cost of drilling rigs, completion services, equipment, supplies, personnel, oilfield services and water required to execute our exploration and development plans;

the ability to obtain environmental and other permits and the timing thereof;

government regulation or action;

environmental and weather risks, including the possible impacts of climate change;

and disruptions to our business due to acquisitions and other significant transactions.

These and other risks and uncertainties are described under Item 1A., "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2020.

EQT CORPORATION AND SUBSIDIARIES

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

Any forward-looking statement speaks only as of the date on which such statement is made, and we do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Consolidated Results of Operations

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.

Net loss attributable to EQT Corporation for the three months ended March 31, 2021 was $40.5 million, $0.15 per diluted share, compared to net loss attributable to EQT Corporation for the same period in 2020 of $167.1 million, $0.65 per diluted share.

The improvement was attributable primarily to higher sales of natural gas, NGLs and oil, income from investments, lower impairments and an income tax benefit, partly offset by loss on derivatives not designated as hedges, the gain on the Equitrans Share Exchange (defined and discussed in Note 8 to the Condensed Consolidated Financial Statements) in the first quarter of 2020, lower dividends and other income, increased depreciation and depletion and increased selling, general and administrative expense.

See "Sales Volume and Revenues" and "Operating Expenses" for discussions of items affecting operating income and "Other Income Statement Items" for a discussion of other income statement items.

See "Investing Activities" under "Capital Resources and Liquidity" for a discussion of capital expenditures.

Average Realized Price Reconciliation

The following table presents detailed natural gas and liquids operational information to assist in the understanding of the Company's consolidated operations, including the calculation of the Company's average realized price ($/Mcfe), which is based on adjusted operating revenues, a non-GAAP supplemental financial measure.

Adjusted operating revenues is presented because it is an important measure used by the Company's management to evaluate period-to-period comparisons of earnings trends.

The following table presents detailed natural gas and liquids operational information to assist in the understanding of our consolidated operations, including the calculation of our average realized price ($/Mcfe), which is based on adjusted operating revenues, a non-GAAP supplemental financial measure.

Adjusted operating revenues is presented because it is an important measure we use to evaluate period-to-period comparisons of earnings trends.

Adjusted operating revenues should not be considered as an alternative to total operating revenues.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(Thousands, unless otherwise noted)

Sales volume (MMcf) 390,298 369,742

NYMEX price ($/MMBtu) (a) $ 1.97 $ 2.23 $ 1.88 $ 2.67

NYMEX price ($/MMBtu) $ 2.69 $ 1.95

Btu uplift 0.15 0.10

Natural gas price ($/Mcf) $ 2.84 $ 2.05

Basis ($/Mcf) (b) $ (0.48) $ (0.35) $ (0.35) $ (0.23)

Basis ($/Mcf) (a) $ (0.25) $ (0.22)

Cash settled basis swaps (not designated as hedges) ($/Mcf) (0.09) 0.05

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Natural gas liquids (NGLs), excluding ethane:

Sales volume (MMcfe) (c) 10,661 10,609 32,053 34,359

Sales volume (MMcfe) (b) 14,600 10,820

Sales volume (Mbbl) 2,433 1,803

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NGLs sales $ 83,443 $ 33,511

Sales volume (MMcfe) (c) 6,442 5,846 18,540 18,239

Sales volume (MMcfe) (b) 8,587 3,329

Sales volume (Mbbl) 1,431 555

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Ethane sales $ 9,534 $ 2,245

Sales volume (MMcfe) (c) 899 1,334 3,136 3,847

Sales volume (MMcfe) (b) 1,705 1,179

Sales volume (Mbbl) 284 197

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Oil sales $ 17,614 $ 6,215

Total liquids sales volume (MMcfe) (c) 18,002 17,789 53,729 56,445

Total liquids sales volume (MMcfe) (b) 24,892 15,328

Total liquids sales volume (Mbbl) 4,148 2,555

Total liquids sales $ 110,591 $ 41,971

Total natural gas and liquids sales, including cash settled derivatives (d) $ 853,164 $ 941,671 $ 2,626,787 $ 3,110,527

Total natural gas and liquids sales, including cash settled derivatives (c) $ 1,083,085 $ 957,382

Total sales volume (MMcfe) 415,190 385,070

Average realized price ($/Mcfe) $ 2.61 $ 2.49

(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.

(d) Total natural gas and liquids sales, including cash settled derivatives, is also referred to in this report as adjusted operating revenues, a non-GAAP supplemental financial measure.

(a) Basis represents the difference between the ultimate sales price for natural gas and the New York Mercantile Exchange (NYMEX) natural gas price.

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

(c) Total natural gas and liquids sales, including cash settled derivatives, is also referred to in this report as adjusted operating revenues, a non-GAAP supplemental financial measure.

EQT CORPORATION AND SUBSIDIARIES

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The table below reconciles adjusted operating revenues, a non-GAAP supplemental financial measure, with total operating revenues, its most directly comparable financial measure calculated in accordance with GAAP.

Adjusted operating revenues (also referred to in this report as total natural gas and liquids sales, including cash settled derivatives) is presented because it is an important measure used by the Company's management to evaluate period-to-period comparisons of earnings trends.

Adjusted operating revenues (also referred to in this report as total natural gas and liquids sales, including cash settled derivatives) is presented because it is an important measure we use to evaluate period-to-period comparisons of earnings trends.

Adjusted operating revenues excludes the revenue impacts of changes in the fair value of derivative instruments prior to settlement and net marketing services and other.

Management uses adjusted operating revenues to evaluate earnings trends because, as a result of the measure's exclusion of the often-volatile changes in the fair value of derivative instruments prior to settlement, the measure reflects only the impact of settled derivative contracts.

We use adjusted operating revenues to evaluate earnings trends because, as a result of the measure's exclusion of the often-volatile changes in the fair value of derivative instruments prior to settlement, the measure reflects only the impact of settled derivative contracts.

Net marketing services and other primarily includes the costs of, and recoveries on, pipeline capacity releases.

Because management considers net marketing services and other to be unrelated to the Company's natural gas and liquids production activities, adjusted operating revenues excludes net marketing services and other.

Management believes that adjusted operating revenues provides useful information to investors for evaluating period-to-period comparisons of earnings trends.

Because we consider net marketing services and other to be unrelated to our natural gas and liquids production activities, adjusted operating revenues excludes net marketing services and other.

We believe that adjusted operating revenues provides useful information to investors for evaluating period-to-period comparisons of earnings trends.

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(Thousands, unless otherwise noted)

Total operating revenues $ 949,923 $ 1,107,057

Deduct (add):

Add (deduct):

Loss (gain) on derivatives not designated as hedges 188,813 (389,436)

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 cash settlements (paid) received on derivatives not designated as hedges (38,140) 245,736

Premiums (paid) for derivatives that settled during the period (9,726) (3,555)

Net marketing services and other (7,785) (2,420)

Adjusted operating revenues, a non-GAAP financial measure $ 1,083,085 $ 957,382

Total sales volumes (MMcfe) 366,138 380,823 1,096,855 1,134,407

Total sales volume (MMcfe) 415,190 385,070

Average realized price ($/Mcfe) $ 2.61 $ 2.49

EQT Corporation and Subsidiaries

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

Sales Volumes and Revenues

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

2020 2019 % 2020 2019 %

Sales Volume and Revenues

Three Months Ended March 31,

(Thousands, unless otherwise noted)

Sales volumes by shale (MMcfe):

Sales volume by shale (MMcfe):

Marcellus (a) 373,941 333,751 12.0

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Other 1,320 1,544 (14.5)

Total sales volumes (b) 366,138 380,823 (3.9) 1,096,855 1,134,407 (3.3)

Average daily sales volumes (MMcfe/d) 3,980 4,139 (3.8) 4,003 4,155 (3.7)

Total sales volume (b) 415,190 385,070 7.8

Average daily sales volume (MMcfe/d) 4,613 4,232 9.0

Operating revenues:

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

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 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.

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.

Sales of natural gas, NGLs and oil increased for the three months ended March 31, 2021 compared to the same period in 2020 due to higher sales volume and a higher average realized price.

Average realized price

EQT CORPORATION AND SUBSIDIARIES

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

increased due to higher NYMEX prices and higher liquids prices, partly offset by unfavorable cash settled derivatives.

For the three months ended March 31, 2021, we paid $38.1 million of net cash settlements on derivatives not designated as hedges and for the same period in 2020, we received $245.7 million 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 volume increased primarily as a result of sales volume of 34 Bcfe from upstream assets we acquired from Chevron U.S.A.

in the fourth quarter of 2020 (Chevron Acquisition), partly offset by a decrease of 5 Bcfe attributable to assets we divested in the second quarter of 2020.

(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.

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.

Production-Related Operating Expenses

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

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

2020 2019 % 2020 2019 %

For the three months ended March 31, 2021, we recognized a loss of $188.8 million on derivatives not designated as hedges and for the same period in 2020, we recognized a gain of $389.4 million.

The loss for the three months ended March 31, 2021 was related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices.

The gain for the three months ended March 31, 2020 was related primarily to increases in the fair market value of our NYMEX swaps and options due to decreases in NYMEX forward prices.

Operating Expenses

The following table presents information on our production-related operating expenses.

Three Months Ended March 31,

(Thousands, unless otherwise noted)

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Production depletion 0.90 0.92 (2.2)

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.

Gathering expense increased on an absolute basis for the three months ended March 31, 2021 compared to the same period in 2020 due to increased sales volume and additional gathering capacity acquired as a result of the Chevron Acquisition and a higher gathering rate structure as a result of the Consolidated GGA (defined and discussed in Note 8 to the Condensed Consolidated Financial Statements).

We expect to realize fee relief and a lower gathering rate structure from the Consolidated GGA beginning with the Mountain Valley Pipeline (MVP) in-service date.

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.

Transmission expense decreased on an absolute and per Mcfe basis for the three months ended March 31, 2021 compared to the same period in 2020 due primarily to released capacity on, and credits received from, the Texas Eastern Transmission Pipeline and the Tennessee Gas Pipeline.

EQT CORPORATION AND SUBSIDIARIES

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

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 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 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.

Processing expense increased on an absolute and per Mcfe basis for the three months ended March 31, 2021 compared to the same period in 2020 due to higher liquid sales volume due primarily to the Chevron Acquisition and increased development of liquids-rich areas.

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.

Production taxes increased on an absolute and per Mcfe basis for the three months ended March 31, 2021 compared to the same period in 2020 due primarily to increased West Virginia severance taxes as a result of higher prices and sales volume.

Selling, general and administrative.

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.

Selling, general and administrative expense increased on an absolute and per Mcfe basis for the three months ended March 31, 2021 compared to the same period in 2020 due primarily to higher long-term incentive compensation costs due to changes in the fair value of awards.

Depreciation and depletion.

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

Production depletion increased on an absolute basis for the three months ended March 31, 2021 compared to the same period in 2020 due to increased sales volume, partly offset by a lower annual depletion rate.

Production depletion decreased on a per Mcfe basis for the three months ended March 31, 2021 compared to the same period in 2020 due to a lower annual depletion rate.

Amortization of intangible assets.

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 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.

Amortization of intangible assets for the three months ended March 31, 2020 was $7.5 million.

The intangible assets were fully amortized in the fourth quarter of 2020.

(Gain) loss on sale/exchange of long-lived assets.

During the first quarter of 2020, we recognized a loss on exchange of long-lived assets of $48.9 million related to the 2020 Asset Exchange Transactions.

See Note 9 to the Condensed Consolidated Financial Statements.

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 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.

Impairment and expiration of leases for the three months ended March 31, 2021 was $16.8 million compared to $53.8 million for the same period in 2020.

The decrease was driven by higher lease expirations in 2020 due to changes in market conditions.

Other operating expenses.

Other operating expenses for the three months ended March 31, 2021 of $9.4 million were due primarily to certain transaction-related costs associated with the Chevron Acquisition and changes in legal reserves, including settlements.

Other Income Statement Items

Gain on Equitrans Share Exchange.

During the first quarter of 2020, the Company recognized a gain on the Equitrans Share Exchange of $187.2 million.

See Note 9 to the Condensed Consolidated Financial Statements.

(Gain) loss on investment in Equitrans Midstream Corporation.

The Company's investment in Equitrans Midstream is recorded at fair value by multiplying the closing stock price of Equitrans Midstream's common stock by the number of shares of Equitrans Midstream's common stock owned by the Company.

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 $8.46 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.

During the first quarter of 2020, we recognized a gain on the Equitrans Share Exchange of $187.2 million.

See Note 8 to the Condensed Consolidated Financial Statements.

(Income) loss from investments.

For the three months ended March 31, 2021, we recognized a gain on an investment in a fund that invests in companies developing technology and operating solutions for exploration and production companies and a gain on our investment in Equitrans Midstream.

Our investment in Equitrans Midstream fluctuates with changes in Equitrans Midstream's stock price, which was $8.16 and $8.04 as of March 31, 2021 and December 31, 2020, respectively.

For the three months ended March 31, 2020, we recognized a loss on our investment in Equitrans Midstream, due to a decrease in Equitrans Midstream's stock price during the three months ended March 31, 2020 as well as a decrease in the number of shares of Equitrans Midstream's common stock that we own as a result of the Equitrans Share Exchange.

Dividend and other income.

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.

Dividend and other income decreased for the three months ended March 31, 2021 compared to the same period in 2020 due primarily to lower dividends received from our investment in Equitrans Midstream driven by the decrease in the number of shares of Equitrans Midstream's common stock that we own as well as a decrease in the dividend amount per share.

Loss on debt extinguishment.

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.

During the three months ended March 31, 2021, we recognized a loss on debt extinguishment of $4.4 million related to the repayment of our 4.875% senior notes.

During the three months ended March 31, 2020, we recognized a loss on debt extinguishment of $16.6 million related to the repayment of all or a portion of our 4.875% senior notes, 2.50% senior notes and floating rate notes.

EQT CORPORATION AND SUBSIDIARIES

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

Interest expense.

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.

Interest expense increased for the three months ended March 31, 2021 compared to the same period in 2020 due to increased interest incurred on new debt and letters of credit issued throughout 2020 as well as higher borrowings under our credit facility.

These increases were partly offset by lower interest incurred due to debt repayments throughout 2020 and the first quarter of 2021.

See Note 6 to the Condensed Consolidated Financial Statements.

Income tax benefit.

Income tax (benefit) expense.

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.

Sales volumes in 2020 are expected to be 1,480 Bcfe to 1,500 Bcfe.

The Company's revenues, profitability, ability to grow, liquidity and financial performance are substantially dependent on the prices it receives for, and the Company's ability to develop its reserves of, natural gas, NGLs and oil.

Changes in natural gas, NGLs and oil prices could affect, among other things, the Company's development plans, which would increase or decrease the pace of the development and the level of the Company's reserves, as well as the Company's revenues, earnings or liquidity.

Lower prices and changes in development plans could also result in non-cash impairments of the book value of the Company's oil and gas properties or other long-lived assets or downward adjustments to the Company's estimated proved reserves.

Any such impairments or downward adjustments to the Company's estimated reserves could potentially be material to the Company's financial statements.

Increases in natural gas, NGLs or oil prices may be accompanied by, or result in, increased well drilling costs, production taxes, lease operating expenses, volatility in seasonal gas price spreads for the Company's storage assets and end-user conservation or conversion to alternative fuels.

In addition, to the extent the Company has hedged its production at prices below the current market price, the Company will not benefit fully from any increase in the price of natural gas.

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.

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.

Future declines in commodity prices, increases in operating costs or adverse changes in well performance or additional changes in our development strategy may result in additional write-downs of the carrying amounts of our assets, including long lived intangible assets, which could materially and adversely affect our results of operations in future periods" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

COVID-19 and Oil Price War

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, 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).

Although the members of OPEC+ eventually reached an agreement to reduce their oil production beginning in May 2020 and continuing through April 2022, there remains significant uncertainty regarding the future actions of OPEC+, its members and other state-controlled oil companies related to oil price and production controls, including anticipated increases in supply from Russia and other members of OPEC+, particularly Saudi Arabia.

Impact of COVID-19 on the Company's Operations.

To date, the Company has experienced limited operational impacts as a direct result of work from home restrictions or COVID-19.

As a "life-sustaining" business under the guidelines issued by each of the states in which the Company operates, the Company has been allowed to continue operations, provided that non-essential personnel have been required to work from home.

One of the primary actions taken by the Company's new management team over the past twelve months has been the establishment of a digital work environment, which has allowed the Company to maintain the engagement and connectivity of its personnel as well as minimize the number of employees required in the office and field.

Impact of Oil Price War on the Company's Operations.

The Company has had, and expects to have, limited direct operational impacts from the oil price war.

The oversupply of oil and NGLs resulting from the demand destruction attributable to the COVID-19 pandemic is anticipated by some market participants to result in a lack of storage capacity and ultimately the shutting in of certain oil and NGLs production.

The Company has limited oil and NGLs exposure, with approximately 95% of its production being natural gas.

Impact of COVID-19 and Oil Price War on the Company's Outlook.

The prices for natural gas, NGLs and oil have historically been volatile;

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

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 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

In October 2019, the Company announced a plan to reduce its debt through asset monetizations and increased free cash flow (the Deleveraging Plan).

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.

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.

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.

By settling its Convertible Notes obligation either partially or wholly in EQT common stock, the Company could favorably affect its leverage levels.

The successful execution of the Deleveraging Plan is based on the Company's current expectations, including with respect to matters beyond its control, and is subject to change.

There can be no assurance that the Company will be able to find attractive asset monetization opportunities or that such transactions will be completed on its anticipated timeframe, if at all.

Furthermore, the Company's estimated value for the assets to be monetized under the Deleveraging Plan involves multiple assumptions and judgments about future events that are inherently uncertain;

accordingly, there can be no assurance that the resulting net cash proceeds from asset monetization transactions will be as anticipated, even if such transactions are consummated.

Some of the factors that could affect the Company's ability to successfully execute the Deleveraging Plan include changes in the financial condition or prospects of prospective purchasers and the availability of financing to potential purchasers on reasonable terms, if at all, the number of prospective purchasers, the number of competing assets on the market, unfavorable economic conditions, industry trends and changes in laws and regulations.

If the Company is not able to successfully execute the Deleveraging Plan or otherwise reduce debt to a level the Company believes is appropriate, the Company’s credit ratings may be lowered, the Company may reduce or delay its planned capital expenditures or investments and the Company may revise or delay its strategic plans.

Capital Resources and Liquidity

Although the Company cannot provide any assurance, it believes cash flows from operating activities and availability under its credit facility should be sufficient to meet the Company's cash requirements inclusive of, but not limited to, normal operating needs, debt service obligations, planned capital expenditures and commitments for at least the next twelve months.

Although we cannot provide any assurance, we believe cash flows from operating activities and availability under our credit facility should be sufficient to meet our cash requirements inclusive of, but not limited to, normal operating needs, debt service obligations, planned capital expenditures and commitments for at least the next twelve months and, based on current expectations, for the long-term.

Planned Capital Expenditures .

In 2021, we expect to spend approximately $1,025 million to $1,125 million in total capital expenditures, excluding amounts attributable to noncontrolling interests, which are expected to be funded by operating cash flow and, if required, borrowings under our credit facility.

Sales volume in 2021 is expected to be 1,620 Bcfe to 1,700 Bcfe.

Operating Activities.

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.

The Company is unable to predict such movements outside of the current market view as reflected in forward strip pricing.

Refer to Item 1A., "Risk Factors – Natural gas, NGLs and oil price volatility, or a prolonged period of low natural gas, NGLs and oil prices, may have an adverse effect on our revenue, profitability, future rate of growth, liquidity and financial position" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Net cash provided by operating activities was $400 million for the three months ended March 31, 2021 compared to $500 million for the same period in 2020.

The decrease was due primarily to decreased cash settlements received on derivatives not designated as hedges and unfavorable timing of working capital payments, partly offset by higher cash operating revenues.

Our cash flows from operating activities are affected by movements in the market price for commodities.

We are unable to predict such movements outside of the current market view as reflected in forward strip pricing.

Refer to Item 1A., "Risk Factors – Natural gas, NGLs and oil price volatility, or a prolonged period of low natural gas, NGLs and oil prices, may have an adverse effect on our revenue, profitability, future rate of growth, liquidity and financial position" in our Annual Report on Form 10-K for the year ended December 31, 2020.

Investing Activities.

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.

The following table summarizes the Company's capital expenditures.

Net cash used in investing activities was $248 million for the three months ended March 31, 2021 compared to $204 million for the same period in 2020.

The increase was due primarily to cash received during the first quarter of 2020 for the Equitrans Share Exchange, partly offset by lower capital expenditures.

The following table summarizes our capital expenditures.

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Reserve development $ 189 $ 223

Land and lease 38 51 88 152

Land and lease (a) 23 22

Capitalized overhead 13 11

3 unchanged sentences

Total capital expenditures 238 262

Deduct (add back):

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

Add (deduct) non-cash items (b) 13 (6)

Total cash capital expenditures $ 251 $ 256

(a) Represents the net impact of non-cash capital expenditures, including the effect of timing of receivables from working interest partners, accrued capital expenditures and capitalized share-based compensation costs.

(a) Capital expenditures attributable to noncontrolling interests were $1.3 million for the three months ended March 31, 2021.

(b) Represents the net impact of non-cash capital expenditures, including the effect of timing of receivables from working interest partners, accrued capital expenditures and capitalized share-based compensation costs.

The impact of accrued capital expenditures includes the reversal of the prior period accrual as well as the current period estimate.

Financing Activities.

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.

On March 26, 2020, the Company announced its suspension of the quarterly cash dividend on its common stock for purposes of accelerating cash flow to be used for the Deleveraging Plan.

Depending on the Company's actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors, the Company may from time to time seek to retire or repurchase its outstanding debt or equity securities through cash purchases in the open market or privately negotiated transactions.

The amounts involved in any such transactions may be material.

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.

Net cash used in financing activities was $130 million for the three months ended March 31, 2021 compared to $283 million for the same period in 2020.

For the three months ended March 31, 2021, the primary use of financing cash flows

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.

was net repayments of debt.

For the three months ended March 31, 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.

See Note 6 to the Condensed Consolidated Financial Statements for further discussion of our debt and borrowings under our credit facility.

Depending on our actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors, we may from time to time seek to retire or repurchase our outstanding debt or equity securities through cash purchases in the open market or privately negotiated transactions.

The amounts involved in any such transactions may be material.

Additionally, we plan to dispose of our remaining retained shares of Equitrans Midstream's common stock and use the proceeds to reduce our debt.

Security Ratings and Financing Triggers

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.

The Company cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by a rating agency if, in the rating agency's judgment, circumstances so warrant.

The table below reflects the credit ratings and rating outlooks assigned to our debt instruments as of April 30, 2021.

Our 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.

We cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by a rating agency if, in the rating agency's judgment, circumstances so warrant.

See Note 3 to the Condensed Consolidated Financial Statements for further discussion of what is deemed investment grade.

Rating agency Senior notes Outlook

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

Moody's Investors Service (Moody's) Ba2 Stable

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 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.

Changes in credit ratings may affect our access to the capital markets, the cost of short-term debt through interest rates and fees under our lines of credit, the interest rate on the senior notes with adjustable rates, the rates available on new long-term debt, our pool of investors and funding sources, the borrowing costs and margin deposit requirements on our over the counter (OTC) derivative instruments and credit assurance requirements, including collateral, in support of our midstream service contracts, joint venture arrangements or construction contracts.

Margin deposits on our 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 us and our hedging counterparties.

As of April 30, 2021, we had sufficient unused borrowing capacity, net of letters of credit, under our credit facility to satisfy any requests for margin deposit or other collateral that our counterparties are permitted to request of us pursuant to our OTC derivative instruments, midstream services contracts and other contracts.

As of April 30, 2021, such assurances could be up to approximately $1.1 billion, inclusive of letters of credit, OTC derivative instrument margin deposits and other collateral posted of approximately $0.9 billion in the aggregate.

See Notes 3 and 6 to the Condensed Consolidated Financial Statements for further information.

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

The most significant covenants and events of default under the debt agreements relate to maintenance of a debt-to-total capitalization ratio, limitations on transactions with affiliates, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of other financial obligations and change of control provisions.

The Company's credit facility contains financial covenants that require the Company to have a total debt-to-total capitalization ratio no greater than 65%.

Our credit facility contains financial covenants that require us to have a total debt to total capitalization ratio no greater than 65%.

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

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.

As of March 31, 2021, we were in compliance with all debt provisions and covenants under our debt agreements.

Commodity Risk Management

The substantial majority of our commodity risk management program is related to hedging sales of our produced natural gas.

The overall objective of our hedging program is to protect cash flows from undue exposure to the risk of changing commodity prices.

EQT CORPORATION AND SUBSIDIARIES

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

Commodity Risk Management

The substantial majority of the Company's commodity risk management program is related to hedging sales of the Company's produced natural gas.

The overall objective of the Company's hedging program is to protect cash flows from undue exposure to the risk of changing commodity prices.

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 October 16, 2020.

The derivative commodity instruments that we use are primarily swap, collar and option agreements.

The following table summarizes the approximate volumes and prices of our NYMEX hedge positions through 2024 as of April 30, 2021.

2021 (a) 2022 2023 2024

10 unchanged sentences

Average Price ($/Dth) $ 2.49 $ 2.38 $ 2.38 $ —

(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 (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 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.

Off-Balance Sheet Arrangements

See Note 17 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 guarantees.

EQT Corporation and Subsidiaries

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

Schedule of Contractual Obligations

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

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

Purchase obligations (b) $ 25,386,319 $ 425,686 $ 3,467,036 $ 3,848,902 $ 17,644,695

Long-term debt, including current portion 4,660,474 12,477 928,677 22,083 3,697,237

Interest payments on debt (c) 1,499,575 62,287 481,275 431,659 524,354

Credit facility borrowings (d) 244,500 — 244,500 — —

Lease obligations (e) 42,864 7,646 19,324 15,866 28

Other liabilities (f) 33,252 438 17,957 9,339 5,518

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

(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.

The Company has entered into agreements to release some of its capacity.

Purchase obligations also include commitments for processing capacity in order to extract heavier liquid hydrocarbons from the natural gas stream.

(c) Interest payments exclude interest related to the Company's credit facility borrowings as the interest rate is variable.

(d) The Company's credit facility borrowings were classified based on the credit facility's termination date.

(e) See Note 15 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 lease obligations.

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

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;

therefore, this amount has been excluded from the schedule of contractual obligations.

(a) April 1 through December 31.

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

For 2021 (April 1 through December 31), 2022, 2023 and 2024, we have natural gas sales agreements for approximately 14 MMDth, 18 MMDth, 88 MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of $3.17, $3.17, $2.84 and $3.21, respectively.

We have also entered into derivative instruments to hedge basis.

We may use other contractual agreements to implement our commodity hedging strategy from time to time.

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

Commitments and Contingencies

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company.

While the amounts claimed may be substantial, the Company is unable to predict with certainty the ultimate outcome of such claims and proceedings.

The Company accrues legal and other direct costs related to loss contingencies when actually incurred.

The Company has established reserves it believes to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, the Company believes that the ultimate outcome of any matter currently pending against the Company will not materially affect the Company's financial condition, results of operations or liquidity.

See Note 16 to the Consolidated Financial Statements and Part I, Item 3., "Legal Proceedings" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the Company's commitments and contingencies.

See also Part II, Item 1., "Legal Proceedings."

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against us.

While the amounts claimed may be substantial, we are unable to predict with certainty the ultimate outcome of such claims and proceedings.

We accrue legal and other direct costs related to loss contingencies when actually incurred.

We have established reserves that we believe to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, we believe that the ultimate outcome of any matter currently pending against us will not materially affect our financial condition, results of operations or liquidity.

See Note 16 to the Consolidated Financial Statements and Part I, Item 3., "Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of our commitments and contingencies.

Recently Issued Accounting Standards

The Company's recently issued accounting standards are described in Note 1 to the Condensed Consolidated Financial Statements.

Our recently issued accounting standards are described in Note 1 to the Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The Company's significant accounting policies are described in Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been

EQT Corporation and Subsidiaries

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

included in the notes to the Condensed Consolidated Financial Statements.

The application of the Company's critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Condensed Consolidated Financial Statements.

Management uses historical experience and all available information to make these estimates and judgments.

Our critical accounting policies, including a discussion regarding the estimation uncertainty and the impact that our critical accounting estimates have had, or are reasonably likely to have, on our financial condition or results of operations, are described in Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

The application of our critical accounting policies may require us to make judgments and estimates about the amounts reflected in the Condensed Consolidated Financial Statements.

We use historical experience and all available information to make these estimates and judgments.

Different amounts could be reported using different assumptions and estimates.

See Note 5 for a discussion of the CARES Act, including its expected impact on the Company's methodologies, financial statements and related disclosures.

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