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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 178 added, 303 removed, 281 unchanged (63% of the section changed)

2 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS (UNAUDITED)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

(Thousands, except per share amounts)

10 unchanged sentences

Depreciation and depletion 422,098 377,116

Amortization of intangible assets — 7,478 — 22,433

(Gain) loss on sale/exchange of long-lived assets ( 391 ) 4,662 ( 18,414 ) 102,721

Gain on sale/exchange of long-lived assets ( 1,209 ) ( 1,207 )

Impairment of contract asset 184,945 —

Impairment and expiration of leases 29,991 16,757

1 unchanged sentence

Total operating expenses 1,309,156 941,078

Operating loss ( 2,609,526 ) ( 760,195 ) ( 3,818,322 ) ( 1,023,749 )

Gain on Equitrans Share Exchange (see Note 8)

— — — ( 187,223 )

(Income) loss from investments ( 43,184 ) ( 3,801 ) ( 66,861 ) 303,844

Operating (loss) income ( 1,888,266 ) 8,845

Loss (income) from investments 20,785 ( 11,848 )

Dividend and other income ( 3,596 ) ( 3,304 )

4 unchanged sentences

Net loss ( 1,514,583 ) ( 37,941 )

Net income attributable to noncontrolling interest 601 — 25 —

Net income (loss) attributable to noncontrolling interest 1,465 ( 514 )

Net loss attributable to EQT Corporation $ ( 1,516,048 ) $ ( 37,427 )

Loss per share of common stock attributable to EQT Corporation:

Weighted average common stock outstanding 356,792 255,589 304,961 255,516

Net loss $ ( 5.55 ) $ ( 2.35 ) $ ( 9.70 ) $ ( 4.03 )

Basic and diluted:

Weighted average common stock outstanding 374,142 278,852

3 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE LOSS (UNAUDITED)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net loss $ ( 1,514,583 ) $ ( 37,941 )

2 unchanged sentences

$ 20 and $ 27

37 72 198 156

Comprehensive loss ( 1,514,520 ) ( 37,861 )

Comprehensive income attributable to noncontrolling interests 601 — 25 —

Comprehensive income (loss) attributable to noncontrolling interest 1,465 ( 514 )

Comprehensive loss attributable to EQT Corporation $ ( 1,515,985 ) $ ( 37,347 )

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets:

25 unchanged sentences

Total liabilities 13,608,578 11,636,389

Common stock, no par value, shares authorized:

Common stock, no par value,

shares authorized:

640,000 , shares issued:

4 unchanged sentences

( 2,848 ) ( 18,046 )

Retained earnings ( 1,908,833 ) 1,048,259

Accumulated deficit ( 1,725,279 ) ( 94,400 )

Accumulated other comprehensive loss ( 4,548 ) ( 4,611 )

Total common shareholders' equity 8,188,673 9,954,763

Noncontrolling interests in consolidated subsidiaries 11,265 7,490

Noncontrolling interest in consolidated subsidiary 17,360 16,236

Total equity 8,206,033 9,970,999

3 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Depreciation and depletion 422,098 377,116

Amortization of intangible assets — 22,433

Gain/loss on sale/exchange of long-lived assets and impairment and expiration of leases 65,086 248,217

Gain on Equitrans Share Exchange — ( 187,223 )

(Income) loss from investments ( 66,861 ) 303,844

Impairments of long-lived assets and gain on sale/exchange of long-lived assets 213,727 15,550

Loss (income) from investments 20,785 ( 11,848 )

Loss on debt extinguishment 6,923 4,424

2 unchanged sentences

Loss on derivatives not designated as hedges 3,077,637 188,813

Cash settlements (paid) received on derivatives not designated as hedges ( 729,445 ) 813,218

Net premiums paid on derivative instruments ( 53,429 ) ( 53,473 )

Net cash settlements paid on derivatives not designated as hedges ( 885,539 ) ( 38,140 )

Net premiums received (paid) on derivative instruments 372 ( 3,147 )

Changes in other assets and liabilities:

1 unchanged sentence

Accounts payable 52,867 116,732

Income tax receivable and payable ( 27,055 ) 248,101

Other current assets ( 107,455 ) ( 34,066 )

3 unchanged sentences

Capital expenditures ( 292,281 ) ( 251,277 )

Cash paid for acquisitions, net of cash acquired ( 1,021,510 ) —

Proceeds from sale of assets 1,258 —

Cash received for Equitrans Share Exchange — 52,323

Other investing activities ( 149 ) 3,367

3 unchanged sentences

Repayment of credit facility borrowings ( 2,695,000 ) ( 1,581,000 )

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

Debt issuance costs and Capped Call Transactions (See Note 6) ( 19,713 ) ( 65,102 )

Repayment and retirement of debt ( 570,174 ) ( 126,396 )

Premiums paid on debt extinguishment ( 6,240 ) ( 4,267 )

Contributions from noncontrolling interests 3,750 —

Dividends paid ( 47,063 ) —

Cash paid for taxes related to net settlement of share-based incentive awards ( 13,648 ) ( 2,632 )

Proceeds from exercises under employee compensation plans 1,214 —

Repurchase and retirement of common stock ( 216,491 ) —

(Distribution to) contribution from noncontrolling interest ( 341 ) 3,750

Other financing activities ( 354 ) —

Net cash provided by (used in) financing activities 1,227,938 ( 499,797 )

Net cash used in financing activities ( 827,097 ) ( 129,545 )

Net change in cash and cash equivalents ( 97,050 ) 22,460

5 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED EQUITY (UNAUDITED)

Common Stock Accumulated Other

Comprehensive Loss (a) Noncontrolling Interests in Consolidated Subsidiaries

Shares No Par

Value Treasury Stock Retained Earnings Total Equity

(Thousands, except per share amounts)

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

Comprehensive loss, net of tax:

Net loss ( 600,640 ) ( 600,640 )

Other postretirement benefits liability adjustment, net of tax expense:

Share-based compensation plans 55 6,556 994 7,550

Balance at September 30, 2020 255,345 $ 7,895,628 $ ( 29,347 ) $ 984,571 $ ( 5,043 ) $ — $ 8,845,809

Balance at July 1, 2021 278,858 $ 8,245,752 $ ( 20,084 ) $ 71,284 $ ( 5,194 ) $ 10,664 $ 8,302,422

Comprehensive loss, net of tax:

Net (loss) income ( 1,980,117 ) 601 ( 1,979,516 )

Other postretirement benefits liability adjustment, net of tax expense:

Share-based compensation plans 105 9,495 1,882 11,377

Alta Acquisition (See Note 10) 98,789 1,925,405 1,925,405

Balance at September 30, 2021 377,752 $ 10,180,652 $ ( 18,202 ) $ ( 1,908,833 ) $ ( 5,157 ) $ 11,265 $ 8,259,725

Common shares authorized:

Preferred shares authorized:

There were no preferred shares issued or outstanding.

(a) Amounts included in accumulated other comprehensive loss are related to other postretirement benefits liability adjustments, net of tax, which are attributable to net actuarial losses and net prior service costs.

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

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED EQUITY (UNAUDITED)

Common Stock Accumulated Other

Comprehensive Loss (a) Noncontrolling Interests in Consolidated Subsidiaries

Shares No Par

Value Treasury Stock Retained Earnings Total Equity

Shares No Par Value Treasury Stock Retained Earnings

(Accumulated Deficit) Accumulated Other

Comprehensive Loss (a) Noncontrolling Interest in

Consolidated Subsidiary Total Equity

(Thousands, except per share amounts)

3 unchanged sentences

Other postretirement benefits liability adjustment, net of tax expense:

Dividends ($ 0.03 per share)

( 7,664 ) ( 7,664 )

Share-based compensation plans 436 ( 3,041 ) 7,879 4,838

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

Balance at September 30, 2020 255,345 $ 7,895,628 $ ( 29,347 ) $ 984,571 $ ( 5,043 ) $ — $ 8,845,809

Contribution from noncontrolling interest 3,750 3,750

Balance at March 31, 2021 278,781 $ 8,142,498 $ ( 21,469 ) $ 1,019,199 $ ( 5,275 ) $ 10,726 $ 9,145,679

Balance at January 1, 2022 376,399 $ 10,071,820 $ ( 18,046 ) $ ( 94,400 ) $ ( 4,611 ) $ 16,236 $ 9,970,999

2 unchanged sentences

Other postretirement benefits liability adjustment, net of tax expense:

Dividends ($0.125 share) ( 47,063 ) ( 47,063 )

Share-based compensation plans 1,207 ( 18,220 ) 15,198 ( 3,022 )

Contributions from noncontrolling interests 3,750 3,750

Alta Acquisition (See Note 10) 98,789 1,925,405 1,925,405

Balance at September 30, 2021 377,752 $ 10,180,652 $ ( 18,202 ) $ ( 1,908,833 ) $ ( 5,157 ) $ 11,265 $ 8,259,725

Issuance of common stock for Convertible Notes settlement (Note 6) 1 8 8

Repurchase and retirement of common stock ( 8,533 ) ( 132,260 ) ( 67,768 ) ( 200,028 )

Distribution to noncontrolling interest ( 341 ) ( 341 )

Balance at March 31, 2022 369,074 $ 9,921,348 $ ( 2,848 ) $ ( 1,725,279 ) $ ( 4,548 ) $ 17,360 $ 8,206,033

Common shares authorized:

8 unchanged sentences

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

In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of September 30, 2021 and December 31, 2020, the results of its operations and equity for the three and nine month periods ended September 30, 2021 and 2020 and its cash flows for the nine month periods ended September 30, 2021 and 2020.

In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of March 31, 2022 and December 31, 2021, the results of its operations, equity and cash flows for the three month periods ended March 31, 2022 and 2021.

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

In this Quarterly Report on Form 10-Q, references to "EQT," "EQT Corporation" and "the Company" refer collectively to EQT Corporation and its consolidated subsidiaries.

The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date.

For further information, refer to the Consolidated Financial Statements and accompanying notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

These financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes .

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

In addition, this ASU simplifies aspects of accounting for franchise taxes and interim period effects of enacted changes in tax laws or rates and provides clarification on accounting for transactions that result in a step up in the tax basis of goodwill and allocation of consolidated income tax expense to separate financial statements of entities not subject to income tax.

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

The Company adopted this ASU in the first quarter of 2021 with no material changes to its financial statements or disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging:

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging:

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity .

This ASU simplifies accounting for convertible instruments by removing certain separation models for convertible instruments.

For convertible instruments with conversion features that are not accounted for as derivatives under ASC 815 or do not result in substantial premiums accounted for as paid-in capital, the convertible instrument's embedded conversion features are no longer separated from the host contract.

For convertible instruments with conversion features that are not accounted for as derivatives under Accounting Standards Codification 815 or do not result in substantial premiums accounted for as paid-in capital, the convertible instrument's embedded conversion features are no longer separated from the host contract.

Consequently, and as long as no other feature requires bifurcation and recognition as a derivative, the convertible instrument is accounted for as a single liability measured at its amortized cost.

This ASU also amends the impact of convertible instruments on the calculation of diluted earnings per share (EPS) and adds several new disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

The Company plans to adopt this ASU on January 1, 2022 using the full retrospective method of adoption.

The Company is evaluating the impact this standard will have on its financial statements and disclosures.

Under ASU 2020-06, entities are required to use the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS).

The if-converted method assumes share settlement of the instrument, which increases the number of potentially dilutive securities used to calculate diluted EPS.

This ASU also adds several new disclosure requirements.

The Company adopted this ASU effective as of January 1, 2022 using the full retrospective method of adoption.

The following tables present the impact of the adoption of ASU 2020-06 on the Company's previously reported historical results.

See Note 6 for discussion of the Convertible Notes (defined in Note 6).

Three Months Ended March 31, 2021

As Reported ASU 2020-06 Adoption Adjustment As Adjusted

(Thousands, except per share amounts)

Interest expense $ 75,099 $ ( 4,626 ) $ 70,473

Income tax benefit ( 14,494 ) 1,535 ( 12,959 )

Net loss ( 41,032 ) 3,091 ( 37,941 )

Net loss attributable to noncontrolling interest ( 514 ) — ( 514 )

Net loss attributable to EQT Corporation $ ( 40,518 ) $ 3,091 $ ( 37,427 )

Basic and diluted:

Weighted average common stock outstanding (a) 278,852 — 278,852

Loss per share of common stock attributable to EQT Corporation $ ( 0.15 ) $ 0.02 $ ( 0.13 )

(a) For the three months ended March 31, 2021, diluted weighted average common stock outstanding did not change because the potentially dilutive securities had an anti-dilutive effect on loss per share.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

December 31, 2021

As Reported ASU 2020-06 Adoption Adjustment As Adjusted

Current portion of debt (a) $ 954,900 $ 106,070 $ 1,060,970

Deferred income taxes 938,612 ( 31,306 ) 907,306

Common stock, no par value 10,167,963 ( 96,143 ) 10,071,820

Accumulated deficit ( 115,779 ) 21,379 ( 94,400 )

(a) Pursuant to the terms of the Convertible Notes indenture, a sale price condition for conversion of the Convertible Notes was satisfied as of December 31, 2021, and, accordingly, holders of the Convertible Notes were permitted to convert any of their Convertible Notes at their option at any time during the three months ended March 31, 2022, subject to all terms and conditions set forth in the Convertible Notes indenture.

Therefore, as of December 31, 2021, the net carrying value of the Convertible Notes was included in current portion of debt in the Consolidated Balance Sheet.

Certain line items in the Statement of Condensed Consolidated Cash Flows were adjusted to reflect the impact of the adoption of ASU 2020-06;

however, the adoption did not impact cash and did not change net cash provided by operating, investing or financing activities.

Supplemental Cash Flow Information .

The following table summarizes net cash paid (received) for interest and income taxes and non-cash activity included in the Statements of Condensed Consolidated Cash Flows.

Nine Months Ended September 30,

Cash paid (received) during the period for:

The following table summarizes net cash paid for interest and income taxes and non-cash activity included in the Statements of Condensed Consolidated Cash Flows.

Three Months Ended March 31,

Cash paid during the period for:

Interest, net of amount capitalized $ 82,698 $ 85,211

1 unchanged sentence

Non-cash activity during the period for:

Increase in right-of-use assets and lease liabilities $ 1,091 $ 3,130

Increase in asset retirement costs and obligations $ 6,475 $ 907

Capitalization of non-cash equity share-based compensation 1,033 1,228

Equity issued as consideration for the Alta Acquisition (See Note 10) 1,925,405 —

Issuance of common stock for Convertible Notes settlement (Note 6) 8 —

Increase in right-of-use assets and lease liabilities, net — 783

Revenue from Contracts with Customers

7 unchanged sentences

Based on management's judgment, the performance obligations for the sale of natural gas, NGLs and oil are satisfied at a point in time because the customer obtains control and legal title of the asset when the natural gas, NGLs or oil is delivered to the designated sales point.

The sales of natural gas, NGLs and oil presented in the Statements of Condensed Consolidated Operations represent the Company's share of revenues net of royalties and exclude revenue interests owned by others.

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

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $ 851.2 million and $ 394.1 million in accounts receivable in the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $ 898.4 million and $ 1,093.9 million in accounts receivable in the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021, respectively.

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

Certain contracts that provide for the release of capacity that is not used to transport the Company's produced volume are outside the scope of ASU 2014-09, Revenue from Contracts with Customers .

The costs of, and recoveries on, such capacity are reported in net marketing services and other in the Statements of Condensed Consolidated Operations.

Certain other revenue contracts are outside the scope of ASU 2014-09, Revenue from Contracts with Customers .

These contracts are reported in net marketing services and other in the Statements of Condensed Consolidated Operations.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Revenues from contracts with customers:

7 unchanged sentences

Total operating revenues $ ( 579,110 ) $ 949,923

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of September 30, 2021.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of September 30, 2021.

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of March 31, 2022.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of March 31, 2022.

2022 (a) 2023 Total

Natural gas sales $ 6,146 $ 6,795 $ 12,941

(a) October 1 through December 31.

(a) April 1 through December 31.

Derivative Instruments

7 unchanged sentences

The Company typically enters into over the counter (OTC) derivative commodity instruments with financial institutions, and the creditworthiness of all counterparties is regularly monitored.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company does not designate any of its derivative instruments as cash flow hedges;

5 unchanged sentences

Contracts that result in the physical receipt or delivery of a commodity but are not designated or do not meet all of the criteria to qualify for the normal purchase and normal sale scope exception are subject to derivative accounting.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company's OTC derivative instruments generally require settlement in cash.

1 unchanged sentence

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

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of its expected sales of production and portions of its basis exposure covering approximately 2,554 Bcf of natural gas and 5,146 Mbbl of NGLs as of September 30, 2021 and 1,955 Bcf of natural gas and 3,462 Mbbl of NGLs as of December 31, 2020.

The open positions at September 30, 2021 and December 31, 2020 had maturities extending through December 2027 and December 2024, respectively.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of its expected sales of production and portions of its basis exposure covering approximately 2,471 billion cubic feet (Bcf) of natural gas and 2,143 thousand barrels (Mbbl) of NGLs as of March 31, 2022 and 2,184 Bcf of natural gas and 3,055 Mbbl of NGLs as of December 31, 2021.

The open positions at both March 31, 2022 and December 31, 2021 had maturities extending through December 2027.

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

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

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

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

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

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

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

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

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

Anything below these ratings is considered non-investment grade.

As of September 30, 2021, the Company's senior notes were rated "Ba1" by Moody's and "BB+" by S&P.

As of March 31, 2022, the Company's senior notes were rated "Ba1" by Moody's, "BBB–" by S&P and "BBB–" by Fitch.

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

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

As of September 30, 2021 and December 31, 2020, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $ 1,242.7 million and $ 137.7 million, respectively, for which the Company deposited and recorded current assets of $ 332.0 million and $ 21.1 million, respectively.

As of March 31, 2022 and December 31, 2021, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $ 639.6 million and $ 594.9 million, respectively, for which the Company deposited and recorded current assets of $ 117.7 million and $ 0.1 million, respectively.

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

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

As of both September 30, 2021 and December 31, 2020, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

As of both March 31, 2022 and December 31, 2021, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

5 unchanged sentences

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

As of September 30, 2021 and December 31, 2020, the Company recorded $ 381.4 million and $ 61.5 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

Refer to Note 8 for a discussion of the derivative liability recorded in connection with the Equitrans Share Exchange (defined in Note 8).

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2022 and December 31, 2021, the Company recorded $ 141.6 million and $ 147.7 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

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

2 unchanged sentences

master netting agreements Margin requirements with counterparties Net derivative instruments

September 30, 2021

March 31, 2022

Asset derivative instruments, at fair value $ 1,304,109 $ ( 1,268,394 ) $ — $ 35,715

3 unchanged sentences

Liability derivative instruments, at fair value 2,413,608 ( 468,266 ) ( 147,773 ) 1,797,569

The Consolidated GGA (defined in Note 8) executed in connection with the Equitrans Share Exchange (defined in Note 8) provides for additional cash bonus payments (the Henry Hub Cash Bonus) payable by the Company during the period beginning on the first day of the quarter in which the Mountain Valley Pipeline is placed in service and ending on the earlier of 36 months thereafter or December 31, 2024.

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

As of March 31, 2022 and December 31, 2021, the derivative liability related to the Henry Hub Cash Bonus had a fair value of approximately $ 51 million and $ 111 million, respectively.

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

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

During the second quarter of 2020, the Company closed a transaction to sell certain non-strategic assets located in Pennsylvania and West Virginia (the 2020 Divestiture), the purchase and sale agreement for which, among other things, provides for additional cash bonus payments (the Contingent Consideration) payable to the Company of up to $ 20 million, conditioned upon the three-month average of the NYMEX Henry Hub natural gas settlement price relative to stated floor and target price thresholds beginning on August 31, 2020 and ending on November 30, 2022.

As of March 31, 2022 and December 31, 2021, the derivative asset related to the Contingent Consideration had a fair value of approximately $ 5.8 million and $ 8.2 million, respectively.

During the three months ended March 31, 2022, the Company received cash from the Contingent Consideration of $ 2.5 million.

Changes in fair value are recorded in gain on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations.

The fair value of the derivative asset related to the Contingent Consideration is based on significant inputs that are interpolated from observable market data and, as such, is a Level 2 fair value measurement.

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Fair Value Measurements

11 unchanged sentences

The significant observable inputs used by the option pricing models include NYMEX forward curves, natural gas volatilities and LIBOR-based discount rates.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The table below summarizes assets and liabilities measured at fair value on a recurring basis.

4 unchanged sentences

(Level 2) Significant unobservable inputs

September 30, 2021

March 31, 2022

Asset derivative instruments, at fair value $ 1,304,109 $ 306,902 $ 997,207 $ —

7 unchanged sentences

The Company considered all of these fair values to be Level 1 fair value measurements.

During April 2022, the Company sold the remaining balance of its Equitrans Midstream common stock for net proceeds of approximately $ 189 million.

The Company has an investment in a fund (the Investment Fund) that invests in companies developing technology and operating solutions for exploration and production companies.

The investment is valued using, as a practical expedient, the net asset value provided in the financial statements received from fund managers.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company estimates the fair value of its senior notes using established fair value methodology.

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

As of September 30, 2021 and December 31, 2020, the Company's senior notes had a fair value of approximately $ 6.4 billion and $ 5.2 billion, respectively, and a carrying value of approximately $ 5.4 billion and $ 4.5 billion, respectively, inclusive of any current portion.

As of March 31, 2022 and December 31, 2021, the Company's senior notes had a fair value of approximately $ 5.8 billion and $ 6.5 billion, respectively, and a carrying value of approximately $ 4.9 billion and $ 5.5 billion, respectively, inclusive of any current portion.

The fair value of the Company's note payable to EQM Midstream Partners, LP (EQM) is estimated using an income approach model with a market-based discount rate and is a Level 3 fair value measurement.

As of September 30, 2021 and December 31, 2020, the Company's note payable to EQM had a fair value of approximately $ 120 million and $ 130 million, respectively, and a carrying value of approximately $ 101 million and $ 105 million, respectively, inclusive of any current portion.

As of March 31, 2022 and December 31, 2021, the Company's note payable to EQM had a fair value of approximately $ 109 million and $ 118 million, respectively, and a carrying value of approximately $ 98 million and $ 100 million, respectively, inclusive of any current portion.

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

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

See Note 8 for a discussion of the fair value measurement of the Equitrans Share Exchange (defined in Note 8), Note 9 for a discussion of the fair value measurement of the 2020 Asset Exchange Transactions and 2020 Divestiture (each defined in Note 9) and Note 10 for a discussion of the fair value measurement of the Alta Acquisition (defined in Note 10).

See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the fair value of assets related to the impairment and expiration of leases.

For the nine months ended September 30, 2021 and 2020, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period.

There were no material changes to the Company's methodology for determining unrecognized tax benefits during the nine months ended September 30, 2021.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company recorded income tax benefit at an effective tax rate of 25.7 % and 22.3 % for the nine months ended September 30, 2021 and 2020, respectively.

The Company's effective tax rate for the nine months ended September 30, 2021 was higher compared to the U.S.

federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits and West Virginia tax legislation enacted on April 13, 2021 that changed the way taxable income is apportioned to West Virginia for tax years beginning on or after January 1, 2022.

The Company's effective tax rate for the nine months ended September 30, 2020 was higher compared to the U.S.

federal statutory rate due primarily to state taxes, including valuation allowances that limit certain state tax benefits, and the benefit related to the settlement of the Company's 2010, 2011 and 2012 audit with the Internal Revenue Service (IRS).

These items were partly offset by valuation allowances provided against federal and state deferred tax assets for the additional unrealized losses on the Company's investment in Equitrans Midstream incurred through September 30, 2020 that, if such investment is sold, would become capital losses.

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

See Note 3 for a discussion of the fair value measurement of the derivative liability recorded in connection with the Equitrans Share Exchange and the embedded derivative recorded in connection with the 2020 Divestiture.

See Note 8 for a discussion of the fair value measurement of the contract asset.

See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of the fair value measurement of the Company's oil and gas properties and other long-lived assets, including impairment and expiration of leases.

For the three months ended March 31, 2022 and 2021, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period.

There were no material changes to the Company's methodology for determining unrecognized tax benefits during the three months ended March 31, 2022.

The Company recorded income tax benefit at an effective tax rate of 23.5 % and 25.5 % for the three months ended March 31, 2022 and 2021, respectively.

The Company's effective tax rate for the three months ended March 31, 2022 was higher compared to the U.S.

federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits.

The Company's effective tax rate for the three months ended March 31, 2021 was higher compared to the U.S.

federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits, partly offset by tax expense related to deduction limitations for executive compensation.

Credit facility .

The Company has a $ 2.5 billion credit facility.

On April 23, 2021, the Company entered into an Extension Agreement and First Amendment to Second Amended and Restated Credit Agreement (the Extension Agreement and First Amendment), amending the Second Amended and Restated Credit Agreement, dated as of July 31, 2017, among the Company, PNC Bank, National Association, as administrative agent, swing line lender and an L/C issuer, and the other lenders party thereto (the Credit Agreement).

The Extension Agreement and First Amendment, among other things, (i) extends the maturity date of the commitments and loans under the Credit Agreement from July 31, 2022 to July 31, 2023, (ii) adds customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate and (iii) adds an additional pricing level for the Applicable Rate (as defined in the Credit Agreement).

The Company had approximately $ 553 million and $ 791 million of letters of credit outstanding under its credit facility as of September 30, 2021 and December 31, 2020, respectively.

Under the Company's credit facility, for the three months ended September 30, 2021 and 2020, the maximum amounts of outstanding borrowings were $ 1,652 million and $ 399 million, respectively, the average daily balances were approximately $ 813 million and $ 149 million, respectively, and interest was incurred at weighted average annual interest rates of 1.9 % and 2.2 %, respectively.

Under the Company's credit facility, for the nine months ended September 30, 2021 and 2020, the maximum amounts of outstanding borrowings were $ 1,652 million and $ 399 million, respectively, the average daily balances were approximately $ 525 million and $ 90 million, respectively, and interest was incurred at weighted average annual interest rates of 2.0 % and 2.5 %, respectively.

Term loan facility.

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

On June 30, 2020, the Company used proceeds from the offering of its Convertible Notes (see below), cash from its income tax refunds and proceeds from the 2020 Divestiture (see Note 9) to fully repay its term loan facility.

Under the Company's term loan facility, for the period beginning January 1, 2020 and ending June 30, 2020, the average daily balance was approximately $ 692 million and interest was incurred at a weighted average annual interest rate of 2.6 %.

3.125 % senior notes and 3.625 % senior notes .

On May 17, 2021, the Company issued $ 500 million aggregate principal amount of 3.125 % senior notes due May 15, 2026 and $ 500 million aggregate principal amount of 3.625 % senior notes due May 15, 2031.

After deducting offering costs of $ 15.6 million, net proceeds from the sale of the notes of $ 984.4 million were used to partly fund the Alta Acquisition (defined and described in Note 10).

The covenants of the 3.125 % senior notes and 3.625 % senior notes are consistent with the Company's existing senior unsecured notes.

Similar to the Company's 5.00 % senior notes due January 2029 issued in November 2020, the 3.125 % senior notes and 3.625 % senior notes include an offer to repurchase provision applicable upon the occurrence of certain change of control events specified in the applicable indentures.

4.875 % senior notes .

On February 1, 2021, the Company redeemed the remaining $ 125.1 million aggregate principal amount of its 4.875 % senior notes at a total cost of $ 130.7 million, inclusive of redemption premiums of $ 4.3 million and accrued but unpaid interest of $ 1.3 million.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company has a $ 2.5 billion credit facility that matures in July 2023.

The Company had approximately $ 425 million and $ 440 million of letters of credit outstanding under its credit facility as of March 31, 2022 and December 31, 2021, respectively.

Under the Company's credit facility, for the three months ended March 31, 2022 and 2021, the maximum amounts of outstanding borrowings were $ 615 million and $ 890 million, respectively, the average daily balances were approximately $ 306 million and $ 525 million, respectively, and interest was incurred at weighted average annual interest rates of 2.0 % and 2.1 %, respectively.

Debt repayments .

In the first quarter of 2022, the Company redeemed or repurchased all $ 568.8 million of the remaining aggregate principal amount of its 3.00 % senior notes at a total cost of $ 581.5 million, inclusive of premiums of $ 5.5 million and accrued but unpaid interest of $ 7.2 million.

Convertible Notes .

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

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

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

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

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

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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

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

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

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

A sinking fund is not provided for the Convertible Notes.

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

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

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

Upon conversion of the Convertible Notes, the Company may satisfy its conversion obligation by paying and/or delivering at the Company's election, in the manner and subject to the terms and conditions provided in the Convertible Notes indenture, cash, shares of EQT common stock or a combination thereof.

Pursuant to the terms of the Convertible Notes indenture, the Sale Price Condition for conversion of the Convertible Notes was satisfied as of June 30, 2021, and, accordingly, holders of Convertible Notes were permitted to convert any of their Convertible Notes, at their option, at any time during the quarter beginning on July 1, 2021 and ending on September 30, 2021, subject to all terms and conditions set forth in the Convertible Notes indenture.

During the three months ended September 30, 2021, holders of the Convertible Notes exercised their conversion right with respect to $ 9 thousand in aggregate principal amount of the Convertible Notes.

The Company elected to settle all such conversions by issuing to the converting holders of the Convertible Notes 599 shares of EQT common stock in the aggregate at an average conversion price of $ 19.64 .

The Sale Price Condition for conversion of the Convertible Notes was not satisfied as of September 30, 2021, and, accordingly, holders of the Convertible Notes cannot convert any of their Convertible Notes during the fourth quarter of 2021.

Therefore, as of September 30, 2021, the net carrying value of the liability portion of the Convertible Notes was included in senior notes on the Condensed Consolidated Balance Sheet.

Upon conversion of the remaining outstanding 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.

As a result of the cash dividend the Company paid on its common stock in the first quarter of 2022, effective February 11, 2022, the conversion rate for the Convertible Notes was adjusted to 67.0535 shares of EQT common stock per $1,000 principal amount of the Convertible Notes.

Future dividend payments by the Company will result in further adjustments to the conversion rate per share of EQT common stock.

The Sale Price Condition for conversion of the Convertible Notes was satisfied as of December 31, 2021 and March 31, 2022, and, accordingly, holders of the Convertible Notes are permitted to convert any of their Convertible Notes at their option at any time beginning on January 1, 2022 and continuing until June 30, 2022, subject to the terms and conditions set forth in the Convertible Notes indenture.

Therefore, as of December 31, 2021 and March 31, 2022, the net carrying value of the Convertible Notes was included in current portion of debt on the Condensed Consolidated Balance Sheets.

The following table summarizes Convertible Notes conversion right exercises from issuance through April 22, 2022.

The Company elected to settle all such conversions by issuing to the converting holders shares of EQT common stock.

Settlement Month Principal Converted Shares Issued Average Conversion Price

September 2021 $ 9 599 $ 19.64

March 2022 8 536 33.65

April 2022 26 1,742 34.78

Upon conversion of the remaining outstanding Convertible Notes, the Company may satisfy its conversion obligation by paying and/or delivering at the Company's election, in the manner and subject to the terms and conditions provided in the Convertible Notes indenture, cash, shares of EQT common stock or a combination thereof.

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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

A sinking fund is not provided for the Convertible Notes.

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

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

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

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

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

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

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

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

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

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

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

The Capped Call Transactions are separate from the Convertible Notes.

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

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

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

The table below summarizes the net carrying amount of the Convertible Notes, including the unamortized debt discount and debt issuance costs.

September 30, 2021 December 31, 2020

The cost to purchase the Capped Call Transactions of $ 32.5 million was recorded as a reduction to equity and will not be remeasured.

Based on the closing stock price of EQT common stock of $ 34.41 on March 31, 2022 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $ 651 million.

The table below summarizes the net carrying value and fair value of the Convertible Notes.

March 31, 2022 December 31, 2021

Principal $ 499,983 $ 499,991

Unamortized debt discount 113,960 129,103

Unamortized debt issuance costs 11,764 12,448

Net carrying value of Convertible Notes $ 488,219 $ 487,543

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Fair value of Convertible Notes (a) $ 1,187,320 $ 854,985

(a) The fair value is a Level 2 fair value measurement.

See Note 4 for further discussion.

The table below summarizes the components of interest expense related to the Convertible Notes.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

The effective interest rate for the Convertible Notes is 2.4 %.

Three Months Ended March 31,

Contractual interest expense $ 2,187 $ 2,188

Amortization of debt discount 5,143 4,767 15,141 7,998

Amortization of issuance costs 684 669

Total Convertible Notes interest expense $ 2,871 $ 2,857

Based on the closing stock price of EQT common stock of $ 20.46 on September 30, 2021 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $ 182 million.

Earnings Per Share

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

As a result, for the three and nine months ended September 30, 2021 and 2020, all such securities were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

Such securities for the three and nine months ended September 30, 2021 were 7,506,075 and 7,642,451 , respectively, and such securities for the three and nine months ended September 30, 2020 were 6,671,532 and 6,715,083 , respectively.

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

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

In addition, for all periods presented, the conversion premium of approximately 6.7 million shares was excluded from potentially dilutive securities because of its anti-dilutive effect on EPS.

Equitrans Share Exchange

During the first quarter of 2020, the Company sold to Equitrans Midstream a total of 25,299,752 shares of Equitrans Midstream's common stock in exchange for approximately $ 52 million in cash and rate relief under certain of the Company's gathering contracts with EQM, an affiliate of Equitrans Midstream (the Equitrans Share Exchange).

The rate relief was effected through the execution of a consolidated gas gathering and compression agreement entered into between the Company and an affiliate of EQM (the Consolidated GGA).

The Company recorded in the Condensed Consolidated Balance Sheet a contract asset representing the estimated fair value of the rate relief and, beginning on the Mountain Valley Pipeline (MVP) in-service date, expects to recognize amortization of the contract asset over a period of approximately four years in a manner consistent with the expected timing of the Company's realization of the economic benefits of the rate relief.

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

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

As of September 30, 2021 and December 31, 2020, the derivative liability related to the Henry Hub Cash Bonus was approximately $ 109 million and $ 107 million, respectively.

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

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

Key assumptions used in the fair value calculation included an estimated production volume forecast, a market-based discount rate and a probability-weighted estimate of the in-service date of the MVP.

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

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Asset Exchange Transactions and Divestiture

2020 Asset Exchange Transactions.

During the nine months ended September 30, 2020, the Company closed on various acreage trade agreements (collectively, the 2020 Asset Exchange Transactions), pursuant to which the Company exchanged approximately 14,600 aggregate net revenue interest acres across Greene, Allegheny, Westmoreland and Washington Counties, Pennsylvania;

Wetzel and Marshall Counties, West Virginia;

and Belmont County, Ohio for approximately 14,600 aggregate net revenue interest acres across Greene and Washington Counties, Pennsylvania;

Wetzel County, West Virginia;

and Belmont County, Ohio.

As a result of the 2020 Asset Exchange Transactions, the Company recognized a loss of $ 11.6 million and $ 67.2 million in (gain) loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations for the three and nine months ended September 30, 2020, respectively.

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

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

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

2020 Divestiture.

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

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

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

In addition, the 2020 Divestiture relieved the Company of approximately $ 49 million in asset retirement obligations and other liabilities associated with the sold assets.

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

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

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

The Contingent Consideration represents an embedded derivative that is recorded at fair value in the Condensed Consolidated Balance Sheets.

The Contingent Consideration had a fair value of approximately $ 12.9 million and $ 1.9 million as of September 30, 2021 and December 31, 2020, respectively.

During the nine months ended September 30, 2021, the Company received cash from the Contingent Consideration of $ 5.6 million.

Changes in fair value are recorded in (gain) loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations.

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

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

As a result of the 2020 Divestiture, the Company recognized a net loss of $ 36.8 million, including the impact of the change in fair value of the Contingent Consideration, in (gain) loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the nine months ended September 30, 2020.

Reliance Asset Acquisition

On April 1, 2021, the Company closed on the acquisition of certain oil and gas assets (the Reliance Asset Acquisition) from Reliance Marcellus, LLC (Reliance), pursuant to the Company's exercise of a preferential purchase right that was triggered by Northern Oil and Gas, Inc.'s acquisition of Reliance's Marcellus assets.

The total purchase price for the acquisition was approximately $ 69 million, and the assets acquired consisted of approximately 40 MMcfe per day of current production and 4,100 net acres located in southwest Pennsylvania.

The Reliance Asset Acquisition was accounted for as an asset acquisition and, as such, its proceeds were allocated to property, plant and equipment.

Alta Acquisition

On July 21, 2021, the Company completed its previously announced acquisition (the Alta Acquisition) of Alta Marcellus Development, LLC and ARD Operating, LLC and subsidiaries (together, the Alta Target Entities), pursuant to that certain Membership Interest Purchase Agreement, dated May 5, 2021 (the Alta Purchase Agreement), by and among the Company, EQT Acquisition HoldCo LLC (a wholly-owned indirect subsidiary of the Company), Alta Resources Development, LLC (Alta Resources) and the Alta Target Entities.

The Alta Target Entities collectively held all of Alta Resources' upstream and midstream assets and liabilities.

The purchase price for the Alta Acquisition consisted of approximately $ 1.0 billion in cash and 98,789,388 shares of EQT common stock, as adjusted pursuant to customary closing purchase price adjustments set forth in the Alta Purchase Agreement.

The Alta Purchase Agreement has an effective date of January 1, 2021.

As a result, for the three months ended March 31, 2022 and 2021, all such securities, totaling 7,336,020 and 7,745,522 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

Additionally, the Company uses the if-converted method to calculate the impact of the Convertible Notes on diluted EPS.

For the three months ended March 31, 2022 and 2021, approximately 33.5 million and 33.3 million shares, respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

See Notes 1 and 6 for further discussion of the Convertible Notes.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As a result of the Alta Acquisition, the Company acquired approximately 300,000 net Northeast Marcellus acres, approximately 1.0 Bcfe per day of current net production, approximately 300 miles of midstream gathering systems, approximately 100 miles of a freshwater system and a firm transportation portfolio to premium demand markets.

Certain of the acquired midstream gathering systems are not wholly-owned but are operated by the Company pursuant to a construction, ownership and operation agreement, through which the Company is entitled to its pro rata share of revenues, expenses, assets and liabilities.

Allocation of Purchase Price .

The Alta Acquisition has been accounted for as a business combination using the acquisition method.

The table below summarizes the preliminary purchase price and estimated fair values of assets acquired and liabilities assumed as of July 21, 2021.

Certain information necessary to complete the purchase price allocation is not yet available, including, but not limited to, final appraisals of assets acquired and liabilities assumed.

The Company expects to complete the purchase price allocation once it has received all necessary information, at which time the value of the assets and liabilities assumed will be revised, if necessary.

Preliminary Purchase Price Allocation

Consideration:

Equity $ 1,925,405

Cash 1,000,000

Total consideration $ 2,925,405

Fair value of assets acquired:

Cash and cash equivalents $ 43,199

Accounts receivable, net 165,048

Property, plant and equipment 3,139,781

Other assets 6,309

Amount attributable to assets acquired $ 3,354,337

Fair value of liabilities assumed:

Accounts payable $ 131,214

Derivative instruments, at fair value 169,744

Other current liabilities 13,359

Other liabilities and credits 114,615

Amount attributable to liabilities assumed $ 428,932

The fair value of the acquired natural gas and oil properties was measured using discounted cash flow valuation techniques based on inputs that are not observable in the market and, as such, are considered Level 3 fair value measurements.

Significant inputs include future commodity prices, projections of estimated quantities of reserves, estimated future rates of production, projected reserve recovery factors, timing and amount of future development and operating costs and a weighted average cost of capital.

The fair value of the acquired undeveloped properties were primarily measured using discounted cash flow valuation techniques based on inputs that are not observable in the market and, as such, are considered Level 3 fair value measurements.

Significant inputs include timing and amount of future development from a market participant perspective.

The fair value of the acquired midstream gathering systems was measured primarily using the cost approach based on inputs that are not observable in the market and, as such, are considered Level 3 fair value measurements.

Significant inputs include replacement costs for similar assets, relative age of the acquired assets and any potential economic or functional obsolescence associated with the acquired assets.

Impairment of Contract Asset

During the first quarter of 2020, the Company sold to Equitrans Midstream approximately 50 % of the Company's equity interest in Equitrans Midstream in exchange for a combination of cash and rate relief under certain of the Company's gathering contracts with an affiliate of Equitrans Midstream (the Equitrans Share Exchange).

The rate relief was effected through the execution of a consolidated gas gathering and compression agreement entered into between the Company and an affiliate of Equitrans Midstream (the Consolidated GGA).

In addition, because the Mountain Valley Pipeline was not in service by January 1, 2022, the Consolidated GGA provides the Company with the option to forgo a portion of the gathering fee relief that would otherwise be applicable following the Mountain Valley Pipeline in-service date in exchange for a cash payment to the Company of $ 196 million.

The cash payment option can be exercised following January 1, 2022 and ending on the earlier of the Mountain Valley Pipeline in-service date or December 31, 2022.

To date, the Company has not exercised the cash payment option.

On the closing date of the Equitrans Share Exchange, the Company recorded in the Condensed Consolidated Balance Sheet a contract asset of $ 410 million representing the estimated fair value of the rate relief inclusive of the cash payment option.

During the first quarter of 2022, the Company identified indicators that the carrying value of the contract asset may not be fully recoverable, including increased uncertainty of the estimated timing of completion of the Mountain Valley Pipeline due to recent court rulings.

As a result of the Company's impairment evaluation, the Company recognized impairment of $ 184.9 million in the Statement of Condensed Consolidated Operations for the three months ended March 31, 2022.

The impairment reduced the carrying value of the contract asset to its estimated fair value as of March 31, 2022 of $ 225 million, of which $ 196 million was attributable to the cash payment option provided by the Consolidated GGA and presented in prepaid expenses and other in the Condensed Consolidated Balance Sheet and $ 29 million was attributable to the residual rate relief realizable upon the in-service date of the Mountain Valley Pipeline and presented in contract asset in the Condensed Consolidated Balance Sheet.

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

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Post-Acquisition Operating Results .

The Alta Target Entities contributed the following to the Company's consolidated results for the period from July 21, 2021 through September 30, 2021.

Sales of natural gas, NGLs and oil $ 251,129

Loss on derivatives not designated as hedges ( 293,840 )

Net marketing services and other 2,525

Total operating revenues $ ( 40,186 )

Net loss $ ( 129,779 )

Unaudited Pro Forma Information .

The table below summarizes the Company's results as though the Alta Acquisition had been completed on January 1, 2020.

Certain of Alta Resources' historical amounts were reclassified to conform to the Company's financial presentation of operations.

The following unaudited pro forma information is provided for informational purposes only and does not represent what consolidated results of operations would have been had the Alta Acquisition occurred on January 1, 2020 nor are they necessarily indicative of future consolidated results of operations.

Nine Months Ended

September 30,

(Thousands, except per share amounts)

Pro forma sales of natural gas, NGLs and oil $ 4,437,755 $ 2,122,092

Pro forma loss on derivatives not designated as hedges ( 4,918,616 ) ( 20,762 )

Pro forma net marketing services and other 28,452 11,095

Pro forma total operating revenues $ ( 452,409 ) $ 2,112,425

Pro forma net loss $ ( 2,950,427 ) $ ( 1,090,841 )

Pro forma net income attributable to noncontrolling interests 25 —

Pro forma net loss attributable to EQT $ ( 2,950,452 ) $ ( 1,090,841 )

Pro forma loss per share (basic) $ ( 9.67 ) $ ( 4.27 )

Pro forma loss per share (diluted) $ ( 9.67 ) $ ( 4.27 )

Key assumptions used in the fair value calculation included the following:

(i) a probability-weighted estimate of the in-service date of the Mountain Valley Pipeline;

(ii) an estimate of the potential exercise and timing of the cash payment option;

(iii) an estimated production volume forecast and (iv) a market-based weighted average cost of capital.

EQT CORPORATION AND SUBSIDIARIES

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What changed 10-Q

Item 1. Financial Statements