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Item 2. Management’s Discussion and Analysis

2022-04-28 compared with 2021-10-28 · 109 added, 176 removed, 220 unchanged (56% of the section changed)

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CAUTIONARY STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended.

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.

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total resource potential and drilling inventory duration;

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

projected production and sales volume and growth rates;

natural gas prices;

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

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;

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

projected gathering and compression rates;

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, including our acquisition of certain upstream and midstream assets from Alta Resources Development, LLC;

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;

projected cash flows and free cash flow;

the projected amount and timing of dividends;

projected cash flows and free cash flow and the timing thereof;

liquidity and financing requirements, including funding sources and availability;

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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;

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

access to and cost of capital;

our hedging and other financial contracts;

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;

availability and cost of drilling rigs, completion services, equipment, supplies, personnel, oilfield services and water required to execute our exploration and development plans, including as a result of the COVID-19 pandemic;

risks associated with operating primarily in the Appalachian Basin and obtaining a substantial amount of our midstream services from Equitrans Midstream Corporation (Equitrans Midstream);

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

government regulation or action;

government regulation or action, including regulations pertaining to methane and other greenhouse gas emissions;

negative public perception of the fossil fuels industry;

increased consumer demand for alternatives to natural gas;

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.

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, 2021 and set forth in other documents we file 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 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.

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Consolidated Results of Operations

Net loss attributable to EQT Corporation for the three months ended September 30, 2021 was $1,980.1 million, $5.55 per diluted share, compared to net loss attributable to EQT Corporation for the same period in 2020 of $600.6 million, $2.35 per diluted share.

The change was attributable primarily to the loss on derivatives not designated as hedges, increased depreciation and depletion, increased transportation and processing expense and increased other operating expenses, partly offset by increased sales of natural gas, NGLs and oil, higher income tax benefit and higher income from investments.

Net loss attributable to EQT Corporation for the nine months ended September 30, 2021 was $2,957.1 million, $9.70 per diluted share, compared to net loss attributable to EQT Corporation for the same period in 2020 of $1,030.9 million, $4.03 per diluted share.

The change was attributable primarily to the loss on derivatives not designated as hedges, the gain on Equitrans Share Exchange (defined and discussed in Note 8 to the Condensed Consolidated Financial Statements) recognized in the first quarter of 2020, increased depreciation and depletion, increased transportation and processing expense and increased other operating expenses, partly offset by increased sales of natural gas, NGLs and oil, higher income tax benefit, the income from investments, the gain on sale of long-lived assets and decreased impairment and expiration of leases.

Net loss attributable to EQT Corporation for the three months ended March 31, 2022 was $1,516.0 million, $4.05 per diluted share, compared to net loss attributable to EQT Corporation for the same period in 2021 of $37.4 million, $0.13 per diluted share.

The change was attributable primarily to the loss on derivatives not designated as hedges and, to a lesser extent, the impairment of our contract asset (discussed in Note 8 to the Condensed Consolidated Financial Statements), increased transportation and processing expense, increased depreciation and depletion and a loss from investments, partly offset by increased sales of natural gas, NGLs and oil and higher income tax benefit.

Results of operations for 2022 include the results of our operation of assets acquired from Alta Resources Development, LLC (the Alta Acquisition), which closed in July 2021.

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.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

(Thousands, unless otherwise noted)

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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,

2021 2020 2021 2020

Three Months Ended March 31,

(Thousands, unless otherwise noted)

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

Net cash settlements (paid) received on derivatives not designated as hedges (619,864) 252,089 (729,445) 813,218

Premiums (paid) received for derivatives that settled during the period (9,155) 2,083 (28,460) 604

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

Premiums paid for derivatives that settled during the period (32,463) (9,726)

Net marketing services and other (11,903) (7,785)

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Sales Volume and Revenues

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

2021 2020 % 2021 2020 %

Three Months Ended March 31,

2022 2021 Change % Change

(Thousands, unless otherwise noted)

Sales volume by shale (MMcfe):

Marcellus (a) 449,650 318,740 41.1 1,198,707 958,243 25.1

Marcellus 455,427 373,941 81,486 21.8

Ohio Utica 34,206 39,929 (5,723) (14.3)

Other 2,642 1,320 1,322 100.2

Total sales volume (b) 495,013 366,138 35.2 1,330,798 1,096,855 21.3

Total sales volume (a) 492,275 415,190 77,085 18.6

Average daily sales volume (MMcfe/d) 5,470 4,613 857 18.6

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Total operating revenues $ (579,110) $ 949,923 $ (1,529,033) (161.0)

(a) Includes Upper Devonian wells.

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

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

EQT CORPORATION AND SUBSIDIARIES

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

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil increased for the three months ended September 30, 2021 compared to the same period in 2020 due to increased sales volume.

Average realized price for the three months ended September 30, 2021 compared to the same period in 2020 remained consistent due to higher NYMEX prices and higher liquids prices, offset by lower cash settled derivatives and unfavorable differential.

For the three months ended September 30, 2021 and 2020, we paid $619.9 million and received $252.1 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 volume increased primarily as a result of sales volume increases of 74 Bcfe from the assets acquired in the Alta Acquisition (defined and discussed in Note 10 to the Condensed Consolidated Financial Statements), sales volume increases of 34 Bcfe from the assets acquired in the Chevron Acquisition (defined below) and prior period sales volume decreases of 15 Bcfe from the 2020 Strategic Production Curtailments (defined below).

The Chevron Acquisition refers to our acquisition of upstream assets from Chevron U.S.A.

in the fourth quarter of 2020.

The 2020 Strategic Production Curtailments refers to our strategic decisions to temporarily curtail 2020 production.

In May 2020, we temporarily curtailed approximately 1.4 Bcf per day of gross production, equivalent to approximately 1.0 Bcf per day of net production.

In July 2020, we began a moderated approach to bring back on-line the curtailed production.

In September 2020, we curtailed approximately 0.6 Bcf per day of gross production, equivalent to approximately 0.4 Bcf per day of net production.

In October 2020, we began a phased approach to bring back on-line the curtailed production, which was completed in November 2020.

Loss on derivatives not designated as hedges.

For the three months ended September 30, 2021 and 2020, we recognized a loss on derivatives not designated as hedges of $3,257.2 million and $427.2 million, respectively.

The losses were related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices.

Net marketing services and other.

Net marketing services and other increased for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to the liquids uplift realized on gas purchased at the wellhead from other operators and third-party gathering revenues recognized on the midstream assets acquired in the Alta Acquisition.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil increased for the nine months ended September 30, 2021 compared to the same period in 2020 due to increased sales volume and a higher average realized price.

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

For the nine months ended September 30, 2021 and 2020, we paid $729.4 million and received $813.2 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 volume increased primarily as a result of sales volume increases of 101 Bcfe from the assets acquired in the Chevron Acquisition, sales volume increases of 74 Bcfe from the assets acquired in the Alta Acquisition and prior period sales volume decreases of 51 Bcfe from the 2020 Strategic Production Curtailments.

Sales of natural gas, NGLs and oil increased for the three months ended March 31, 2022 compared to the same period in 2021 due to a higher average realized price and increased sales volume.

Average realized price for the three months ended March 31, 2022 compared to the same period in 2021 increased due to higher NYMEX prices and higher liquids prices, partly offset by unfavorable cash settled derivatives and unfavorable differential.

For the three months ended March 31, 2022 and 2021, we paid $885.5 million and $38.1 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 volume increased primarily as a result of sales volume increases from the assets acquired in the Alta Acquisition.

Loss on derivatives not designated as hedges.

For the nine months ended September 30, 2021 and 2020, we recognized a loss on derivatives not designated as hedges of $4,791.6 million and $11.3 million, respectively.

For the three months ended March 31, 2022 and 2021, we recognized a loss on derivatives not designated as hedges of $3,077.6 million and $188.8 million, respectively.

The losses were related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices.

Net marketing services and other.

Net marketing services and other increased for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to the liquids uplift realized on gas purchased at the wellhead from other operators and third-party gathering revenues recognized on the midstream assets acquired in the Alta Acquisition.

EQT CORPORATION AND SUBSIDIARIES

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

Net marketing services and other increased for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to third-party gathering revenues recognized on the midstream assets acquired in the Alta Acquisition.

Operating Expenses

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

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

2021 2020 % 2021 2020 %

Three Months Ended March 31,

2022 2021 Change % Change

(Thousands, unless otherwise noted)

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Processing 48,469 40,551 7,918 19.5

Lease operating expenses (LOE), excluding production taxes 32,141 28,758 11.8 84,707 82,675 2.5

Lease operating expenses (LOE) 39,829 27,019 12,810 47.4

Production taxes 31,183 20,211 10,972 54.3

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0.10 0.10 — —

LOE, excluding production taxes 0.06 0.08 (25.0) 0.06 0.08 (25.0)

LOE 0.08 0.07 0.01 14.3

Production taxes

0.06 0.05 0.01 20.0

Exploration 0.04 0.01 300.0 0.02 — —

Selling, general and administrative 0.14 0.11 0.03 27.3

Production depletion 0.85 0.90 (0.05) (5.6)

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Gathering expense increased on an absolute basis for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to increased sales volume from the assets acquired in the Alta Acquisition and Chevron Acquisition.

Gathering expense decreased on a per Mcfe basis for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to a lower gathering rate structure on the assets acquired in the Alta Acquisition and Chevron Acquisition.

Transmission.

Transmission expense increased on an absolute basis for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to additional capacity acquired as part of the Alta Acquisition and fewer capacity releases on the Tennessee Gas Pipeline.

Transmission expense decreased on a per Mcfe basis for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to increased sales volume, some of which, particularly sales volume from assets acquired in the Alta Acquisition and Chevron Acquisition, has lower transmission expense on a per Mcfe basis as compared to our historical transmission portfolio.

Processing expense increased on an absolute and per Mcfe basis for the three months ended September 30, 2021 compared to the same period in 2020 due to increased liquid sales volume due primarily to increased development of liquids-rich areas and increased processed volume from assets acquired in the Chevron Acquisition.

EQT CORPORATION AND SUBSIDIARIES

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

Production taxes.

Production taxes increased on an absolute and per Mcfe basis for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to increased West Virginia severance taxes as a result of increased production from the Chevron Acquisition and higher prices as well as increased Pennsylvania impact fees as a result of higher prices and additional wells acquired in the Alta Acquisition and Chevron Acquisition.

Exploration increased on an absolute and per Mcfe basis for the three months ended September 30, 2021 compared to the same period in 2020 due primarily to our purchase of seismic data following the completion of the Alta Acquisition.

Depreciation and depletion.

Production depletion expense increased on an absolute basis for the three months ended September 30, 2021 compared to the same period in 2020 due to increased sales volume, partly offset by a lower annual depletion rate.

Production depletion expense decreased on a per Mcfe basis for the three months ended September 30, 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.

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

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

During the three months ended September 30, 2021, we recognized a gain on sale/exchange of long-lived assets of $0.4 million related primarily to changes in the fair value of the Contingent Consideration from the 2020 Divestiture (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements).

During the three months ended September 30, 2020, we recognized a loss on sale/exchange of long-lived assets of $4.7 million related primarily to the 2020 Asset Exchange Transactions (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements), partly offset by changes in the fair value of the Contingent Consideration from the 2020 Divestiture.

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, 2021 was $41.1 million compared to $50.4 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 September 30, 2021 of $38.8 million were attributable primarily to transaction costs associated with the Alta Acquisition.

Other operating expenses for the three months ended September 30, 2020 of $6.5 million were attributable primarily to changes in legal reserves, including settlements and reorganization costs.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Gathering expense increased on an absolute basis for the nine months ended September 30, 2021 compared to the same period in 2020 due to increased sales volume.

Gathering expense decreased on a per Mcfe basis for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to increased sales volume, which resulted in our utilization of lower overrun rates as part of the Consolidated GGA (defined and discussed in Note 8 to the Condensed Consolidated Financial Statements), and a lower gathering rate structure on the assets acquired in the Chevron Acquisition and Alta Acquisition.

Gathering expense increased on an absolute basis for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to increased sales volume from the assets acquired in the Alta Acquisition and higher gathering rates on certain contracts indexed to price.

Gathering expense decreased on a per Mcfe basis for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to the lower gathering rate structure on the assets acquired in the Alta Acquisition.

Transmission.

Transmission expense decreased on an absolute basis for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to released capacity on, and credits received from, the Texas Eastern Transmission Pipeline in 2020 and released capacity on the Tennessee Gas Pipeline, partly offset by additional capacity acquired as part of the Alta Acquisition.

Transmission expense decreased on a per Mcfe basis for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to increased sales volume, some of which, particularly volume from the Chevron Acquisition and Alta Acquisition, has lower transmission expense on a per Mcfe basis as compared to our historical transmission portfolio.

Processing expense increased on an absolute and per Mcfe basis for the nine months ended September 30, 2021 compared to the same period in 2020 due to increased liquid sales volume due primarily to increased development of liquids-rich areas and increased processed volume from the Chevron Acquisition.

Transmission expense increased on an absolute basis for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to additional capacity acquired as part of the Alta Acquisition, lower credits received from and higher rates on the Texas Eastern Transmission Pipeline and additional capacity acquired on the Rockies Express Pipeline in the third quarter of 2021.

Processing expense increased on an absolute basis for the three months ended March 31, 2022 compared to the same period in 2021 due to increased liquid sales volume as a result of increased development of liquids-rich areas throughout 2021.

LOE increased on an absolute and per Mcfe basis for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to additional lease operating costs as a result of the Alta Acquisition.

Production taxes.

Production taxes increased on an absolute and per Mcfe basis for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to increased West Virginia severance taxes as a result of increased West Virginia production from the Chevron Acquisition and higher prices as well as increased Pennsylvania impact fees as a result of higher prices and additional wells acquired in the Alta Acquisition and Chevron Acquisition.

EQT CORPORATION AND SUBSIDIARIES

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

Exploration increased on an absolute and per Mcfe basis for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to our purchase of seismic data following the completion of the Alta Acquisition.

Production taxes increased on an absolute and per Mcfe basis for the three months ended March 31, 2022 compared to the same period in 2021 due to increased West Virginia severance taxes, which resulted primarily from higher prices, and increased Pennsylvania impact fees, which resulted from the additional wells acquired in the Alta Acquisition, higher prices and inflation.

Selling, general and administrative.

Selling, general and administrative expense increased on an absolute basis for the nine months ended September 30, 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 as well as higher litigation expense.

Selling, general and administrative expense increased on an absolute and per Mcfe basis for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to higher long-term incentive compensation costs as a result of changes in the fair value of awards and higher litigation expense.

Long-term incentive compensation may fluctuate with changes in our stock price and performance conditions.

Depreciation and depletion.

Production depletion expense increased on an absolute basis for the nine months ended September 30, 2021 compared to the same period in 2020 due to increased sales volume, partly offset by a lower annual depletion rate.

Production depletion expense decreased on a per Mcfe basis for the nine months ended September 30, 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 nine months ended September 30, 2020 was $22.4 million.

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

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

During the nine months ended September 30, 2021, we recognized a gain on sale/exchange of long-lived assets of $18.4 million related primarily to changes in the fair value of the Contingent Consideration from the 2020 Divestiture.

During the nine months ended September 30, 2020, we 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, including the 2020 Divestiture.

Production depletion expense increased on an absolute basis for the three months ended March 31, 2022 compared to the same period in 2021 due to increased sales volume, partly offset by a lower annual depletion rate.

Production depletion expense decreased on a per Mcfe basis for the three months ended March 31, 2022 compared to the same period in 2021 due to a lower annual depletion rate.

Impairment of contract asset.

During the three months ended March 31, 2022, we recognized impairment of our contract asset of $184.9 million.

See Note 8 to the Condensed Consolidated Financial Statements.

Impairment and expiration of leases.

Impairment and expiration of leases for the nine months ended September 30, 2021 was $83.5 million compared to $145.5 million for the same period in 2020.

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

During the three months ended March 31, 2022 and 2021, we recognized impairment and expiration of leases of $30.0 million and $16.8 million, respectively, related to leases that we no longer expect to extend or develop prior to their expiration based on our development plan.

Other operating expenses.

Other operating expenses for the nine months ended September 30, 2021 of $53.4 million were attributable primarily to transaction costs associated with the Alta Acquisition and Chevron Acquisition.

Other operating expenses for the nine months ended September 30, 2020 of $11.3 million were attributable primarily to changes in legal reserves, including settlements, reorganization and transaction costs.

Other operating expenses for the three months ended March 31, 2022 of $16.3 million were attributable primarily to changes in legal reserves, including settlements.

Other operating expenses for the three months ended March 31, 2021 of $9.4 million were attributable primarily to transaction costs associated with our acquisition of upstream assets from Chevron U.S.A.

and changes in legal reserves, including settlements.

Other Income Statement Items

Gain on 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 and nine months ended September 30, 2021, we recognized income on our investment in Equitrans Midstream and income on our investment in a fund that invests in companies developing technology and operating solutions for exploration and production companies.

Our investment in Equitrans Midstream fluctuates with changes in Equitrans Midstream's stock price, which was $10.14 and $8.04 as of September 30, 2021 and December 31, 2020, respectively.

For the three months ended September 30, 2020, we recognized income on our investment in Equitrans Midstream due to an increase in Equitrans Midstream's stock price.

For the nine months ended September 30, 2020, we recognized a loss on our investment in Equitrans Midstream due to a decrease in Equitrans Midstream's stock price as well as a decrease in the number of shares of Equitrans Midstream's common stock that we owned as a result of the Equitrans Share Exchange.

Dividend and other income.

Dividend and other income decreased for the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to lower dividends received from our investment in Equitrans Midstream driven by a decrease in the number of shares of Equitrans Midstream's common stock that we owned as well as a decrease in the dividend amount per share.

Loss (income) from investments.

For the three months ended March 31, 2022, we recognized a loss from investments due primarily to a loss on our investment in Equitrans Midstream, which resulted from a decrease in Equitrans Midstream's stock price to $8.44 as of March 31, 2022 from $10.34 as of December 31, 2021, partly offset by a gain on our investment in the Investment Fund (defined in Note 4 to the Condensed Consolidated Financial Statements) and equity earnings on our investment in Laurel Mountain Midstream LLC.

For the three months ended March 31, 2021, we recognized gains on our investments in the Investment Fund and Equitrans Midstream.

Loss on debt extinguishment.

During the nine months ended September 30, 2021, we recognized a loss on debt extinguishment of $9.8 million due to fees incurred for a bridge-loan commitment related to the Alta Acquisition and the repayment of our 4.875% senior notes.

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

During the three months ended March 31, 2022, we recognized a loss on debt extinguishment of $6.9 million due to the repayment of our 3.00% senior notes.

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

See Note 6 to the Condensed Consolidated Financial Statements.

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Interest expense.

Interest expense increased for the three and nine months ended September 30, 2021 compared to the same periods in 2020 due to increased interest incurred on new debt, higher borrowings under our credit facility and increased interest due to letters of credit issued throughout 2020.

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

Interest expense decreased for the three months ended March 31, 2022 compared to the same period in 2021 due primarily to reduced interest expense on letters of credit and lower borrowings under our credit facility.

See Note 6 to the Condensed Consolidated Financial Statements.

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Planned Capital Expenditures and Sales Volume .

In 2021, we expect to spend approximately $1,075 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.

In 2022, we expect to spend approximately $1.30 to $1.45 billion in total capital expenditures, excluding amounts attributable to noncontrolling interest.

We expect to fund our capital expenditures with cash generated from operations and, if required, borrowings under our credit facility.

Because we are the operator of a high percentage of our developed acreage, the amount and timing of these capital expenditures are largely discretionary.

We could choose to defer a portion of these planned 2022 capital expenditures depending on a variety of factors, including prevailing and anticipated prices for natural gas, NGLs and oil;

the availability of necessary equipment, infrastructure and capital;

the receipt and timing of required regulatory permits and approvals;

and drilling, completion and acquisition costs.

Sales volume in 2022 is expected to be 1,950 Bcfe to 2,050 Bcfe.

Operating Activities.

Net cash provided by operating activities was $492 million for the nine months ended September 30, 2021 compared to $1,132 million for the same period in 2020.

The decrease was due primarily to the cash settlements paid on derivatives not designated as hedges, unfavorable timing of working capital payments, including increased payments for collateral and margin deposits associated with our over the counter (OTC) derivative instrument contracts and exchange traded natural gas contracts, and income tax refunds received in the prior year, partly offset by higher cash operating revenues.

Net cash provided by operating activities was $1,021 million for the three months ended March 31, 2022 compared to $400 million for the same period in 2021.

The increase was due primarily to higher cash operating revenues and favorable timing of working capital payments, partly offset by net cash settlements paid on derivatives not designated as hedges and higher cash operating expenses.

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 $1,715 million for the nine months ended September 30, 2021 compared to $623 million for the same period in 2020.

The increase was due primarily to cash paid for acquisitions in 2021 and proceeds received from the sale of assets and the Equitrans Share Exchange in 2020, partly offset by lower capital expenditures.

Net cash used in investing activities was $291 million for the three months ended March 31, 2022 compared to $248 million for the same period in 2021.

The increase was due to increased capital expenditures.

The following table summarizes our capital expenditures.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Reserve development $ 229 $ 189

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Other production infrastructure 13 5

Other corporate items 1 3 5 8

Total capital expenditures 310 238

(Deduct) add back:

(Deduct) add:

Non-cash items (b) (18) 13

Total cash capital expenditures $ 292 $ 251

(a) Capital expenditures attributable to noncontrolling interests were $0.7 million and $5.7 million for the three and nine months ended September 30, 2021, respectively.

(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.

(a) Capital expenditures attributable to noncontrolling interest were $1.9 million and $1.3 million for the three months ended March 31, 2022 and 2021, respectively.

EQT CORPORATION AND SUBSIDIARIES

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

The impact of accrued capital expenditures includes the current period estimate, net of the reversal of the prior period accrual.

Financing Activities.

Net cash provided by financing activities was $1,228 million for the nine months ended September 30, 2021 compared to net cash used in financing activities of $500 million for the same period in 2020.

For the nine months ended September 30, 2021, the primary sources of financing cash flows were net proceeds from the issuance of debt and credit facility borrowings, and the primary use of financing cash flows was net repayments of debt.

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.

Net cash used in financing activities was $827 million for the three months ended March 31, 2022 compared to $130 million for the same period in 2021.

For the three months ended March 31, 2022, the primary use of financing cash flows was repayment and retirement of debt, repurchase and retirement of EQT common stock and payment of dividends, and the primary source of financing cash flows was net proceeds from credit facility borrowings.

For the three months ended March 31, 2021, the primary use of financing cash flows was net repayments 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.

On April 20, 2022, our Board of Directors declared a quarterly cash dividend of $0.125 per share of EQT common stock, payable on June 1, 2022, to shareholders of record at the close of business on May 11, 2022.

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

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 redeem 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 our debt instruments as of October 22, 2021.

The table below reflects the credit ratings and rating outlooks assigned to our debt instruments as of April 22, 2022.

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.

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

Rating agency Senior notes Outlook

Moody's Investors Service (Moody's) Ba1 Stable

Standard & Poor's Ratings Service (S&P) BB+ Positive

Fitch Ratings Service (Fitch) BB+ Stable

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 our 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 OTC derivative instruments and credit assurance requirements, including collateral, in support of our midstream service contracts, joint venture arrangements or construction contracts.

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

Fitch Ratings Service (Fitch) BBB– Stable

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 credit facility, the interest rate on our 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 October 22, 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 October 22, 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 $0.8 billion in the aggregate.

During the third quarter of 2021, we amended agreements with six of our largest OTC hedge counterparties to permanently or temporarily reduce or eliminate our margin posting obligations associated with our OTC derivative instruments with such OTC hedge counterparties.

The purpose of such amendments was to mitigate the amount of cash collateral that we would otherwise have been required to post based on current NYMEX strip pricing.

As of October 22, 2021, our margin balance on our existing hedge portfolio, including both OTC and broker margin balances, was approximately $0.4 billion, compared to approximately $0.5 billion as of June 30, 2021, despite a significant increase in natural gas prices between June 30, 2021 and October 22, 2021.

As of April 22, 2022, 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 22, 2022, such assurances could be up to approximately $1.0 billion, inclusive of letters of credit, OTC derivative instrument margin deposits and other collateral posted of approximately $0.8 billion in the aggregate.

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

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

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

As of March 31, 2022, we were in compliance with all debt provisions and covenants under our debt agreements.

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

Commodity Risk Management

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

The following table summarizes the approximate volume and prices of our NYMEX hedge positions through 2024 as of October 22, 2021.

2021 (a) 2022 2023 2024

The following table summarizes the approximate volume and prices of our NYMEX hedge positions as of April 22, 2022.

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.

Q2 2022 (a) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 2024

Hedged Volume (MMDth) 329 286 287 185 233 236 204 17

Hedged Volume (MMDth/d) 3.6 3.1 3.1 2.1 2.6 2.6 2.2 —

Swaps, including Futures

Volume (MMDth) 296 253 232 — 41 42 42 2

Average Price ($/Dth) $ 2.39 $ 2.59 $ 2.53 $ 2.67

Price ($/Dth) $ 2.63 $ 2.34 $ 2.40 $ — $ 2.53 $ 2.53 $ 2.53 $ 2.67

Calls – Net Short

Volume (MMDth) 101 102 102 162 192 194 127 15

Average Short Strike Price ($/Dth) $ 2.92 $ 2.98 $ 2.89 $ 3.11

Short Strike ($/Dth) $ 3.00 $ 3.05 $ 3.02 $ 8.07 $ 4.16 $ 4.16 $ 4.18 $ 3.11

Puts – Net Long

Volume (MMDth) 32 32 54 184 191 193 162 15

Average Long Strike Price ($/Dth) $ 2.58 $ 2.68 $ 2.40 $ 2.45

Fixed Price Sales (b):

Long Strike ($/Dth) $ 2.78 $ 2.68 $ 2.68 $ 3.77 $ 2.73 $ 2.73 $ 2.85 $ 2.45

Fixed Price Sales

Volume (MMDth) 0.9 0.9 0.9 0.9 0.9 0.9 0.3 —

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 our price reconciliation in "Average Realized Price Reconciliation." The fixed price natural gas sales agreements can be physically or financially settled.

For 2021 (October 1 through December 31), 2022, 2023 and 2024, we have natural gas sales agreements for approximately 5 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.

During the third quarter of 2021 and during the period beginning October 1, 2021 and ending October 22, 2021, we purchased $54 million and $18 million, respectively, of winter calls to reposition our 2021 and 2022 hedge portfolio to enable incremental upside participation in rising natural gas prices and to further mitigate potential incremental margin posting requirements.

These positions cover approximately 149 MMDth in 2021 and 2022 and have been excluded from the table above.

In addition, during the third quarter of 2021, we purchased $3 million of 2022 swaptions.

If exercised, these positions will be converted into approximately 37 MMDth of swaps and have been excluded from the table above.

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

(a) April 1 through June 30 .

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

We entered into 455 MMDth per day of NYMEX swaps at a weighted average price of $6.05 that offset existing NYMEX swaps related to the first quarter of 2023 with a weighted average price of $2.53.

These positions have been excluded from the table above.

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.

EQT CORPORATION AND SUBSIDIARIES

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

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

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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.

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 pending matter involving 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, 2021 for a discussion of our commitments and contingencies.

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

Recently Issued Accounting Standards

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What changed 10-Q

Item 2. Management’s Discussion and Analysis