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Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 142 added, 113 removed, 513 unchanged (33% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

24 unchanged sentences

Net income (loss) 687,462 ( 1,976,211 ) 67,103 ( 2,947,474 )

Net income (loss) attributable to noncontrolling interests 2,863 ( 62 ) 4,328 ( 576 )

Net income attributable to noncontrolling interests 3,792 601 8,120 25

Net income (loss) attributable to EQT Corporation $ 683,670 $ ( 1,976,812 ) $ 58,983 $ ( 2,947,499 )

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

Comprehensive income (loss) 687,525 ( 1,976,174 ) 67,293 ( 2,947,276 )

Comprehensive income (loss) attributable to noncontrolling interests 2,863 ( 62 ) 4,328 ( 576 )

Comprehensive income attributable to noncontrolling interests 3,792 601 8,120 25

Comprehensive income (loss) attributable to EQT Corporation $ 683,733 $ ( 1,976,775 ) $ 59,173 $ ( 2,947,301 )

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

19 unchanged sentences

Total current liabilities 6,637,902 5,186,241

Credit facility borrowings 100,000 —

Senior notes 4,257,359 4,435,782

9 unchanged sentences

Treasury stock, shares at cost:

192 and 1,033

( 579 ) ( 18,046 )

8 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net loss $ ( 620,359 ) $ ( 971,263 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ 67,103 $ ( 2,947,474 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Deferred income tax benefit ( 14,229 ) ( 1,020,094 )

7 unchanged sentences

Net cash settlements paid on derivatives ( 4,672,998 ) ( 729,445 )

Net premiums received on derivative instruments 14,073 3,654

Net premiums received (paid) on derivative instruments 13,809 ( 53,429 )

Changes in other assets and liabilities:

6 unchanged sentences

Capital expenditures ( 1,047,475 ) ( 706,938 )

Deposit on acquisition ( 150,000 ) —

Cash paid for acquisitions — ( 1,021,510 )

14 unchanged sentences

Repurchase and retirement of common stock ( 270,345 ) —

(Distribution to) contribution from noncontrolling interest ( 2,894 ) 3,750

Net contribution from noncontrolling interest 4,050 3,750

Other financing activities ( 1,165 ) ( 690 )

12 unchanged sentences

(Thousands, except per share amounts)

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

Balance at July 1, 2021 278,858 $ 8,149,607 $ ( 20,084 ) $ 85,939 $ ( 5,194 ) $ 10,664 $ 8,220,932

Comprehensive loss, net of tax:

Net loss ( 933,260 ) ( 62 ) ( 933,322 )

Net (loss) income ( 1,976,812 ) 601 ( 1,976,211 )

Other postretirement benefits liability adjustment, net of tax expense:

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

Balance at June 30, 2021 278,858 $ 8,149,607 $ ( 20,084 ) $ 85,939 $ ( 5,194 ) $ 10,664 $ 8,220,932

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

Alta Acquisition (Note 9) 98,789 1,925,405 1,925,405

Balance at September 30, 2021 377,752 $ 10,084,507 $ ( 18,202 ) $ ( 1,890,873 ) $ ( 5,157 ) $ 11,265 $ 8,181,540

Balance at July 1, 2022 369,720 $ 9,948,646 $ ( 2,848 ) $ ( 880,127 ) $ ( 4,484 ) $ 28,903 $ 9,090,090

Comprehensive income, net of tax:

5 unchanged sentences

Convertible Notes settlements (Note 6) 1 10 10

Repurchase and retirement of common stock ( 1,768 ) ( 27,409 ) ( 47,627 ) ( 75,036 )

Distribution to noncontrolling interest ( 4,306 ) ( 4,306 )

Other 11,233 11,233

Balance at June 30, 2022 369,720 $ 9,948,646 $ ( 2,848 ) $ ( 880,127 ) $ ( 4,484 ) $ 28,903 $ 9,090,090

Contribution from noncontrolling interest 11,250 11,250

Balance at September 30, 2022 368,162 $ 9,923,539 $ ( 579 ) $ ( 299,577 ) $ ( 4,421 ) $ 39,639 $ 9,658,601

Common shares authorized:

12 unchanged sentences

Comprehensive loss, net of tax:

Net loss ( 970,687 ) ( 576 ) ( 971,263 )

Net (loss) income ( 2,947,499 ) 25 ( 2,947,474 )

Other postretirement benefits liability adjustment, net of tax expense:

1 unchanged sentence

Contribution from noncontrolling interest 3,750 3,750

Balance at June 30, 2021 278,858 $ 8,149,607 $ ( 20,084 ) $ 85,939 $ ( 5,194 ) $ 10,664 $ 8,220,932

Alta Acquisition (Note 9) 98,789 1,925,405 1,925,405

Balance at September 30, 2021 377,752 $ 10,084,507 $ ( 18,202 ) $ ( 1,890,873 ) $ ( 5,157 ) $ 11,265 $ 8,181,540

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

Comprehensive loss, net of tax:

Net (loss) income ( 624,687 ) 4,328 ( 620,359 )

Comprehensive income, net of tax:

Net income 58,983 8,120 67,103

Other postretirement benefits liability adjustment, net of tax expense:

5 unchanged sentences

Distribution to noncontrolling interest ( 7,200 ) ( 7,200 )

Contribution from noncontrolling interest 11,250 11,250

Other 11,233 11,233

Balance at June 30, 2022 369,720 $ 9,948,646 $ ( 2,848 ) $ ( 880,127 ) $ ( 4,484 ) $ 28,903 $ 9,090,090

Balance at September 30, 2022 368,162 $ 9,923,539 $ ( 579 ) $ ( 299,577 ) $ ( 4,421 ) $ 39,639 $ 9,658,601

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 June 30, 2022 and December 31, 2021, the results of its operations and equity for the three and six month periods ended June 30, 2022 and 2021 and its cash flows for the six month periods ended June 30, 2022 and 2021.

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, 2022 and December 31, 2021, the results of its operations and equity for the three and nine month periods ended September 30, 2022 and 2021 and its cash flows for the nine month periods ended September 30, 2022 and 2021.

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

13 unchanged sentences

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

As Reported ASU 2020-06 Adoption Adjustment As Adjusted

3 unchanged sentences

Net loss ( 1,979,516 ) 3,305 ( 1,976,211 )

Net loss attributable to noncontrolling interest ( 62 ) — ( 62 )

Net income attributable to noncontrolling interest 601 — 601

Net loss attributable to EQT Corporation $ ( 1,980,117 ) $ 3,305 $ ( 1,976,812 )

2 unchanged sentences

Loss per share of common stock attributable to EQT Corporation $ ( 5.55 ) $ 0.01 $ ( 5.54 )

(a) For the three months ended June 30, 2021, diluted weighted average common stock outstanding did not change because the potentially dilutive securities had an anti-dilutive effect on loss per share.

(a) For the three months ended September 30, 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)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

As Reported ASU 2020-06 Adoption Adjustment As Adjusted

3 unchanged sentences

Net loss ( 2,957,067 ) 9,593 ( 2,947,474 )

Net loss attributable to noncontrolling interest ( 576 ) — ( 576 )

Net income attributable to noncontrolling interest 25 — 25

Net loss attributable to EQT Corporation $ ( 2,957,092 ) $ 9,593 $ ( 2,947,499 )

2 unchanged sentences

Loss per share of common stock attributable to EQT Corporation $ ( 9.70 ) $ 0.03 $ ( 9.67 )

(a) For the six months ended June 30, 2021, diluted weighted average common stock outstanding did not change because the potentially dilutive securities had an anti-dilutive effect on loss per share.

(a) For the nine months ended September 30, 2021, diluted weighted average common stock outstanding did not change because the potentially dilutive securities had an anti-dilutive effect on loss per share.

December 31, 2021

6 unchanged sentences

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 for the six months ended June 30, 2021 were adjusted to reflect the impact of the adoption of ASU 2020-06;

Certain line items in the Statement of Condensed Consolidated Cash Flows for the nine months ended September 30, 2021 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.

3 unchanged sentences

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.

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid during the period for:

5 unchanged sentences

Increase in right-of-use assets and lease liabilities, net 1,651 1,091

Issuance of common stock for Convertible Notes settlements (see Note 6) 38 —

Issuance of common stock for Convertible Notes settlements (Note 6) 48 —

Equity issued as consideration for acquisition (Note 9) — 1,925,405

Revenue from Contracts with Customers

9 unchanged sentences

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 $ 1,558.1 million and $ 1,093.9 million in accounts receivable in the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, respectively.

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $ 1,486.8 million and $ 1,093.9 million in accounts receivable in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

EQT CORPORATION AND SUBSIDIARIES

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

Total operating revenues $ 2,069,463 $ ( 1,464,838 ) $ 4,017,861 $ ( 775,031 )

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of June 30, 2022.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of June 30, 2022.

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, 2022.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of September 30, 2022.

2022 (a) 2023 2024 Total

Natural gas sales $ 11,735 $ 14,432 $ 469 $ 26,636

(a) July 1 through December 31.

(a) October 1 through December 31.

Derivative Instruments

9 unchanged sentences

therefore, all changes in fair value of the Company's derivative instruments are recognized in operating revenues in loss on derivatives in the Statements of Condensed Consolidated Operations.

Because the Company does not designate any of its derivative instruments as cash flow hedges, the Company has changed the references to "derivatives not designated as hedges" to "derivatives" throughout the Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2022.

The Company recognizes all derivative instruments as either assets or liabilities at fair value on a gross basis.

1 unchanged sentence

The Company can net settle its derivative instruments at any time.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Contracts that result in physical delivery of a commodity expected to be sold by the Company in the normal course of business are generally designated as normal sales and are exempt from derivative accounting.

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 2,227 billion cubic feet (Bcf) of natural gas and 1,830 thousand barrels (Mbbl) of NGLs as of June 30, 2022 and 2,184 Bcf of natural gas and 3,055 Mbbl of NGLs as of December 31, 2021.

The open positions at both June 30, 2022 and December 31, 2021 had maturities extending through December 2027.

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 1,587 billion cubic feet (Bcf) of natural gas and 1,517 thousand barrels (Mbbl) of NGLs as of September 30, 2022 and 2,184 Bcf of natural gas and 3,055 Mbbl of NGLs as of December 31, 2021.

The open positions at both September 30, 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.

5 unchanged sentences

Anything below these ratings is considered non-investment grade.

As of June 30, 2022, the Company's senior notes were rated "Ba1" by Moody's, "BBB–" by S&P and "BBB–" by Fitch.

As of September 30, 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 June 30, 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 $ 465.0 million and $ 594.9 million, respectively, for which the Company deposited and recorded current assets of $ 238.0 million and $ 0.1 million, respectively.

As of September 30, 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 $ 679.5 million and $ 594.9 million, respectively, for which the Company deposited and recorded current assets of $ 142.7 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 June 30, 2022 and December 31, 2021, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

As of both September 30, 2022 and December 31, 2021, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

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

5 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, the Company recorded $ 109.4 million and $ 147.7 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

As of September 30, 2022 and December 31, 2021, the Company recorded $ 45.2 million and $ 147.7 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

EQT CORPORATION AND SUBSIDIARIES

4 unchanged sentences

master netting agreements Margin requirements with counterparties Net derivative instruments

June 30, 2022

September 30, 2022

Asset derivative instruments, at fair value $ 1,466,800 $ ( 1,404,502 ) $ — $ 62,298

5 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, the derivative liability related to the Henry Hub Cash Bonus had a fair value of approximately $ 53 million and $ 111 million, respectively.

As of September 30, 2022 and December 31, 2021, the derivative liability related to the Henry Hub Cash Bonus had a fair value of approximately $ 53 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.

1 unchanged sentence

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 June 30, 2022 and December 31, 2021, the derivative asset related to the Contingent Consideration had a fair value of approximately $ 3.9 million and $ 8.2 million, respectively.

During the six months ended June 30, 2022 and 2021, the Company received cash from the Contingent Consideration of $ 4.5 million and $ 0.6 million, respectively.

As of September 30, 2022 and December 31, 2021, the derivative asset related to the Contingent Consideration had a fair value of approximately $ 2.0 million and $ 8.2 million, respectively.

During the nine months ended September 30, 2022 and 2021, the Company received cash from the Contingent Consideration of $ 6.5 million and $ 5.6 million, respectively.

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

17 unchanged sentences

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

Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets Fair value measurements at reporting date using:

Quoted prices in active

Fair value measurements at reporting date using:

Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets Quoted prices in active

markets for identical assets

1 unchanged sentence

(Level 2) Significant unobservable inputs

June 30, 2022

September 30, 2022

Asset derivative instruments, at fair value $ 1,466,800 $ 315,991 $ 1,150,809 $ —

12 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, the Company's senior notes had a fair value of approximately $ 5.4 billion and $ 6.5 billion, respectively, and a carrying value of approximately $ 4.8 billion and $ 5.5 billion, respectively, inclusive of any current portion.

As of September 30, 2022 and December 31, 2021, the Company's senior notes had a fair value of approximately $ 5.2 billion and $ 6.5 billion, respectively, and a carrying value of approximately $ 4.7 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 June 30, 2022 and December 31, 2021, the Company's note payable to EQM had a fair value of approximately $ 102 million and $ 118 million, respectively, and a carrying value of approximately $ 97 million and $ 100 million, respectively, inclusive of any current portion.

As of September 30, 2022 and December 31, 2021, the Company's note payable to EQM had a fair value of approximately $ 96 million and $ 118 million, respectively, and a carrying value of approximately $ 96 million and $ 100 million, respectively, inclusive of any current portion.

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

6 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the six months ended June 30, 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 six months ended June 30, 2022.

The Company recorded income tax benefit at an effective tax rate of 20.2 % and 27.0 % for the six months ended June 30, 2022 and 2021, respectively.

The Company's effective tax rate for the six months ended June 30, 2022 was lower compared to the U.S.

federal statutory rate due primarily to nondeductible repurchase premiums on the Convertible Notes, partly offset by state taxes, including valuation allowances limiting certain state tax benefits.

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

For the nine months ended September 30, 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 nine months ended September 30, 2022.

For the nine months ended September 30, 2022 and 2021, the Company recorded income tax benefit at an effective tax rate of ( 8.5 )% and 25.7 %, respectively.

The Company's effective tax rate for the nine months ended September 30, 2022 was lower compared to the U.S.

federal statutory rate due primarily to a reduction to deferred state taxes from the Pennsylvania law change enacted on July 8, 2022 that lowered the corporate net income tax rate from 9.99% to 8.99% in 2023 and by 0.5% thereafter until the corporate net income tax rate reaches 4.99% in 2031, partly offset by nondeductible repurchase premiums on the Convertible Notes.

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.

On July 8, 2022, the Pennsylvania General Assembly enacted House Bill 1342, which reduces the corporate net income tax rate from 9.99% to 8.99% in 2023 and continues to reduce that rate by 0.5% per year beginning in 2024 and ending at 4.99% in 2031 and thereafter.

The Company is evaluating the impact this change in law will have on the Company's consolidated financial statements.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA).

The IRA establishes a 15% corporate alternative minimum tax for certain corporations and a 1% excise tax on stock repurchases made by publicly traded U.S.

corporations.

The IRA also includes new and renewed options for energy credits.

These changes are effective for tax years beginning after December 31, 2022.

The Company is evaluating the impact these changes will have on its financial statements and disclosures.

The Company intends to maintain a valuation allowance on certain of its state net operating loss deferred tax assets (DTAs) until there is sufficient evidence to support a reversal of all or a portion of such allowance.

However, given the Company's anticipated future earnings, the Company believes that there is a reasonable possibility that, in the near term, sufficient positive evidence may become available that supports the release of a portion of the Company's valuation allowance, which would result in the recognition of certain DTAs and a decrease to income tax expense for the period in which the release is recorded.

The exact timing and amount of the valuation allowance release would be subject to change based on the level of profitability that the Company can achieve.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The table below summarizes the Company's outstanding debt.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Principal Value Carrying Value (a) Principal Value Carrying Value (a)

Credit Facility expiring June 28, 2027 $ 100,000 $ 100,000 $ — $ —

Senior notes:

27 unchanged sentences

Interest rates on the Company's other outstanding senior notes do not fluctuate based on changes to the credit ratings assigned to its senior notes by Moody's, S&P and Fitch.

(c) As of June 30, 2022, the current portion of debt includes the 7.42 % series B notes, the 1.75 % convertible notes (described below) and a portion of the note payable to EQM.

(c) As of September 30, 2022, the current portion of debt includes the 7.42 % series B notes, the 1.75 % convertible notes and a portion of the note payable to EQM.

As of December 31, 2021, the current portion of debt includes the 3.00 % notes, the 1.75 % convertible notes and a portion of the note payable to EQM.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Debt Repayments .

The Company redeemed or repurchased the following debt during the six months ended June 30, 2022.

Debt Tranche Principal (a) Premiums/(Discounts) (a) Accrued but Unpaid Interest Total Cost

The Company redeemed or repurchased the following debt during the nine months ended September 30, 2022.

Debt Tranche Principal Premiums/(Discounts) Accrued but Unpaid Interest Total Cost

3.00 % notes due October 1, 2022

6 unchanged sentences

36,646 ( 2,050 ) 187 34,783

5.00 % notes due January 15, 2029

435 ( 15 ) 10 430

7.500 % notes due February 1, 2030

12,350 877 387 13,614

(a) Of the total principal repurchased and premiums recorded during the six months ended June 30, 2022, approximately $ 80 million and $ 94 million, respectively, were accrued but not yet paid as of June 30, 2022 due to the timing of settlements.

The Company redeemed or repurchased the following debt during the period beginning July 1, 2022 and ending July 26, 2022.

Debt Tranche Principal Premiums/(Discounts) Accrued but Unpaid Interest Total Cost

6.625 % notes due February 1, 2025

$ 79,721 $ 2,904 $ 2,491 $ 85,116

1.75 % convertible notes due May 1, 2026

20,000 26,027 64 46,091

3.125 % notes due May 15, 2026

34,340 ( 1,907 ) 177 32,610

3.90 % notes due October 1, 2027

6 unchanged sentences

4,835 ( 601 ) 28 4,262

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Credit Facility .

2 unchanged sentences

The Third Amendment, among other things, (i) extends the maturity date of the commitments and loans under the Credit Agreement to June 28, 2027 and provides, at the Company's option, two one-year extensions thereafter, subject to the approval of the lenders, (ii) allows for commitment increases of up to $ 500 million, subject to the agreement of the Company and new or existing lenders and (iii) allows for Base Rate Loans, Term SOFR Rate Loans and Swing Line Loans (each defined in the Third Amendment).

The Company had approximately $ 208 million and $ 440 million of letters of credit outstanding under its credit facility as of June 30, 2022 and December 31, 2021, respectively.

Under the Company's credit facility, for the three months ended June 30, 2022 and 2021, the maximum amount of outstanding borrowings was $ 1,300 million and $ 578 million, respectively, the average daily balances were approximately $ 844 million and $ 236 million, respectively, and interest was incurred at a weighted average annual interest rate of 2.3 % and 2.1 %, respectively.

Under the Company's credit facility, for the six months ended June 30, 2022 and 2021, the maximum amount of outstanding borrowings was $ 1,300 million and $ 890 million, respectively, the average daily balances were approximately $ 576 million and $ 188 million, respectively, and interest was incurred at a weighted average annual interest rate of 2.2 % and 2.1 %, respectively.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company had approximately $ 27 million and $ 440 million of letters of credit outstanding under its credit facility as of September 30, 2022 and December 31, 2021, respectively.

Under the Company's credit facility, for the three months ended September 30, 2022 and 2021, the maximum amount of outstanding borrowings was $ 1,216 million and $ 1,652 million, respectively, the average daily balances were approximately $ 717 million and $ 813 million, respectively, and interest was incurred at a weighted average annual interest rate of 3.8 % and 1.9 %, respectively.

Under the Company's credit facility, for the nine months ended September 30, 2022 and 2021, the maximum amount of outstanding borrowings was $ 1,300 million and $ 1,652 million, respectively, the average daily balances were approximately $ 624 million and $ 525 million, respectively, and interest was incurred at a weighted average annual interest rate of 2.8 % and 2.0 %, respectively.

3.125 % Senior Notes and 3.625 % Senior Notes.

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A sinking fund is not provided for the Convertible Notes.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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.

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As a result of the cash dividend the Company paid on its common stock in the second quarter of 2022, effective May 10, 2022, the conversion rate for the Convertible Notes was adjusted to 67.2836 shares of EQT common stock per $1,000 principal amount of the Convertible Notes.

As a result of the cash dividend paid by the Company on its common stock in the third quarter of 2022, effective August 8, 2022, the conversion rate for the Convertible Notes was adjusted to 67.5232 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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Sale Price Condition for conversion of the Convertible Notes was satisfied as of December 31, 2021, March 31, 2022 and June 30, 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 September 30, 2022, subject to the terms and conditions set forth in the Convertible Notes indenture.

Therefore, as of December 31, 2021 and June 30, 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 July 22, 2022.

The Sale Price Condition for conversion of the Convertible Notes was satisfied as of December 31, 2021 and September 30, 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 December 31, 2022, subject to the terms and conditions set forth in the Convertible Notes indenture.

Therefore, as of December 31, 2021 and September 30, 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 October 21, 2022.

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

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July 2022 5 335 36.91

October 2022 10 674 40.14

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.

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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 $ 34.40 on June 30, 2022 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $ 572 million.

Based on the closing stock price of EQT common stock of $ 40.75 on September 30, 2022 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $ 727 million.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Principal $ 414,846 $ 499,991

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Total Convertible Notes interest expense $ 2,395 $ 2,863 $ 8,136 $ 8,579

Earnings Per Share

5.678 % Senior Notes and 5.700 % Senior Notes.

On October 4, 2022, the Company issued $ 500 million aggregate principal amount of 5.678 % senior notes due October 1, 2025 and $ 500 million aggregate principal amount of 5.700 % senior notes due April 1, 2028.

The Company intends to use the estimated net proceeds from the sale of the notes of $ 989.5 million (after deducting estimated offering costs of $ 10.5 million) to partly fund the Tug Hill and XcL Midstream Acquisition (defined in Note 9).

The covenants of the 5.678 % senior notes and 5.700 % senior notes are consistent with the Company's existing senior unsecured notes.

The 5.678 % senior notes and 5.700 % senior notes have a special mandatory redemption provision that provides that if the consummation of the Tug Hill and XcL Midstream Acquisition does not occur on or before June 30, 2023 or if the Company notifies the trustee of the notes that it will not pursue consummation of the Tug Hill and XcL Midstream Acquisition, the Company is required to redeem the notes of each series then outstanding at a price equal to 101 % of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Term Loan Facility and Bridge Loan Facility .

In connection with the Tug Hill and XcL Midstream Purchase Agreement (defined in Note 9), on September 6, 2022, the Company entered into a debt commitment letter, which was amended and restated on September 20, 2022.

Pursuant to such amended and restated debt commitment letter, Royal Bank of Canada, PNC Bank, National Association, Mizuho Bank, Ltd.

and certain other financial institutions committed to provide the Company with an unsecured bridge loan facility in an aggregate principal amount of $ 1.25 billion (the Bridge Loan Facility) and an unsecured term loan facility in an aggregate principal amount of $ 1.25 billion (the Term Loan Facility), subject to satisfaction of standard conditions.

In connection with the closing of the offering of the Company’s 5.678 % senior notes and 5.700 % senior notes on October 4, 2022, the commitments under the Bridge Loan Facility were automatically reduced by $ 989.5 million (the estimated net proceeds from the sale of the notes) in accordance with the terms of the Bridge Loan Facility.

As of September 30, 2022, neither the Bridge Loan Facility nor the Term Loan Facility had closed, and, accordingly, commitments thereunder remained undrawn.

Earnings (Loss) Per Share

For the three and nine months ended September 30, 2022, potentially dilutive securities, composed of the Company's options, restricted stock, performance awards and stock appreciation rights, of 5,879,634 and 5,719,990 , respectively, were included in the Company's calculation of diluted 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 six months ended June 30, 2022 and the three and six months ended June 30, 2021, all such securities were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

Such securities for the six months ended June 30, 2022 were 6,855,482 , and such securities for the three and six months ended June 30, 2021 were 7,679,584 and 7,712,354 , respectively.

For the three months ended June 30, 2022, such potentially dilutive securities included in the calculation of diluted earnings per share were 4,132,337 .

Additionally, the Company uses the if-converted method to calculate the impact of the Convertible Notes on diluted earnings (loss) per share.

For the six months ended June 30, 2022 and the three and six months ended June 30, 2021, all such if-converted securities were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

Such securities for the six months ended June 30, 2022 were approximately 33.4 million, and such securities for both the three and six months ended June 30, 2021 were approximately 33.3 million.

For the three months ended June 30, 2022, such potentially dilutive securities included in the calculation of diluted earnings per share were 33.3 million.

As a result, for the three and nine months ended September 30, 2021, all such securities of 7,506,075 and 7,642,451 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

In addition, the Company uses the if-converted method to calculate the impact of the Convertible Notes on diluted earnings (loss) per share.

For the three months ended September 30, 2022, such potentially dilutive securities of approximately 28.0 million were included in the Company's calculation of diluted earnings per share.

For the nine months ended September 30, 2022, such if-converted securities of approximately 31.6 million were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share when considering the numerator adjustments.

For both the three and nine months ended September 30, 2021, such if-converted securities of approximately 33.3 million 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.

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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 approximately $ 196 million (the Cash Payment Option).

On July 8, 2022, the Company delivered notice to Equitrans Midstream that it had elected to exercise the Cash Payment Option.

In addition, because the Mountain Valley Pipeline was not in service by January 1, 2022, the Consolidated GGA provided the Company 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 of approximately $ 196 million (the Cash Payment Option).

During the third quarter of 2022, the Company elected to exercise the Cash Payment Option, and, on October 4, 2022, the Company received the cash proceeds from 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.

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

Tug Hill and XcL Midstream Acquisition.

On September 6, 2022, the Company entered into a purchase agreement with EQT Production Company (a wholly-owned indirect subsidiary of the Company), THQ Appalachia I, LLC (Tug Hill) and THQ-XcL Holdings I, LLC (XcL Midstream) (the Tug Hill and XcL Midstream Purchase Agreement), pursuant to which the Company and EQT Production Company agreed to acquire Tug Hill's upstream assets and XcL Midstream's gathering and processing assets through the acquisition of all of the issued and outstanding membership interests of each of THQ Appalachia I Midco, LLC and THQ-XcL Holdings I Midco, LLC (the Tug Hill and XcL Midstream Acquisition) for consideration of approximately $ 2.6 billion in cash and 55.0 million shares of EQT common stock, as adjusted pursuant to customary closing purchase price adjustments.

The Tug Hill and XcL Midstream Purchase Agreement has an effective date of July 1, 2022.

The Tug Hill and XcL Midstream Acquisition is expected to close in the fourth quarter of 2022, subject to regulatory approvals.

Upon execution of the Tug Hill and XcL Midstream Purchase Agreement, the Company deposited $ 150 million into an escrow account, which will be credited toward the cash consideration upon closing of the Tug Hill and XcL Midstream Acquisition and is recorded in other assets in the September 30, 2022 Condensed Consolidated Balance Sheet.

Alta Acquisition.

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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.

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The Company completed the purchase price allocation for the Alta Acquisition during the second quarter of 2022, at which time the value of the assets acquired and liabilities assumed were revised.

The purchase accounting adjustments recorded in 2022 were not material.

The purchase accounting adjustments recorded in 2022 were not material to the Company's financial statements.

Post-Acquisition Operating Results .

The Alta Target Entities contributed the following to the Company's consolidated results.

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 )

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Unaudited Pro Forma Information .

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Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2021

September 30, 2021 Nine Months Ended

September 30, 2021

(Thousands, except per share amounts)

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

What changed 10-Q

Item 1. Financial Statements