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Item 2. Management’s Discussion and Analysis

2023-10-26 compared with 2023-07-26 · 111 added, 112 removed, 327 unchanged (41% of the section changed)

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

For certain industry specific terms used in this Quarterly Report on Form 10-Q, please see "Glossary of Commonly Used Terms, Abbreviations and Measurements" in our Annual Report on Form 10-K for the year ended December 31, 2022.

CAUTIONARY STATEMENTS

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projected gathering and compression rates;

potential or pending acquisition transactions, including the pending Tug Hill and XcL Midstream Acquisition (defined and discussed in Note 6 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022), or other strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits from any such transactions;

potential acquisitions or other strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits from any such transactions or from any recently completed acquisitions or other strategic transactions, including the Tug Hill and XcL Midstream Acquisition (defined and discussed in Note 9 to the Condensed Consolidated Financial Statements);

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

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

and disruptions to our business due to acquisitions and other significant transactions, including the pending Tug Hill and XcL Midstream Acquisition.

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, 2022, and may be updated by Part II, Item 1A., "Risk Factors" in subsequent Quarterly Reports on Form 10-Q and other documents we subsequently file from time to time with the Securities and Exchange Commission.

and disruptions to our business due to acquisitions and other significant transactions, including the Tug Hill and XcL Midstream Acquisition.

These and other risks and uncertainties are described under the "Risk Factors" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022, and may be updated by the "Risk Factors" section of subsequent Quarterly Reports on Form 10-Q and other documents we subsequently 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, except as required by law, we do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

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Consolidated Results of Operations

Net loss attributable to EQT Corporation for the three months ended June 30, 2023 was $66.6 million, $0.18 per diluted share, compared to net income attributable to EQT Corporation for the same period in 2022 of $891.4 million, $2.19 per diluted share.

The change was attributable primarily to decreased sales of natural gas, NGLs and oil, partly offset by a gain on derivatives in 2023 compared to a loss on derivatives in 2022 and income tax benefit in 2023 compared to income tax expense in 2022.

Net income attributable to EQT Corporation for the six months ended June 30, 2023 was $1,151.9 million, $2.94 per diluted share, compared to net loss attributable to EQT Corporation for the same period in 2022 of $624.7 million, $1.68 per diluted share.

The change was attributable primarily to a gain on derivatives in 2023 compared to a loss on derivatives in 2022 and impairment of the contract asset in 2022, partly offset by decreased sales of natural gas, NGLs and oil and income tax expense in 2023 compared to income tax benefit in 2022.

Net income attributable to EQT Corporation for the three months ended September 30, 2023 was $81.3 million, $0.20 per diluted share, compared to net income attributable to EQT Corporation for the same period in 2022 of $683.7 million, $1.69 per diluted share.

The decrease was attributable primarily to decreased sales of natural gas, NGLs and oil, partly offset by a gain on derivatives in 2023 compared to a loss on derivatives in 2022 and income tax benefit in 2023 compared to income tax expense in 2022.

Net income attributable to EQT Corporation for the nine months ended September 30, 2023 was $1,233.2 million, $3.08 per diluted share, compared to net income attributable to EQT Corporation for the same period in 2022 of $59.0 million, $0.16 per diluted share.

The increase was attributable primarily to a gain on derivatives in 2023 compared to a loss on derivatives in 2022, impairment of the contract asset in 2022 and a loss on debt extinguishment in 2022, partly offset by decreased sales of natural gas, NGLs and oil and income tax expense in 2023 compared to income tax benefit in 2022.

Results of operations for 2023 include the results of approximately one month of our operation of assets acquired in the Tug Hill and XcL Midstream Acquisition, which closed on August 22, 2023.

See Note 9 to the Condensed Consolidated Financial Statements for further discussion of the Tug Hill and XcL Midstream Acquisition.

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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In addition, as a result of third-party supply chain constraints in 2022, we shifted the planned development of approximately 30 wells from 2022 to 2023 (the Rescheduled Wells).

All of the Rescheduled Wells have been completed and turned-to-sales as of July 20, 2023;

however, future supply chain constraints or declines in natural gas prices may result in adjustments to our 2023 planned development schedule.

All of the Rescheduled Wells have been completed and were turned-to-sales as of July 2023, resulting in our third quarter 2023 sales volume returning to our maintenance level of production;

however, our third quarter 2023 sales volume was negatively impacted by approximately 13 Bcfe of curtailments (inclusive of our operated and non-operated wells) principally in response to lower natural gas prices in the Appalachian Basin.

Future supply chain constraints or declines in natural gas prices may result in adjustments to our 2023 planned development schedule or the development schedule of non-operated wells in which we have a working interest.

Our sales volume and operating expenses on a per Mcfe basis for the second quarter of 2023 were also negatively impacted by lower-than-expected liquids volumes from unscheduled downtime at an in-basin ethane cracker plant to conduct equipment repairs and maintenance and a delay in the development schedule of certain wells that are not operated by us but in which we have a working interest in the volumes produced from such wells.

We cannot control or otherwise influence the development schedule of non-operated wells in which we have a working interest.

Adjustments to our 2023 planned development schedule or delays in the development schedule of non-operated wells in which we have a working interest could impact our future sales volume, operating revenues and expenses, per unit metrics and capital expenditures.

The annual inflation rate in the United States was particularly high during 2022, and, although the inflation rate has decreased through the first half of 2023, it still remains elevated compared to historical levels.

Adjustments to our 2023 planned development schedule or the development schedule of non-operated wells in which we have a working interest could impact our future sales volume, operating revenues and expenses, per unit metrics and capital expenditures.

The annual inflation rate in the United States was particularly high during 2022, and, although the inflation rate has decreased through 2023, it still remains elevated compared to historical levels.

Inflationary pressures have multiple impacts on our business, including increasing our operating expenses and our cost of capital.

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Although we believe our scale and supply chain contracting strategy of using multi-year sand and frac crew contracts allows us to maximize capital and operating efficiencies, future increases in the inflation rate will negatively impact our long-term contracts with consumer price index adjustments.

EQT CORPORATION AND SUBSIDIARIES

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

Additionally, while the prices for natural gas, NGLs and oil have historically been volatile, price volatility was especially pronounced during 2022, with natural gas prices peaking in August 2022 and steadily declining thereafter.

While natural gas prices through the first half of 2023 have declined from the high prices experienced during the majority of 2022, we expect commodity price volatility to continue or increase throughout the remainder of 2023 due to macroeconomic uncertainty and geopolitical tensions, including continued developments pertaining to Russia's invasion of Ukraine, which began in February 2022 and has put upward pressure on natural gas and oil prices.

Natural gas prices have generally continued to trend down through the first half of 2023 but have moderately increased during the third quarter of 2023, although, through most of 2023, natural gas prices on average have remained lower than the prices experienced throughout 2022.

We expect commodity price volatility to continue or increase throughout the remainder of 2023 due to macroeconomic uncertainty and geopolitical tensions, including continued developments pertaining to Russia's invasion of Ukraine and conflicts in the Middle East.

Our revenue, profitability, rate of growth, liquidity and financial position will continue to be impacted in the future by the market prices for natural gas and, to a lesser extent, NGLs and oil.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

Net marketing services and other consists of the costs of, and recoveries on, pipeline capacity releases, revenues for gathering services provided to third parties and other revenues.

Net marketing services and other consists of the costs of, and recoveries on, pipeline capacity releases, revenues for gathering and processing services provided to third parties and other revenues.

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

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Sales Volume and Revenues

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Three Months Ended June 30,

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Three Months Ended September 30,

2023 2022 Change % Change

12 unchanged sentences

Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil decreased for the three months ended June 30, 2023 compared to the same period in 2022 due to decreased sales volume and lower average realized price.

Sales volume decreased for the three months ended June 30, 2023 primarily as a result of sales volume decreases from natural decline of producing wells, fewer wells turned-in-line throughout 2022 as a result of third-party supply chain constraints and a delay in the development schedule of certain non-operated wells in which we have a working interest, partly offset by increased volumes from our operated wells as a result efficiencies realized within our drilling and completions operations.

The assets that we intend to acquire in the pending Tug Hill and XcL Midstream Acquisition, which is subject to regulatory approvals, are currently producing approximately 800 MMcfe per day of sales volume, 20% of which is liquids sales volume.

Average realized price decreased for the three months ended June 30, 2023 compared to the same period in 2022 due to lower NYMEX and liquids prices, partly offset by favorable cash settled derivatives and favorable differential.

For the three months ended June 30, 2023, we received $212.2 million of net cash settlements on derivatives, composed of $304.8 million of net cash settlements received on our NYMEX natural gas hedge positions and $92.6 million of net cash settlements paid on our basis and liquids hedge positions.

Sales of natural gas, NGLs and oil decreased for the three months ended September 30, 2023 compared to the same period in 2022 due to lower average realized price, partly offset by increased sales volume.

Average realized price decreased for the three months ended September 30, 2023 compared to the same period in 2022 due to lower NYMEX prices, partly offset by favorable cash settled derivatives and favorable differential.

For the three months ended September 30, 2023, we received $255.8 million of net cash settlements on derivatives, composed of $199.0 million of net cash settlements received on our NYMEX natural gas hedge positions and $56.8 million of net cash settlements received on our basis and liquids hedge positions.

For the same period in 2022, we paid $2,033.7 million of net cash settlements on derivatives, composed of $2,003.2 million of net cash settlements paid on our NYMEX natural gas hedge positions and $30.5 million of net cash settlements paid on our basis and liquids hedge positions.

Net cash settlements received (paid) on derivatives are included in average realized price but may not be included in operating revenues.

For the three months ended June 30, 2023 and 2022, we paid $67.5 million and received $0.3 million, respectively, of premiums for derivatives that settled during the period.

For the three months ended September 30, 2023 and 2022, we paid $65.2 million and received $0.9 million, respectively, of premiums for derivatives that settled during the period.

Sales volume increased for the three months ended September 30, 2023 compared to the same period in 2022 primarily as a result of sales volume increases of 25 Bcfe from the assets acquired in the Tug Hill and XcL Midstream Acquisition in addition to wells, including the Rescheduled Wells, turned-in-line during 2023.

Gain (loss) on derivatives.

For the three months ended June 30, 2023, we recognized a gain on derivatives of $164.4 million related primarily to increases in the fair market value of our basis swaps, which were in a liability position as of March 31, 2023, partly offset by a loss on the derivative liability related to the Henry Hub Cash Bonus (defined and discussed in Note 4 to the Condensed Consolidated Financial Statements).

For the three months ended September 30, 2023, we recognized a gain on derivatives of $177.9 million related primarily to increases in the fair market value of our NYMEX swaps and options due to decreases in NYMEX forward prices.

For the same period in 2022, we recognized a loss on derivatives of $1,627.3 million related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices.

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Six Months Ended June 30,

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Nine Months Ended September 30,

2023 2022 Change % Change

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Sales of natural gas, NGLs and oil.

Sales of natural gas, NGLs and oil decreased for the six months ended June 30, 2023 compared to the same period in 2022 due to decreased sales volume and lower average realized price.

Sales volume decreased for the six months ended June 30, 2023 primarily as a result of sales volume decreases from natural decline of producing wells, fewer wells turned-in-line throughout 2022 as a result of third-party supply chain constraints and a delay in the development schedule of certain non-operated wells in which we have a working interest, partly offset by increased volumes from our operated wells as a result efficiencies realized within our drilling and completions operations.

Average realized price decreased for the six months ended June 30, 2023 compared to the same period in 2022 due to lower NYMEX and liquids prices, partly offset by favorable cash settled derivatives and favorable differential.

For the six months ended June 30, 2023 and 2022, we received $369.2 million, composed of $539.0 million of net cash settlements received on our NYMEX natural gas hedge positions and $169.8 million of net cash settlements paid on our basis and liquids hedge positions.

Sales of natural gas, NGLs and oil decreased for the nine months ended September 30, 2023 compared to the same period in 2022 due to lower average realized price and decreased sales volume.

Average realized price decreased for the nine months ended September 30, 2023 compared to the same period in 2022 due to lower NYMEX and liquids prices, partly offset by favorable cash settled derivatives and favorable differential.

For the nine months ended September 30, 2023, we received $625.1 million of net cash settlements on derivatives, composed of $738.1 million of net cash settlements received on our NYMEX natural gas hedge positions and $113.0 million of net cash settlements paid on our basis and liquids hedge positions.

For the same period in 2022, we paid $4,673.0 million of net cash settlements on derivatives, composed of $4,525.4 million of net cash settlements paid on our NYMEX natural gas hedge positions and $147.6 million of net cash settlements paid on our basis and liquids hedge positions.

Net cash settlements received (paid) on derivatives are included in average realized price but may not be included in operating revenues.

For the six months ended June 30, 2023 and 2022, we paid premiums for derivatives that settled during the period of $166.9 million and $32.2 million, respectively.

For the nine months ended September 30, 2023 and 2022, we paid premiums for derivatives that settled during the period of $232.1 million and $31.3 million, respectively.

Sales volume decreased for the nine months ended September 30, 2023 compared to the same period in 2022 primarily as a result of sales volume decreases from natural decline of producing wells, fewer wells turned-in-line throughout 2022 as a result of third-party supply chain constraints and delays in the development schedule of certain non-operated wells in which we have a working interest, partly offset by sales volume increases of 25 Bcfe from the assets acquired in the Tug Hill and XcL Midstream Acquisition as well as sales volume increases from our operated wells as a result of efficiencies in our drilling and completions operations and wells, including the Rescheduled Wells, turned-in-line during 2023.

Gain (loss) on derivatives.

For the six months ended June 30, 2023, we recognized a gain on derivatives of $989.2 million related primarily to increases in the fair market value of our NYMEX swaps and options due to decreases in NYMEX forward prices, partly offset by a loss on the derivative liability related to the Henry Hub Cash Bonus.

For the nine months ended September 30, 2023, we recognized a gain on derivatives of $1,167.1 million related primarily to increases in the fair market value of our NYMEX swaps and options due to decreases in NYMEX forward prices, partly offset by a loss on the derivative liability related to the Henry Hub Cash Bonus (defined and discussed in Note 3 to the Condensed Consolidated Financial Statements).

For the same period in 2022, we recognized a loss on derivatives of $5,550.0 million related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices, partly offset by a gain on the derivative liability related to the Henry Hub Cash Bonus.

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Operating Expenses

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Three Months Ended June 30,

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Three Months Ended September 30,

2023 2022 Change % Change

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Processing 59,667 52,135 7,532 14.4

Lease operating expenses (LOE) 35,552 42,814 (7,262) (17.0)

Lease operating expense (LOE) 44,318 39,934 4,384 11.0

Production taxes 22,775 41,851 (19,076) (45.6)

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Production depletion 0.84 0.85 (0.01) (1.2)

Operating expenses on a per Mcfe basis for the three months ended June 30, 2023 compared to the same period in 2022 were negatively impacted by decreased sales volume.

Gathering expense decreased on an absolute basis for the three months ended June 30, 2023 compared to the same period in 2022 due primarily to decreased sales volume and lower gathering rates on certain contracts indexed to price.

Gathering expense decreased on an absolute and per Mcfe basis for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to lower gathering rates on certain contracts indexed to price as well as the impact of the gathering assets acquired in the Tug Hill and XcL Midstream Acquisition, which are wholly-owned by us and, therefore, reduce our gathering cost structure on a per Mcfe basis.

Transmission.

Transmission expense increased on an absolute and per Mcfe basis for the three months ended June 30, 2023 compared to the same period in 2022 due primarily to additional capacity acquired subsequent to June 2022, partly offset by credits received from the Texas Eastern Transmission Pipeline.

LOE decreased on an absolute and per Mcfe basis for the three months ended June 30, 2023 compared to the same period in 2022 due primarily to lower salt water disposal costs and increased recycling.

Saltwater disposal costs and recycle rates were favorably impacted by increased usage of our internally developed produced water gathering and storage system, which was placed in service during the fourth quarter of 2022.

Transmission expense increased on an absolute and per Mcfe basis for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to additional capacity acquired.

Processing expense increased on an absolute basis for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to processing expenses for the liquids-rich assets acquired in the Tug Hill and XcL Midstream Acquisition.

LOE increased on an absolute basis for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to the assets acquired in the Tug Hill and XcL Midstream Acquisition, partly offset by lower salt water disposal costs and increased recycling.

Saltwater disposal costs and recycle rates were favorably impacted by increased use of our internally developed produced water gathering and storage system, which was placed in service during the fourth quarter of 2022.

Production taxes.

Production taxes decreased on an absolute and per Mcfe basis for the three months ended June 30, 2023 compared to the same period in 2022 due to lower West Virginia severance taxes and Pennsylvania impact fees, which resulted primarily from lower prices.

Depreciation and depletion.

Production depletion expense decreased on an absolute and per Mcfe basis for the three months ended June 30, 2023 compared to the same period in 2022 due to a lower annual depletion rate and decreased sales volume.

Production taxes decreased on an absolute and per Mcfe basis for the three months ended September 30, 2023 compared to the same period in 2022 due to lower West Virginia severance taxes and Pennsylvania impact fees, which decreased due to lower TETCO M2 and NYMEX prices, respectively.

EQT CORPORATION AND SUBSIDIARIES

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

Selling, general and administrative.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to lower long-term incentive compensation costs as a result of decreases in awards outstanding and changes in the fair value of awards.

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 three months ended September 30, 2023 compared to the same period in 2022 due to increased sales volume.

Impairment and expiration of leases.

During the three months ended June 30, 2023 and 2022, we recognized impairment and expiration of leases of $5.3 million and $47.0 million, respectively, related to leases that we no longer expect to extend or develop prior to their expiration based on our development plan.

During the three months ended September 30, 2023 and 2022, we recognized impairment and expiration of leases of $6.4 million and $20.5 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 increased for the three months ended June 30, 2023 compared to the same period in 2022 due primarily to transaction costs associated with the pending Tug Hill and XcL Midstream Acquisition in 2023, partly offset by decreased environmental and legal reserves, including from settlements.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Six Months Ended June 30,

Other operating expenses increased for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to transaction costs associated with the Tug Hill and XcL Midstream Acquisition, partly offset by decreased legal reserves, including from settlements.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Nine Months Ended September 30,

2023 2022 Change % Change

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Production depletion 0.83 0.85 (0.02) (2.4)

Operating expenses on a per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 were negatively impacted by decreased sales volume.

Gathering expense decreased on an absolute basis for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to decreased sales volume and lower gathering rates on certain contracts indexed to price.

Gathering expense decreased on an absolute basis for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to lower gathering rates on certain contracts indexed to price as well as decreased sales volume.

Gathering expense decreased on a per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to lower gathering rates on certain contracts indexed to price.

Transmission.

Transmission expense increased on an absolute and per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to additional capacity acquired subsequent to June 2022, partly offset by credits received from the Texas Eastern Transmission Pipeline.

Processing expense increased on an absolute and per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to inflation of contracted processing rates.

Transmission expense increased on an absolute and per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to additional capacity acquired, partly offset by credits received from the Texas Eastern Transmission Pipeline.

EQT CORPORATION AND SUBSIDIARIES

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

LOE decreased on an absolute and per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to lower salt water disposal costs and increased recycling.

Processing expense increased on an absolute and per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to processing expenses for the liquids-rich assets acquired in the Tug Hill and XcL Midstream Acquisition as well as inflation of contracted processing rates.

LOE decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to lower salt water disposal costs and increased recycling.

Production taxes.

Production taxes decreased on an absolute and per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 due to lower West Virginia severance taxes and Pennsylvania impact fees, which resulted primarily from lower prices.

Production taxes decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due to lower West Virginia severance taxes and Pennsylvania impact fees, which decreased due to lower sales volume and lower TETCO M2 and NYMEX prices, respectively.

Selling, general and administrative.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to lower long-term incentive compensation costs as a result of changes in the fair value of awards.

Selling, general and administrative expense decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to lower long-term incentive compensation costs as a result of decreases in awards outstanding and changes in the fair value of awards.

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

Depreciation and depletion.

Production depletion expense decreased on an absolute and per Mcfe basis for the six months ended June 30, 2023 compared to the same period in 2022 due to a lower annual depletion rate and decreased sales volume.

Production depletion expense decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2023 compared to the same period in 2022 due to a lower annual depletion rate and decreased sales volume.

Loss (gain) on sale/exchange of long-lived assets .

During the six months ended June 30, 2023, we recognized a loss on sale/exchange of long-lived assets of $16.3 million related to acreage trade agreements where the carrying value of the acres traded exceeded the fair value of the acres received.

During the nine months ended September 30, 2023, we recognized a loss on sale/exchange of long-lived assets of $17.8 million related to acreage trade agreements where the carrying value of the acres traded exceeded the fair value of the acres received.

Impairment of contract asset.

During the six months ended June 30, 2022, we recognized impairment of our contract asset of $184.9 million.

During the nine months ended September 30, 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.

During the six months ended June 30, 2023 and 2022, we recognized impairment and expiration of leases of $15.9 million and $77.0 million, respectively, related to leases that we no longer expect to extend or develop prior to their expiration based on our development plan.

During the nine months ended September 30, 2023 and 2022, we recognized impairment and expiration of leases of $22.3 million and $97.5 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 increased for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to transaction costs associated with the pending Tug Hill and XcL Midstream Acquisition in 2023, partly offset by decreased legal reserves, including from settlements.

Other operating expenses increased for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to transaction costs associated with the Tug Hill and XcL Midstream Acquisition, partly offset by decreased legal reserves, including from settlements.

Other Income Statement Items

(Income) loss from investments.

For the three months ended June 30, 2023, we recognized income from investments due primarily to equity earnings on our equity method investments.

For the three months ended June 30, 2022, we recognized income from investments due primarily to equity earnings on our equity method investments, partly offset by a loss on our sale of our investment in Equitrans Midstream.

For the six months ended June 30, 2023, we recognized income from investments due to a gain on our investment in the Investment Fund (defined in Note 4 to the Condensed Consolidated Financial Statements) and equity earnings on our equity method investments.

For the six months ended June 30, 2022, we recognized a loss from investments due primarily to a loss on our sale of our investment in Equitrans Midstream, partly offset by a gain on our investment in the Investment Fund and equity earnings on our equity method investments.

For the nine months ended September 30, 2023, we recognized income from investments due to equity earnings on our equity method investments and a gain on our investment in the Investment Fund (defined in Note 4 to the Condensed Consolidated Financial Statements).

For the nine months ended September 30, 2022, we recognized a loss from investments due to a loss on our sale of our investment in Equitrans Midstream, partly offset by equity earnings on our equity method investments and a gain on our investment in the Investment Fund.

Dividend and other income .

Dividend and other income decreased for the three months ended June 30, 2023 compared to the same period in 2022 due primarily to lower dividends received on our investment in the Investment Fund.

Dividend and other income decreased for the six months ended June 30, 2023 compared to the same period in 2022 due primarily to lower dividends received on our investment in the Investment Fund as well as dividends received on our investment in Equitrans Midstream in 2022.

Dividend and other income decreased for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to lower dividends received on our investment in the Investment Fund as well as dividends received on our investment in Equitrans Midstream in 2022.

Loss (gain) on debt extinguishment.

During the three and nine months ended September 30, 2022, we recognized a loss on debt extinguishment of $27.8 million and $139.1 million, respectively, due to the repayment and repurchase of debt discussed in Note 6 to the Condensed Consolidated Financial Statements.

EQT CORPORATION AND SUBSIDIARIES

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

Loss (gain) on debt extinguishment.

During the three months ended June 30, 2023, we recognized a loss on debt extinguishment of $5.5 million due to debt repayment and repurchases at a premium to par value.

During the six months ended June 30, 2023, we recognized a gain on debt extinguishment of $1.1 million due to debt repayment and repurchases at a discount to par value during the first quarter of 2023, partly offset by the loss recognized during the three months ended June 30, 2023.

During the three and six months ended June 30, 2022, we recognized a loss on debt extinguishment of $104.3 million and $111.3 million, respectively, due primarily to the repayment and repurchases of our Convertible Notes (defined and discussed in Note 6 to the Condensed Consolidated Financial Statements).

See Note 6 to the Condensed Consolidated Financial Statements.

Interest expense, net.

Interest expense, net decreased for the three and six months ended June 30, 2023 compared to the same periods in 2022 due primarily to higher interest income earned as well as reduced interest expense due to a reduction of our letters of credit balances.

Interest expense, net was flat for the three months ended September 30, 2023 compared to the same period in 2022 due primarily to higher interest expense on debt as a result of senior notes issuances in the fourth quarter of 2022 as well as the draw down of the Term Loan Facility (defined and discussed in Note 6 to the Condensed Consolidated Financial Statements) in August 2023, wholly offset by higher interest income earned as well as lower interest expense on our revolving credit facility from lower borrowings thereunder.

Interest expense, net decreased for the nine months ended September 30, 2023 compared to the same period in 2022 due primarily to higher interest income earned as well as lower interest expense on our revolving credit facility from lower borrowings and reduced letters of credit balances thereunder, partly offset by higher interest expense on debt as a result of senior notes issuances in the fourth quarter of 2022 as well as the draw down of the Term Loan Facility in August 2023.

Income tax (benefit) expense.

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Capital Resources and Liquidity

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

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

Planned Capital Expenditures and Sales Volume .

In 2023, we expect to spend approximately $1.7 billion to $1.9 billion in total capital expenditures, excluding amounts attributable to noncontrolling interest and amounts attributable to the assets expected to be acquired in the pending Tug Hill and XcL Midstream Acquisition.

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

In the fourth quarter of 2023, we expect to spend approximately $525 million to $575 million in total capital expenditures.

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

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

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and drilling, completion and acquisition costs.

In 2023, we expect our sales volume to be 1,900 Bcfe to 2,000 Bcfe, excluding amounts attributable to the assets expected to be acquired in the pending Tug Hill and XcL Midstream Acquisition.

In the fourth quarter of 2023, we expect our sales volume to be 525 Bcfe to 575 Bcfe.

Operating Activities.

Net cash provided by operating activities was $2,100 million for the six months ended June 30, 2023 compared to $1,252 million for the same period in 2022.

The increase was due primarily to net cash settlements received on derivatives in 2023 compared to net cash settlements paid on derivatives in 2022, favorable changes in working capital driven by declining accounts receivable and lower margin postings as well as lower cash operating expenses, partly offset by lower cash operating revenues.

Net cash provided by operating activities was $2,554 million for the nine months ended September 30, 2023 compared to $2,402 million for the same period in 2022.

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, 2022.

For a discussion of potential commodity market risks, refer to "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, 2022.

Investing Activities.

Net cash used in investing activities was $984 million for the six months ended June 30, 2023 compared to $508 million for the same period in 2022.

The increase was attributable primarily to increased capital expenditures.

Net cash used in investing activities was $3,774 million for the nine months ended September 30, 2023 compared to $1,017 million for the same period in 2022.

The increase was attributable primarily to cash paid for the Tug Hill and XcL Midstream Acquisition in 2023 and increased capital expenditures.

EQT CORPORATION AND SUBSIDIARIES

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Total capital expenditures 445 356 1,387 1,042

Add (deduct):

Non-cash items (b) 59 6 99 5

Total cash capital expenditures $ 504 $ 362 $ 1,486 $ 1,047

(a) Capital expenditures attributable to noncontrolling interest were $3.1 million and $2.5 million for the three months ended June 30, 2023 and 2022, respectively, and $8.5 million and $4.4 million for the six months ended June 30, 2023 and 2022, respectively.

(a) Capital expenditures attributable to noncontrolling interests were $6.6 million for the three months ended September 30, 2022 and $8.5 million and $11.0 million for the nine months ended September 30, 2023 and 2022, respectively.

There were no capital expenditures attributable to noncontrolling interests for the three months ended September 30, 2023.

(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.

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Financing Activities.

Net cash used in financing activities was $1,359 million for the six months ended June 30, 2023 compared to $814 million for the same period in 2022.

For the six months ended June 30, 2023, the primary uses of financing cash flows were repayment and retirement of debt, repurchase and retirement of EQT Corporation common stock and payment of dividends.

For the six months ended June 30, 2022, the primary uses of financing cash flows were repayment and retirement of debt, repurchase and retirement of EQT Corporation common stock and payment of dividends, and the primary source of financing cash flows was net proceeds from credit facility borrowings.

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

On July 19, 2023, our Board of Directors declared a quarterly cash dividend of $0.15 per share of EQT Corporation common stock, payable on September 1, 2023, to shareholders of record at the close of business on August 9, 2023.

Net cash used in financing activities was $174 million for the nine months ended September 30, 2023 compared to $1,411 million for the same period in 2022.

For the nine months ended September 30, 2023, the primary source of financing cash flows was proceeds from the Term Loan Facility borrowings, and the primary uses of financing cash flows were repayment and retirement of debt, repurchase and retirement of EQT Corporation common stock and payment of dividends.

For the nine months ended September 30, 2022, the primary uses of financing cash flows were repayment and repurchase of debt, repurchase and retirement of EQT Corporation common stock and payment of dividends.

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

On October 12, 2023, our Board of Directors declared a quarterly cash dividend of $0.1575 per share of EQT Corporation common stock, payable on December 1, 2023, to shareholders of record at the close of business on November 8, 2023.

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 tender offers or other cash purchases in the open market or privately negotiated transactions.

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Security Ratings and Financing Triggers

The table below reflects the credit ratings and rating outlooks assigned to our debt instruments as of July 21, 2023.

The table below reflects the credit ratings and rating outlooks assigned to our debt instruments as of September 30, 2023.

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.

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Rating agency Senior notes Outlook

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

Moody's Investors Service (Moody's) Baa3 Stable

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 Term Loan Facility (defined in Note 6 to the Condensed Consolidated Financial Statements) and 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.

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 revolving credit facility, the interest rate on the Term Loan Facility and 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 July 21, 2023, 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 July 21, 2023, such assurances could be up to approximately $0.6 billion, inclusive of letters of credit, OTC derivative instrument margin deposits and other collateral posted of approximately $0.2 billion in the aggregate.

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

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

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

Our credit facility and Term Loan Facility contain financial covenants that require us to have a total debt to total capitalization ratio no greater than 65%.

As of June 30, 2023, 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.

As of June 30, 2023, we had not yet borrowed, and thus, had no borrowings, under the Term Loan Facility.

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

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

Our revolving credit facility and the Term Loan Facility contain financial covenants that require us to have a total debt to total capitalization ratio no greater than 65%.

As of September 30, 2023, 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 revolving credit facility and the Term Loan Facility.

EQT CORPORATION AND SUBSIDIARIES

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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 as of July 21, 2023.

The following table summarizes the approximate volume and prices of our NYMEX hedge positions as of October 20, 2023.

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.

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

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

Hedged Volume (MMDth) 377 263 239 237 98

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Strike ($/Dth) $ 3.67 $ 4.17 $ 3.93 $ 3.93 $ 4.04

Fixed Price Sales

Volume (MMDth) 1 — — — — —

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

Option Premiums

Cash Settlement of Deferred Premiums (millions) $ (91) $ (34) $ (4) $ (4) $ —

(a) July 1 through September 30 .

(a) October 1 through December 31 .

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.

See "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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See Note 13 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our commitments and contingencies, including certain pending legal and regulatory proceedings and other contingent matters.

As of June 30, 2023, there have been no material changes to such matters as disclosed therein.

See also Part II, "Other Information," Item 1., "Legal Proceedings," for a description of certain other pending environmental matters for which we accrued contingent liabilities.

As of September 30, 2023, there have been no material changes to such matters as disclosed therein.

See also "Legal Proceedings" for a description of certain other pending environmental matters for which we accrued contingent liabilities.

Additionally, in the normal course of business, we are subject to various other pending and threatened legal proceedings in which claims for monetary damages or other relief are asserted.

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Critical Accounting Policies and Estimates

Our critical accounting policies, including a discussion regarding the estimation uncertainty and the impact that our critical accounting estimates have had, or are reasonably likely to have, on our financial condition or results of operations, are described in Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Our critical accounting policies, including a discussion regarding the estimation uncertainty and the impact that our critical accounting estimates have had, or are reasonably likely to have, on our financial condition or results of operations, are described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended December 31, 2022.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis