UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017~~

orFOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE TRANSITION PERIOD FROM TO

	~~COMMISSION FILE NUMBER 1-3551~~

COMMISSION FILE NUMBER 001-03551

EQT CORPORATION

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~Charter)



~~PENNSYLVANIA~~Pennsylvania		25-0464690
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

~~625 Liberty Avenue, Suite 1700, Pittsburgh, Pennsylvania~~		~~15222~~
~~(Address of principal executive offices)~~		~~(Zip code)~~

~~(412) 553-5700~~

625 Liberty Avenue, Suite 1700

Pittsburgh, Pennsylvania15222

(~~Registrant’s~~Address of principal executive offices and zip code)

(412) 553-5700

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	EQT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesx☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting ~~company”~~company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large ~~Accelerated Filer~~ x accelerated filer	☒	Accelerated filer	~~Accelerated Filer~~ ¨ ☐	Emerging ~~Growth Company~~ ¨ growth company	☐
~~Non-Accelerated Filer~~ ¨ Non-accelerated filer	~~(Do not check if a~~ ~~smaller reporting company)~~ ☐	Smaller ~~Reporting Company~~ ¨ reporting company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

As of ~~September 30, 2017, 173,343 (in thousands)~~October 29, 2019, 255,643,475 shares of common stock, no par value, of the registrant were outstanding.

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Index



			~~Page No.~~
Part I. Financial Information:		Page No.

Item 1.	Financial Statements (Unaudited):

	Statements of Condensed Consolidated Operations for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	3

	Statements of Condensed Consolidated Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	4

	Statements of Condensed Consolidated Cash Flows for the Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	5

	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018	6

	Statements of Condensed Consolidated Equity for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	87

	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33

~~Item 2.~~		~~Management��s Discussion and Analysis of Financial Condition and Results of Operations~~	23

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	40

~~Item 4.~~	~~Controls and Procedures~~	42

Part II. Other Information:

Item 1.	Legal Proceedings	4334
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	35
Item 6.	Exhibits	36

~~Item 1A.~~Signature		~~Risk Factors~~	43

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	44

~~Item 6.~~	~~Exhibits~~	45

~~Signature~~		4637

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated Operations (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Thousands, except per share amounts)
Operating revenues:
Sales of natural gas, oil and natural gas liquids	$	769,627		$	1,046,989		$	2,941,767		$	3,264,728
Gain (loss) on derivatives not designated as hedges	180,313			(3,075		)	455,952			5,620
Net marketing services and other	1,636			6,132			7,282			42,382
Total operating revenues	951,576			1,050,046			3,405,001			3,312,730
Operating expenses:
Transportation and processing	437,942			420,747			1,314,172			1,265,473
Production	37,821			42,734			117,545			149,231
Exploration	3,492			3,596			6,356			6,474
Selling, general and administrative	79,376			51,816			214,562			154,590
Depreciation and depletion	390,993			388,016			1,154,519			1,152,418
Impairment/loss on sale/exchange of long-lived assets	13,935			259,279			13,935			2,706,438
Impairment of intangible assets	15,411			—			15,411			—
Lease impairments and expirations	49,601			12,176			127,719			35,584
Amortization of intangible assets	7,755			10,341			28,439			31,025
Proxy, transaction and reorganization	76,779			8,792			102,386			23,930
Total operating expenses	1,113,105			1,197,497			3,095,044			5,525,163
Operating (loss) income	(161,529		)	(147,451		)	309,957			(2,212,433		)
Unrealized loss on investment in Equitrans Midstream Corporation	(261,093		)	—			(276,779		)	—
Dividend and other income	22,960			4,323			67,592			4,063
Interest expense	47,709			56,180			154,785			171,211
Loss from continuing operations before income taxes	(447,371		)	(199,308		)	(54,015		)	(2,379,581		)
Income tax benefit	(86,343		)	(71,961		)	(9,244		)	(596,723		)
Loss from continuing operations	(361,028		)	(127,347		)	(44,771		)	(1,782,858		)
Income from discontinued operations, net of tax	—			190,795			—			537,673
Net (loss) income	(361,028		)	63,448			(44,771		)	(1,245,185		)
Less: Net income from discontinued operations attributable to noncontrolling interests	—			103,141			—			362,696
Net loss attributable to EQT Corporation	$	(361,028	)	$	(39,693	)	$	(44,771	)	$	(1,607,881	)

Amounts attributable to EQT Corporation:
Loss from continuing operations	$	(361,028	)	$	(127,347	)	$	(44,771	)	$	(1,782,858	)
Income from discontinued operations, net of tax	—			87,654			—			174,977
Net loss attributable to EQT Corporation	$	(361,028	)	$	(39,693	)	$	(44,771	)	$	(1,607,881	)

Earnings per share of common stock attributable to EQT Corporation:
Basic:
Weighted average common stock outstanding	255,235			259,560			255,069			262,816
Loss from continuing operations	$	(1.41	)	$	(0.49	)	$	(0.18	)	$	(6.79	)
Income from discontinued operations	—			0.34			—			0.67
Net loss	$	(1.41	)	$	(0.15	)	$	(0.18	)	$	(6.12	)
Diluted:
Weighted average common stock outstanding	255,235			259,560			255,069			262,816
Loss from continuing operations	$	(1.41	)	$	(0.49	)	$	(0.18	)	$	(6.79	)
Income from discontinued operations	—			0.34			—			0.67
Net loss	$	(1.41	)	$	(0.15	)	$	(0.18	)	$	(6.12	)

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

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated Comprehensive (Loss) Income (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands, except per share amounts)
Revenues:
Sales of natural gas, oil and NGLs $ 552,953
$ 403,939
$ 1,803,132
$ 1,072,898
Pipeline and net marketing services 71,735
59,431
222,904
188,770
Gain (loss) on derivatives not designated as hedges 35,625
93,356
222,693
(32,342 )
Total operating revenues 660,313
556,726
2,248,729
1,229,326

Operating expenses:

Transportation and processing 136,219
89,883
404,743
251,283
Operation and maintenance 20,604
18,198
61,471
51,687
Production 39,630
38,999
129,812
126,092
Exploration 2,436
2,671
9,039
9,385
Selling, general and administrative 77,170
61,430
206,237
196,765
Depreciation, depletion and amortization 246,560
237,088
719,295
682,948
Total operating expenses 522,619
448,269
1,530,597
1,318,160

Operating income (loss) 137,694
108,457
718,132
(88,834 )

Other income 6,859
10,715
16,878
23,199
Interest expense 50,377
35,984
137,110
108,469
Income (loss) before income taxes 94,176
83,188
597,900
(174,104 )
Income tax (benefit) expense (11,281 ) 13,084
119,093
(151,826 )
Net income (loss) 105,457
70,104
478,807
(22,278 )
Less: Net income attributable to noncontrolling interests 82,117
78,120
250,349
238,747
Net income (loss) attributable to EQT Corporation $ 23,340
$ (8,016 ) $ 228,458
$ (261,025 )

Earnings per share of common stock attributable to EQT Corporation:

Basic:

Weighted average common stock outstanding 173,476
172,867
173,368
165,197
Net income (loss) $ 0.13
$ (0.05 ) $ 1.32
$ (1.58 )
Diluted:

Weighted average common stock outstanding 173,675
172,867
173,572
165,197
Net income (loss) $ 0.13
$ (0.05 ) $ 1.32
$ (1.58 )
Dividends declared per common share $ 0.03
$ 0.03
$ 0.09
$ 0.09



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Thousands)
Net (loss) income	$	(361,028	)	$	63,448		$	(44,771	)	$	(1,245,185	)

Other comprehensive (loss) income, net of tax:
Net change in cash flow hedges:
Natural gas (a)	—			(430		)	—			(1,183		)
Interest rate (b)	43			52			127			132
Other post-retirement benefits liability adjustment (c)	77			86			229			258
Change in accounting principle (d)	—			—			(496		)	—
Other comprehensive income (loss)	120			(292		)	(140		)	(793		)
Comprehensive (loss) income	(360,908		)	63,156			(44,911		)	(1,245,978		)
Less: Comprehensive income from discontinued operations attributable to noncontrolling interests	—			103,141			—			362,696
Comprehensive loss attributable to EQT Corporation	$	(360,908	)	$	(39,985	)	$	(44,911	)	$	(1,608,674	)


(a)	Net of tax benefit of $150 and $413 for the three and nine months ended September 30, 2018, respectively.


(b)	Net of tax expense of $10 for both the three months ended September 30, 2019 and 2018 and $30 and $54 for the nine months ended September 30, 2019 and 2018, respectively.


(c)	Net of tax expense of $26 and $29 for the three months ended September 30, 2019 and 2018, respectively, and $78 and $89 for the nine months ended September 30, 2019 and 2018, respectively.


(d)	Related to adoption of Accounting Standards Update (ASU) 2018-02. See Note 1 for additional information.

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

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated Cash Flows (Unaudited)



	Nine Months Ended September 30,
	2019			2018
	(Thousands)
Cash flows from operating activities:
Net loss	$	(44,771	)	$	(1,245,185	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income tax benefit	(10,407		)	(502,853		)
Depreciation and depletion	1,154,519			1,290,876
Amortization of intangible assets	28,439			62,185
Asset and lease impairments	157,065			2,742,022
Unrealized loss on investment in Equitrans Midstream Corporation	276,779			—
Share-based compensation expense	29,453			23,137
Amortization, accretion and other	19,385			(33,492		)
Gain on derivatives not designated as hedges	(455,952		)	(5,620		)
Net cash settlements received (paid) on derivatives not designated as hedges	152,149			(27,401		)
Net premiums received on derivative instruments	22,512			—
Changes in other assets and liabilities:
Accounts receivable	508,306			(7,713		)
Accounts payable	(286,453		)	205,360
Other items, net	82,830			(55,926		)
Net cash provided by operating activities	1,633,854			2,445,390
Cash flows from investing activities:
Capital expenditures	(1,257,333		)	(2,225,671		)
Capital expenditures for discontinued operations (a)	—			(624,359		)
Proceeds from sale of assets	—			583,895
Capital contributions to Mountain Valley Pipeline, LLC (a)	—			(446,049		)
Other investing activities	1,123			(7,276		)
Net cash used in investing activities	(1,256,210		)	(2,719,460		)
Cash flows from financing activities:
Proceeds from borrowings on credit facility	2,261,250			3,695,500
Repayment of borrowings on credit facility	(2,900,250		)	(4,540,500		)
Proceeds from borrowings on term loan facility	1,000,000			—
Debt issuance costs for term loan facility	(913		)	—
Repayments and retirements of debt	(703,471		)	(7,999		)
Dividends paid	(22,985		)	(23,736		)
Proceeds from awards under employee compensation plans	—			1,946
Cash paid for taxes related to net settlement of share-based incentive awards	(7,220		)	(21,910		)
Repurchase and retirement of common stock	—			(538,876		)
Repurchase of common stock	—			(27		)
Distributions to noncontrolling interests (a)	—			(279,539		)
Increase in borrowings on credit facilities of discontinued operations (a)	—			2,524,000
Repayment of borrowings on credit facilities of discontinued operations (a)	—			(2,968,000		)
Proceeds from issuance of EQM Midstream Partners, LP debt (a)	—			2,500,000
Debt discount and issuance costs for EQM Midstream Partners, LP debt (a)	—			(34,249		)
Acquisition of 25% ownership interest in Strike Force Midstream LLC (a)	—			(175,000		)
Net cash (used in) provided by financing activities	(373,589		)	131,610
Net change in cash, cash equivalents and restricted cash	4,055			(142,460		)
Cash, cash equivalents and restricted cash at beginning of period	3,487			147,315
Cash and cash equivalents at end of period	$	7,542		$	4,855
Cash paid (received) during the period for:
Interest, net of amount capitalized	$	125,817		$	163,688
Income taxes, net	$	(1,480	)	$	193
Non-cash activity during the period for:
Increase in right-of-use lease assets and lease liabilities	$	112,141		$	—
Increase in asset retirement costs and obligations	$	3,610		$	6,109


(a)	Related to discontinued operations. See Note 2.

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

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)



	September 30, 2019			December 31, 2018
	(Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	7,542		$	3,487
Accounts receivable (less provision for doubtful accounts of $6,179 and $8,648 at September 30, 2019 and December 31, 2018, respectively)	552,260			1,241,843
Derivative instruments, at fair value	771,634			481,654
Tax receivable	127,789			131,573
Prepaid expenses and other	35,995			111,107
Total current assets	1,495,220			1,969,664

Property, plant and equipment	23,460,786			22,148,012
Less: accumulated depreciation and depletion	5,890,792			4,755,505
Net property, plant and equipment	17,569,994			17,392,507

Intangible assets, net	33,483			77,333
Investment in Equitrans Midstream Corporation	736,223			1,013,002
Other assets	325,529			268,838
Total assets	$	20,160,449		$	20,721,344

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt	$	4,916		$	704,390
Accounts payable	755,102			1,059,873
Derivative instruments, at fair value	339,995			336,051
Other current liabilities	349,697			254,687
Total current liabilities	1,449,710			2,355,001

Credit facility borrowings	161,000			800,000
Term loan borrowings	999,239			—
Senior Notes	3,887,907			3,882,932
Note payable to EQM Midstream Partners, LP	106,333			110,059
Deferred income taxes	1,809,650			1,823,381
Other liabilities	848,985			791,742
Total liabilities	9,262,824			9,763,115

Shareholders' equity:
Common stock, no par value, authorized 320,000 shares, issued 257,003 and 257,225 shares at September 30, 2019 and December 31, 2018, respectively	7,818,683			7,828,554
Treasury stock, shares at cost of 1,833 and 2,753 at September 30, 2019 and December 31, 2018, respectively	(32,527		)	(49,194		)
Retained earnings	3,117,015			3,184,275
Accumulated other comprehensive loss	(5,546		)	(5,406		)
Total equity	10,897,625			10,958,229
Total liabilities and equity	$	20,160,449		$	20,721,344

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

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated ~~Comprehensive Income~~Equity (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands)
Net income (loss) $ 105,457
$ 70,104
$ 478,807
$ (22,278 )

Other comprehensive (loss) income, net of tax:

Net change in cash flow hedges:

Natural gas, net of tax benefit of $(955), $(9,894), $(2,640), and $(28,934) (1,451 ) (14,740 ) (4,011 ) (43,104 )
Interest rate, net of tax expense of $26, $26, $78, and $78 36
36
108
108
Pension and other post-retirement benefits liability adjustment,
net of tax expense of $49, $52, $148, and $6,287 77
82
230
9,917
Other comprehensive loss (1,338 ) (14,622 ) (3,673 ) (33,079 )
Comprehensive income (loss) 104,119
55,482
475,134
(55,357 )
Less: Comprehensive income attributable to noncontrolling interests 82,117
78,120
250,349
238,747
Comprehensive income (loss) attributable to EQT Corporation $ 22,002
$ (22,638 ) $ 224,785
$ (294,104 )



	Common Stock											Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests in Consolidated Subsidiaries
	Shares		No Par Value			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
	(Thousands, except per share or unit amounts)
Balance at July 1, 2018	264,331		$	9,316,209		$	(50,769	)	$	2,416,802		$	(2,959	)	$	5,023,336		$	16,702,619
Comprehensive income (net of tax):
Net (loss) income									(39,693		)				103,141			63,448
Net change in cash flow hedges:
Natural gas (a)												(430		)				(430		)
Interest rate (b)												52						52
Other post-retirement benefits liability adjustment (c)												86						86
Dividends (d)									(7,838		)							(7,838		)
Share-based compensation plans	41		6,996			755									462			8,213
Distributions to noncontrolling interests (e)															(98,794		)	(98,794		)
Repurchase and retirement of common stock	(9,946	)	(500,199		)													(500,199		)
Changes in ownership of consolidated subsidiaries			(138,837		)										189,072			50,235
Balance at September 30, 2018	254,426		$	8,684,169		$	(50,014	)	$	2,369,271		$	(3,251	)	$	5,217,217		$	16,217,392

Balance at July 1, 2019	254,796		$	7,807,740		$	(39,310	)	$	3,485,711		$	(5,666	)	$	—		$	11,248,475
Comprehensive income (net of tax):
Net loss									(361,028		)							(361,028		)
Net change in interest rate cash flow hedges (b)												43						43
Other post-retirement benefit liability adjustment (c)												77						77
Dividends (d)									(7,668		)							(7,668		)
Share-based compensation plans	374		10,943			6,783												17,726
Balance at September 30, 2019	255,170		$	7,818,683		$	(32,527	)	$	3,117,015		$	(5,546	)	$	—		$	10,897,625

Common shares authorized: 320,000 shares. Preferred shares authorized: 3,000 shares. There are 0 preferred shares issued or outstanding.


(a)	Net of tax benefit of $150.


(b)	Net of tax expense of $10 for both the three months ended September 30, 2018 and 2019.


(c)	Net of tax expense of $29 and $26 for the three months ended September 30, 2018 and 2019, respectively.


(d)	Dividends were $0.03 per share for both the three months ended September 30, 2018 and 2019.


(e)	Distributions to noncontrolling interests from EQM Midstream Partners, LP (EQM) and EQGP Holdings, LP (EQGP) were $1.09 and $0.306 per common unit, respectively.

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

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated ~~Cash Flows~~Equity (Unaudited)

Nine Months Ended September 30,
2017 2016
(Thousands)
Cash flows from operating activities:
Net income (loss) $ 478,807
$ (22,278 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Deferred income taxes 121,704
(145,739 )
Depreciation, depletion and amortization 719,295
682,948
Lease impairments 5,053
5,498
(Recoveries of) provision for losses on accounts receivable (1,230 ) 1,165
Other income (16,878 ) (23,199 )
Stock-based compensation expense 27,894
34,551
(Gain) loss on derivatives not designated as hedges (222,693 ) 32,342
Cash settlements (paid) received on derivatives not designated as hedges (6,837 ) 222,516
Pension settlement charge —
9,403
Changes in other assets and liabilities:

Accounts receivable 64,057
(11,521 )
Accounts payable (15,446 ) (12,916 )
Other items, net 57,646
(5,071 )
Net cash provided by operating activities 1,211,372
767,699

Cash flows from investing activities:

Capital expenditures (1,152,865 ) (1,193,321 )
Capital expenditures for acquisitions (818,957 ) (412,348 )
Sales of investments in trading securities 283,758
—
Capital contributions to Mountain Valley Pipeline, LLC (103,448 ) (76,297 )
Sales of interests in Mountain Valley Pipeline, LLC —
12,533
Restricted cash, net 75,000
—
Net cash used in investing activities (1,716,512 ) (1,669,433 )

Cash flows from financing activities:

Proceeds from the issuance of common shares of EQT Corporation, net of issuance costs —
1,225,999
Proceeds from the issuance of common units of EQT Midstream Partners, LP, net of issuance costs —
217,102
Increase in borrowings on EQT Midstream Partners, LP credit facilities 334,000
430,000
Decrease in borrowings on EQT Midstream Partners, LP credit facilities (229,000 ) (638,000 )
Dividends paid (15,620 ) (14,966 )
Distributions to noncontrolling interests (172,498 ) (137,719 )
Proceeds from awards under employee compensation plans —
2,040
Cash paid for taxes related to net settlement of share-based incentive awards (18,030 ) (26,517 )
Debt issuance costs and revolving credit facility origination fees (13,679 ) —
Repurchase of common stock (15 ) (23 )
Net cash (used in) provided by financing activities (114,842 ) 1,057,916
Net change in cash and cash equivalents (619,982 ) 156,182
Cash and cash equivalents at beginning of period 1,103,540
1,601,232
Cash and cash equivalents at end of period $ 483,558
$ 1,757,414

Cash paid during the period for:

Interest, net of amount capitalized $ 113,618
$ 88,281
Income taxes, net $ 9,702
$ 1,294



	Common Stock											Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests in Consolidated Subsidiaries
	Shares		No Par Value			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
	(Thousands, except per share or unit amounts)
Balance at January 1, 2018	264,320		$	9,388,903		$	(63,602	)	$	3,996,775		$	(2,458	)	$	5,094,995		$	18,414,613
Comprehensive income (net of tax):
Net (loss) income									(1,607,881		)				362,696			(1,245,185		)
Net change in cash flow hedges:
Natural gas (a)												(1,183		)				(1,183		)
Interest rate (b)												132						132
Other post-retirement benefits liability adjustment (c)												258						258
Dividends (d)									(23,736		)							(23,736		)
Share-based compensation plans	752		(9,116		)	13,588									953			5,425
Distributions to noncontrolling interests (e)															(279,539		)	(279,539		)
Change in accounting principle									4,113									4,113
Repurchase and retirement of common stock	(10,646	)	(538,876		)													(538,876		)
Acquisition of 25% ownership interest in Strike Force Midstream LLC			1,818												(176,818		)	(175,000		)
Changes in ownership of consolidated subsidiaries			(158,560		)										214,930			56,370
Balance at September 30, 2018	254,426		$	8,684,169		$	(50,014	)	$	2,369,271		$	(3,251	)	$	5,217,217		$	16,217,392

Balance at January 1, 2019	254,472		$	7,828,554		$	(49,194	)	$	3,184,275		$	(5,406	)	$	—		$	10,958,229
Comprehensive income (net of tax):
Net loss									(44,771		)							(44,771		)
Net change in interest rate cash flow hedges (b)												127						127
Other post-retirement benefit liability adjustment (c)												229						229
Dividends (d)									(22,985		)							(22,985		)
Share-based compensation plans	920		4,599			16,667												21,266
Change in accounting principle (f)									496			(496		)				—
Other	(222	)	(14,470		)													(14,470		)
Balance at September 30, 2019	255,170		$	7,818,683		$	(32,527	)	$	3,117,015		$	(5,546	)	$	—		$	10,897,625

Common shares authorized: 320,000 shares. Preferred shares authorized: 3,000 shares. There are 0 preferred shares issued or outstanding.


(a)	Net of tax benefit of $413.


(b)	Net of tax expense of $54 and $30 for the nine months ended September 30, 2018 and 2019, respectively.


(c)	Net of tax expense of $89 and $78 for the nine months ended September 30, 2018 and 2019, respectively.


(d)	Dividends were $0.09 per share for both the nine months ended September 30, 2018 and 2019.


(e)	Distributions to noncontrolling interests were $3.18, $0.808 and $0.5966 per common unit from EQM, EQGP and Rice Midstream Partners LP (RMP), respectively.


(f)	Related to adoption of ASU 2018-02. See Note 1 for additional information.

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

~~Table of Contents~~

~~EQT CORPORATION AND SUBSIDIARIES~~

~~Condensed Consolidated Balance Sheets (Unaudited)~~

September 30, 2017 December 31, 2016
(Thousands)
Assets

Current assets:

Cash and cash equivalents $ 483,558
$ 1,103,540
Trading securities —
286,396
Accounts receivable (less accumulated provision for doubtful accounts:
$5,663 at September 30, 2017 and $6,923 at December 31, 2016) 279,201
341,628
Derivative instruments, at fair value 67,555
33,053
Prepaid expenses and other 28,144
63,602
Total current assets 858,458
1,828,219

Property, plant and equipment 20,296,620
18,216,775
Less: accumulated depreciation and depletion 5,755,358
5,054,559
Net property, plant and equipment 14,541,262
13,162,216

Restricted cash —
75,000
Investment in nonconsolidated entity 339,978
184,562
Other assets 244,950
222,925
Total assets $ 15,984,648
$ 15,472,922

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

~~Table of Contents~~

~~EQT CORPORATION AND SUBSIDIARIES~~

~~Condensed Consolidated Balance Sheets (Unaudited)~~

September 30, 2017 December 31, 2016
(Thousands)
Liabilities and Shareholders’ Equity

Current liabilities:

Current portion of long-term debt $ 707,470
$ —
Accounts payable 388,059
309,978
Derivative instruments, at fair value 71,374
257,943
Other current liabilities 268,356
236,719
Total current liabilities 1,435,259
804,640

Credit facility borrowings 105,000
—
Long-term debt 2,586,041
3,289,459
Deferred income taxes 1,866,208
1,760,004
Other liabilities and credits 567,463
499,572
Total liabilities 6,559,971
6,353,675

Equity:

Shareholders’ equity:

Common stock, no par value, authorized 320,000 shares, shares issued:
177,896 at September 30, 2017 and 177,896 at December 31, 2016 3,449,119
3,440,185
Treasury stock, shares at cost: 4,553 at September 30, 2017 (including 251 held in
rabbi trust) and 5,069 at December 31, 2016 (including 226 held in rabbi trust) (81,729 ) (91,019 )
Retained earnings 2,721,911
2,509,073
Accumulated other comprehensive (loss) income (1,631 ) 2,042
Total common shareholders’ equity 6,087,670
5,860,281
Noncontrolling interests in consolidated subsidiaries 3,337,007
3,258,966
Total equity 9,424,677
9,119,247
Total liabilities and equity $ 15,984,648
$ 15,472,922

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

~~Table of Contents~~

~~EQT CORPORATION AND SUBSIDIARIES~~

~~Statements of Condensed Consolidated Equity (Unaudited)~~

Common Stock Accumulated Other
Comprehensive
Income (Loss) Noncontrolling
Interests in
Consolidated
Subsidiaries
Shares
Outstanding No
Par Value Retained
Earnings Total
Equity
(Thousands)
Balance, January 1, 2016 152,554
$ 2,049,201
$ 2,982,212
$ 46,378
$ 2,950,251
$ 8,028,042
Comprehensive income (net of tax):
Net (loss) income

(261,025 )
238,747
(22,278 )
Net change in cash flow hedges:

Natural gas, net of tax benefit of $(28,934) (43,104 ) (43,104 )
Interest rate, net of tax expense of $78 108
108
Pension and other post-retirement benefits liability adjustment, net of tax expense of $6,287 9,917
9,917
Dividends ($0.09 per share)

(14,966 )

(14,966 )
Stock-based compensation plans, net 654
26,211

161
26,372
Distributions to noncontrolling interests ($2.235 and $0.406 per common unit from EQT Midstream Partners, LP and EQT GP Holdings, LP, respectively)

(137,719 ) (137,719 )
Issuance of common shares of EQT Corporation 19,550
1,225,999
1,225,999
Issuance of common units of EQT Midstream Partners, LP 217,102
217,102
Changes in ownership of consolidated subsidiaries 25,293

(40,487 ) (15,194 )
Balance, September 30, 2016 172,758
$ 3,326,704
$ 2,706,221
$ 13,299
$ 3,228,055
$ 9,274,279

Balance, January 1, 2017 172,827
$ 3,349,166
$ 2,509,073
$ 2,042
$ 3,258,966
$ 9,119,247
Comprehensive income (net of tax):
Net income

228,458

250,349
478,807
Net change in cash flow hedges:

Natural gas, net of tax benefit of $(2,640) (4,011 ) (4,011 )
Interest rate, net of tax expense of $78 108
108
Other post-retirement benefit liability adjustment, net of tax expense of $148 230
230
Dividends ($0.09 per share)

(15,620 )

(15,620 )
Stock-based compensation plans, net 516
18,224

190
18,414
Distributions to noncontrolling interests ($2.675 and $0.578 per common unit from EQT Midstream Partners, LP and EQT GP Holdings, LP, respectively)

(172,498 ) (172,498 )
Balance, September 30, 2017 173,343
$ 3,367,390
$ 2,721,911
$ (1,631 ) $ 3,337,007
$ 9,424,677

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

Table of Contents

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

A.1.Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all ~~of the~~ information and footnotes required by ~~United States~~ GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the results of its operations and equity for the three and nine month periods ended September 30, ~~2017~~2019 and ~~2016~~2018 and its cash flows ~~and equity~~ for the nine month periods ended September 30, ~~2017~~2019 and 2016. In this Quarterly Report on Form 10-Q, references to “we,” “us,” “our,” “EQT,” “EQT Corporation,” and the “Company” refer collectively to EQT Corporation and its consolidated subsidiaries.

As of December 31, 2016, the Company reports its results of operations through three business segments: EQT Production, EQT Gathering and EQT Transmission. The segment disclosures and discussions contained in this Quarterly Report on Form 10-Q have been recast to reflect the current reporting structure for all periods presented.2018. Certain previously reported amounts have been reclassified to conform to the current year ~~presentation under~~presentation. In this Quarterly Report on Form 10-Q, references to "we," "us," "our," "EQT," "EQT Corporation" and the ~~current segment reporting structure.~~"Company" refer collectively to EQT Corporation and its consolidated subsidiaries.

The balance sheet at December 31, ~~2016~~2018 has been derived from the audited financial statements at that date but does not include all ~~of the~~ information and footnotes required by ~~United States~~ GAAP for complete financial statements. Additionally, the Condensed Consolidated Financial Statements have been recast to reflect the presentation of discontinued operations as a result of the Separation and Distribution defined and described in Note 2.

For further information, ~~on the Company,~~ refer to the consolidated financial statements and related footnotes ~~thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,~~ as well as ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of ~~Operations” beginning on page 23 of this Quarterly Report on Form 10-Q.~~

B.~~EQT GP Holdings, LP~~

In January 2015, the Company formed EQT GP Holdings, LP (EQGP) (NYSE: EQGP), a Delaware limited partnership, to own the Company's partnership interests in EQT Midstream Partners, LP (EQM) (NYSE: EQM). EQGP owned the following EQM partnership interests as of September 30, 2017, which represent EQGP’s only cash-generating assets: 21,811,643 EQM common units, representing a 26.6% limited partner interest in EQM; 1,443,015 EQM general partner units, representing a 1.8% general partner interest in EQM; and all of EQM’s incentive distribution rights, or IDRs, which entitle EQGP to receive up to 48.0% of all incremental cash distributed in a quarter after $0.5250 has been distributed in respect of each common unit and general partner unit of EQM for that quarter. Through EQGP's general partner interest, limited partner interest and IDRs in EQM, EQGP has a controlling financial interest in EQM; therefore, EQGP consolidates EQM. The Company is the ultimate parent company of EQGP and EQM.

The Company consolidates the results of EQGP but records an income tax provision only on its ownership percentage of EQGP earnings. The Company records the noncontrolling interest of the EQGP and EQM public limited partners (i.e., the EQGP limited partner interests not owned by the Company and the EQM limited partner interests not owned by EQGP) in its financial statements.

On October 24, 2017, the Board of Directors of EQGP's general partner declared a cash distribution to EQGP’s unitholders for the third quarter of 2017 of $0.228 per common unit, or approximately $60.7 million. The distribution will be paid on November 22, 2017 to unitholders of record, including the Company, at the close of business on November 3, 2017.

C.~~EQT Midstream Partners, LP~~

~~In January 2012, the Company formed EQM to own, operate, acquire and develop midstream assets~~Operations" included in the Appalachian Basin. EQM provides midstream services to the Company and other third parties. EQM is consolidated in the Company’s financial statements. The Company records the noncontrolling interest of the EQM public limited partners in its financial statements.

On October 24, 2017, the Board of Directors of EQM's general partner declared a cash distribution to EQM’s unitholders for the third quarter of 2017 of $0.980 per common unit. The cash distribution will be paid on November 14, 2017 to unitholders of record, including EQGP, at the close of business on November 3, 2017. Based on the 80,581,758 EQM common units outstanding on October 26, 2017, the aggregate cash distributions by EQM to EQGP for the third quarter 2017 will be approximately $61.1 million consisting of: $21.4 million in respect of its limited partner interest, $2.1 million in respect of its general partner interest and $37.6

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

million in respect of its IDRs. These distribution amounts to EQGP related to its general partner interest and IDRs in EQM are subject to change if EQM issues additional common units on or prior to the record date for the third quarter 2017 distribution.

~~D. Investment in Nonconsolidated Entity~~

As of September 30, 2017, EQM owned a 45.5% interest (the MVP Interest) in Mountain Valley Pipeline, LLC (MVP Joint Venture). The MVP Joint Venture plans to construct the Mountain Valley Pipeline (MVP), an estimated 300-mile natural gas interstate pipeline spanning from northern West Virginia to southern Virginia. The MVP Joint Venture has secured a total of 2.0 Bcf per day of 20-year firm capacity commitments, including a 1.29 Bcf per day firm capacity commitment by the Company. On October 13, 2017, the Federal Energy Regulatory Commission (FERC) issued the Certificate of Public Convenience and Necessity for the project. The pipeline is targeted to be placed in-service during the fourth quarter of 2018.

The MVP Joint Venture has been determined to be a variable interest entity because it has insufficient equity to finance its activities during the construction stage of the project. EQM is not the primary beneficiary because it does not have the power to direct the activities of the MVP Joint Venture that most significantly impact its economic performance. Certain business decisions require the approval of owners holding more than a 66 2/3% interest in the MVP Joint Venture and no one member owns more than a 66 2/3% interest. The Company, through its ownership interest in EQM, accounts for the interest in the MVP Joint Venture as an equity method investment as EQM has the ability to exercise significant influence over operating and financial policies of the MVP Joint Venture.

In August 2017, the MVP Joint Venture issued a capital call notice to MVP Holdco, LLC (MVP Holdco), a direct wholly owned subsidiary of EQM, for $48.0 million, of which $27.2 million was paid in October 2017 and the remaining $20.8 million is expected to be paid in November 2017. The capital contribution payable has been reflected on the Condensed Consolidated Balance Sheet as of September 30, 2017 with a corresponding increase to the Company's ~~investment in the MVP Joint Venture.~~

EQM’s ownership share of the MVP Joint Venture's earnings for the three months ended September 30, 2017 and 2016 was $6.0 million and $2.7 million, respectively. EQM’s ownership share of the earnings for the nine months ended September 30, 2017 and 2016 was $15.4 million and $6.1 million, respectively. These earnings are reported in other income on the Statements of Consolidated Operations for the periods presented.

As of September 30, 2017, EQM had issued a $91 million performance guarantee in favor of the MVP Joint Venture to provide performance assurances for MVP Holdco's obligations to fund its proportionate share of the construction budget for the MVP. Upon the FERC's initial release to begin construction of the MVP, EQM's guarantee will terminate. EQM will then be obligated to issue a new guarantee in an amount equal to 33% of MVP Holdco’s proportionate share of the then remaining construction budget, less, subject to certain limits, any credit assurances issued by any affiliate of EQM under such affiliate's precedent agreement with the MVP Joint Venture.

As of September 30, 2017, EQM's maximum financial statement exposure related to the MVP Joint Venture was approximately $431 million, which consists of the investment in nonconsolidated entity balance on the Condensed Consolidated Balance Sheet as of September 30, 2017 and amounts which could have become due under EQM's performance guarantee as of that date.

~~E. Consolidated Variable Interest Entities~~

The Company determined EQGP and EQM to be variable interest entities. Through EQT's ownership and control of EQGP's general partner and control of EQM's general partner, EQT has the power to direct the activities that most significantly impact their economic performance. In addition, through EQT's limited partner interest in EQGP and EQGP's general partner interest, limited partner interest and IDRs in EQM, EQT has the obligation to absorb the losses of EQGP and EQM and the right to receive benefits from EQGP and EQM, in accordance with such interests. As EQT has a controlling financial interest in EQGP, and is the primary beneficiary of EQGP, EQT consolidates EQGP and EQGP consolidates EQM. See Note 12 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Issued Accounting Standards

In February 2016, ~~for additional information related~~the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases. The standard requires entities to record assets and liabilities that arise from operating leases. In July 2018, the FASB issued ASU 2018-11, Leases: Targeted Improvements, which provided an optional transition method of adoption that permitted entities to recognize a cumulative-effect adjustment to the ~~consolidated variable interest entities.~~opening balance of retained earnings in the period of adoption. Under the optional transition method, comparative financial information and disclosures are not required. The update also provided transition practical expedients. The standard requires disclosure of the nature, maturity and value of an entity's lease liabilities and elections made by the entity. In March 2019, the FASB issued ASU 2019-01, Leases: Codification Improvements, which, among other things, clarified interim disclosure requirements in the year of ASU 2016-02 adoption.

The ~~risks associated with~~Company adopted ASU 2016-02, ASU 2018-11 and ASU 2019-01 on January 1, 2019 using the ~~operations~~optional transition method of ~~EQGP~~adoption. The Company implemented a new lease accounting system to monitor its population of lease contracts. The Company also implemented processes and ~~EQM are discussed~~controls to review both new contracts and modifications to existing contracts that contain lease components for appropriate accounting treatment and to generate disclosures required under the standards. For the disclosures required by the standards, see Note 10.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this ASU eliminates the probable initial recognition threshold and requires entities to reflect their current estimate of all expected credit losses. The amendment affects loans, debt securities, trade receivables, net investments in ~~their respective Annual Reports~~leases, off balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from its scope that have a contractual right to receive cash. This ASU will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The Company does not expect that the adoption of this standard will have a material impact on ~~Form 10-K~~its financial statements and related disclosures and plans to adopt this ASU in the first quarter of 2020.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows entities to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the Tax Cuts and Jobs Act) from accumulated other comprehensive income to retained earnings. This ASU is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The reclassification permitted under this ASU should be applied either in the ~~year ended December 31, 2016, as updated by any Quarterly Reports on Form 10-Q. See further discussion~~period of adoption or retrospectively to each period (or periods) in which the effect of the impact that EQT's ownership and control of EQGP and EQM have on EQT's financial position, results of operations and cash flows included in EQT's Annual Report on Form 10-K for the year ended December 31, 2016, includingchange in the ~~section captioned "Management's~~U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

109

Table of Contents

EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Discussion and Analysis of Financial Condition and Results of Operations" contained therein. See Notes~~ B ~~and~~ C ~~for further discussion of EQGP and EQM, respectively.~~

The ~~following table presents amounts included~~Company adopted this ASU on January 1, 2019, resulting in a $0.5 million decrease to other comprehensive income and increase to retained earnings.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the hierarchy associated with Level 1, 2 and 3 fair value measurements and the related disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The Company does not expect that the adoption of this standard will have a material impact on its financial statements and related disclosures and plans to adopt this ASU in the ~~Company's Condensed Consolidated Balance Sheets that were for the use or obligation~~first quarter of ~~EQGP or EQM as of September 30, 2017 and December 31, 2016.~~2020.

Classification September 30, 2017 December 31, 2016
(Thousands)
Assets:

Cash and cash equivalents $ 6,933
$ 60,453
Accounts receivable 21,768
20,662
Prepaid expenses and other 4,196
5,745
Property, plant and equipment, net 2,745,509
2,578,834
Other assets 363,186
206,104
Liabilities:
Accounts payable $ 37,494
$ 35,831
Other current liabilities 70,960
32,242
Credit facility borrowings 105,000
—
Long-term debt 986,947
985,732
Other liabilities and credits 9,877
9,562

~~The following table summarizes EQGP's Statements of Consolidated Operations and Cash Flows for the three and nine months ended September 30, 2017 and 2016, inclusive of affiliate amounts.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands)
Operating revenues $ 207,193
$ 176,772
$ 609,585
$ 540,600
Operating expenses 62,230
51,138
180,218
150,548
Other expenses (income) 2,556
(7,452 ) 6,418
(9,900 )
Net income $ 142,407
$ 133,086
$ 422,949
$ 399,952

Net cash provided by operating activities $ 159,911
$ 102,923
$ 479,566
$ 378,042
Net cash used in investing activities (117,637 ) (204,470 ) (324,936 ) (541,369 )
Net cash (used in) provided by financing activities (48,128 ) 17,454
(208,150 ) (197,367 )

F.~~Financial Information by Business Segment~~2.Discontinued Operations

~~Operating segments are revenue-producing components~~On November 12, 2018, the Company completed the separation of its midstream business, which was composed of the ~~enterprise for~~separately operated natural gas gathering, transmission and storage and water services businesses of the Company, from its upstream business, which ~~separate financial information~~ is ~~produced internally and which are subject to evaluation by~~composed of the ~~Company’s chief operating decision maker in deciding how to allocate resources.~~

The Company reports its operations in three segments, which reflect its lines of business: EQT Production, EQT Gathering and EQT Transmission. The EQT Production segment includes the Company’s exploration for, and development and production of, natural gas, oil and natural gas liquids (NGLs) development, production and sales and commercial operations of the Company (the Separation). The Separation was effected by the transfer of the midstream business from the Company to Equitrans Midstream Corporation (Equitrans Midstream) and the distribution of 80.1% of the outstanding shares of Equitrans Midstream's common stock to the Company's shareholders (the Distribution).

The Company retained 19.9% of the outstanding shares of Equitrans Midstream's common stock. The Company does not have the ability to exercise significant influence and does not have a ~~limited amount~~controlling financial interest in Equitrans Midstream or any of ~~crude oil, primarily~~its subsidiaries; therefore, this investment is accounted for as an investment in equity securities. As of September 30, 2019 and December 31, 2018, the ~~Appalachian Basin. The EQT Production segment also includes~~fair value was based on the ~~marketing activities~~closing stock price of Equitrans Midstream's common stock multiplied by the number of shares of Equitrans Midstream's common stock owned by the Company. The changes in fair value were recorded in the Statements of Condensed Consolidated Operations.

Equitrans Midstream included the Company's former EQM Gathering, EQM Transmission and EQM Water segments. For all periods prior to the Separation and Distribution, the results of operations of ~~EQT Gathering include~~Equitrans Midstream are reflected as discontinued operations. The Statements of Condensed Consolidated Operations have been recast to reflect this presentation and present certain transportation and processing expenses in continuing operations that were previously eliminated in consolidation. The cash flows related to Equitrans Midstream have not been segregated and are included within the ~~natural gas gathering activities~~Statements of Condensed Consolidated Cash Flows for all periods prior to the Separation and Distribution.

The results of operations of Equitrans Midstream, as presented as discontinued operations in the Statements of Condensed Consolidated Operations, are summarized below. The Company allocated the transaction costs associated with the Separation and Distribution and a portion of the ~~Company, consisting solely~~costs associated with the acquisition of assets that are owned and operated by EQM. The operations of EQT Transmission include the natural gas transmission and storage activities of the Company, consisting solely of assets that are owned and operated by EQM.

~~Operating segments are evaluated on their contribution~~Rice Energy Inc. to the Company’s consolidated results based on operating income. Other income, interest and income taxes are managed on a consolidated basis. Headquarters’ costs are billed to the operating segments based upon an allocation of the headquarters’ annual operating budget. Differences between budget and actual headquarters’ expenses are not allocated to the operating segments.

discontinued operations.



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	(Thousands)
Operating revenues	$	108,824		$	334,394
Transportation and processing	(234,340		)	(688,876		)
Operation and maintenance	29,909			82,458
Selling, general and administrative	13,584			41,238
Depreciation	47,295			138,458
Transaction costs	22,714			69,246
Amortization of intangible assets	10,387			31,160
Other income	17,432			39,029
Interest expense	36,862			68,848
Income from discontinued operations before income taxes	199,845			630,891
Income tax expense	9,050			93,218
Income from discontinued operations after income taxes	190,795			537,673
Less: Net income from discontinued operations attributable to noncontrolling interests	103,141			362,696
Net income from discontinued operations	$	87,654		$	174,977

Table of Contents

EQT Corporation and Subsidiaries

Notes to ~~the~~ Condensed Consolidated Financial Statements (Unaudited)

The following table presents cash flows from discontinued operating activities related to Equitrans Midstream that are included and not separately stated in the Statements of Condensed Consolidated Cash Flows. Cash flows from investing and financing activities are separately stated in the Statements of Condensed Consolidated Cash Flows.

~~Substantially all~~



	Nine Months Ended September 30, 2018
	(Thousands)
Operating activities:
Deferred income tax benefit	$	(124,331	)
Depreciation	138,458
Amortization of intangibles	31,160
Other income	(39,029		)
Share-based compensation expense	1,293

3. Revenue from Contracts with Customers

Under the Company's natural gas, oil and NGLs sales contracts, the Company generally considers the delivery of each unit (MMBtu or Bbl) to be a separate performance obligation that is satisfied upon delivery. These contracts typically require payment within 25 days of the ~~Company’s operating revenues, income~~end of the calendar month in which the commodity is delivered. A significant number of these contracts contain variable consideration because the payment terms refer to market prices at future delivery dates. In these situations, the Company has not identified a standalone selling price because the terms of the variable payments relate specifically to the Company's efforts to satisfy the performance obligations. Other contracts contain fixed consideration (i.e. fixed price contracts or contracts with a fixed differential to New York Mercantile Exchange (NYMEX) or index prices). The fixed consideration is allocated to each performance obligation on a relative standalone selling price basis, which requires judgment from ~~operations and assets are generated~~management. For these contracts, the Company generally concludes that the fixed price or ~~located~~fixed differentials in the ~~United States.~~contracts are representative of the standalone selling price.

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

The sales of natural gas, oil and NGLs presented on the Statements of Condensed Consolidated Operations represent the Company's share of revenues net of royalties and excluding revenue interests owned by others. When selling natural gas, oil and NGLs on behalf of royalty owners or working interest owners, the Company is acting as an agent and, thus, reports the revenue on a net basis.

Because the Company's performance obligations have been satisfied and an unconditional right to consideration exists as of the balance sheet date, the Company recognized amounts due from contracts with customers of $301.5 million and $783.0 million as accounts receivable within the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively. Accounts receivable also includes amounts due from joint interest partners as well as amounts due for settled derivative instruments.

Three Months Ended September 30, 2017 EQT Production EQT Gathering EQT Transmission Intersegment Eliminations EQT Corporation
Revenues: (Thousands)
Sales of natural gas, oil and NGLs $ 552,953
$ —
$ —
$ —
$ 552,953
Pipeline and net marketing services 9,140
116,522
90,671
(144,598 ) 71,735
Gain on derivatives not designated as hedges 35,625
—
—
—
35,625
Total operating revenues $ 597,718
$ 116,522
$ 90,671
$ (144,598 ) $ 660,313

Three Months Ended September 30, 2016 EQT Production EQT Gathering EQT Transmission Intersegment Eliminations EQT Corporation
Revenues: (Thousands)
Sales of natural gas, oil and NGLs $ 403,939
$ —
$ —
$ —
$ 403,939
Pipeline and net marketing services 10,797
99,141
77,631
(128,138 ) 59,431
Gain on derivatives not designated as hedges 93,356
—
—
—
93,356
Total operating revenues $ 508,092
$ 99,141
$ 77,631
$ (128,138 ) $ 556,726

Nine Months Ended September 30, 2017 EQT Production EQT Gathering EQT Transmission Intersegment Eliminations EQT Corporation
Revenues: (Thousands)
Sales of natural gas, oil and NGLs $ 1,803,132
$ —
$ —
$ —
$ 1,803,132
Pipeline and net marketing services 31,656
330,996
278,589
(418,337 ) 222,904
Gain on derivatives not designated as hedges 222,693
—
—
—
222,693
Total operating revenues $ 2,057,481
$ 330,996
$ 278,589
$ (418,337 ) $ 2,248,729

Nine Months Ended September 30, 2016 EQT Production EQT Gathering EQT Transmission Intersegment Eliminations EQT Corporation
Revenues: (Thousands)
Sales of natural gas, oil and NGLs $ 1,072,898
$ —
$ —
$ —
$ 1,072,898
Pipeline and net marketing services 28,196
297,305
243,295
(380,026 ) 188,770
Loss on derivatives not designated as hedges (32,342 ) —
—
—
(32,342 )
Total operating revenues $ 1,068,752
$ 297,305
$ 243,295
$ (380,026 ) $ 1,229,326

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands)
Operating income (loss):

EQT Production $ 12,082
$ (15,465 ) $ 322,277
$ (468,678 )
EQT Gathering 85,817
72,495
242,716
218,274
EQT Transmission 59,689
53,715
188,995
174,085
Unallocated expenses (a) (19,894 ) (2,288 ) (35,856 ) (12,515 )
Total operating income (loss) $ 137,694
$ 108,457
$ 718,132
$ (88,834 )


~~(a)~~	~~Unallocated expenses consist primarily of compensation expense and administrative costs, including the Rice Merger (defined in Note~~ N~~) acquisition-related expenses.~~

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EQT Corporation and Subsidiaries

Notes to ~~the~~ Condensed Consolidated Financial Statements (Unaudited)

~~Reconciliation~~The table below provides disaggregated information regarding the Company's revenues. Certain contracts that provide for the release of ~~operating income (loss)~~capacity that is not used to transport the Company's produced volumes are outside the scope of ASU 2014-09, Revenue from Contracts with Customers. The cost of, and recoveries on, that capacity are reported within net ~~income (loss):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands)
Total operating income (loss) $ 137,694
$ 108,457
$ 718,132
$ (88,834 )
Other income 6,859
10,715
16,878
23,199
Interest expense 50,377
35,984
137,110
108,469
Income tax (benefit) expense (11,281 ) 13,084
119,093
(151,826 )
Net income (loss) $ 105,457
$ 70,104
$ 478,807
$ (22,278 )

marketing services and other. Derivative contracts are also outside the scope of Revenue from Contracts with Customers.



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019		2018
	(Thousands)
Revenues from contracts with customers:
Natural gas sales	$	726,076	$	931,976		$	2,763,792	$	2,877,660
NGLs sales	34,880		106,621			151,004		357,746
Oil sales	8,671		8,392			26,971		29,322
Net marketing services and other	—		2,605			—		14,273
Total revenues from contracts with customers	769,627		1,049,594			2,941,767		3,279,001

Other sources of revenue:
Net marketing services and other	1,636		3,527			7,282		28,109
Gain (loss) on derivatives not designated as hedges	180,313		(3,075		)	455,952		5,620
Total operating revenues	$	951,576	$	1,050,046		$	3,405,001	$	3,312,730

As of September 30, 2017 As of December 31, 2016
(Thousands)
Segment assets:

EQT Production $ 12,071,776
$ 10,923,824
EQT Gathering 1,367,487
1,225,686
EQT Transmission 1,442,068
1,399,201
Total operating segments 14,881,331
13,548,711
Headquarters assets, including cash and short-term investments 1,103,317
1,924,211
Total assets $ 15,984,648
$ 15,472,922

The following table includes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of September 30, 2019. The table excludes all contracts that qualified for the exception to the relative standalone selling price method.



	2019 (a)		2020		2021		Total
	(Thousands)
Natural gas sales	$	22,001	$	56,269	$	14,731	$	93,001

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands)
Depreciation, depletion and amortization:

EQT Production $ 224,103
$ 220,768
$ 654,411
$ 635,253
EQT Gathering 9,983
7,663
28,398
22,520
EQT Transmission 12,261
6,976
35,793
20,657
Other 213
1,681
693
4,518
Total $ 246,560
$ 237,088
$ 719,295
$ 682,948

Expenditures for segment assets (b):

EQT Production (c) $ 449,303
$ 622,856
$ 1,850,482
$ 1,094,747
EQT Gathering 48,182
88,390
150,728
247,755
EQT Transmission 22,312
77,940
73,679
253,957
Other 2,502
4,693
7,097
10,395
Total $ 522,299
$ 793,879
$ 2,081,986
$ 1,606,854


~~(b)~~	~~Includes the capitalized portion of non-cash stock-based compensation expense and the impact of capital accruals.~~

~~(c)~~(a)

Expenditures for segment assets in the EQT Production segment included $52.1 million and $30.1 million for general leasing activity during the three months ended September 30, 2017 and 2016, respectively, and $147.0 million and $98.2 million for general leasing activity during the nine months ended September 30, 2017 and 2016, respectively. The three and nine months ended September 30, 2017 includes $7.8 million and $819.0 million of cash capital expenditures, respectively, for the acquisitions discussed in Note M~~. The three and nine months ended September 30, 2016 includes $412.3 million of cash capital expenditures for the acquisitions discussed in Note~~ M~~. During the nine months ended September 30, 2017 and 2016, the Company also incurred $7.5 million and $6.2 million of non-cash capital expenditures for the acquisitions discussed in Note~~ M.October 1 through December 31.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

G.4.Derivative Instruments

The ~~Company’s~~Company's primary market risk exposure is the volatility of future prices for natural gas and NGLs, which can affect the operating results of the Company. The Company ~~primarily at EQT Production.~~uses derivative commodity instruments to hedge its cash flows from sales of the Company's produced natural gas and NGLs. The ~~Company’s~~Company's overall objective in its hedging program is to protect cash flows from undue exposure to the risk of changing commodity prices.

The ~~Company uses over the counter (OTC)~~ derivative commodity instruments currently used by the Company are primarily swap ~~and~~agreements, collar agreements and option agreements that ~~are typically placed with financial institutions. The creditworthiness of all counterparties is regularly monitored. Swap agreements involve~~may require payments to or ~~receipts~~receipt of payments from counterparties based on the differential between two prices for the commodity. ~~Collar agreements require the counterparty to pay the Company if the index price falls below the floor price and the Company to pay the counterparty if the index price rises above the cap price.~~ The Company ~~also sells call options that require the Company~~uses these agreements to ~~pay the counterparty if the index price rises above the strike price.~~hedge its NYMEX and basis exposure. The Company ~~engages~~may also use other contractual agreements in ~~basis swaps to protect earnings from undue exposure to~~implementing its commodity hedging strategy. The Company's over the risk of geographic disparities in commodity prices and interest rate swaps to hedge exposure to interest rate fluctuations on potential debt issuances. The Company has also engaged in a limited number of swaptions and power-indexed natural gas sales and swaps that are treated ascounter (OTC) derivative commodity instruments ~~for accounting purposes.~~are typically entered into with financial institutions and the creditworthiness of all counterparties is regularly monitored.

The Company does not designate any of its derivative instruments as cash flow hedges; therefore, all changes in fair value of the Company's derivative instruments are recognized within operating revenues in the Statements of Condensed Consolidated Operations. The Company recognizes all derivative instruments as either assets or liabilities at fair value on a gross basis. These derivative instruments are reported as either current assets or current liabilities due to their highly liquid nature. The Company can net settle its derivative instruments at any time.

The Company discontinued cash flow hedge accounting in 2014; therefore, all changes in fair value of the Company’s derivative instruments are recognized within operating revenues in the Statements of Consolidated Operations.

In prior periods, derivative commodity instruments used by the Company to hedge its exposure to variability in expected future cash flows associated with the fluctuations in the price of natural gas related to the Company’s forecasted sale of EQT Production's produced volumes and forecasted natural gas purchases and sales were designated and qualified as cash flow hedges. As of September 30, 2017 and December 31, 2016, the forecasted transactions that were hedged as of December 31, 2014 remained probable of occurring and as such, the amounts in accumulated other comprehensive income (OCI) will continue to be reported in accumulated OCI and will be reclassified into earnings in future periods when the underlying hedged transactions occur. The forecasted transactions extend through December 2018. As of September 30, 2017 and December 31, 2016, the Company deferred net gains of $5.6 million and $9.6 million, respectively, in accumulated OCI, net of tax, related to the effective portion of the change in fair value of its derivative commodity instruments designated as cash flow hedges. The Company estimates that approximately $1.9 million of net gains on its derivative commodity instruments reflected in accumulated OCI, net of tax, as of September 30, 2017 will be recognized in earnings during the next twelve months due to the settlement of hedged transactions.

Contracts ~~which~~that result in physical delivery of a commodity expected to be ~~used or~~ sold by the Company in the normal course of business are generally designated as normal ~~purchases and~~ sales and are exempt from derivative accounting. If contracts that result in the physical receipt or delivery of a commodity are not designated or do not meet all the criteria to qualify for the normal purchase and normal sale scope exception, the contracts are subject to derivative accounting.

Table of Contents

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company's OTC ~~arrangements~~derivative instruments generally require settlement in cash. The Company also enters into exchange traded derivative commodity instruments that are generally settled with offsetting positions. Settlements of derivative commodity instruments are reported as a component of cash flows from operations in the accompanying Statements of Condensed Consolidated Cash Flows.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Thousands)
Commodity derivatives designated as cash flow hedges
Amount of gain reclassified from accumulated OCI, net of tax, into operating revenues (effective portion) $ 1,451
$ 14,740
$ 4,011
$ 43,104

Interest rate derivatives designated as cash flow hedges

Amount of loss reclassified from accumulated OCI, net of tax, into interest expense (effective portion) $ (36 ) $ (36 ) $ (108 ) $ (108 )

Derivatives not designated as hedging instruments

Amount of gain (loss) recognized in operating revenues $ 35,625
$ 93,356
$ 222,693
$ (32,342 )

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of ~~equity~~ production and portions of its basis exposure covering approximately ~~470~~1,922 Bcf of natural gas and ~~1,189~~276 Mbbls of NGLs as of September 30, ~~2017,~~2019, and ~~646~~3,128 Bcf of natural gas and ~~1,095~~1,505 Mbbls of NGLs as of December 31, ~~2016.~~2018. The open positions at both September 30, ~~2017~~2019 and December 31, ~~2016~~2018 had maturities extending through December ~~2020.~~2024.

When the net fair value of any of the Company's swap agreements represents a liability to the Company that is in excess of the agreed-upon threshold between the Company and the counterparty, the counterparty requires 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 threshold amount. The Company records these deposits as a current asset. When the net fair value of any of the Company's swap agreements represents an asset to the Company that is in excess of the agreed-upon threshold between the Company and the counterparty, the Company requires 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 threshold amount. The Company records a current liability for such amounts received. The Company had no such deposits in its Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018.

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. The Company must make such deposits based on an established initial margin requirement as well as the net liability position, if any, of the fair value of the associated contracts. The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets. When the fair value of such contracts is in a net asset position, the broker may remit funds to the Company. The Company records a current liability for any such amounts received. The initial margin requirements are established by the exchanges based on the price, volatility and the time to expiration of the related contract. The margin requirements are subject to change at the exchanges' discretion. The Company recorded current assets of $23.4 million and $40.3 million as of September 30, 2019 and December 31, 2018, respectively, for such deposits in its Condensed Consolidated Balance Sheets.

The Company has netting agreements with financial institutions and its brokers that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities. The table below reflects the impact of netting agreements and margin deposits on gross derivative assets and ~~liabilities as of September 30, 2017 and December 31, 2016.~~ liabilities.

As of September 30, 2017
Derivative
instruments,
recorded in the
Condensed
Consolidated
Balance
Sheet, gross

Derivative
instruments
subject to
master
netting
agreements

Margin
deposits
remitted to
counterparties

Derivative
instruments, net
(Thousands)
Asset derivatives:

Derivative instruments, at fair value $ 67,555
$ (42,886 ) $ —
$ 24,669
Liability derivatives:

Derivative instruments, at fair value $ 71,374
$ (42,886 ) $ —
$ 28,488



	Gross derivative instruments, recorded in the Condensed Consolidated Balance Sheets		Derivative instruments subject to master netting agreements			Margin deposits remitted to counterparties			Derivative instruments, net
	(Thousands)
As of September 30, 2019
Asset derivative instruments, at fair value	$	771,634	$	(288,898	)	$	—		$	482,736
Liability derivative instruments, at fair value	$	339,995	$	(288,898	)	$	(23,372	)	$	27,725

As of December 31, 2018
Asset derivative instruments, at fair value	$	481,654	$	(256,087	)	$	—		$	225,567
Liability derivative instruments, at fair value	$	336,051	$	(256,087	)	$	(40,283	)	$	39,681

As of December 31, 2016
Derivative
instruments,
recorded in the
Condensed
Consolidated
Balance
Sheet, gross

Derivative
instruments
subject to
master
netting
agreements

Margin
deposits
remitted to
counterparties

Derivative
instruments, net
(Thousands)
Asset derivatives:

Derivative instruments, at fair value $ 33,053
$ (23,373 ) $ —
$ 9,680
Liability derivatives:

Derivative instruments, at fair value $ 257,943
$ (23,373 ) $ —
$ 234,570

Certain of the ~~Company’s~~Company's OTC derivative instrument contracts provide that, if the ~~Company’s~~Company's credit ratings by ~~Standard & Poor’s Rating Service~~S&P Global Ratings (S&P) or ~~Moody’s~~Moody's Investors Service, ~~(Moody’s)~~Inc. (Moody's) are lowered below investment grade, additional collateral must be deposited with the counterparty if the ~~amounts outstanding~~derivative liability on those contracts ~~exceed~~exceeds certain thresholds. The additional collateral can be up to 100% of the derivative liability. As of September 30, ~~2017,~~2019, the aggregate fair value of all OTC derivative instruments with credit risk-related contingent features that were in a net liability position was ~~$12.8~~$76.7 million, for which the Company had no0 collateral posted on September 30, ~~2017.~~2019. If the ~~Company’s~~Company's credit rating by S&P or ~~Moody’s~~Moody's had been downgraded to a rating immediately below investment grade on September 30, ~~2017,~~2019, the Company would not have been required to post any additional collateral under ~~the agreements~~its OTC derivative instrument contracts with the respective counterparties. The required margin on the ~~Company’s~~Company's derivative instruments is subject to significant change as a result of factors other than credit rating, such as gas prices and credit thresholds set forth in agreements between the hedging counterparties and the Company. Investment grade refers to the quality of the ~~Company’s~~ Company's

Table of Contents

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

credit as assessed by one or more credit rating agencies. The ~~Company’s~~Company's senior unsecured debt was rated ~~BBB~~BBB- by S&P and Baa3 by ~~Moody’s~~Moody's at September 30, ~~2017.~~2019. In order to be considered investment grade, the Company must be rated BBB- or higher by S&P and Baa3 or higher by ~~Moody’s.~~Moody's. Anything below these ratings is considered non-investment grade. See also "Security Ratings and Financing Triggers" under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

The Company may engage in interest rate swaps to hedge exposure to fluctuations in interest rates but has not executed any interest rate swaps since 2011. Amounts related to historical interest rate swaps are recorded in other comprehensive income (OCI). See Note 9.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

H.5.Fair Value Measurements

The Company records its financial instruments, principally derivative instruments, at fair value in its Condensed Consolidated Balance Sheets. The Company estimates the fair value using quoted market prices, where available. If quoted market prices are not available, fair value is based ~~upon~~on models that use market-based parameters as inputs, including forward curves, discount rates, volatilities and nonperformance risk. Nonperformance risk considers the effect of the ~~Company’s~~Company's credit standing on the fair value of liabilities and the effect of the ~~counterparty’s~~counterparty's credit standing on the fair value of assets. The Company estimates nonperformance risk by analyzing publicly available market information, including a comparison of the yield on debt instruments with credit ratings similar to the ~~Company’s~~Company's or ~~counterparty’s~~counterparty's credit rating and the yield of a risk-free ~~instrument and credit default swaps rates where available.~~instrument.

The Company has categorized its assets and liabilities recorded at fair value into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Assets and liabilities in Level 2 primarily include the ~~Company’s~~Company's swap, collar and ~~collar~~option agreements.

Exchange traded commodity swaps are included in Level 1. The fair value of the commodity swaps included in Level 2 is based on standard industry income approach models that use significant observable inputs, including but not limited to ~~New York Mercantile Exchange (NYMEX)~~NYMEX natural gas ~~and propane~~ forward curves, LIBOR-based discount rates, basis forward curves and ~~basis~~natural gas liquids forward curves. The ~~Company’s~~Company's collars ~~options~~ and ~~swaptions~~options are valued using standard industry income approach option models. The significant observable inputs ~~utilized~~used by the option pricing models include NYMEX forward curves, natural gas volatilities and LIBOR-based discount rates. ~~The NYMEX natural gas and propane forward curves, LIBOR-based discount rates, natural gas volatilities and basis forward curves are validated to external sources at least monthly.~~

The ~~following~~table below reflects assets and liabilities ~~were~~ measured at fair value on a recurring ~~basis during the applicable period:~~basis.



	Gross derivative instruments, recorded in the Condensed Consolidated Balance Sheets		Fair value measurements at reporting date using:
			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Thousands)
As of September 30, 2019
Asset derivative instruments, at fair value	$	771,634	$	140,855	$	630,779	$	—
Liability derivative instruments, at fair value	$	339,995	$	107,490	$	232,505	$	—

As of December 31, 2018
Asset derivative instruments, at fair value	$	481,654	$	112,107	$	369,547	$	—
Liability derivative instruments, at fair value	$	336,051	$	126,582	$	209,469	$	—

Fair value measurements at reporting date using
Description As of September 30, 2017
Quoted prices in
active markets for
identical assets
(Level 1)

Significant
other observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
(Thousands)
Assets

Derivative instruments, at fair value $ 67,555
$ —
$ 67,555
$ —
Liabilities
Derivative instruments, at fair value $ 71,374
$ —
$ 71,374
$ —

Fair value measurements at reporting date using
Description As of December 31, 2016
Quoted prices in
active markets for
identical assets
(Level 1)

Significant
other observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
(Thousands)
Assets

Trading securities $ 286,396
$ —
$ 286,396
$ —
Derivative instruments, at fair value $ 33,053
$ —
$ 33,053
$ —
Liabilities

Derivative instruments, at fair value $ 257,943
$ —
$ 257,943
$ —

The carrying values of cash equivalents, ~~restricted cash,~~ accounts receivable and accounts payable approximate fair value due to the short-term maturity of the instruments. The carrying ~~values~~value of the Company's investment in Equitrans Midstream approximates fair value as it is a publicly traded company. The carrying value of borrowings under ~~EQM’s~~the Company's credit ~~facilities~~facility and term loan facility approximate fair value as the interest rates are based on prevailing market rates. ~~These are~~The Company considered all of these fair values to be Level 1 fair ~~values.~~value measurements.

~~As of December 31, 2016,~~The Company also has an immaterial investment in a fund that invests in companies developing technology and operating solutions for exploration and production companies for which the Company ~~reflected its~~recognized a cumulative effect of accounting change in the first quarter 2018. The investment is valued using the net asset value as a practical expedient as provided in ~~trading securities as Level 2 fair value measurements. The fair values of trading securities classified as Level 2 are priced using nonbinding market prices that are corroborated by observable~~the financial statements received from fund managers.

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Table of Contents

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

market data. Inputs into these valuation techniques include actual trade data, broker/dealer quotes and other similar data. As of March 31, 2017, the Company closed its positions on all trading securities.

The Company estimates the fair value of its ~~debt~~Senior Notes using its established fair value methodology. ~~Because~~As the Company's Senior Notes are not all ~~of the Company’s debt is~~ actively traded, the fair value ~~of the debt~~ is a Level 2 fair value measurement. Fair value for non-traded debt obligations is estimated using a standard industry income approach model which utilizes a discount rate based on market rates for debt with similar remaining time to maturityAs of September 30, 2019 and ~~credit risk. The~~December 31, 2018, the estimated fair value of ~~total~~the Company's Senior Notes was approximately $3.8 billion and $4.4 billion, respectively, and the carrying value of the Company's Senior Notes was approximately $3.9 billion and $4.6 billion, respectively, inclusive of the current portion of debt ~~(including EQM’s long-term debt)~~ on the Condensed Consolidated Balance ~~Sheets was approximately $3.5 billion at~~Sheets. The fair value of the Company's note payable to EQM is a Level 3 fair value measurement, which is estimated using an income approach model with a market-based discount rate. As of September 30, ~~2017~~2019 and December 31, ~~2016. The~~2018, the estimated fair value of the Company's note payable to EQM was approximately $131 million and $122 million, respectively, and the carrying value of ~~total~~the Company's note payable to EQM was approximately $111 million and $115 million, respectively, inclusive of the current portion of debt ~~(including EQM’s long-term debt)~~ on the Condensed Consolidated Balance ~~Sheets was approximately $3.3 billion at September 30, 2017 and December 31, 2016.~~Sheets.

The Company recognizes transfers between Levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between Levels 1, 2 and 3 during the periods presented.

For information on the fair values of assets related to the impairments of proved and unproved oil and gas properties and of other long-lived assets, see Note 12 and Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

I.6.Income Taxes

Historically, 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. Because small fluctuations in estimated ordinary income could result in significant changes in the estimated annual effective tax rate, the Company determined that the historic method does not provide a reliable estimate for the nine months ended September 30, 2019. As a result, the Company instead used a discrete effective tax rate method to calculate taxes for the nine months ended September 30, 2019. There were no material changes to the Company's methodology for determining unrecognized tax benefits during the nine months ended September 30, 2019.

For the nine months ended September 30, ~~2017,~~2018, the Company calculated the provision for income taxes by applying the annual effective tax rate for the full fiscal year to ~~“ordinary”~~ordinary income or loss ~~(pre-tax income or loss excluding unusual or infrequently occurring items)~~ for the ~~quarter. For the nine months ended September 30, 2016, the~~period.

The Company ~~determined small fluctuations in estimated “ordinary”~~recorded income ~~would result in significant changes in the estimated annual~~tax benefit at effective tax ~~rate~~rates of 17.1% and ~~thus an estimated annual effective tax rate would not provide a reliable estimate for that period. As a consequence, the Company used a discrete effective tax rate method to calculate taxes~~25.1% for the nine months ended September 30, ~~2016.~~

All of EQGP’s income is included in the Company’s pre-tax income. However, the Company is not required to record income tax expense with respect to the portion of EQGP’s income allocated to the noncontrolling public limited partners of EQGP2019 and ~~EQM, which reduces the Company’s effective tax rate in periods when the Company has consolidated pre-tax income and increases the~~2018, respectively. The Company's effective tax rate in periods when the Company has consolidated pre-tax loss. The Company had consolidated pre-tax income for the nine months ended September 30, 2017, compared to a consolidated pre-tax loss for the nine months ended September 30, 2016. The Company’s effective tax rate for the nine months ended September 30, ~~2017~~2019 was ~~19.9%~~lower compared to ~~87.2%~~the U.S. federal statutory rate of 21% due primarily to state valuation allowances that limit certain state tax benefits and executive compensation and transaction costs, which are not deductible for tax purposes, partly offset by state taxes recorded in 2019 and the release of the valuation allowance related to Alternative Minimum Tax (AMT) sequestration. The IRS announced in January 2019 that it was reversing its prior position that 6.2% of AMT refunds were subject to sequestration by the U.S. federal government. As a result, the Company reversed this related valuation allowance in the first quarter of 2019. The Company's effective tax rate for the nine months ended September 30, ~~2016.~~2018 was higher than the U.S. federal statutory rate due primarily to higher state taxes recorded in 2018, partly offset by valuation allowances that limit state tax benefits.

~~There were no material changes to the Company’s methodology for determining unrecognized tax benefits during the three months ended September 30, 2017.~~

J.~~Revolving Credit Facilities~~7.Debt

~~In July 2017, the~~The Company ~~amended and restated its $1.5~~has a $2.5 billion ~~revolving~~ credit facility ~~to extend the term to~~that expires in July 2022. In addition, following the closing of the Rice Merger (defined in Note N) and subject to the satisfaction of certain conditions, the borrowing capacity under the revolving credit facility will automatically increase to $2.5 billion. The Company had no borrowings or letters of credit outstanding under its revolving credit facility as of September 30, 2017 or December 31, 2016 or at any time during the three and nine months ended September 30, 2017 and 2016.

In July 2017, EQM amended and restated its credit facility to increase the borrowing capacity under the facility from $750 million to $1 billion and to extend the term to July 2022. Subject to certain terms and conditions, the $1 billion credit facility has an accordion feature that allows EQM to increase the available borrowings under the facility by up to an additional $500 million. EQM had $105 million in borrowings and no0 letters of credit outstanding under the credit facility as of September 30, ~~2017. EQM had no~~2019 and December 31, 2018. During the three months ended September 30, 2019 and 2018, the maximum amounts of outstanding borrowings ~~and no letters of credit outstanding~~at any time under the credit facility ~~as of December 31, 2016. The maximum amount of outstanding borrowings under EQM’s revolving credit facility at any time during each of~~were $0.3 billion and $0.7 billion, respectively, the three and nine months ended September 30, 2017 was $177 million. The maximum amount of EQM's outstanding borrowings under the credit facility at any time during the three and nine months ended September 30, 2016 was $91 million and $299 million, respectively. The average daily ~~balance of loans outstanding under EQM's credit facility~~balances were approximately $0.1 billion and $0.3 billion, respectively, and interest was ~~approximately $95 million and $32 million during the three and nine months ended September 30, 2017, respectively,~~incurred at a weighted average annual interest rate of ~~2.7%~~3.6% for both periods. ~~The~~During the nine months ended September 30, 2019 and 2018, the maximum amounts of outstanding borrowings at any time under the credit facility were $1.1 billion and $1.6 billion, respectively, the average daily ~~balance of loans outstanding under EQM's credit facility~~balances were approximately $0.3 billion and $0.9 billion, respectively, and interest was ~~approximately $34 million and $67 million~~incurred at weighted average annual interest rates of ~~2.0%~~4.0% and ~~1.9%~~3.3%, respectively.

On May 31, 2019, the Company entered into a Term Loan Agreement (Term Loan Agreement) providing for a $1.0 billion unsecured term loan facility (Term Loan Facility) and borrowed $1.0 billion under the ~~three~~Term Loan Facility. The Company used the net proceeds to (i) repay the $700 million in aggregate principal amount of 8.125% Senior Notes, which matured on June 1, 2019, (ii) repay outstanding borrowings under the Company's $2.5 billion credit facility and ~~nine months ended September 30, 2016, respectively.~~(iii) pay accrued interest and fees and expenses related to the foregoing and the Term Loan Agreement. Remaining proceeds from the borrowing were used by the Company for general corporate purposes. The Term Loan Facility matures on May 31, 2021.

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

At the Company's election, the $1.0 billion in borrowings under the Term Loan Facility bear interest at a eurodollar rate as defined in the Term Loan Agreement plus a margin determined on the basis of the Company's credit ratings, which is currently 1.00%. The Company may voluntarily prepay borrowings under the Term Loan Facility, in whole or in part, without premium or penalty, but subject to reimbursement of funding losses with respect to prepayment. Borrowings under the Term Loan Facility that are repaid may not be reborrowed. As of September 30, 2019, the Company had $1.0 billion of outstanding borrowings under the Term Loan Facility and interest was incurred at a weighted average annual interest rate of 3.3%.

The Term Loan Agreement contains certain representations and warranties and various affirmative and negative covenants and events of default, including (i) a restriction on the ability of the Company or its subsidiaries to incur or permit liens on assets, subject to certain significant exceptions, (ii) the establishment of a maximum ratio of consolidated debt to total capital of the Company and its subsidiaries such that consolidated debt shall at no time exceed 65% of total capital, (iii) a limitation on certain changes to the Company's business and (iv) certain restrictions related to mergers or acquisitions.

8.Earnings Per Share

Potentially dilutive securities (options and restricted stock awards) included in the calculation of diluted earnings per share totaled 199,376 and 204,080 for the three and nine months ended September 30, 2017, respectively. Options to purchase common stock excluded from potentially dilutive securities because they were anti-dilutive totaled 425,100 and 431,190 for the three and nine months ended September 30, 2017, respectively. In periods when theThe Company ~~reports~~reported a net loss, all options and restricted stock awards are excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on loss per share. Due to the Company's net loss for the three and nine months ended September 30, ~~2016,~~2019 and 2018; therefore, all ~~outstanding~~ options and restricted stock ~~awards~~ were excluded from the calculation of diluted weighted average shares outstanding and diluted earnings per share because of their anti-dilutive effect on loss per share. ~~The~~Options to purchase common stock that were excluded ~~options~~from potentially dilutive securities because they were anti-dilutive were 2,554,729 for both the three and ~~restricted stock awards totaled 1,712,527~~nine months ended September 30, 2019 and ~~1,812,142~~1,201,900 and 1,257,991 for the three and nine months ended September 30, ~~2016,~~2018, respectively. ~~The impact of EQM’s and EQGP’s dilutive units did not have a material impact on the Company’s earnings per share calculations for any of the periods presented.~~

L.9. Changes in Accumulated Other Comprehensive (Loss) Income by Component

The following ~~tables explain~~table explains the changes in accumulated OCI (loss) income by ~~component during the applicable period:~~component.



	Natural gas cash flow hedges, net of tax				Interest rate cash flow hedges, net of tax				Other post-retirement benefit liability adjustment, net of tax				Accumulated OCI (loss), net of tax
	(Thousands)
As of July 1, 2019	$	—			$	(303	)		$	(5,363	)		$	(5,666	)
Losses reclassified from accumulated OCI, net of tax	—				43			(a)	77			(b)	120
As of September 30, 2019	$	—			$	(260	)		$	(5,286	)		$	(5,546	)

As of July 1, 2018	$	3,872			$	(475	)		$	(6,356	)		$	(2,959	)
(Gains) losses reclassified from accumulated OCI, net of tax	(430		)	(a)	52			(a)	86			(b)	(292		)
As of September 30, 2018	$	3,442			$	(423	)		$	(6,270	)		$	(3,251	)

As of January 1, 2019	$	—			$	(387	)		$	(5,019	)		$	(5,406	)
Losses reclassified from accumulated OCI, net of tax	—				127			(a)	229			(b)	356
Change in accounting principle	—				—				(496		)	(c)	(496		)
As of September 30, 2019	$	—			$	(260	)		$	(5,286	)		$	(5,546	)

As of January 1, 2018	$	4,625			$	(555	)		$	(6,528	)		$	(2,458	)
(Gains) losses reclassified from accumulated OCI, net of tax	(1,183		)	(a)	132			(a)	258			(b)	(793		)
As of September 30, 2018	$	3,442			$	(423	)		$	(6,270	)		$	(3,251	)

Three Months Ended September 30, 2017

Natural gas cash
flow hedges, net of tax

Interest rate
cash flow
hedges, net
of tax

Other post-
retirement
benefit liability
adjustment,
net of tax

Accumulated
OCI, net of tax
(Thousands)
Accumulated OCI (loss), net of tax, as of July 1, 2017
$ 7,047
$ (627 ) $ (6,713 ) $ (293 )
(Gains) losses reclassified from accumulated OCI, net of tax (1,451 ) (a) 36
(a) 77
(b) (1,338 )
Accumulated OCI (loss), net of tax, as of September 30, 2017
$ 5,596
$ (591 ) $ (6,636 ) $ (1,631 )


(a)	(Gains) losses reclassified from accumulated OCI, net of tax related to natural gas cash flow hedges were reclassified into operating revenues. Losses from accumulated OCI, net of tax related to interest rate cash flow hedges were reclassified into interest expense.


(b)	Accumulated OCI reclassification is attributable to the net actuarial loss and net prior service cost related to the Company's defined benefit pension plans and other post-retirement benefit plans. See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.


(c)	Related to adoption of ASU 2018-02. See Note 1 for additional information.

Three Months Ended September 30, 2016
Natural gas cash
flow hedges, net of tax Interest rate
cash flow
hedges, net
of tax
Pension and
other post-
retirement
benefits liability
adjustment,
net of tax
Accumulated
OCI, net of tax
(Thousands)
Accumulated OCI (loss), net of tax, as of July 1, 2016 $ 36,398
$ (771 ) $ (7,706 ) $ 27,921
(Gains) losses reclassified from accumulated OCI, net of tax (14,740 ) (a) 36
(a) 82
(b) (14,622 )
Accumulated OCI (loss), net of tax, as of September 30, 2016 $ 21,658
$ (735 ) $ (7,624 ) $ 13,299

Nine Months Ended September 30, 2017

Natural gas cash
flow hedges, net of tax

Interest rate
cash flow
hedges, net
of tax

Other post-
retirement
benefit liability
adjustment,
net of tax

Accumulated
OCI, net of tax
(Thousands)
Accumulated OCI (loss), net of tax, as of January 1, 2017
$ 9,607
$ (699 ) $ (6,866 ) $ 2,042
(Gains) losses reclassified from accumulated OCI, net of tax (4,011 ) (a) 108
(a) 230
(b) (3,673 )
Accumulated OCI (loss), net of tax, as of September 30, 2017
$ 5,596
$ (591 ) $ (6,636 ) $ (1,631 )

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

10. Leases

Nine Months Ended September 30, 2016

Natural gas cash
flow hedges, net of tax

Interest rate
cash flow
hedges, net
of tax

Pension and
other post-
retirement
benefits liability
adjustment,
net of tax

Accumulated
OCI, net of tax
(Thousands)
Accumulated OCI (loss), net of tax, as of January 1, 2016
$ 64,762
$ (843 ) $ (17,541 ) $ 46,378
(Gains) losses reclassified from accumulated OCI, net of tax (43,104 ) (a) 108
(a) 9,917
(b) (33,079 )
Accumulated OCI (loss), net of tax, as of September 30, 2016
$ 21,658
$ (735 ) $ (7,624 ) $ 13,299

The Company leases certain drilling rigs, facilities and other equipment. As discussed in Note 1, the Company adopted ASU 2016-02, ASU 2018-11 and ASU 2019-01 on January 1, 2019 using the optional transition method of adoption. The Company elected a package of practical expedients that together allows an entity to not reassess (i) whether a contract is or contains a lease, (ii) lease classification and (iii) initial direct costs. In addition, the Company elected the following practical expedients: (i) to not reassess certain land easements, (ii) to not apply the recognition requirements under the standard to short-term leases and (iii) to combine and account for lease and nonlease contract components as a lease, which requires the capitalization of fixed nonlease payments on January 1, 2019 or lease effective date and the recognition of variable nonlease payments as variable lease expense.

~~(a) See Note~~ G

On January 1, 2019, the Company recorded a total of $89.0 million in right-of-use assets and corresponding lease liabilities on its Condensed Consolidated Balance Sheet, representing the present value of its future operating lease payments. Adoption of the standards did not require an adjustment to the opening balance of retained earnings. The discount rate used to determine present value was based on the rate of interest that the Company estimated it would have to pay to borrow (on a collateralized-basis over a similar term) an amount equal to the lease payments in a similar economic environment as of January 1, 2019. The Company is required to reassess the discount rate for ~~additional information.~~new and modified lease contracts as of the lease effective date.

~~(b)~~

The ~~accumulated OCI reclassification~~right-of-use assets and lease liabilities recognized upon adoption of ASU 2016-02 were based on lease classifications, lease commitment amounts and terms recognized under the prior lease accounting guidance. Leases with an initial term of twelve months or less are considered short-term leases and are not recorded on the balance sheet. As of September 30, 2019, the Company had no finance leases and was not a lessor.

The following table summarizes operating lease costs for the three and nine months ended September 30, 2017 is attributable to the net actuarial loss and net prior service cost related to the Company’s post-retirement benefit plans. The accumulated OCI reclassification for the three and nine months ended September 30, 2016 is attributable to the net actuarial loss and net prior service cost related to the Company’s defined benefit pension plans and other post-retirement benefit plans. See Note 15 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for additional information.2019.



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
	(Thousands)
Operating lease costs	$	13,067	$	50,764
Variable lease costs (a)	4,182		14,451
Total lease costs (b)	$	17,249	$	65,215

~~M. Acquisitions~~


(a)	Includes short-term lease costs.

(b)

Includes costs capitalized to property, plant and equipment on the Condensed Consolidated Balance Sheet of $12.0 million and $51.4 million for the three and nine months ended September 30, 2019, respectively, related primarily to drilling rig leases. Of the capitalized costs, $10.9 million and $43.6 million for the three and nine months ended September 30, 2019, respectively, are operating lease costs.

~~On February 1, 2017, the Company acquired approximately 14,000 net Marcellus acres located in Marion, Monongalia and Wetzel Counties of West Virginia from a third-party for $132.9 million.~~

On February 27, 2017, the Company acquired approximately 85,000 net Marcellus acres, including drilling rights on approximately 44,000 net Utica acres and current natural gas production of approximately 110 MMcfe per day, from Stone Energy Corporation for $523.5 million. The acquired acres are primarily located in Wetzel, Marshall, Tyler and Marion Counties of West Virginia. The acquired assets also include 174 operated Marcellus wells and 20 miles of gathering pipeline.

On June 30, 2017, the Company acquired approximately 11,000 net Marcellus acres, and the associated Utica drilling rights, from a third-party for $83.7 million. The acquired acres are primarily located in Allegheny, Washington and Westmoreland Counties of Pennsylvania.

~~The Company paid net cash of $740.1 million for the 2017 acquisitions during~~For the nine months ended September 30, 2017. The purchase prices remain subject to customary post-closing adjustments as of September 30, 2017. The preliminary fair value assigned to the acquired property, plant and equipment as of the opening balance sheet dates totaled $750.1 million. In connection with the 2017 acquisitions, the Company assumed approximately $5.3 million of net current2019, cash paid for operating lease liabilities, and ~~$4.7 million of non-current liabilities. The amounts presented~~reported in ~~the financial statements represent the Company's estimates based on preliminary valuations of acquired assets and liabilities and are subject to change based~~cash flows provided by operating activities on the Company's ~~finalization~~Statement of ~~asset and liability valuations.~~

As a result of post-closing adjustments on its 2016 acquisitions, the Company paid $78.9 million for additional undeveloped acreage and recorded other non-cash adjustments which reduced the preliminary fair values assigned to the acquired property, plant and equipment by $2.5 million duringCondensed Consolidated Cash Flows, was $8.1 million. During the nine months ended September 30, ~~2017. With~~2019, the ~~exception~~Company recorded $23.1 million of right-of-use assets in exchange for new lease liabilities.

The operating lease right-of-use assets were reported in other assets and the current and noncurrent portions of the ~~Company's acquisition of Marcellus acreage~~operating lease liabilities were reported in other current liabilities and other ~~assets from Statoil USA Onshore Properties, Inc., which closed~~liabilities, respectively, on ~~July 8, 2016,~~ the ~~purchase prices for the Company’s 2016 acquisitions, as well as the fair values assigned to the acquired assets and assumed liabilities, remained preliminary as~~Condensed Consolidated Balance Sheet. As of September 30, ~~2017.~~2019, the operating right-of-use assets were $59.1 million and operating lease liabilities were $66.9 million, of which $29.9 million was classified as current. As of September 30, 2019, the weighted average remaining lease term was 3.4 years and the weighted average discount rate was 3.3%.

N.~~Rice Merger~~

On June 19, 2017, the Company entered into an Agreement and Plan of Merger (the Rice Merger Agreement) with Rice Energy Inc. (Rice) (NYSE: RICE), pursuant to which Rice will merge with and into a wholly owned indirect subsidiary of EQT through a series of transactions (the Rice Merger). If the Rice Merger is completed, each share of the common stock of Rice (Rice Common Stock) issued and outstanding immediately prior to the effective time (the Effective Time) of the Rice Merger (other than shares excluded by the Rice Merger Agreement) will be converted into the right to receive 0.37 of a share of the common stock of the Company (EQT Common Stock) and $5.30 in cash (collectively, the Merger Consideration).

Based on the closing price of EQT Common Stock on the New York Stock Exchange on June 16, 2017, the last trading day before the public announcement of the Rice Merger, the aggregate value of the Merger Consideration payable to Rice stockholders was

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

~~approximately $6.7 billion.~~Schedule of Operating Lease Liability Maturities. The following table summarizes undiscounted cash flows owed by the Company ~~will also assume or refinance approximately $2.2 billion of net debt and preferred equity (based on anticipated balances~~to lessors pursuant to contractual agreements in effect as of September 30, 2019.



	As of September 30, 2019
	(Thousands)
2019 (October – December)	$	9,338
2020	29,598
2021	9,186
2022	8,499
2023	8,417
2024+	6,013
Total lease payments	71,051
Less: Interest	4,128
Present value of lease liabilities	$	66,923

11. Asset Exchange Transaction

During the ~~expected closing date)~~third quarter of Rice and its subsidiaries and will assume other assets and liabilities of Rice and its subsidiaries at the Effective Time. Based on the estimated number of shares of EQT Common Stock and Rice Common Stock that will be outstanding immediately prior to the Effective Time,2019, the Company ~~estimates that, upon the closing of the Rice Merger, existing EQT shareholders~~closed on an acreage trade agreement and ~~former Rice stockholders will own approximately 65%~~purchase and ~~35%, respectively, of the Company’s outstanding shares.~~

The waiting period applicable to the Rice Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 was terminated by the Federal Trade Commission on July 18, 2017. The Rice Merger is expected to close in mid-November 2017 following the satisfaction of certain customary closing conditions, including the approval by the Company’s shareholders of the issuance of shares of EQT Common Stock as Merger Consideration and the adoption of the Rice Merger Agreement by Rice stockholders. The special meetings of the shareholders of EQT and the stockholders of Rice are scheduled to be held for these purposes on November 9, 2017.

~~On June 19, 2017, in connection~~sale agreement with ~~its entry into the Rice Merger Agreement, the Company entered into~~ a ~~commitment letter (the Commitment Letter) with Citigroup Global Markets Inc. (Citi)~~third party (Asset Exchange Transaction), pursuant to which ~~Citi~~the Company exchanged approximately 16,000 net revenue interest acres primarily in Tyler and ~~its affiliates committed to provide, subject~~Wetzel counties, West Virginia for approximately 16,000 net revenue interest acres primarily in Wetzel and Marion counties, West Virginia. Under the terms of the purchase and sale agreement, the Company assigned to the ~~terms and conditions set forth therein, up to $1.4 billion of senior unsecured bridge loans (the Bridge Facility). On July 14, 2017, the Company entered into~~third party a ~~joinder letter to the Commitment Letter, pursuant to which 16 additional banks assumed~~gas gathering agreement covering a portion of ~~Citi’s~~Tyler county and providing a firm gathering commitment, and the Company was released from its remaining obligations under the ~~Bridge Facility. The lenders’ commitments~~gas gathering agreement. As consideration for the third party's assumption of the Tyler county gas gathering agreement, the Company agreed to reimburse the third party for certain firm gathering costs under the ~~Bridge Facility terminated upon~~gas gathering agreement through December 2022 and assign the ~~closing~~third party an additional approximately 3,000 net revenue interest acres in Tyler and Wetzel counties, West Virginia. As a result of the ~~2017 Notes Offering (as defined~~transaction, the Company recorded a net loss of $13.9 million for the three months ended September 30, 2019, reflected in impairment/loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations. As of September 30, 2019, the liability for the reimbursement of certain firm gathering costs was $38.1 million and is reflected in other current and noncurrent liabilities in the Condensed Consolidated Balance Sheets.

The fair values of leases acquired and the liability for the reimbursement of certain firm gathering costs were based on significant inputs that were not observable in the market and, as such, are considered to be Level 3 fair value measurements. See Note O)5 for a description of the fair value hierarchy included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. Key assumptions included in the calculation of these fair values included market-based prices for comparable acreage and a calculation of net present value of the expected payments due for reimbursement.

12. ~~The~~Divestitures

In 2018, the Company ~~expensed $7.6 million~~sold its non-core production and related midstream assets located in ~~debt issuance costs related to~~ the ~~Bridge Facility during~~Permian Basin and Huron play (2018 Divestitures). For the nine months ended September 30, ~~2017.~~

~~The Rice Merger Agreement provides for certain termination rights for both~~2018, as a result of the 2018 Divestitures, the Company recorded an impairment/loss on sale/exchange of long-lived assets of $2.4 billion. The impairment of these properties and ~~Rice, including~~related pipeline assets recorded was due to the right of either party to terminate the Rice Merger Agreement if the Rice Merger is not consummated by February 19, 2018 (which may be extended by either party to May 19, 2018 under certain circumstances). Upon terminationcarrying value of the ~~Rice Merger Agreement under certain specified circumstances,~~assets exceeding the amounts received upon the closing of the 2018 Divestitures.

The fair value of the impaired assets was based on significant inputs that were not observable in the market and, as such, are considered to be Level 3 fair value measurements. See Note 5 for a description of the fair value hierarchy and Note 1 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for the policy on impairment of proved and unproved properties. Key assumptions included in the calculation of the fair value of the impaired assets included (i) reserves, including risk adjustments for probable and possible reserves, (ii) future commodity prices, (iii) to the extent available, market based indicators of fair value including estimated proceeds that could be realized upon a potential disposition, (iv) production rates based on the Company's experience with similar properties it operates, (v) estimated future operating and development costs and (vi) a market-based weighted average cost of capital.

In connection with the closing of the 2018 Divestitures, the Company ~~may be required to pay Rice, or Rice may be required to pay~~also recorded a loss of $259.3 million during the ~~Company, a termination fee~~third quarter of $255.0 million. In addition, if the Rice Merger Agreement is terminated because of a failure of a party’s shareholders to approve the proposals required to complete the Rice Merger, that party may be required to reimburse the other party for its transaction expenses in an amount equal to $67.0 million.

~~The Company expects to finance the cash portion of the Merger Consideration and the transactions~~2018 related to ~~the Rice Merger with cash on hand (including from the proceeds of the 2017 Notes Offering) and borrowings under the Company’s revolving credit facility.~~

O.~~Subsequent Event~~

On October 4, 2017, the Company completed the public offering (the 2017 Notes Offering) of $500 million aggregate principal amount of Floating Rate Notes due 2020 (the Floating Rate Notes), $500 million aggregate principal amount of 2.50% Senior Notes due 2020 (the 2020 Notes), $750 million aggregate principal amount of 3.00% Senior Notes due 2022 (the 2022 Notes) and $1.25 billion aggregate principal amount of 3.90% Senior Notes due 2027 (the 2027 Notes and, together with the Floating Rate Notes, the 2020 Notes and the 2023 Notes, the 2017 Notes). The Company received net proceeds from the 2017 Notes Offering of approximately $2,974.3 million, which the Company expects to use, together with other cash on hand and borrowings under the Company’s revolving credit facility, to fund the cash portion of the Merger Consideration, to pay expenses related to the Rice Merger and other transactions contemplated by the Rice Merger Agreement (including the refinancing of certain indebtedness of Rice and its subsidiaries), to redeem or repay certain Company senior notes and medium term notes due in 2018 and for other general corporate purposes. In October 2017, the Company delivered redemption notices pursuant to which the Company expects to redeem all of its outstanding $200 million aggregate principal amount 5.15% Senior Notes due 2018 and $500 million aggregate principal amount 6.50% Senior Notes due 2018 in November 2017. Upon redemption, the Company will pay make whole call premiums based upon prevailing rates on U.S. government securities at the time of redemption.

The indentures related to the 2017 Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions and enter into certain consolidations, mergers or sales other than for cash or leases of the Company’s assets substantially as an entirety. In addition, if the Rice Merger does not occur on or before May 19, 2018 or the Company notifies the trustee under the indenture governing the 2017 Notescapacity contracts that the Company ~~will~~no longer has existing production to satisfy and does not ~~pursue the consummation of the Rice Merger, the Company will be required~~plan to redeem the Floating Rate Notes, the 2020 Notes and the 2027 Notes (but not the 2022 Notes) then outstanding at a redemption 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.

2018

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

~~P. Recently Issued Accounting Standards~~

~~In May 2014,~~use in the ~~Financial Accounting Standards Board (FASB) issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~.future. The ~~standard requires an entity to recognize revenue~~loss was recorded in ~~a manner that depicts~~ the ~~transfer~~impairment/loss on sale/exchange of ~~goods or services to customers at an amount that reflects~~long-lived assets within the ~~consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14,~~ ~~Revenue from Contracts with Customers - Deferral~~Statements of Consolidated Operations. The fair value of the ~~Effective Date~~ ~~which approved~~loss for the initial measurement was based upon significant inputs that were not observable in the market and, as such, is considered a ~~one year deferral~~Level 3 fair value measurement. The key unobservable input in the calculation is the amount, if any, of ~~ASU No. 2014-09~~potential future economic benefit from the contracts. See Note 5 for ~~annual reporting periods beginning after December 15, 2017. The Company expects to adopt the ASUs using the modified retrospective method~~a description of adoption on January 1, 2018. During the third quarter of 2017, the Company substantially completed its detailed review of the impact of the standard on each of its contracts. Based on this review, the Company does not expect the standard to have a significant impact on net income. The Company is currently evaluating the impact of the standard on its internal controls and disclosures.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The changes primarily affect the accounting for equity investments, financial liabilities under~~ the fair value option and the presentation and disclosure requirements for financial instruments. This standard will eliminate the cost method of accounting for equity investments. The ASU will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period, with early adoption of certain provisions permitted. The Company will adopt this standard in the first quarter of 2018 and does not expect that the adoption will have a material impact on its financial statements and related disclosures.hierarchy.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~. The primary effect of adopting the new standard will be to record assets and obligations for contracts currently recognized as operating leases. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The ASU will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. The Company has completed a high level identification of agreements covered by this standard and will continue to evaluate the impact this standard will have on its financial statements and related disclosures.

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting~~. This ASU is part of the FASB initiative to reduce complexity in accounting standards. The areas for simplification in this ASU involve several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted this standard in the first quarter of 2017 with no significant impact on its reported results or disclosures.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments~~. This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this ASU eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The ASU will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The Company is currently evaluating the impact this standard will have on its financial statements and related disclosures.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This ASU addresses the presentation and classification of eight specific cash flow issues. The amendments in the ASU will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company adopted this standard in the second quarter of 2017 with no material impact on its financial statements and related disclosures.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company anticipates this standard will not have a material impact on its financial statements and related disclosures.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~. This ASU provides additional guidance on the presentation of net benefit cost in the income statement and on the components eligible for capitalization in assets. The ASU will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company anticipates this standard will not have a material impact on its financial statements and related disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting~~. This ASU provides guidance regarding which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its financial statements and related disclosures.

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EQT Corporation and Subsidiaries

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

Item 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of financial condition and results of operations in conjunction with the Condensed Consolidated Financial Statements, and the notes thereto, included elsewhere in this report. For all periods prior to the Separation and Distribution (as defined in Note 2 to the Condensed Consolidated Financial Statements), the results of operations of Equitrans Midstream Corporation (Equitrans Midstream) are reflected as discontinued operations. The Statements of Condensed Consolidated Operations have been recast to reflect this presentation and also included presenting certain transportation and processing expenses in continuing operations that were previously eliminated in consolidation. The cash flows related to Equitrans Midstream have not been segregated and are included within the Statements of Condensed Consolidated Cash Flows for all periods prior to the Separation and Distribution. See Note 2 to the Condensed Consolidated Financial Statements for amounts of the discontinued operations related to Equitrans Midstream that are included in the Statements of Condensed Consolidated Cash Flows.

CAUTIONARY STATEMENTS

~~Disclosures in this~~This Quarterly Report on Form 10-Q ~~contain~~contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as ~~“anticipate,” “estimate,” “could,” “would,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe”~~"anticipate," "estimate," "could," "would," "will," "may," "forecast," "approximate," "expect," "project," "intend," "plan," "believe" and other words of similar meaning, or the negative thereof, in connection with any discussion of future operating or financial matters. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the matters discussed in the section captioned ~~“Outlook”~~"Outlook" in Item 2, ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations,”" and the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of ~~the Company~~EQT Corporation and its subsidiaries (collectively, the Company), including guidance regarding the ~~Company’s~~Company's strategy to develop its Marcellus, Utica, Upper Devonian and other reserves; drilling plans and programs (including the number, type, ~~feet of pay~~depth, spacing, lateral lengths and location of wells to be drilled and the availability of capital to complete these plans and programs); production and sales volumes (including liquids volumes) and growth rates; production of free cash flow; the Company's ability to reduce its drilling costs and capital expenditures; the Company's ability to maximize recoveries per acre; infrastructure programs (including the timing, cost and capacity of the gathering and transmission expansion projects); the cost, capacity, timing of regulatory approvals for, and anticipated in-service date of, the Mountain Valley Pipeline (MVP) project;programs; monetization transactions, including asset sales, joint ventures or other transactions involving the ~~Company’s~~Company's assets; acquisition transactions; the Company's ability to ~~complete~~successfully implement and execute the new management team's strategic and operational plan and achieve the anticipated results of such plan; the Company's ability to achieve the anticipated synergies, operational efficiencies and returns from its acquisition of Rice Energy Inc.; the timing and structure of ~~the Rice Merger (as defined in Note~~ N to the Condensed Consolidated Financial Statements), including whether the Company will sell Rice Energy Inc.'s (Rice) retained midstream assets to EQM; the amount of net debt and preferred equity of Rice and its subsidiaries the Company will assume or refinance; the timingany dispositions of the Company's ~~redemption~~approximately 19.9% interest in Equitrans Midstream, and the planned use of ~~its senior notes due in 2018;~~the proceeds from any such dispositions; natural gas prices, changes in basis and the impact of commodity prices on the Company's business; reserves, including potential future downward adjustments and reserve life; potential future impairments of the Company's assets; projected capital ~~expenditures and capital contributions;~~expenditures; the amount and timing of any repurchases ~~under~~of the ~~Company’s share repurchase authorization;~~Company's common stock and outstanding debt securities; dividend amounts and rates; liquidity and financing requirements, including funding sources and availability; the Company's ability to maintain or improve its credit ratings; the Company's hedging strategy; and the effects of litigation, government regulation, ~~and litigation;~~ and tax position. The forward-looking statements included in this Quarterly Report on Form 10-Q involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company has based these forward-looking statements on current expectations and assumptions about future ~~events.~~events, taking into account all information currently available to the Company. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond the ~~Company’s~~Company's control. The risks and uncertainties that may affect the operations, performance and results of the ~~Company’s~~Company's business and forward-looking statements include, but are not limited to, those set forth under Item 1A, ~~“Risk Factors”,~~"Risk Factors," and elsewhere in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, as updated by Part II, Item 1A, "Risk Factors" in both the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 2019 and this Quarterly Report on Form ~~10-Q.~~10-Q, and the other documents the Company files from time to time with the Securities and Exchange Commission.

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

In reviewing any agreements incorporated by reference in or filed with this Quarterly Report on Form 10-Q, please remember such agreements are included to provide information regarding the terms of such agreements and are not intended to provide any other factual or disclosure information about the Company. The agreements may contain representations and warranties by the Company, which should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties to such agreements should those statements prove to be inaccurate. The representations and warranties were made only as of the date of the relevant agreement or such other date or dates as may be specified in such agreement and are subject to more recent developments. Accordingly, these representations and warranties alone may not describe the actual state of affairs of the Company or its affiliates as of the date they were made or at any other time.

Table of Contents

EQT Corporation and Subsidiaries

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

~~CORPORATE OVERVIEW~~Consolidated Results of Operations

~~Three Months Ended September 30, 2017 vs. Three Months Ended September 30, 2016~~

~~Net income attributable to EQT Corporation~~Loss from continuing operations for the three months ended September 30, ~~2017~~2019 was ~~$23.3~~$361.0 million, ~~$0.13~~$1.41 per diluted share, compared ~~with net~~to loss ~~attributable to EQT Corporation~~from continuing operations for the same period in 2018 of ~~$8.0~~$127.3 million, ~~a loss of $0.05~~$0.49 per diluted ~~share, for~~share. The decrease was attributable primarily to the ~~three months ended September 30, 2016. The increase was primarily attributable to a $0.56 increase~~unrealized loss on investment in the average realized price, a 5% increase in production sales volumes, an income tax benefit for the three months ended September 30, 2017 compared to income tax expense for the three months ended September 30, 2016Equitrans Midstream, decreased operating revenues and ~~higher pipeline~~increased proxy, transaction and ~~net marketing services revenue, partly offset by higher operating expenses, lower gains on derivatives not designated as hedges, higher interest expense~~reorganization and ~~higher net income attributable to noncontrolling interests of EQGP and EQM.~~

EQT Production received $13.3 million and $27.3 million of net cash settlements for derivatives not designated as hedges for the three months ended September 30, 2017 and 2016, respectively, that are included in the average realized price but are not in GAAP operating revenues.

Net income attributable to noncontrolling interests of EQGP and EQM was $82.1 million for the three months ended September 30, 2017 compared to $78.1 million for the three months ended September 30, 2016. The $4.0 million increase was primarily the result of increased net income at EQM.

~~In connection with the Rice Merger, the Company recorded $10.8 million in acquisition-related expenses during the three months ended September 30, 2017 that are included in~~other selling, general and administrative ~~expenses. The Company also expensed approximately $6.8 million~~costs, partly offset by lower impairment costs as a result of the ~~Bridge Facility debt issuance costs during~~2018 Divestitures (defined in Note 12 to the ~~three months ended September 30, 2017.~~Condensed Consolidated Financial Statements).

~~Nine Months Ended September 30, 2017 vs. Nine Months Ended September 30, 2016~~

~~Net income attributable to EQT Corporation~~Loss from continuing operations for the nine months ended September 30, ~~2017~~2019 was ~~$228.5~~$44.8 million, ~~$1.32~~$0.18 per diluted share, compared ~~with net~~to loss ~~attributable to EQT Corporation~~from continuing operations for the same period in 2018 of ~~$261.0 million, a loss of $1.58~~$1.8 billion, $6.79 per diluted ~~share, for the nine months ended September 30, 2016.~~share. The increase was attributable primarily ~~attributable~~ to lower impairment costs as a ~~$0.72 increase~~result of the 2018 Divestitures, increased operating revenues and dividends received on investment in the average realized price, gains on derivatives not designated as hedges for the nine months ended September 30, 2017 compared to losses on derivatives not designated as hedges for the nine months ended September 30, 2016, a 6% increase in production sales volumes and higher pipeline and net marketing services revenue,Equitrans Midstream, partly offset by decreased income tax ~~expense for~~benefit, the nine months ended September 30, 2017 compared to a benefit for the nine months ended September 30, 2016, higher operating expenses, higher interest expense and higher net income attributable to noncontrolling interests of EQGP and EQM.

EQT Production paid $6.8 million and received $222.5 million of net cash settlements for derivatives not designated as hedges for the nine months ended September 30, 2017 and 2016, respectively, that are includedunrealized loss on investment in ~~the average realized price but are not in GAAP operating revenues.~~

Net income attributable to noncontrolling interests of EQGP and EQM was $250.3 million for the nine months ended September 30, 2017 compared to $238.7 million for the nine months ended September 30, 2016. The $11.6 million increase was primarily the result of increased net income at EQMEquitrans Midstream and increased ~~ownership of EQM common units by third-parties.~~

~~In connection with the Rice Merger, the Company recorded $15.0 million in acquisition-related expenses during the nine months ended September 30, 2017 that are included in~~proxy, transaction and reorganization and other selling, general and administrative ~~expenses. The Company also expensed $7.6 million in debt issuance costs related to the Bridge Facility during the nine months ended September 30, 2017.~~costs.

See ~~“Business Segment Results of Operations”~~"Sales Volumes and Revenues" and "Operating Expenses" for a discussion of ~~production sales volumes~~items impacting operating income and ~~gathering and transmission revenues.~~

"Other Income Statement Items" for a discussion of other income statement items. See ~~“Investing Activities”~~"Investing Activities" under the caption ~~“Capital~~"Capital Resources and ~~Liquidity”~~Liquidity" for a discussion of capital expenditures.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Consolidated Operational Data~~Average Realized Price Reconciliation

The following table presents detailed natural gas and liquids operational information to assist in the understanding of the ~~Company’s~~Company's consolidated operations, including the calculation of the Company's average realized price ($/Mcfe), which is based on ~~EQT Production~~ adjusted operating revenues, a non-GAAP supplemental financial measure. ~~EQT Production adjusted~~Adjusted operating revenues is presented because it is an important measure used by the ~~Company’s~~Company's management to evaluate period-to-period comparisons of earnings trends. ~~EQT Production adjusted~~Adjusted operating revenues should not be considered as an alternative to ~~EQT Production~~ total operating revenues. See ~~“Reconciliation~~"Reconciliation of Non-GAAP Financial ~~Measures”~~Measures" for a reconciliation of ~~EQT Production~~ adjusted operating revenues ~~to EQT Production~~with total operating ~~revenues.~~revenues, the most directly comparable financial measure calculated in accordance with GAAP.

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


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended September 30,						Nine Months Ended September 30,
in thousands (unless noted)	2017			2016			%		2017			2016			%
																	2019			2018			2019			2018
																	(Thousands, unless noted otherwise)
NATURAL GAS
Sales volume (MMcf)	176,311			175,191			0.6		508,457			508,206			—		363,034			350,297			1,077,962			1,013,836
NYMEX price ($/MMBtu) (a)	$	3.00		$	2.81		6.8		$	3.16		$	2.29		38.0		$	2.23		$	2.90		$	2.67		$	2.89
Btu uplift	0.30			0.27			11.1		0.28			0.21			33.3		0.11			0.17			0.13			0.19
Natural gas price ($/Mcf)	$	3.30		$	3.08		7.1		$	3.44		$	2.50		37.6		$	2.34		$	3.07		$	2.80		$	3.08

Basis ($/Mcf) (b)	$	(0.81	)	$	(1.21	)	(33.1	)	$	(0.53	)	$	(0.80	)	(33.8	)	$	(0.35	)	$	(0.41	)	$	(0.23	)	$	(0.24	)
Cash settled basis swaps (not designated as hedges) ($/Mcf)	(0.04		)	—			(100.0	)	(0.02		)	0.05			(140.0	)	0.02			(0.06		)	(0.05		)	(0.07		)
Average differential, including cash settled basis swaps ($/Mcf)	$	(0.85	)	$	(1.21	)	(29.8	)	$	(0.55	)	$	(0.75	)	(26.7	)	$	(0.33	)	$	(0.47	)	$	(0.28	)	$	(0.31	)

Average adjusted price ($/Mcf)	$	2.45		$	1.87		31.0		$	2.89		$	1.75		65.1		$	2.01		$	2.60		$	2.52		$	2.77
Cash settled derivatives (cash flow hedges) ($/Mcf)	0.01			0.14			(92.9	)	0.01			0.14			(92.9	)
Cash settled derivatives (not designated as hedges) ($/Mcf)	0.13			0.15			(13.3	)	0.01			0.38			(97.4	)	0.44			0.03			0.19			0.05
Average natural gas price, including cash settled derivatives ($/Mcf)	$	2.59		$	2.16		19.9		$	2.91		$	2.27		28.2		$	2.45		$	2.63		$	2.71		$	2.82

Natural gas sales, including cash settled derivatives	$	456,347		$	378,484		20.6		$	1,484,711		$	1,155,898		28.4		$	891,249		$	922,974		$	2,916,891		$	2,862,582

LIQUIDS
NGLs (excluding ethane):
Natural gas liquids (NGLs) (excluding ethane):
Sales volume (MMcfe) (c)	19,054			16,803			13.4		55,089			44,897			22.7		10,609			13,964			34,359			51,299
Sales volume (Mbbls)	3,176			2,799			13.5		9,182			7,482			22.7		1,768			2,328			5,726			8,550
Price ($/Bbl)	$	29.81		$	14.82		101.1		$	28.33		$	15.26		85.6		$	16.85		$	40.73		$	23.00		$	37.97
Cash settled derivatives (not designated as hedges) ($/Bbl)	(0.44		)	—			(100.0	)	(0.43		)	—			(100.0	)	3.89			(2.28		)	2.74			(1.39		)
Average NGL price, including cash settled derivatives ($/Bbl)	$	29.37		$	14.82		98.2		$	27.90		$	15.26		82.8

NGL sales	$	93,273		$	41,508		124.7		$	256,123		$	114,188		124.3
Average NGLs price, including cash settled derivatives ($/Bbl)																	$	20.74		$	38.45		$	25.74		$	36.58
NGLs sales																	$	36,668		$	89,498		$	147,392		$	312,768
Ethane:
Sales volume (MMcfe) (c)	8,226			2,967			177.2		24,970			4,144			502.6		5,846			9,002			18,239			25,413
Sales volume (Mbbls)	1,371			495			177.0		4,162			691			502.3		974			1,501			3,040			4,236
Price ($/Bbl)	$	5.92		$	8.02		(26.2	)	$	6.45		$	8.09		(20.3	)	$	5.22		$	7.88		$	6.34		$	7.82
Ethane sales	$	8,119		$	3,966		104.7		$	26,858		$	5,590		380.5		$	5,083		$	11,822		$	19,273		$	33,108
Oil:
Sales volume (MMcfe) (c)	1,476			1,124			31.3		4,565			3,321			37.5		1,334			974			3,847			3,234
Sales volume (Mbbls)	246			188			30.9		761			554			37.4		222			162			641			539
Price ($/Bbl)	$	36.86		$	35.81		2.9		$	39.69		$	32.81		21.0		$	39.01		$	51.73		$	42.07		$	54.41
Oil sales	$	9,072		$	6,710		35.2		$	30,198		$	18,164		66.3		$	8,671		$	8,392		$	26,971		$	29,322

Total liquids sales volume (MMcfe) (c)	28,756			20,894			37.6		84,624			52,362			61.6		17,789			23,940			56,445			79,946
Total liquids sales volume (Mbbls)	4,793			3,482			37.7		14,105			8,727			61.6		2,964			3,991			9,407			13,325

Liquids sales	$	110,464		$	52,184		111.7		$	313,179		$	137,942		127.0		$	50,422		$	109,712		$	193,636		$	375,198

TOTAL PRODUCTION
TOTAL
Total natural gas & liquids sales, including cash settled derivatives (d)	$	566,811		$	430,668		31.6		$	1,797,890		$	1,293,840		39.0		$	941,671		$	1,032,686		$	3,110,527		$	3,237,780
Total sales volume (MMcfe)	205,067			196,085			4.6		593,081			560,568			5.8		380,823			374,237			1,134,407			1,093,782

Average realized price ($/Mcfe)	$	2.76		$	2.20		25.5		$	3.03		$	2.31		31.2		$	2.47		$	2.76		$	2.74		$	2.96

(a)

The ~~Company’s~~Company's volume weighted ~~NYMEX~~New York Mercantile Exchange (NYMEX) natural gas price (actual average NYMEX natural gas price ($/MMBtu)) was ~~$3.00~~$2.23 and ~~$2.81~~$2.90 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$3.17~~$2.67 and ~~$2.29~~$2.90 for the nine months ended September 30, ~~2017~~2019 and ~~2016, respectively).~~2018, respectively.


(b)	Basis represents the difference between the ultimate sales price for natural gas and the NYMEX natural gas price.


(c)	NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods.


(d)	Also referred to in this report as ~~EQT Production~~ adjusted operating revenues, a non-GAAP supplemental financial measure.

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

Reconciliation of Non-GAAP Financial Measures

The table below reconciles ~~EQT Production~~ adjusted operating revenues, a non-GAAP supplemental financial measure, ~~to EQT Production~~with total operating revenues, ~~as reported under EQT Production Results of Operations,~~ its most directly comparable financial measure calculated in accordance with GAAP. ~~See Note~~ F to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a reconciliation of EQT Production operating revenues to EQT Corporation total operating revenues as reported in the Statements of Consolidated Operations.

~~EQT Production adjusted~~Adjusted operating revenues (also referred to as total natural gas & liquids sales, including cash settled derivatives) is presented because it is an important measure used by the ~~Company’s~~Company's management to evaluate period-over-period comparisons of earnings trends. ~~EQT Production adjusted~~Adjusted operating revenues as presented excludes the revenue impact of changes in the fair value of derivative instruments prior to settlement and the revenue impact of ~~certain pipeline~~"net marketing services and ~~net marketing services.~~other." Management ~~utilizes EQT Production~~uses adjusted operating revenues to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts and, thus, does not impact the revenue from natural gas sales with the ~~often volatile~~often-volatile fluctuations in the fair value of derivatives prior to settlement. ~~EQT Production adjusted~~Adjusted operating revenues also excludes ~~"Pipeline~~"net marketing services and ~~net marketing services"~~other" because management considers these revenues to be unrelated to the revenues for its natural gas and liquids production. ~~"Pipeline~~"Net marketing services and ~~net marketing services"~~other" primarily includes ~~revenues for gathering services provided to third-parties as well as both~~ the cost of and recoveries on ~~third-party~~ pipeline capacity ~~not used~~releases and revenues for ~~EQT Production sales volumes.~~gathering services. Management further believes that ~~EQT Production~~ adjusted operating revenues as presented provides useful information to investors for evaluating period-over-period earnings trends.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Thousands, unless noted otherwise)
Total operating revenues	$	951,576		$	1,050,046		$	3,405,001		$	3,312,730
Add back (deduct):
(Gain) loss on derivatives not designated as hedges	(180,313		)	3,075			(455,952		)	(5,620		)
Net cash settlements received (paid) on derivatives not designated as hedges	162,639			(14,285		)	152,149			(27,401		)
Premiums received (paid) for derivatives that settled during the period	9,405			(18		)	16,611			453
Net marketing services and other	(1,636		)	(6,132		)	(7,282		)	(42,382		)
Adjusted operating revenues, a non-GAAP financial measure	$	941,671		$	1,032,686		$	3,110,527		$	3,237,780
Total sales volumes (MMcfe)	380,823			374,237			1,134,407			1,093,782
Average realized price ($/Mcfe)	$	2.47		$	2.76		$	2.74		$	2.96

Sales Volumes and Revenues

Calculation of EQT Production adjusted operating revenues Three Months Ended September 30, Nine Months Ended September 30,
$ in thousands (unless noted) 2017 2016 2017 2016
EQT Production total operating revenues $ 597,718
$ 508,092
$ 2,057,481
$ 1,068,752
(Deduct) add back:
(Gain) loss on derivatives not designated as hedges (35,625 ) (93,356 ) (222,693 ) 32,342
Net cash settlements received (paid) on derivatives not designated as hedges 13,321
27,287
(6,837 ) 222,516
Premiums received (paid) for derivatives that settled during the period 537
(558 ) 1,595
(1,574 )
Pipeline and net marketing services (9,140 ) (10,797 ) (31,656 ) (28,196 )
EQT Production adjusted operating revenues, a non-GAAP financial measure $ 566,811
$ 430,668
$ 1,797,890
$ 1,293,840

Total sales volumes (MMcfe) 205,067
196,085
593,081
560,568

Average realized price ($/Mcfe) $ 2.76
$ 2.20
$ 3.03
$ 2.31



	Three Months Ended September 30,							Nine Months Ended September 30,
	2019		2018			%		2019		2018		%
Sales volume detail (MMcfe):
Marcellus (a)	314,915		316,740			(0.6	)	960,588		899,642		6.8
Ohio Utica	64,581		52,400			23.2		169,501		147,706		14.8
Other	1,327		5,097			(74.0	)	4,318		46,434		(90.7	)
Total sales volumes (b)	380,823		374,237			1.8		1,134,407		1,093,782		3.7

Average daily sales volumes (MMcfe/d)	4,139		4,068			1.7		4,155		4,007		3.7

Operating revenues (thousands):
Sales of natural gas, oil and NGLs	$	769,627	$	1,046,989		(26.5	)	$	2,941,767	$	3,264,728	(9.9	)
Gain (loss) on derivatives not designated as hedges	180,313		(3,075		)	(5,963.8	)	455,952		5,620		8,013.0
Net marketing services and other	1,636		6,132			(73.3	)	7,282		42,382		(82.8	)
Total operating revenues	$	951,576	$	1,050,046		(9.4	)	$	3,405,001	$	3,312,730	2.8

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Business Segment Results of Operations~~

Business segment operating results are presented in the segment discussions and financial tables on the following pages. Operating segments are evaluated on their contribution to the Company’s consolidated results based on operating income. Other income, interest and income taxes are managed on a consolidated basis. Headquarters’ costs are billed to the operating segments based upon a fixed allocation of the headquarters’ annual operating budget. Unallocated expenses consist primarily of incentive compensation expense and administrative costs, including the Rice Merger acquisition-related expenses.

The Company has reported the components of each segment’s operating income and various operational measures in the sections below, and where appropriate, has provided information describing how a measure was derived. EQT’s management believes that presentation of this information provides useful information to management and investors regarding the financial condition, operations and trends of each of EQT’s business segments without being obscured by the financial condition, operations and trends for the other segments or by the effects of corporate allocations of interest, income taxes and other income. In addition, management uses these measures for budget planning purposes. The Company has reconciled each segment’s operating income to the Company’s consolidated operating income and net income in Note F ~~to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.~~

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~EQT PRODUCTION~~

~~RESULTS OF OPERATIONS~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 % 2017 2016 %
OPERATIONAL DATA

Sales volume detail (MMcfe):

Marcellus (a) 181,650
171,468
5.9
523,122
486,439
7.5
Other (b) 23,417
24,617
(4.9 ) 69,959
74,129
(5.6 )
Total production sales volumes (c) 205,067
196,085
4.6
593,081
560,568
5.8

Average daily sales volumes (MMcfe/d) 2,229
2,131
4.6
2,172
2,046
6.2

Average realized price ($/Mcfe) $ 2.76
$ 2.20
25.5
$ 3.03
$ 2.31
31.2

Gathering to EQT Gathering ($/Mcfe) $ 0.47
$ 0.46
2.2
$ 0.48
$ 0.49
(2.0 )
Transmission to EQT Transmission ($/Mcfe) $ 0.23
$ 0.19
21.1
$ 0.23
$ 0.19
21.1
Third-party gathering and transmission ($/Mcfe) $ 0.45
$ 0.29
55.2
$ 0.46
$ 0.29
58.6
Processing ($/Mcfe) $ 0.22
$ 0.17
29.4
$ 0.23
$ 0.16
43.8
Lease operating expenses (LOE), excluding production taxes ($/Mcfe) $ 0.13
$ 0.14
(7.1 ) $ 0.13
$ 0.15
(13.3 )
Production taxes ($/Mcfe) $ 0.07
$ 0.05
40.0
$ 0.09
$ 0.07
28.6
Production depletion ($/Mcfe) $ 1.03
$ 1.06
(2.8 ) $ 1.03
$ 1.06
(2.8 )

Depreciation, depletion and amortization (DD&A) (thousands):

Production depletion $ 210,393
$ 207,120
1.6
$ 613,379
$ 594,408
3.2
Other DD&A 13,710
13,648
0.5
41,032
40,845
0.5
Total DD&A $ 224,103
$ 220,768
1.5
$ 654,411
$ 635,253
3.0

Capital expenditures (thousands) (d) $ 449,303
$ 622,856
(27.9 ) $ 1,850,482
$ 1,094,747
69.0

FINANCIAL DATA (thousands)

Revenues:
Sales of natural gas, oil and NGLs $ 552,953
$ 403,939
36.9
$ 1,803,132
$ 1,072,898
68.1
Pipeline and net marketing services 9,140

10,797
(15.3 ) 31,656
28,196
12.3
Gain (loss) on derivatives not designated as hedges 35,625
93,356
(61.8 ) 222,693
(32,342 ) (788.6 )
Total operating revenues 597,718
508,092
17.6
2,057,481
1,068,752
92.5

Operating expenses:

Gathering 116,921
103,231
13.3
334,801
307,682
8.8
Transmission 119,729
81,456
47.0
354,534
235,196
50.7
Processing 44,166
33,332
32.5
133,745
88,429
51.2
LOE, excluding production taxes 26,177
28,303
(7.5 ) 77,522
84,510
(8.3 )
Production taxes 13,453
10,696
25.8
52,290
41,582
25.8
Exploration 2,437
2,670
(8.7 ) 9,040
9,384
(3.7 )
Selling, general and administrative (SG&A) 38,650
43,101
(10.3 ) 118,861
135,394
(12.2 )
DD&A 224,103
220,768
1.5
654,411
635,253
3.0
Total operating expenses 585,636
523,557
11.9
1,735,204
1,537,430
12.9
Operating income (loss) $ 12,082
$ (15,465 ) (178.1 ) $ 322,277
$ (468,678 ) (168.8 )


(a)	Includes Upper Devonian wells.


(b)	Includes 2,267 and 3,847 MMcfe of Utica sales volume for the three months ended September 30, 2017 and 2016, respectively, and 7,239 and 11,641 MMcfe of Utica sales volume for the nine months ended September 30, 2017 and 2016, respectively.


~~(c)~~	NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods.

~~(d)~~

Expenditures for segment assets in the EQT Production segment included $52.1 million and $30.1 million for general leasing activity during the three months ended September 30, 2017 and 2016, respectively, and $147.0 million and $98.2 million for general leasing activity during the nine months ended September 30, 2017 and 2016, respectively. The three and nine months ended September 30, 2017 includes $7.8 million and $819.0 million of cash capital expenditures, respectively, for the acquisitions discussed in Note M to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The three and nine months ended September 30, 2016 includes $412.3 million of cash capital expenditures for the acquisitions discussed in Note M~~. During the nine months ended September 30, 2017 and 2016, the Company also incurred $7.5 million and $6.2 million of non-cash capital expenditures for the acquisitions discussed in Note~~ M.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Total operating revenues were $951.6 million for the three months ended September 30, 2019 compared to $1,050.0 million for the three months ended September 30, 2018.

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EQT Corporation and Subsidiaries

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

~~Three Months Ended September 30, 2017 vs. Three Months Ended September 30, 2016~~

~~EQT Production’s operating income was $12.1 million~~Sales of natural gas, oil and NGLs decreased for the three months ended September 30, ~~2017~~2019 compared to ~~an operating loss of $15.5 million for~~the same period in 2018 due to a lower average realized price, partly offset by a 2% increase in sales volumes. Average realized price decreased due to lower NYMEX prices, liquids sales and Btu uplift, partly offset by higher cash settled derivatives and a higher average differential. For the three months ended September 30, ~~2016. The increase was primarily due to a higher average realized price~~2019 and ~~increased sales volumes~~2018, the Company received $162.6 million and paid $14.3 million, respectively, of ~~produced natural gas and NGLs, partly offset by increased operating expenses and lower gains~~net cash settlements on derivatives not designated as ~~hedges.~~

Total operating revenues were $597.7 million for the three months ended September 30, 2017 compared to $508.1 million for the three months ended September 30, 2016. Sales of natural gas, oil and NGLs increased as a result of a higher average realized price and a 5% increase in production sales volumes in the current period. EQT Production received $13.3 million and $27.3 million of net cash settlements for derivatives not designated as hedges, ~~for the three months ended September 30, 2017 and~~ ~~2016, respectively, that~~which are included in ~~the~~ average realized price but ~~are~~may not be included in ~~GAAP~~ operating revenues.

Changes in the fair market value of derivative instruments prior to settlement are recognized in gain (loss) on derivatives not designated as hedges. The increase in production sales volumes was primarily the result of increased production from the 2015 and 2016 drilling programs, primarily in the Marcellus play, as well as recent acquisition activity, partially offset by the normal production decline in the Company's producing wells in 2017.

~~The $0.56 per Mcfe increase in the average realized price for~~For the three months ended September 30, ~~2017 was primarily due to an increase in~~2019, the average natural gas differential of $0.36 per Mcf, higher liquids prices and an increase in the average NYMEX natural gas price net of cash settled derivatives. The improvement in the average differential primarily related to higher basis. Basis improved in the Appalachian Basin and at sales points reached through the Company’s transportation portfolio. The Company ~~started flowing its produced volumes to its Rockies Express pipeline capacity and Texas Eastern Transmission Gulf Markets pipeline capacity in the fourth quarter of 2016, which resulted in~~recognized a ~~favorable impact to basis for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.~~

~~EQT Production total operating revenues for the three months ended September 30, 2017 included a $35.6 million~~ gain on derivatives not designated as hedges of $180.3 million compared to a ~~$93.4~~loss of $3.1 million for the same period in 2018. The gain for the three months ended September 30, ~~2016. The gains~~2019 was related primarily to increases in the fair market value of the Company's NYMEX swaps and options due to decreases in NYMEX prices.

Net marketing services and other decreased for the three months ended September 30, ~~2017~~2019 compared to the same period in 2018 primarily ~~related to a gain on a physical contract treated~~ as a ~~derivative for accounting purposes and an increase in~~result of fewer capacity releases at lower capacity release rates on the ~~fair value of EQT Production’s basis swaps due~~Tennessee Gas Pipeline.

Nine Months Ended September 30, 2019 Compared to ~~decreased basis prices. The gains~~Nine Months Ended September 30, 2018

Total operating revenues were $3.4 billion for the ~~three~~nine months ended September 30, ~~2016 primarily~~2019 compared to $3.3 billion for the nine months ended September 30, 2018.

Sales of natural gas, oil and NGLs decreased for the nine months ended September 30, 2019 compared to the same period in 2018 as a result of a lower average realized price, partly offset by a 4% increase in sales volumes. Excluding sales volumes related to ~~favorable changes~~the 2018 Divestitures, sales volumes increased by 8% for the nine months ended September 30, 2019 compared to the same period in 2018. Average realized price decreased due to lower NYMEX and liquids prices and, as a result of the 2018 Divestitures, lower liquids volumes and Btu uplift, partly offset by higher cash settled derivatives and a higher average differential. For the nine months ended September 30, 2019 and 2018, the Company received $152.1 million and paid $27.4 million, respectively, of net cash settlements on derivatives not designated as hedges, which are included in average realized price but may not be included in operating revenues.

For the nine months ended September 30, 2019, the Company recognized a gain on derivatives not designated as hedges of $456.0 million compared to $5.6 million for the same period in 2018. The gain for the nine months ended September 30, 2019 was related to increases in the fair market value of ~~EQT Production’s~~the Company's NYMEX swaps and options due to decreases in NYMEX prices, partly offset by decreases in the fair market value of the Company's basis swaps due to ~~a decrease~~increases in ~~forward prices during the third quarter of 2016.~~basis prices.

~~Operating expenses totaled $585.6 million~~Net marketing services and other decreased for the ~~three~~nine months ended September 30, ~~2017~~2019 compared to ~~$523.6 million for~~ the three months ended September 30, 2016. Gathering expense increased primarily due to increased third-party volumetric charges and increased affiliate firm gathering capacity. Transmission expense increased due to higher third-party costs and increased firm capacity on contracts with affiliates incurred to move EQT Production’s natural gas out of the Appalachian Basin. During the fourth quarter of 2016 the Ohio Valley Connector (OVC) was placed into service and as a result, the Company started flowing its produced volumes to its Rockies Express pipeline capacity. Additionally,same period in ~~the fourth quarter of 2016, the Company started flowing its produced volumes to its Texas Eastern Transmission Gulf Markets pipeline capacity. Processing expense increased~~2018 as a result of ~~increased processing~~fewer capacity ~~acquired through recent acquisitions~~releases at lower capacity release rates on the Tennessee Gas Pipeline and ~~higher volumes processed.~~lower revenues from gathering services following the 2018 Divestitures.

The decrease in LOE was primarily due to lower salt water disposal costs in 2017. Production taxes increased as a result of higher severance taxes associated with increased production volumes resulting from recent acquisitions and an increase in the Pennsylvania impact fee, primarily as a result of higher NYMEX prices during the three months ended September 30, 2017.

SG&A expense decreased primarily due to decreased legal reserves, partly offset by higher personnel costs. DD&A expense increased as a result of higher produced volumes partly offset by a lower overall depletion rate in the third quarter of 2017.

3024

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EQT Corporation and Subsidiaries

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

~~Nine~~Operating Expenses

The following table presents information about certain of the Company's operating expenses.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		%		2019		2018		%
	(Thousands, except per unit amounts)
Per Unit ($/Mcfe)
Gathering	$	0.55	$	0.53	3.8		$	0.55	$	0.54	1.9
Transmission	0.52		0.49		6.1		0.52		0.50		4.0
Processing	0.08		0.10		(20.0	)	0.08		0.12		(33.3	)
Lease operating expenses (LOE), excluding production taxes	0.06		0.06		—		0.06		0.08		(25.0	)
Production taxes	0.04		0.06		(33.3	)	0.05		0.06		(16.7	)
Exploration	0.01		0.01		—		0.01		0.01		—
Selling, general and administrative	0.21		0.14		50.0		0.19		0.14		35.7
Production depletion	1.02		1.03		(1.0	)	1.01		1.03		(1.9	)

Operating expenses:
Gathering	$	210,631	$	199,475	5.6		$	629,359	$	587,844	7.1
Transmission	197,005		182,932		7.7		589,433		548,106		7.5
Processing	30,306		38,340		(21.0	)	95,380		129,523		(26.4	)
LOE, excluding production taxes	22,355		21,480		4.1		62,582		83,069		(24.7	)
Production taxes	15,466		21,254		(27.2	)	54,963		66,162		(16.9	)
Exploration	3,492		3,596		(2.9	)	6,356		6,474		(1.8	)
Selling, general and administrative	79,376		51,816		53.2		214,562		154,590		38.8

Depreciation and depletion:
Production depletion	$	387,404	$	384,904	0.6		$	1,143,552	$	1,128,248	1.4
Other depreciation and depletion	3,589		3,112		15.3		10,967		24,170		(54.6	)
Total depreciation and depletion	$	390,993	$	388,016	0.8		$	1,154,519	$	1,152,418	0.2

Three Months Ended September 30, ~~2017 vs. Nine~~2019 Compared to Three Months Ended September 30, ~~2016~~2018

~~EQT Production’s operating income totaled $322.3 million~~Gathering expense increased on an absolute and per Mcfe basis for the ~~nine~~three months ended September 30, ~~2017~~2019 compared to ~~an operating loss of $468.7 million for~~ the ~~nine~~three months ended September 30, ~~2016. The $791.0 million increase was~~2018 due primarily ~~due~~ to ~~higher average realized price, gains~~the sales volumes mix between firm and volumetric gathering contracts. Transmission expense increased on ~~derivatives not designated as hedges~~an absolute and per Mcfe basis for the ~~nine~~three months ended September 30, ~~2017~~2019 compared to ~~losses on derivatives not designated as hedges for~~ the ~~nine~~three months ended September 30, ~~2016 and increased sales volumes of produced natural gas and NGLs, partly offset by increased operating expenses.~~

Total operating revenues were $2,057.5 million for the nine months ended September 30, 2017 compared to $1,068.8 million for the nine months ended September 30, 2016. Sales of natural gas, oil and NGLs increased as a result of a higher average realized price and a 6% increase in production sales volumes. EQT Production paid $6.8 million and received $222.5 million of net cash settlements for derivatives not designated as hedges for the nine months ended September 30, 2017 and ~~2016, respectively, that are included in the average realized price but are not in GAAP operating revenues. The increase in production sales volumes was~~2018 due primarily the result of increased production from the 2015 and 2016 drilling programs, primarily in the Marcellus play, as well as recent acquisition activity, partially offset by the normal production decline in the Company's producing wells in 2017.

The $0.72 per Mcfe increase in the average realized price for the nine months ended September 30, 2017 was primarily due to the increase in the average NYMEX natural gas price net of cash settled derivatives of $0.44 per Mcf, an increase in the average natural gas differential of $0.20 per Mcf and an increase in liquids prices. The improvement in the average differential primarily related to higher basis partly offset by unfavorable cash settled basis swaps for the first nine months of 2017 as compared to the first nine months of 2016. The Company started flowing its produced volumes to its Rockies Express pipeline capacity and Texas Eastern Transmission Gulf Markets pipeline capacity in the fourth quarter of 2016, which resulted in a favorable impact to basis for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. In addition, for the first nine months of 2017, basis improved in the Appalachian Basin and at sales points reached through the Company’s transportation portfolio, particularly in the United States Northeast.

EQT Production total operating revenues for the nine months ended September 30, 2017 included a $222.7 million gain on derivatives not designated as hedges compared to a $32.3 million loss for the nine months ended September 30, 2016. The gains for the nine months ended September 30, 2017 primarily related to increases in the fair market value of EQT Production’s NYMEX swaps due to decreased NYMEX prices.

Operating expenses totaled $1,735.2 million for the nine months ended September 30, 2017 compared to $1,537.4 million for the nine months ended September 30, 2016. Gathering expense increased primarily due to increased ~~third-party volumetric charges and increased affiliate firm gathering capacity. Transmission expense increased due to higher third-party costs and increased firm~~transmission capacity ~~on contracts with affiliates incurred~~contracted to move ~~EQT Production’s~~the Company's natural gas out of the Appalachian ~~Basin. During~~Basin and increased costs associated with unreleased capacity on the fourth quarter of 2016, the OVC was placed into service and as a result, the Company started flowing its produced volumes to its Rockies Express pipeline capacity. Additionally, in the fourth quarter of 2016, the Company started flowing its produced volumes to its Texas Eastern Transmission Gulf Markets pipeline capacity.Tennessee Gas Pipeline. Processing expense decreased on an absolute and per Mcfe basis for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 due primarily to lower liquids sales volumes.

LOE increased on an absolute basis for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 due primarily to increased salt water disposal costs, partly offset by lower personnel costs due to reductions in workforce.

Production taxes decreased on an absolute and per Mcfe basis for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 due primarily to lower severance taxes as a result of ~~increased processing capacity acquired through recent acquisitions~~lower unhedged prices and ~~higher volumes processed.~~

~~The decrease in LOE was primarily due to decreased personnel costs driven by~~ the ~~consolidation of the Company’s Huron operations in 2016~~2018 Divestitures and lower ~~well operating expenses, partly offset by higher operational costs related to~~Pennsylvania impact fees.

Selling, general and administrative expense increased on an absolute and per Mcfe basis for the ~~Company’s recent acquisitions during the nine~~three months ended September 30, ~~2017. Production taxes increased as a result of higher severance taxes associated with increased production volumes and on higher market sales prices partly offset by~~2019 compared to the ~~expiration of the West Virginia volume based tax in 2016. Production taxes also increased~~three months ended September 30, 2018 due primarily to an increase in the ~~Pennsylvania impact fee, primarily as a result~~royalty and litigation reserve, net of ~~an increase in~~settlements received, of $36.6 million for the ~~number of wells drilled in Pennsylvania and higher NYMEX prices during the nine~~three months ended September 30, ~~2017.~~

SG&A expense decreased primarily due to lower pension expense of $9.4 million related to the termination of the EQT Corporation Retirement Plan for Employees in the second quarter of 2016, lower legal reserves in 2017, a reduction to the reserve for uncollectible accounts, and the absence of costs related to the consolidation of the Company’s Huron operations in 2016. This was2019, partly offset by ~~higher professional service fees driven primarily by recent acquisitions. DD&A expense increased on higher production depletion as a result of higher produced volumes partly offset by a~~ lower ~~overall depletion rate~~personnel costs due to reductions in ~~2017.~~workforce.

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EQT Corporation and Subsidiaries

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

~~EQT GATHERING~~

~~RESULTS OF OPERATIONS~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 % Change 2017 2016 % Change
(Thousands, other than per day amounts)
FINANCIAL DATA
Firm reservation fee revenues $ 104,772
$ 83,560
25.4
$ 300,901
$ 249,127
20.8
Volumetric based fee revenues:
Usage fees under firm contracts (a) 7,873
10,024
(21.5 ) 19,173
31,515
(39.2 )
Usage fees under interruptible contracts 3,877
5,557
(30.2 ) 10,922
16,663
(34.5 )
Total volumetric based fee revenues 11,750
15,581
(24.6 ) 30,095
48,178
(37.5 )
Total operating revenues 116,522
99,141
17.5
330,996
297,305
11.3

Operating expenses:
Operating and maintenance 10,219
9,672
5.7
31,082
27,740
12.0
SG&A 10,503
9,311
12.8
28,800
28,771
0.1
Depreciation and amortization 9,983
7,663
30.3
28,398
22,520
26.1
Total operating expenses 30,705
26,646
15.2
88,280
79,031
11.7

Operating income $ 85,817
$ 72,495
18.4
$ 242,716
$ 218,274
11.2

OPERATIONAL DATA

Gathered volumes (BBtu per day)
Firm capacity reservation 1,838
1,563
17.6
1,783
1,506
18.4
Volumetric based services (b) 370
451
(18.0 ) 292
463
(36.9 )
Total gathered volumes 2,208
2,014
9.6
2,075
1,969
5.4

Capital expenditures $ 48,182
$ 88,390
(45.5 ) $ 150,728
$ 247,755
(39.2 )


~~(a)~~	~~Includes fees on volumes gathered in excess of firm contracted capacity.~~


~~(b)~~	~~Includes volumes gathered under interruptible contracts and volumes gathered in excess of firm contracted capacity.~~

~~Three Months Ended September 30, 2017 vs. Three Months Ended September 30, 2016~~

~~Gathering revenues~~Production depletion increased ~~by $17.4 million~~on an absolute basis for the three months ended September 30, ~~2017~~2019 compared to the three months ended September 30, ~~2016 driven~~2018 due primarily to higher produced volumes, partly offset by ~~third party and affiliate production development in the Marcellus Shale. EQT Gathering increased firm reservation fee revenues primarily as~~ a ~~result of third parties and affiliates contracting for additional firm gathering capacity~~lower depletion rate. Production depletion decreased on ~~the Range Resources Corporation (Range Resources) Header Pipeline project and various affiliate wellhead gathering expansion projects. The decrease in usage fees under firm contracts was~~a per Mcfe basis due to ~~lower affiliate volumes in excess of firm contracted capacity. The decrease in usage fees under interruptible contracts was primarily due~~higher sales volumes.

See Notes 11 and 12 to the ~~additional contracts~~Condensed Consolidated Financial Statements for ~~firm capacity.~~a discussion of the Asset Exchange Transaction and the 2018 Divestitures, respectively, both of which were recognized in impairment/loss on sale/exchange of long-lived assets.

~~Operating expenses~~Lease impairments and expirations increased ~~by $4.1 million~~ for the three months ended September 30, ~~2017~~2019 compared to the three months ended September 30, 2018 due primarily to increased lease expirations, a majority of which were related to leases acquired in 2016 ~~primarily as a result of increased depreciation~~ and ~~amortization expense of $2.3 million due to additional~~2017.

For the three months ended September 30, 2019, the Company recognized an impairment charge on its intangible assets ~~placed in-service including those~~ associated with non-compete agreements for former Rice Energy Inc. executives who are now employees of the ~~Range Resources Header Pipeline project~~Company.

Proxy, transaction and ~~a Northern West Virginia Marcellus gathering system (NWV Gathering) expansion project~~reorganization expense increased for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 due primarily to reductions in workforce and ~~higher personnel costs.~~other strategy alignment initiatives, which resulted in severance and other termination benefits of $62.2 million and contract termination fees of $12.6 million.

Nine Months Ended September 30, ~~2017 vs.~~2019 Compared to Nine Months Ended September 30, ~~2016~~2018

Gathering ~~revenues~~expense increased ~~by $33.7 million~~on an absolute and per Mcfe basis for the nine months ended September 30, ~~2017~~2019 compared to the nine months ended September 30, ~~2016 driven by third party and affiliate production development in the Marcellus Shale. EQT Gathering increased firm reservation fee revenues~~2018 due primarily as a result of affiliates and third parties contracting for additional firm gathering capacity on various affiliate wellhead gathering expansion projects and the Range Resources Header Pipeline project. The decrease in usage fees under firm contracts was due to lower affiliate volumes in excess of firm contracted capacity. The decrease in usage fees under interruptible contracts was primarily due to the ~~additional contracts for~~sales volumes mix on firm ~~capacity.~~

~~Operating expenses increased by $9.2 million~~and volumetric gathering contracts. Gathering expense per Mcfe excluding sales volumes related to the 2018 Divestitures was $0.56 for the nine months ended September 30, ~~2017~~2018. Transmission expense increased on an absolute and per Mcfe basis for the nine months ended September 30, 2019 compared to the nine months ended September 30, ~~2016~~2018 due primarily to increased transmission capacity contracted to move the Company's natural gas out of the Appalachian Basin, volumetric charges and costs associated with unreleased capacity on the Tennessee Gas Pipeline, partly offset by decreased firm capacity costs as a result of the 2018 Divestitures. Processing expense decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 due primarily to lower liquids sales volumes, the majority of which resulted from the 2018 Divestitures.

LOE and production taxes decreased on an absolute and per Mcfe basis for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 primarily as a result of the 2018 Divestitures and lower Pennsylvania impact fees.

Selling, general and administrative expense increased on an absolute and per Mcfe basis for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 due primarily to an increase in the royalty and litigation reserve, net of settlements received, of $82.4 million in 2019, partly offset by lower personnel costs due to reductions in workforce and decreased long-term incentive compensation due to changes in the fair value of awards. Long-term incentive compensation may fluctuate with changes in the Company's stock price and performance conditions.

Production depletion increased on an absolute basis for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 due primarily to higher produced volumes, partly offset by a lower depletion rate. Production depletion decreased on a per Mcfe basis due to higher sales volumes. Other depreciation and ~~amortization~~depletion decreased as a result of the 2018 Divestitures.

See Notes 11 and 12 to the Condensed Consolidated Financial Statements for a discussion of the Asset Exchange Transaction and the 2018 Divestitures, respectively, both of which were recognized in impairment/loss on sale/exchange of long-lived assets.

Lease impairments and expirations increased for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 due primarily to increased lease expirations, a majority of which were related to leases acquired in 2016 and 2017.

For the nine months ended September 30, 2019, the Company recognized an impairment charge on intangible assets associated with non-compete agreements for former Rice Energy Inc. executives who are now employees of the Company.

Proxy, transaction and reorganization expense increased for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 due primarily to reductions in workforce and other strategy alignment initiatives, which resulted in severance and other termination benefits of ~~$5.9~~$68.0 million ~~due to additional~~and contract termination fees of $12.6 million, and proxy costs of

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

~~assets placed in-service including those associated~~$19.3 million recognized in the first half of 2019. Prior period transaction costs include legal and banking fees recognized with the ~~Range Resources Header Pipeline project and a NWV Gathering expansion project and higher personnel costs.~~acquisition of Rice Energy Inc.

~~EQT TRANSMISSION~~

Other Income Statement Items

~~RESULTS OF OPERATIONS~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 % Change 2017 2016 % Change
(Thousands, other than per day amounts)
FINANCIAL DATA
Firm reservation fee revenues $ 84,438
$ 59,610
41.7
$ 256,224
$ 190,003
34.9
Volumetric based fee revenues:
Usage fees under firm contracts (a) 3,427
14,600
(76.5 ) 9,787
42,274
(76.8 )
Usage fees under interruptible contracts 2,806
3,421
(18.0 ) 12,578
11,018
14.2
Total volumetric based fee revenues 6,233
18,021
(65.4 ) 22,365
53,292
(58.0 )
Total operating revenues 90,671
77,631
16.8
278,589
243,295
14.5

Operating expenses:
Operating and maintenance 10,385
8,526
21.8
30,389
23,947
26.9
SG&A 8,336
8,414
(0.9 ) 23,412
24,606
(4.9 )
Depreciation and amortization 12,261
6,976
75.8
35,793
20,657
73.3
Total operating expenses 30,982
23,916
29.5
89,594
69,210
29.5

Operating income $ 59,689
$ 53,715
11.1
$ 188,995
$ 174,085
8.6

OPERATIONAL DATA

Transmission pipeline throughput (BBtu per day)
Firm capacity reservation 2,517
1,440
74.8
2,288
1,515
51.0
Volumetric based services (b) 21
610
(96.6 ) 22
556
(96.0 )
Total transmission pipeline throughput 2,538
2,050
23.8
2,310
2,071
11.5

Average contracted firm transmission reservation commitments (BBtu per day) 3,474
2,365
46.9
3,519
2,591
35.8

Capital expenditures $ 22,312
$ 77,940
(71.4 ) $ 73,679
$ 253,957
(71.0 )


~~(a)~~	~~Includes commodity charges and fees on all volumes transported under firm contracts as well as transmission fees on volumes in excess of firm contracted capacity.~~


~~(b)~~	~~Includes volumes transported under interruptible contracts and volumes transported in excess of firm contracted capacity.~~

~~Three Months Ended September 30, 2017 vs. Three Months Ended September 30, 2016~~

Transmission and storage revenues increased by $13.0 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Firm reservation fee revenues increased due to affiliates contracting for additional firm capacityThe Company's investment in Equitrans Midstream is recorded at fair value based on the ~~OVC. Approximately $3.4 million~~closing stock price of Equitrans Midstream's common stock multiplied by the ~~increase was related to a FERC-approved retroactive negotiated rate adjustment for~~number of shares of Equitrans Midstream's common stock owned by the ~~period October 1, 2016 through June 30, 2017.~~Company. The ~~firm capacity on the OVC resulted~~changes in ~~lower affiliate usage fees under firm contracts.~~

Operating expenses increased by $7.1 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The increases in operating and maintenance expense and depreciation and amortization expense were the result of the OVC project placed in-servicefair value are recorded in the ~~fourth quarter~~Statements of ~~2016. Operating~~Condensed Consolidated Operations as an unrealized gain or loss on investment in Equitrans Midstream.

Dividend and ~~maintenance expense~~other income increased primarily due to ~~property taxes on~~dividends received from Equitrans Midstream during the ~~OVC.~~

~~Nine Months Ended September 30, 2017 vs. Nine Months Ended September 30, 2016~~

~~Transmission~~three and ~~storage revenues increased by $35.3 million for the~~ nine months ended September 30, ~~2017 compared to~~2019.

Interest expense decreased for the three and nine months ended September 30, ~~2016. Firm reservation fee revenues increased due~~2019 compared to ~~affiliates~~the three and ~~third parties contracting for~~

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

additional firm capacity, primarily on the OVC, as well as higher contractual rates on existing contracts in the current year. The firm capacity on the OVC resulted in lower affiliate usage fees under firm contracts.

~~Operating expenses increased by $20.4 million for the~~ nine months ended September 30, ~~2017 compared~~2018, respectively, due to decreased borrowings under the ~~nine months ended September 30, 2016. The increases in operating~~Company's credit facility and ~~maintenance expense and depreciation and amortization expense were the result~~repayment of the ~~OVC project placed in-service in the fourth quarter of 2016. Operating and maintenance expense increased primarily due to property taxes on the OVC and higher personnel costs.~~

~~Other Income Statement Items~~

~~Other Income~~

~~For the three months ended September 30, 2017 and 2016, the Company recorded equity in earnings of nonconsolidated investments of $6.0~~$700 million ~~and $2.7 million, respectively, related to EQM's portion~~aggregate principal amount of the ~~MVP Joint Venture's Allowance for Funds Used During Construction (AFUDC)~~Company's 8.125% Senior Notes that matured on the MVP project. For the nine months ended September 30, 2017 and 2016, the Company recorded equity in earnings of nonconsolidated investments of $15.4 million and $6.1 million, respectively, related to EQM's portion of the MVP Joint Venture's AFUDC on the MVP project.

For the three months ended September 30, 2017 and 2016, the Company recorded AFUDC of $0.8 million and $8.0 million, respectively, on regulated construction projects. For the nine months ended September 30, 2017 and 2016, the Company recorded AFUDC of $4.1 million and $16.7 million, respectively, on regulated construction projects. These decreases were mainly attributable to completion of the OVC project in 2016.

~~For the nine months ended September 30, 2017, other income was~~June 1, 2019, partly offset by ~~losses on the sale of trading securities.~~

~~Interest Expense~~

Interest expense increased by $14.4 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 primarily driven by $6.8 million of expense for the Bridge Facility, $5.2 million of interest incurred on ~~EQM's long-term debt issued~~borrowings under the Term Loan Facility (defined in ~~November 2016, lower interest income earned on short-term investments and lower AFUDC - debt associated with decreased spending on EQM's regulated projects.~~

~~Interest expense increased by $28.6 million for the nine months ended September 30, 2017 compared~~Note 7 to the nine months ended September 30, 2016 primarily driven by $15.5 million of interest incurred on EQM's long-term debt issued in November 2016, $7.6 million of expense for the Bridge Facility, lower capitalized interest dueCondensed Consolidated Financial Statements).

See Note 6 to the ~~timing~~Condensed Consolidated Financial Statements for a discussion of ~~drilling completions, lower AFUDC - debt associated with decreased spending on EQM's regulated projects, and lower interest income earned on short-term investments.~~

~~Income Tax Expense~~

~~The Company recorded~~ income tax benefit for the three months ended September 30, 2017, compared to income tax expense for the three months ended September 30, 2016. The income tax benefit for the three months ended September 30, 2017 was attributable to a decrease in the estimated annual effective tax rate from the prior quarter and a discrete tax benefit of $12.4 million for the three months ended September 30, 2017 related to refining estimates on the 2016 return. The decrease in the estimated annual effective tax rate at September 30, 2017 compared to June 30, 2017 was primarily the result of lower forecast pre-tax book income for EQT Production which resulted in a higher percentage of pre-tax income being attributable to noncontrolling interests as well as a decrease in state valuation allowances.benefit.

The Company recorded income tax expense for the nine months ended September 30, 2017, compared to income tax benefit for the nine months ended September 30, 2016. The increase in 2017 was primarily attributable to the increase in EQT Production segment operating income for the nine month period ended September 30, 2017 compared to the nine month period ended September 30, 2016.

The Company’s effective income tax rate differed from the U.S. Federal statutory rate of 35% for all periods primarily because the Company consolidates 100% of the pre-tax income related to the noncontrolling public limited partners’ share of EQGP income, but is not required to record an income tax provision with respect to the portion of the income allocated to EQGP and EQM noncontrolling public limited partners.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

OUTLOOK

Following the substantial reconstitution of the Company's Board of Directors at the Company's 2019 annual meeting of shareholders and the change in executive leadership, the Company adopted a business transformation program designed to effect operational, organizational, cultural and other changes to lower operating costs and increase free cash flow generation through improved efficiency, well performance and the use of technology. The transformation program's goal is to reposition the organization to effectively execute on large-scale combo-development projects, which consist of developing multiple wells and pads simultaneously, and intends to take a disciplined approach to capital allocation and in establishing its development schedule. Under the transformation program, the level of future development capital spending will be determined by the economics of the Company's available projects in light of the commodity price environment. Future production growth will be an output of that economic decision.

For 2019, the Company expects to spend $1.735 billion to $1.785 billion for capital expenditures, which are expected to be funded by operating cash flow and, if required, borrowings under the Company's credit facility. Sales volumes are expected to be 1,490 Bcfe to 1,510 Bcfe for 2019.

Compensation packages for certain of the Company's executive officers have not yet been determined by the Compensation Committee of the Company's Board of Directors. As a result, such compensation expenses and any accruals thereof for these executive officers have not been included in the Company's third quarter 2019 financial results.

The Company is committed to profitably developing its Appalachian Basin natural gas and NGL reserves through environmentally responsible, cost-effective and technologically advanced horizontal drilling. The Company’sCompany's revenues, earnings, liquidity and ability to grow are substantially dependent on the prices it receives for, and the ~~Company’s~~Company's ability to develop its reserves of, natural gas, oil and NGLs. Due to the volatility of commodity prices, the Company is unable to predict future potential movements in the market prices for natural gas, ~~including Appalachian~~oil and ~~other market point basis, and~~ NGLs at the Company's ultimate sales points and, thus, cannot predict the ultimate impact of prices on its operations. ~~However,~~Changes in natural gas, oil and NGLs prices could affect, among other things, the ~~Company believes~~Company's development plans, which would increase or decrease the ~~long-term outlook for its business is favorable due~~pace of the development and the level of the Company's reserves, as well as the Company's revenues, earnings or liquidity. Lower prices and changes in development plans could also result in non-cash impairments in the book value of the Company's oil and gas properties or other long-lived intangible assets or downward adjustments to the Company’s substantial resource base, strategically located midstream assets, low cost structure, financial strength, risk management, including its commodity hedging strategy, and disciplined investment of capital. The Company believes the combination of these factors provide it with an opportunity to exploit and develop its positions and maximize efficiency through economies of scale in its strategic operating area.

~~On June 19, 2017, the Company entered into the Rice Merger Agreement with Rice, pursuant to which the Company will acquire Rice. The waiting period applicable~~Company's estimated proved reserves. Any such impairment and/or downward adjustment to the Rice Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 was terminated by the Federal Trade Commission on July 18, 2017. The Rice Merger is expected to close in mid-November 2017 following the satisfaction of certain customary closing conditions, including the approval by the Company’s shareholders of the issuance of shares of EQT Common Stock as Merger Consideration and the adoption of the Rice Merger Agreement by Rice stockholders. The special meetings of the shareholders of EQT and the stockholders of Rice are scheduled toCompany's estimated reserves could potentially be held for these purposes on November 9, 2017. As part of this transaction, the Company will acquire the retained midstream assets that are currently held at Rice, which the Company intends to sell to EQM through one or more drop-down transactions. See Note Nmaterial to the ~~Company’s Condensed Consolidated Financial Statements for further discussion of the Rice Merger and related transactions.~~Company.

On September 13, 2017, the Company announced that it would establish a committee of its board of directors to evaluate options for addressing its sum-of-the-parts discount. The committee will include select independent directors. The Company’s board will announce a decision by the end of the first quarter 2018, after considering the committee’s recommendation.

The Company continues to focus on creating and maximizing shareholder value by profitably developing its reserves and making midstream investments in projects that support EQT Production and third parties while maintaining a strong balance sheet. The Company monitors current and expected market conditions, including the commodity price environment, and its liquidity needs and may adjust its capital investment plan accordingly. While the tactics continue to evolve based on market conditions, the Company periodically considers arrangements to monetize the value of certain mature assets for re-deployment into the highest value development opportunities. Upon the closing of the Rice Merger, the Company’s consolidation goals will largely be met and the Company plans to focus on integrating the Rice assets and realizing higher returns through longer laterals and achieving an even lower operating cost structure. The Company will also continue to pursue tactical acquisitions of fill-in acreage to extend laterals.

Total capital investment by EQT in 2017, excluding the Rice Merger and other acquisitions, is expected to be approximately $2.0 billion (including EQM). Capital spending for well development (primarily drilling and completion) of approximately $1.3 billion in 2017 is expected to support the drilling of approximately 178 gross wells, which includes 121 Marcellus wells, 56 Upper Devonian wells and one deep Utica well. To support continued growth in production, the Company plans to invest approximately $0.5 billion on midstream infrastructure through EQM in 2017. Excluding the Rice Merger, the 2017 capital investment plan for EQT Production is expected to be funded by cash generated from operations and cash on hand. EQM's available sources of liquidity include cash generated from operations, borrowings under its credit facilities, cash on hand, debt offerings and issuances of additional EQM partnership interests.

See ~~"Impairment of Oil and Gas Properties" and “Critical~~"Critical Accounting Policies and ~~Estimates”~~Estimates" and Note 1 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 for a discussion of the ~~Company’s~~Company's accounting policies and significant assumptions related to accounting for oil and gas producing activities, and the Company's policies and processes with respect to impairment reviews for proved and unproved property. ~~As a~~See also Item 1A, "Risk Factors – Natural gas, NGLs and oil price declines have resulted in impairment of certain of our non-core assets. Future declines in commodity prices, increases in operating costs or adverse changes in well performance may result in additional write-downs of ~~its third quarter 2017 evaluations,~~ the ~~Company did not recognize an impairment charge for proved properties. However, a further decline~~carrying amounts of our assets, including long lived intangible assets, which could materially and adversely affect our results of operations in future periods" in the ~~average five-year forward realized prices in a future period may cause~~Company's Annual Report on Form 10-K for the ~~Company to recognize a significant impairment on the assets in the Huron play, which had a carrying value of approximately $3 billion at September 30, 2017.~~year ended December 31, 2018.

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

CAPITAL RESOURCES AND LIQUIDITY

~~Overview~~

During the nine months ended September 30, 2017, the Company’s cash on hand decreased by $620.0 million primarily as a result of capital expenditures, expenditures for acquisitions, and capital contributions to the MVP Joint Venture exceeding the netOperating Activities. Net cash provided by operating activities ~~and proceeds from sales of trading securities.~~

~~Operating Activities~~

~~Net cash flows provided by operating activities totaled $1,211.4~~was $1,633.9 million for the nine months ended September 30, ~~2017~~2019 compared to ~~$767.7~~$2,445.4 million for the nine months ended September 30, ~~2016.~~2018. The ~~$443.7 million increase in~~decrease was driven by cash ~~flows~~ provided by ~~operating activities was primarily the result of higher operating income, the reasons for which are discussed~~discontinued operations included in the ~~section captioned "Corporate Overview"~~nine months ended September 30, 2018 and lower cash operating revenues in ~~Item 2, "Management's Discussion and Analysis~~excess of ~~Financial Condition and Results of Operations,"~~cash operating expenses, partly offset by ~~cash settlements paid in 2017 compared to cash~~favorable timing of working capital payments and dividends received ~~in 2016 on derivatives not designated as hedges.~~from Equitrans Midstream.

The Company's cash flows from operating activities will be ~~impacted~~affected by ~~future~~ movements in the market price for commodities. The Company is unable to predict ~~these future price~~such movements outside of the current market view as reflected in forward strip pricing. Refer to ~~"Natural~~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 ~~upon~~on our revenue, profitability, future rate of growth, liquidity and financial position" ~~under Item 1A, "Risk Factors"~~ in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 for further information.

Investing ~~Activities~~

Activities. Net cash ~~flows~~ used in investing activities ~~totaled $1,716.5~~was $1,256.2 million for the nine months ended September 30, ~~2017~~2019 compared to ~~$1,669.4~~$2,719.5 million for the nine months ended September 30, ~~2016.~~2018. The ~~$47.1 million increase~~decrease was due primarily ~~due~~ to lower capital expenditures for the ~~Company's acquisitions~~nine months ended September 30, 2019 as a result of the change in strategy from production growth to capital efficiency and ~~increased drilling~~cash used in discontinued operations for capital expenditures and ~~completions spending~~capital contributions included in the nine months ended September 30, 2018. These decreases were partly offset by proceeds received from asset sales during the nine months ended September 30, 2017, partly offset by cash received from the sale of trading securities and lower EQM capital expenditures. The Company spud 149 gross wells in the first nine months of 2017, including 100 horizontal Marcellus wells, 48 horizontal Upper Devonian wells and one horizontal Utica well. The Company spud 68 gross wells in the first nine months of 2016, including 65 horizontal Marcellus wells and three horizontal Utica wells. The increase in drilling and completions spending was offset by decreased spending on the following projects: the OVC, the Range Resources Header Pipeline project and the NWV Gathering expansion. The OVC project, part of the Range Resources Header Pipeline project and a prior expansion project in the NWV Gathering development area were placed into service in the fourth quarter of 2016.2018.

Capital expenditures as reported on the Statement of Condensed Consolidated Cash Flows for the nine months ended September 30, 2017 and 2016 excluded capitalized non-cash stock-based compensation expense and accruals. The impact of accrued capital expenditures includes the reversal of the prior period accrual as well as the current period estimate, both of which are non-cash items. The net impact of these non-cash itemsExpenditures



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019			2018
	(Millions)
Reserve development	$	380	$	731	$	1,155		$	1,824
Land and lease	49		61		144			164
Capitalized overhead	18		36		59			101
Capitalized interest	6		7		19			23
Other production infrastructure	17		13		28			39
Property acquisitions	2		5		8			24
Other corporate items	3		2		4			6
Total capital expenditures from continuing operations	475		855		1,417			2,181
Midstream infrastructure (a)	—		241		—			624
Total capital expenditures	475		1,096		1,417			2,805
Add (deduct) non-cash items (b)	16		61		(160		)	45
Total cash capital expenditures	$	491	$	1,157	$	1,257		$	2,850


(a)	Capital expenditures related to midstream infrastructure are presented as discontinued operations as described in Note 2 to the Condensed Consolidated Financial Statements.


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

Financing Activities. Net cash used in financing activities was ~~$102.7 million and $1.2~~$373.6 million for the nine months ended September 30, 2017 and 2016, respectively. Capital expenditures for acquisitions as reported on the Statement of Condensed Consolidated Cash Flows for the nine months ended September 30, 2017 also excluded non-cash capital expenditures of $7.5 million related2019 compared to ~~the Company's acquisitions.~~

~~Financing Activities~~

~~Net~~net cash ~~flows used in~~provided by financing activities ~~totaled $114.8~~of $131.6 million for the nine months ended September 30, ~~2017 compared to net cash flows provided by financing activities of $1,057.9 million for~~2018. For the nine months ended September 30, ~~2016. During~~2019, the primary uses of financing cash flows were net repayments of debt and credit facility borrowings, and the primary source of financing cash flows was net proceeds from borrowings under the Term Loan Facility. For the nine months ended September 30, ~~2017,~~2018, the primary source of financing cash flows was net proceeds from the EQM Midstream Partners, LP (EQM) senior notes offering, and the primary uses of financing cash flows were a net decrease in the Company's, EQM's and Rice Midstream Partners LP's credit facility borrowings, repurchase and retirement of common stock, distributions to noncontrolling interests, EQM's acquisition of the remaining 25% ownership interest in Strike Force Midstream LLC, dividends paid and cash paid for taxes on share-based incentive awards and dividends paid. The primary financing source of cash was a net increase in EQM credit facility borrowings. During the nine months ended September 30, 2016, the primary sources of financing cash flows were net proceeds from public offerings of EQT common stock and EQM common units, and the primary financing uses of cash were net credit facility repayments under the EQM credit facility, distributions to noncontrolling interests and payment of taxes related to the vesting or exercise of equity awards.

On October 4, 2017, the Company completed the 2017 Notes Offering described in Note O to the Condensed Consolidated Financial Statements. The Company received net proceeds from the 2017 Notes Offering of approximately $2,974.3 million, which the Company expects to use, together with other cash on hand and borrowings under the Company’s revolving credit facility, to fund

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

The Company may from time-to-time seek to repurchase its outstanding debt securities. Such repurchases, if any, will depend on prevailing market conditions, the ~~cash portion of the Merger Consideration, to pay expenses related to the Rice Merger~~Company's liquidity requirements, contractual and legal restrictions and other transactions contemplated by the Rice Merger Agreement (including the refinancing of certain indebtedness of Rice and its subsidiaries), to redeem or repay certain Company senior notes and medium term notes due in 2018 and for other general corporate purposes. In October 2017, the Company delivered redemption notices pursuant to which the Company expects to redeem all of its outstanding $200 million aggregate principal amount 5.15% Senior Notes due 2018 and $500 million aggregate principal amount 6.50% Senior Notes due 2018 in November 2017. Upon redemption, the Company will pay make whole call premiums based upon prevailing rates on U.S. government securities at the time of redemption. If the Rice Merger does not occur on or before May 19, 2018 or the Company notifies the trustee that the Company will not pursue the consummation of the Rice Merger, the Company will be required to redeem the Floating Rate Notes, the 2020 Notes and the 2027 Notes (but not the 2022 Notes) then outstanding at a redemption price equal to 101% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the special mandatory redemption date. The Company accrued $6.1 million of expenses related to the 2017 Notes Offering in other assets at September 30, 2017.factors. In addition, the Company ~~expensed $7.6 million~~plans to dispose its retained shares of ~~commitment fees on~~Equitrans Midstream's common stock and use the ~~Bridge Facility during~~proceeds to reduce the ~~nine months ended September 30, 2017.~~Company's debt.

Security Ratings and Financing Triggers

The table below reflects the credit ratings ~~for~~and ratings outlook assigned to debt instruments of the Company ~~at September 30, 2017.~~as of October 31, 2019. Changes in credit ratings may affect the ~~Company’s~~Company's cost of short-term debt through interest rates and fees under its lines of credit. ~~These~~Changes in credit ratings or ratings outlook may also affect collateral requirements onunder the Company's derivative instruments ~~pipeline capacity~~and midstream services contracts, ~~joint venture arrangements and subsidiary construction contracts, as well as the~~ rates available on new long-term debt and access to the credit markets.



Rating Service	~~Senior Notes~~Credit Rating	Outlook
Moody's	Baa3	~~Stable~~Negative
S&P	~~BBB~~BBB-	Negative
Fitch Ratings Service (Fitch)	BBB-	~~Stable~~Negative

The ~~table below reflects the~~Company's credit ratings ~~for debt instruments of EQM at September 30, 2017. Changes in credit~~and ratings may affect EQM’s cost of short-term debt through interest rates and fees under its lines of credit. These ratings may also affect collateral requirements under joint venture arrangements and subsidiary construction contracts, as well as the rates available on new long-term debt and access to the credit markets.



~~Rating Service~~	~~Senior Notes~~	~~Outlook~~
~~Moody’s~~	~~Ba1~~	~~Stable~~
~~S&P~~	~~BBB-~~	~~Stable~~
~~Fitch~~	~~BBB-~~	~~Stable~~

~~The Company’s and EQM’s credit ratings~~outlook are subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. The Company ~~and EQM~~ cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by a credit rating agency if, in its judgment, circumstances so warrant. If any credit rating agency downgrades the ~~ratings, particularly below investment grade,~~Company's rating, the ~~Company’s or EQM’s~~Company's access to the capital markets may be limited, borrowing costs and margin deposits on the ~~Company’s~~Company's derivative ~~contracts would~~instruments may increase, ~~counterparties may request additional assurances, including collateral, and~~ the Company's potential pool of investors and funding sources may ~~decrease. Investment grade refers~~decrease and the Company's counterparties under midstream services contracts may request additional assurances, including collateral. The required margin on the Company's derivative instruments is also subject to ~~the quality~~significant change as a result of ~~a company's credit as assessed by one or more~~factors other than credit rating, ~~agencies. In order to be considered investment grade, a company must be rated BBB- or higher by S&P, Baa3 or higher by Moody's,~~such as gas prices and ~~BBB- or higher by Fitch. Anything below these ratings is considered non-investment grade.~~

I~~n July 2017,~~credit thresholds set forth in agreements between the hedging counterparties and the Company. As of October 31, 2019, the Company ~~amended and restated~~had sufficient unused borrowing capacity under its ~~$1.5 billion revolving~~ credit facility to ~~extend the term~~satisfy any requests for margin or other collateral that a counterparty would be permitted to ~~July 2022. In addition, following the closing~~request of the ~~Rice Merger~~Company under its derivative contracts and ~~subject~~midstream services contracts in the event that the Company's credit ratings were to the satisfaction of certain conditions, the borrowing capacity under the revolving credit facility will automatically increase to $2.5 billion. The Company had no amounts outstanding under the facility asfall one rating category. As of September 30, ~~2017.~~ 2019, such amounts could be up to approximately $1.6 billion. See Note 4 to the Condensed Consolidated Financial Statements for further discussion on what is deemed investment grade and a discussion of other factors affecting margin deposit requirements.

The ~~Company’s~~Company's debt agreements and other financial obligations contain various provisions that, if not complied with, could result in termination of the agreements, require early payment of amounts outstanding or similar actions. The most significant covenants and events of default under the debt agreements relate to maintenance of a debt-to-total capitalization ratio, limitations on transactions with affiliates, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of other financial obligations and change of control provisions. The ~~Company’s~~Company's credit facility ~~contains~~and the Term Loan Agreement each contain financial

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~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

covenants that require the Company to have a total debt-to-total capitalization ratio of no greater than 65%. The calculation of this ratio excludes the effects of accumulated other comprehensive income (OCI). As of September 30, ~~2017,~~2019, the Company was in compliance with all debt provisions and covenants.

~~In July 2017, EQM amended and restated its credit facility~~See Note 7 to ~~increase~~ the ~~borrowing capacity under~~Condensed Consolidated Financial Statements for a discussion of the facility from $750 million to $1 billion and extend the term to July 2022. EQM had $105 million in borrowings outstanding under the facility as of September 30, 2017. Subject to certain terms and conditions, the $1 billion credit facility has an accordion feature that allows EQM to increase the available borrowings under the facility by up to an additional $500 million. EQM’s debt agreements and other financial obligations contain various provisions that, if not complied with, could result in termination of the agreements, require early payment of amounts outstanding or similar actions. The covenants and events of default under the debt agreements relate to maintenance of permitted leverage ratio, limitations on transactions with affiliates, limitations on restricted payments, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of and certain other defaults under other financial obligations and change of control provisions. Under EQM’s $1 billion credit facility, EQM is required to maintain a consolidated leverage ratio of not more than 5.00 to 1.00 (or not more than 5.50 to 1.00 for certain measurement periods following the consummation of certain acquisitions). As of September 30, 2017, EQM was in compliance with all debt provisions and covenants.

EQM has a $500 million, 364-day, uncommitted revolving loan agreement with EQT (the 364-Day Facility) that matures on October 24, 2018 and will automatically renew for successive 364-day periods unless EQT delivers a non-renewal notice at least 60 days prior to the then current maturity date. Interest accrues on any outstanding borrowings at an interest rate equal to the rate then applicable to similar loans under EQM's $1 billion credit facility, or a successor revolving credit facility, less the sum of (i) the then applicable commitment fee under EQM's $1 billionCompany's credit facility and ~~(ii) 10 basis points. During the three~~Term Loan Facility.

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EQT Corporation and ~~nine months ended September 30, 2017, the maximum amount~~Subsidiaries

Management’s Discussion and Analysis of ~~EQM’s outstanding borrowings under the credit facility at any time was $40 million~~Financial Condition and ~~$100 million and the average daily balances were approximately $11 million and $30 million, respectively. EQM had no borrowings outstanding under the 364-Day Facility as~~Results of ~~September 30, 2017 and December 31, 2016.~~Operations

~~EQM ATM Program~~

During 2015, EQM entered into an equity distribution agreement that established an “At the Market” (ATM) common unit offering program, pursuant to which a group of managers acting as EQM’s sales agents may sell EQM common units having an aggregate offering price of up to $750 million. EQM had approximately $443 million in remaining capacity under the program as of October 26, 2017.

Commodity Risk Management

The substantial majority of the ~~Company’s~~Company's commodity risk management program is related to hedging sales of the ~~Company’s~~Company's produced natural gas. The ~~Company’s~~Company's overall objective in this hedging program is to protect cash flow from undue exposure to the risk of changing commodity prices. The derivative commodity instruments currently ~~utilized~~used by the Company are primarily ~~NYMEX~~ swaps, calls and ~~collars.~~

puts. During the third quarter of 2019, the Company terminated certain OTC hedge positions related to years 2021 and onward. The value associated with these terminated positions was rolled into new hedge positions with the same counterparties for 2020. No cash was exchanged related to these terminations or the associated execution of new hedge positions. As of October ~~24, 2017,~~25, 2019, the approximate volumes and prices of the ~~Company’s derivative commodity instruments hedging sales of produced gas for 2017~~Company's NYMEX hedge positions through ~~2019 were:~~2023 are:

NYMEX Swaps 2017 (a)(b)(c) 2018 (b)(c) 2019
Total Volume (Bcf) 120
189
19
Average Price per Mcf (NYMEX) (d) $ 3.35
$ 3.18
$ 3.12
Collars
Total Volume (Bcf) 6
18
—
Average Floor Price per Mcf (NYMEX) (d) $ 3.06
$ 3.16
$ —
Average Cap Price per Mcf (NYMEX) (d) $ 3.93
$ 3.63
$ —



	2019 (a)		2020		2021		2022		2023
Swaps
Volume (MMDth)	272		1,096		166		3		2
Average Price ($/Dth)	$	2.80	$	2.75	$	2.42	$	2.72	$	2.67
Calls - Net Short
Volume (MMDth)	61		392		209		157		77
Average Short Strike Price ($/Dth)	$	3.02	$	2.99	$	2.82	$	2.79	$	2.96
Puts - Net Long
Volume (MMDth)	8		154		157		135		69
Average Long Strike Price ($/Dth)	$	2.67	$	2.38	$	2.38	$	2.35	$	2.40
Fixed Price Sales (b)
Volume (MMDth)	27		14		7		—		—
Average Price ($/Dth)	$	2.81	$	2.78	$	2.57	$	—	$	—

~~(a) October through December 31.~~

~~(b) The Company also sold calendar year 2017 and 2018 calls/swaptions for approximately 8 Bcf and 33 Bcf, respectively, at strike prices of $3.53 per Mcf and $3.47 per Mcf, respectively.~~


~~(c)~~(a)	~~For 2017~~ October 1 through December 31.


(b)	The difference between the fixed price and ~~2018,~~NYMEX price is included in average differential on the ~~Company also sold puts for approximately 1 Bcf and 3 Bcf, respectively, at a strike~~Company's price ~~of $2.63 per Mcf.~~reconciliation under "Average Realized Price Reconciliation." The fixed price natural gas sales agreements can be physically or financially settled.

~~(d) The average price is based on a conversion rate of 1.05 MMBtu/Mcf.~~

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~~EQT Corporation~~For 2019 (October - December), 2020, 2021, 2022 and ~~Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~The~~2023, the Company ~~also enters into~~has natural gas sales agreements for approximately 8 MMDth, 13 MMDth, 18 MMDth, 18 MMDth and 18 MMDth, respectively, that ~~are satisfied by physical delivery. The difference between these sales~~include average NYMEX ceiling prices of $3.37, $3.68, $3.17, $3.17 and ~~NYMEX are included in average differential on the Company's price reconciliation under "Consolidated Operational Data."~~$3.17, respectively. The Company has fixed price physical sales for the remainder of 2017 and 2018 of 25 Bcf and 18 Bcf, respectively, at average NYMEX prices of $3.31 per Mcf and $3.23 per Mcf, respectively. For 2017 and 2018, the Company has a natural gas sales agreement for approximately 35 Bcf per year that includes a NYMEX ceiling price of $4.88 per Mcf. For 2018 and 2019, the Company has a natural gas sales agreement for approximately 49 Bcf per year that includes a NYMEX ceiling price of $3.36 per Mcf. For 2018 and 2019, the Company also has a natural gas sales agreement for approximately 7 Bcf per year that includes a NYMEX floor price of $2.16 per Mcf and a NYMEX ceiling price of $4.47 per Mcf. Currently, the Company has also entered into derivative instruments to hedge basis and a limited number of contracts to hedge its ~~NGL~~NGLs exposure. The Company may ~~also~~ use other contractual agreements ~~in implementing~~to implement its commodity hedging strategy.

See Item 3, ~~“Quantitative~~"Quantitative and Qualitative Disclosures About Market Risk,”" and Note G4 to the ~~Company’s~~Company's Condensed Consolidated Financial Statements for further discussion of the ~~Company’s~~Company's hedging program.

Commitments and Contingencies

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company. While the amounts claimed may be substantial, the Company is unable to predict with certainty the ultimate outcome of such claims and proceedings. The Company accrues legal and other direct costs related to loss contingencies when actually incurred. The Company has established reserves it believes to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, the Company believes that the ultimate outcome of any matter currently pending against the Company will not materially affect the ~~Company’s~~Company's financial ~~position,~~condition, results of operations or liquidity.

~~Off-Balance Sheet Arrangements~~

See Note D15 to the ~~Condensed~~ Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the Company's commitments and contingencies. See also Part II, Item 1 "Legal Proceedings" in this Quarterly Report on Form ~~10-Q~~10-Q.

Off-Balance Sheet Arrangements

See Note 16 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for ~~further~~the year ended December 31, 2018 for a discussion of the ~~MVP Joint Venture guarantee.~~Company's guarantees.

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EQT Corporation and Subsidiaries

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

Dividend

On October ~~11, 2017,~~9, 2019, the Board of Directors of the Company declared a regular quarterly cash dividend of ~~three cents~~$0.03 per share, payable December 1, ~~2017,~~2019, to the ~~Company’s~~Company's shareholders of record at the close of business on November ~~10, 2017.~~8, 2019.

~~See Notes~~ B ~~and~~ C ~~to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for discussion of EQGP's and EQM's distributions, respectively.~~

Critical Accounting Policies

The ~~Company’s~~Company's significant accounting policies are described in Item 7, ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations,”" contained in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in the notes to the ~~Company’s~~Company's Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. The application of the ~~Company’s~~Company's critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Condensed Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk and Derivative Instruments

The ~~Company’s~~Company's primary market risk exposure is the volatility of future prices for natural gas and NGLs. The market price for natural gas in the Appalachian Basin continues to be lower relative to NYMEX Henry Hub as a result of the significant increases in the supply of natural gas in the Northeast region in recent years. Due to the volatility of commodity prices, the Company is unable to predict future potential movements in the market prices for natural gas ~~including Appalachian basis,~~ and NGLs at the Company's ultimate sales points and, thus, cannot predict the ultimate impact of prices on its operations. Prolonged low, and/or significant or extended declines in, natural gas and ~~NGL~~NGLs prices could adversely affect, among other things, the ~~Company’s~~Company's development plans, which would decrease the pace of development and the level of the ~~Company’s~~Company's proved reserves. Such changes or similar impacts on third-party shippers on the Company's midstream assets could also impact the Company’s revenues, earnings or liquidity and could result in material non-cash impairments to the recorded value of the Company’s property, plant and equipment.

The Company uses derivatives to reduce the ~~effects~~effect of commodity price volatility. The ~~Company’s~~Company's use of derivatives is further described in Note G4 to the Condensed Consolidated Financial Statements and under the caption ~~“Commodity~~"Commodity Risk ~~Management”~~Management" in the ~~“Capital~~"Capital Resources and ~~Liquidity”~~Liquidity" section of Item 2, ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of ~~Operations” of this Quarterly Report on Form 10-Q.~~Operations." The ~~Company uses~~Company's over the counter (OTC) derivative commodity instruments ~~that~~ are ~~typically~~ placed primarily with financial institutions and the creditworthiness of these institutions is regularly monitored. The Company primarily enters into derivative instruments to hedge forecasted sales of production. The Company also enters into derivative instruments to hedge basis and exposure to fluctuations in interest rates. The ~~Company’s~~Company's use of derivative instruments is implemented under a set of policies approved by the ~~Company’s~~Company's Hedge and Financial Risk Committee and reviewed by the ~~Audit Committee of the Company’s~~Company's Board of Directors.

For the derivative commodity instruments used to hedge the ~~Company’s~~Company's forecasted sales of production, most of which are hedged at NYMEX natural gas prices, the Company sets policy limits relative to the expected production and sales levels ~~which~~that are exposed to price risk. The Company has an insignificant amount of financial natural gas derivative commodity instruments for trading purposes.

The derivative commodity instruments currently ~~utilized~~used by the Company are primarily fixed price swap agreements, ~~and~~ collar agreements ~~which~~and option agreements that may require payments to or receipt of payments from counterparties based on the differential between two prices for the commodity. The Company may also use other contractual agreements in implementing its commodity hedging strategy.

The Company monitors price and production levels on a continuous basis and makes adjustments to quantities hedged as warranted. The ~~Company’s~~Company's overall objective in its hedging program is to protect a portion of cash flows from undue exposure to the risk of changing commodity prices.

~~With respect to~~For information on the quantity of derivative commodity instruments held by the Company, see Note 4 to the ~~Company hedged portions of expected sales of equity production~~Condensed Consolidated Financial Statements and portions of its basis exposure covering approximately 470 Bcf of natural gas and 1,189 Mbbls of NGLs as of September 30, 2017, and 646 Bcf of natural gas and 1,095 Mbbls of NGLs as of December 31, 2016. See the ~~“Commodity~~"Commodity Risk ~~Management”~~Management" section in the ~~“Capital~~"Capital Resources and ~~Liquidity”~~Liquidity" section of Item 2, ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of ~~Operations” of this Quarterly Report on Form 10-Q for further discussion.~~ Operations."

A hypothetical decrease of 10% in the market price of natural gas from the September 30, ~~2017~~2019 and December 31, ~~2016~~2018 levels would have increased the fair value of these natural gas derivative instruments by approximately ~~$103.1~~$394.1 million and ~~$179.0~~$432.5 million, respectively. A hypothetical increase of 10% in the market price of natural gas from the September 30, ~~2017~~2019 and December 31, ~~2016~~2018 levels would have decreased the fair value of these natural gas derivative instruments by approximately ~~$105.3~~$401.6 million and ~~$181.8~~$443.4 million, respectively. The Company determined the change in the fair value of the derivative commodity instruments using a method similar to its normal determination of fair value as described in Note H5 to the Condensed Consolidated Financial Statements. The Company assumed a 10% change in the price of natural gas from its levels at September 30, ~~2017~~2019 and December 31, ~~2016.~~2018. The price change was then applied to these natural gas derivative commodity instruments recorded on the Company's Condensed Consolidated Balance Sheets, resulting in the hypothetical change in fair value.

The above analysis of the derivative commodity instruments held by the Company does not include the offsetting impact that the same hypothetical price movement may have on the ~~Company’s~~Company's physical sales of natural gas. The portfolio of derivative commodity instruments held to hedge the ~~Company’s~~Company's forecasted produced gas approximates a portion of the ~~Company’s~~Company's expected physical sales of natural ~~gas. Therefore,~~gas; therefore, an adverse impact to the fair value of the portfolio of derivative commodity instruments held to hedge the ~~Company’s~~Company's forecasted production associated with the hypothetical changes in commodity prices referenced above should be offset by a favorable impact on the ~~Company’s~~Company's physical sales of natural gas, assuming the derivative commodity instruments are not closed out in advance of their expected term, and the derivative commodity instruments continue to function effectively as hedges of the underlying risk.

~~Table of Contents~~

If the underlying physical transactions or positions are liquidated prior to the maturity of the derivative commodity instruments, a loss on the financial instruments may occur or the derivative commodity instruments might be worthless as determined by the prevailing market value on their termination or maturity date, whichever comes first.

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Interest Rate Risk

Changes in interest rates affect the amount of interest the Company ~~EQGP and EQM earn~~earns on cash, cash equivalents and short-term investments and the interest rates the Company ~~and EQM pay~~pays on borrowings under ~~their respective revolving~~its credit ~~facilities~~facility, Term Loan Facility and ~~the interest~~floating rate ~~the Company pays on its Floating Rate Notes.~~notes. All of the ~~Company’s and EQM’s long-term borrowings,~~Company's Senior Notes, other than ~~borrowings on~~ the Company's ~~Floating Rate Notes,~~floating rate notes, are fixed rate and, thus, do not expose the Company to fluctuations in its results of operations or liquidity from changes in market interest rates. Changes in interest rates do affect the fair value of the ~~Company’s and EQM’s~~Company's fixed rate debt. See Note J7 to the Condensed Consolidated Financial Statements for further discussion of the ~~Company’s~~Company's credit facility and ~~EQM’s revolving credit facilities~~Term Loan Facility borrowings and Note H5 to the Condensed Consolidated Financial Statements for a discussion of fair value measurements, including the fair value of long-term debt.

Other Market Risks

The Company is exposed to credit loss in the event of nonperformance by counterparties to derivative contracts. This credit exposure is limited to derivative contracts with a positive fair value, which may change as market prices change. The ~~Company’s over-the-counter (OTC)~~Company's OTC derivative instruments are primarily with financial institutions and, thus, are subject to events that would impact those companies individually as well as ~~that~~the financial industry as a whole. The Company ~~utilizes~~uses various processes and analyses to monitor and evaluate its credit risk exposures. These include closely monitoring current market conditions and counterparty credit ~~fundamentals and credit default swap rates.~~fundamentals. Credit exposure is controlled through credit approvals and limits based on counterparty credit fundamentals. To manage the level of credit risk, the Company enters into transactions with financial counterparties that are of investment grade, ~~or better,~~ enters into netting agreements whenever possible and may obtain collateral or other security.

Approximately ~~49%~~73%, or ~~$67.6~~$630.8 million, of the ~~Company’s~~Company's OTC derivative contracts outstanding at September 30, ~~2017~~2019 had a positive fair value. Approximately ~~11%~~64%, or ~~$33.1~~$369.5 million, of the ~~Company’s~~Company's OTC derivative contracts outstanding at December 31, ~~2016~~2018 had a positive fair value.

As of September 30, ~~2017,~~2019, the Company was not in default under any derivative contracts and had no knowledge of default by any counterparty to its derivative contracts. The Company made no adjustments to the fair value of derivative contracts due to credit related concerns outside of the normal non-performance risk adjustment included in the ~~Company’s~~Company's established fair value procedure. The Company monitors market conditions that may impact the fair value of derivative contracts reported in the Condensed Consolidated Balance Sheets.

The Company is also exposed to the risk of nonperformance by credit customers on physical sales ~~or transportation~~ of natural ~~gas.~~gas, NGLs and oil. A significant amount of revenues and related accounts receivable are generated from the sale of produced natural gas and NGLs to certain marketers, utility and industrial customers located ~~mainly~~ in the Appalachian Basin and ~~the northeastern United States as well as the Permian Basin of Texas and a gas processor~~ in ~~Kentucky and West Virginia. The~~markets available through the Company's current transportation portfolio, ~~also enables the Company to reach~~which includes markets ~~along~~in the Gulf Coast, Midwest and ~~Midwestern portions~~Northeast United States and Canada. The Company also contracts with certain processors to market a portion of NGLs on behalf of the United States. Similarly, revenues and related accounts receivable are generated from the gathering, transmission and storage of natural gas in the Appalachian Basin for independent producers, local distribution companies and marketers.Company.

The Company has a revolving credit facility that expires in July 2022. The credit facility is underwritten by a syndicate of financial institutions, each of which is obligated to fund its pro-rata portion of any borrowings by the Company. As of September 30, 2017, the Company had no borrowings or letters of credit outstanding under the facility. No one lender of the large group of financial institutions in the syndicate for the Company's credit facility and the Term Loan Facility holds more than 10% ~~of the facility.~~and 15%, respectively. The ~~Company’s~~ large syndicate group and relatively low percentage of participation by each lender isare expected to limit the ~~Company’s~~Company's exposure to ~~problems~~disruption or consolidation in the banking industry.

EQM has a revolving credit facility that expires in July 2022. The credit facility is underwritten by a syndicate of financial institutions, each of which is obligated to fund its pro-rata portion of any borrowings by EQM. As of September 30, 2017, EQM had $105 million of borrowings and no letters of credit outstanding under the credit facility. No one lender of the large group of financial institutions in the syndicate holds more than 10% of the facility. EQM’s large syndicate group and relatively low percentage of participation by each lender is expected to limit EQM’s exposure to problems or consolidation in the banking industry.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the ~~Company’s~~Company's Principal Executive Officer and Principal Financial Officer, an evaluation of the ~~Company’s~~Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), was conducted as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the ~~Company’s~~Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the third quarter of ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company. While the amounts claimed may be substantial, the Company is unable to predict with certainty the ultimate outcome of such claims and proceedings. The Company accrues legal and other direct costs related to loss contingencies when actually incurred. The Company has established reserves it believes to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, the Company believes that the ultimate outcome of any matter currently pending against the Company will not materially affect the financial ~~position,~~condition, results of operations or liquidity of the Company.

Environmental Proceedings

Well Control Event at Habanaro Well, Washington County, Pennsylvania. On October 12, 2018, the Company received a Notice of Violation (NOV) from the Pennsylvania Department of Environmental Protection (PADEP) relating to a well control event that occurred on September 26, 2018, at the Company's Habanaro well pad in Washington County, Pennsylvania. The NOV alleged multiple violations of the Oil and Gas Act and the Clean Streams Law pertaining to the well control event. The Company took immediate actions to bring the well into control and cooperated fully with the PADEP in its investigation of the event. In June 2019, the PADEP offered to settle the Company's civil penalty liability related to the incident. The Company and the PADEP negotiated a civil penalty settlement of $160,000 to settle this matter, which the Company paid in full in September 2019, and the matter is now closed. The payment of the settlement did not have a material impact on the financial condition, results of operations or liquidity of the Company.

Other Legal Proceedings

Mary Farr Secrist, et al. v. EQT Production Company, et al., Circuit Court of Doddridge County, West Virginia. On May 2, 2014, royalty owners whose predecessors had entered into a 960-acre lease (the Stout Lease) and several additional leases comprising 6,356-acres (the Cities Services Lease) with EQT Production Company's predecessor, each covering acreage in Doddridge County, West Virginia, filed a complaint in the Circuit Court of Doddridge County, West Virginia. The complaint alleged that EQT Production Company and a number of related companies, including the Company, EQT Gathering, LLC, EQT Energy, LLC, and EQM Midstream Services, LLC (formerly known as EQT Midstream Services, LLC, the general partner of the Company's former midstream affiliate), underpaid on royalties for gas produced under the leases and took improper post-production deductions from the royalties paid. With respect to the Stout Lease, the plaintiffs also asserted that the Company committed a trespass by drilling on the leased property, claiming that the Company had no right under the lease to drill in the Marcellus shale formation. The plaintiffs also asserted claims for fraud, slander of title, punitive damages, pre-judgment interest and attorneys' fees. The plaintiffs sought more than $100 million in compensatory damages for the trespass claim under the Stout Lease, and approximately $20 million for insufficient royalties under both the Stout Lease and the Cities Services Lease, in addition to punitive damages and other relief. On June 27, 2018, the Court held that EQT Production Company and its marketing affiliate EQT Energy, LLC are alter egos of one another and that royalties paid under the leases should have been based on the price of gas produced under the leases when sold to unaffiliated third parties, and not on the price when the gas was sold from EQT Production Company to EQT Energy, LLC. Further, on January 14, 2019, the Court entered an Order granting the plaintiffs' motion for summary judgment and declaring that the Company did not have the right to drill in the Marcellus shale formation under the Stout Lease. The Court also ruled that seven of the Company's wells that have been producing gas under the Stout Lease are trespassing, and that a jury will determine whether the trespass was willful or innocent. On February 27, 2019, the Company filed a motion seeking permission to immediately appeal the trespass Order to the West Virginia Supreme Court; however, the motion was denied on March 25, 2019, and the Court continued the trial to September 2019. On May 28, 2019, the Court entered an Order excluding certain of the Company's costs that could have otherwise offset any damages for innocent trespass under the Stout Lease. On August 8, 2019, the Company reached a settlement with the plaintiffs to resolve all claims under the Stout Lease and the Cities Services Lease for $54 million plus lease modifications to address the trespass issue and the calculation of future royalty payments under the leases. The Company paid $51 million of the settlement in October 2019 and is scheduled to pay the remaining amount under the settlement in January 2020.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Item 1A, "Risk Factors" of the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018 as updated by Part II, Item IA, "Risk Factors" in the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 2019, other than those listed in this section.

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We are under the ~~risks described below relating~~leadership of a substantially reconstituted Board of Directors and a new Chief Executive Officer who plan to ~~the proposed Rice Merger.~~

~~Our acquisition~~implement a variety of ~~Rice Energy Inc. (Rice) is subject~~operational, organizational, cultural and other changes to ~~conditions, including certain conditions that~~our business, and we may not be ~~satisfied,~~able to achieve some or ~~completed~~all of the anticipated benefits of this transformation plan.

Our Board of Directors was substantially reconstituted at our annual meeting of shareholders on ~~a timely basis, if at all. Failure~~July 10, 2019 and, following that meeting, Toby Z. Rice was appointed as President and Chief Executive Officer. Prior to ~~complete~~our annual meeting, the ~~acquisition of Rice could have a material and adverse effect on us.~~

~~Completion~~proponents of our ~~acquisition~~reconstituted Board of ~~Rice is subject~~Directors disclosed a detailed transformation plan designed to effect operational, organizational, cultural and other changes to our business in order to lower operating costs and increase free cash flow generation through improved efficiency, well performance and the use of technology. As a ~~number~~result of ~~conditions set forth in~~these events, during the third quarter of 2019, we recorded severance payments and other compensation expenses associated with the departure of certain of our ~~merger agreement~~officers and other employees, and we may incur other similar types of expenses and charges during the fourth quarter of 2019 and thereafter related to other employee departures or otherwise associated with ~~Rice, including the approval by our shareholders~~implementation of the ~~issuance of shares of our common stock as acquisition consideration and approval by Rice stockholders~~transformation plan. In addition, while we believe that the successful implementation of the ~~adoption of the merger agreement, which make the completion~~transformation plan will improve our operational and timing of the completion of the transactions uncertain. Also, either EQT or Rice may terminate the merger agreement if the merger has not been consummated by February 19, 2018 (or, at either party’s discretion, if the only conditions to closing that have not been satisfied or waived by that date are those related to the termination or expiration of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or the issuance of an order, decree, ruling, injunction or other action that is in effect and is restraining, enjoining or otherwise prohibiting the consummation of the merger by May 19, 2018) except that this right to terminate the merger agreement will not be available to any party whose material breach of a representation, warranty, covenant or other agreement of such party under the merger agreement resulted in the failure of the transactions to be consummated on or before that date.

If the transactions contemplated by the merger agreement are not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the transactions, we will be subject to a number of risks, including the following:

~~we will be required to pay our costs relating to the transactions, such as legal, accounting,~~ financial ~~advisory and printing fees, whether or not the transactions are completed;~~

~~time and resources committed by our management to matters relating to the transactions could otherwise have been devoted to pursuing other beneficial opportunities;~~

~~the market price of our common stock could decline to the extent that the current market price reflects a market assumption that the transactions will be completed; and~~

if the merger agreement is terminated and our board of directors seeks another acquisition, our shareholders cannot be certain that we will be able to find a party willing to enter into a transaction as attractive to us as the acquisition of Rice.

~~If the acquisition of Rice is completed, we may not achieve the intended benefits and the acquisition may disrupt our current plans or operations.~~

~~There~~performance, there can be no assurance that we will be able to successfully ~~integrate Rice’s assets~~implement the transformation plan or otherwise realize the ~~expected~~anticipated benefits of the ~~acquisition. In addition,~~transformation plan and we may encounter short-term disruptions of certain aspects of our business ~~may be negatively impacted following~~as elements of the ~~acquisition if we~~transformation plan are unable to effectively manage our expanded operations. The integration will require significant time and focus from management following the acquisition. Additionally, consummating the acquisition could disrupt current plans and operations, which could delay the achievement of our strategic objectives.implemented.

~~Table of Contents~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the ~~Company’s~~Company's repurchases of equity securities registered under Section 12 of the Exchange Act that have occurred during the three months ended September 30, ~~2017:~~2019:

Period
Total
number
of shares
purchased (a)

Average
price
paid per
share

Total number of
shares purchased
as part of publicly
announced plans
or programs

Maximum number
of shares that may
yet be purchased
under the plans or
programs (b)
July 2017 (July 1 – July 31) 231
$ 59.90
—
700,000
August 2017 (August 1 – August 31) 7,261
61.05
—
700,000
September 2017 (September 1 – September 30) —
—
—
700,000
Total 7,492
$ 61.01
—



Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under plans or programs
July 1 – July 31, 2019	—	—		—	—
August 1 – August 31, 2019	59,977	$	15.83	—	—
September 1 – September 30, 2019	103,909	12.27		—	—
Total	163,886	$	13.57	—	—


(a)	Reflects the number of shares withheld by the Company to pay taxes upon vesting of restricted stock.

~~(b)~~

During 2014, the Company’s Board of Directors approved a share repurchase authorization of up to 1,000,000 shares of the Company’s outstanding common stock. The Company may repurchase shares from time to time in open market or in privately negotiated transactions. The share repurchase authorization does not obligate the Company to acquire any specific number of shares, has no pre-established end date and may be discontinued by the Company at any time. As of September 30, 2017, the Company had repurchased 300,000 shares under this authorization since its inception.

Item 5. Other Information

As previously announced by the Company in its current report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2019, the Company's Board of Directors has determined to hold the Company's 2020 annual meeting of shareholders on Friday, May 1, 2020, at a time and location to be determined.

Shareholder proposals intended to be submitted pursuant to Rule 14a-8 in connection with the 2020 annual meeting of shareholders (the 2020 Annual Meeting) should be received by the Company's Corporate Secretary on or before November 25, 2019 in order to be considered for inclusion the Company's 2020 proxy statement. Such proposals must be directed to: 625 Liberty Avenue, Suite 1700, Pittsburgh, Pennsylvania 15222, Attn: Corporate Secretary, must comply with the requirements of Rule 14a-8 and the interpretations thereof, and may be omitted from the 2020 proxy statement if not in compliance with applicable requirements.

Additionally, pursuant to the Company's Amended and Restated Bylaws (the Bylaws), because the 2020 Annual Meeting is being advanced by more than 30 days from the anniversary date of the Company's 2019 annual meeting, shareholder proposals submitted outside of Rule 14a-8, including any proposal nominating a person as a director, must be received by the Company's Corporate Secretary within the following dates: not earlier than the close of business on the 120th day prior to the 2020 Annual Meeting and not later than the later of (i) the close of business on the 90th day prior to the 2020 Annual Meeting or (ii) the close of business on the 10th day following the date that the Company publicly announced the date of the 2020 Annual Meeting. Accordingly, such proposals and nominations must be received by the Company's Corporate Secretary no earlier than January 2, 2020 and no later than February 1, 2020. Such proposals and nominations also must comply with the advance notice provisions contained in the Bylaws.

4435

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Item 6. Exhibits



Exhibit No.	Document Description	Method of Filing
10.01*	EQT Corporation 2019 Supplemental Short-Term Incentive Plan
~~4.01~~	~~Fifth Supplemental Indenture dated as of October 4, 2017 between the Company and The Bank of New York Mellon, as Trustee, pursuant to which the Floating Rate Notes due 2020 were issued~~	~~Incorporated herein by reference to Exhibit 4.3 to Form 8-K filed on October 4, 2017~~

~~4.02~~	~~Sixth Supplemental Indenture dated as of October 4, 2017 between the Company and The Bank of New York Mellon, as Trustee, pursuant to which the 2.50% Senior Notes due 2020 were issued~~	~~Incorporated herein by reference to Exhibit 4.5 to Form 8-K filed on October 4, 2017~~

~~4.03~~	~~Seventh Supplemental Indenture dated as of October 4, 2017 between the Company and The Bank of New York Mellon, as Trustee, pursuant to which the 3.00% Senior Notes due 2022 were issued~~	~~Incorporated herein by reference to Exhibit 4.7 to Form 8-K filed on October 4, 2017~~

~~4.04~~	~~Eighth Supplemental Indenture dated as of October 4, 2017 between the Company and The Bank of New York Mellon, as Trustee, pursuant to which the 3.90% Senior Notes due 2027 were issued~~	~~Incorporated herein by reference to Exhibit 4.9 to Form 8-K filed on October 4, 2017~~

~~10.01~~	First Amendment to Voting and Support Agreement effective as of October 9, 2017 among the Company, Rice Energy 2016 Irrevocable Trust, Rice Energy Holdings LLC, Daniel J. Rice III, Daniel J. Rice IV, Derek A. Rice and Toby Z. Rice	Filed herewith as Exhibit 10.01

10.02	~~Second Amended~~Agreement and ~~Restated Credit Amendment~~Release, dated as of ~~July 31, 2017 among the Company, PNC Bank, National Association, as Administrative Agent, Swing Line Lender~~August 22, 2019, by and ~~an L/C Issuer~~between EQT Corporation and ~~the other lenders party thereto~~ Gary E. Gould	Filed herewith as Exhibit 10.02
10.03*	Agreement and Release, dated as of September 9, 2019, by and between EQT Corporation and Jimmi Sue Smith	Filed herewith as Exhibit 10.03
10.04*	Letter Agreement, effective October 1, 2019, by and between EQT Corporation and Robert J. McNally	Incorporated ~~herein~~ by reference to Exhibit 10.1 to Form 8-K (#001-3551) filed on ~~August 3, 2017~~
		October 2, 2019
~~31.01~~10.05*	Letter Agreement, effective October 1, 2019, by and between EQT Corporation and David L. Porges	Incorporated by reference to Exhibit 10.2 to Form 8-K (#001-3551) filed on October 2, 2019
10.06*	Letter Agreement, effective October 1, 2019, by and between EQT Corporation and David E. Schlosser, Jr.	Incorporated by reference to Exhibit 10.3 to Form 8-K (#001-3551) filed on October 2, 2019
10.07*	Letter Agreement, effective October 1, 2019, by and between EQT Corporation and Jimmi Sue Smith	Incorporated by reference to Exhibit 10.4 to Form 8-K (#001-3551) filed on October 2, 2019
10.08*	Amendment No. 2, dated October 7, 2019, to the Second Amended and Restated Confidentiality, Non-Solicitation and Non-Competition Agreement, by and between EQT Corporation and Donald M. Jenkins	Incorporated by reference to Exhibit 10.1 to Form 8-K (#001-3551) filed on October 7, 2019
10.09	Offer Letter, dated October 14, 2019, by and between EQT Corporation and Todd James	Incorporated by reference to Exhibit 10.1 to Form 8-K (#001-3551) filed on October 17, 2019
31.01	Rule 13(a)-14(a) Certification of Principal Executive Officer	Filed herewith as Exhibit 31.01

31.02	Rule 13(a)-14(a) Certification of Principal Financial Officer	Filed herewith as Exhibit 31.02

32	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer	Furnished herewith as Exhibit 32

101	Interactive Data File	Filed herewith as Exhibit 101

* Indicates a management contract or compensatory plan, contract or arrangement in which a director or a named executive officer of the registrant participates

4536

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		EQT CORPORATION
		(Registrant)


	By:	/s/ ~~Robert J. McNally~~Kyle Derham
		~~Robert J. McNally~~Kyle Derham
		~~Senior Vice President and~~Interim Chief Financial Officer

Date: October ~~26, 2017~~31, 2019

4637



	September 30, 2017		December 31, 2016
	(Thousands)
Assets

Current assets:
Cash and cash equivalents	$	483,558	$	1,103,540
Trading securities	—		286,396
Accounts receivable (less accumulated provision for doubtful accounts: $5,663 at September 30, 2017 and $6,923 at December 31, 2016)	279,201		341,628
Derivative instruments, at fair value	67,555		33,053
Prepaid expenses and other	28,144		63,602
Total current assets	858,458		1,828,219

Property, plant and equipment	20,296,620		18,216,775
Less: accumulated depreciation and depletion	5,755,358		5,054,559
Net property, plant and equipment	14,541,262		13,162,216

Restricted cash	—		75,000
Investment in nonconsolidated entity	339,978		184,562
Other assets	244,950		222,925
Total assets	$	15,984,648	$	15,472,922



	Common Stock						Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests in Consolidated Subsidiaries
	Shares Outstanding	No Par Value		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
	(Thousands)
Balance, January 1, 2016	152,554	$	2,049,201	$	2,982,212		$	46,378		$	2,950,251		$	8,028,042
Comprehensive income (net of tax):
Net (loss) income				(261,025		)				238,747			(22,278		)
Net change in cash flow hedges:
Natural gas, net of tax benefit of $(28,934)							(43,104		)				(43,104		)
Interest rate, net of tax expense of $78							108						108
Pension and other post-retirement benefits liability adjustment, net of tax expense of $6,287							9,917						9,917
Dividends ($0.09 per share)				(14,966		)							(14,966		)
Stock-based compensation plans, net	654	26,211								161			26,372
Distributions to noncontrolling interests ($2.235 and $0.406 per common unit from EQT Midstream Partners, LP and EQT GP Holdings, LP, respectively)										(137,719		)	(137,719		)
Issuance of common shares of EQT Corporation	19,550	1,225,999											1,225,999
Issuance of common units of EQT Midstream Partners, LP										217,102			217,102
Changes in ownership of consolidated subsidiaries		25,293								(40,487		)	(15,194		)
Balance, September 30, 2016	172,758	$	3,326,704	$	2,706,221		$	13,299		$	3,228,055		$	9,274,279

Balance, January 1, 2017	172,827	$	3,349,166	$	2,509,073		$	2,042		$	3,258,966		$	9,119,247
Comprehensive income (net of tax):
Net income				228,458						250,349			478,807
Net change in cash flow hedges:
Natural gas, net of tax benefit of $(2,640)							(4,011		)				(4,011		)
Interest rate, net of tax expense of $78							108						108
Other post-retirement benefit liability adjustment, net of tax expense of $148							230						230
Dividends ($0.09 per share)				(15,620		)							(15,620		)
Stock-based compensation plans, net	516	18,224								190			18,414
Distributions to noncontrolling interests ($2.675 and $0.578 per common unit from EQT Midstream Partners, LP and EQT GP Holdings, LP, respectively)										(172,498		)	(172,498		)
Balance, September 30, 2017	173,343	$	3,367,390	$	2,721,911		$	(1,631	)	$	3,337,007		$	9,424,677



Classification	September 30, 2017		December 31, 2016
	(Thousands)
Assets:
Cash and cash equivalents	$	6,933	$	60,453
Accounts receivable	21,768		20,662
Prepaid expenses and other	4,196		5,745
Property, plant and equipment, net	2,745,509		2,578,834
Other assets	363,186		206,104
Liabilities:
Accounts payable	$	37,494	$	35,831
Other current liabilities	70,960		32,242
Credit facility borrowings	105,000		—
Long-term debt	986,947		985,732
Other liabilities and credits	9,877		9,562



Three Months Ended September 30, 2017	EQT Production		EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	552,953	$	—	$	—	$	—		$	552,953
Pipeline and net marketing services	9,140		116,522		90,671		(144,598		)	71,735
Gain on derivatives not designated as hedges	35,625		—		—		—			35,625
Total operating revenues	$	597,718	$	116,522	$	90,671	$	(144,598	)	$	660,313



Three Months Ended September 30, 2016	EQT Production		EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	403,939	$	—	$	—	$	—		$	403,939
Pipeline and net marketing services	10,797		99,141		77,631		(128,138		)	59,431
Gain on derivatives not designated as hedges	93,356		—		—		—			93,356
Total operating revenues	$	508,092	$	99,141	$	77,631	$	(128,138	)	$	556,726



Nine Months Ended September 30, 2017	EQT Production		EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	1,803,132	$	—	$	—	$	—		$	1,803,132
Pipeline and net marketing services	31,656		330,996		278,589		(418,337		)	222,904
Gain on derivatives not designated as hedges	222,693		—		—		—			222,693
Total operating revenues	$	2,057,481	$	330,996	$	278,589	$	(418,337	)	$	2,248,729



Nine Months Ended September 30, 2016	EQT Production			EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	1,072,898		$	—	$	—	$	—		$	1,072,898
Pipeline and net marketing services	28,196			297,305		243,295		(380,026		)	188,770
Loss on derivatives not designated as hedges	(32,342		)	—		—		—			(32,342		)
Total operating revenues	$	1,068,752		$	297,305	$	243,295	$	(380,026	)	$	1,229,326



	As of September 30, 2017		As of December 31, 2016
	(Thousands)
Segment assets:
EQT Production	$	12,071,776	$	10,923,824
EQT Gathering	1,367,487		1,225,686
EQT Transmission	1,442,068		1,399,201
Total operating segments	14,881,331		13,548,711
Headquarters assets, including cash and short-term investments	1,103,317		1,924,211
Total assets	$	15,984,648	$	15,472,922



As of September 30, 2017	Derivative instruments, recorded in the Condensed Consolidated Balance Sheet, gross		Derivative instruments subject to master netting agreements			Margin deposits remitted to counterparties		Derivative instruments, net
	(Thousands)
Asset derivatives:
Derivative instruments, at fair value	$	67,555	$	(42,886	)	$	—	$	24,669
Liability derivatives:
Derivative instruments, at fair value	$	71,374	$	(42,886	)	$	—	$	28,488



			Fair value measurements at reporting date using
Description	As of September 30, 2017		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Thousands)
Assets
Derivative instruments, at fair value	$	67,555	$	—	$	67,555	$	—
Liabilities
Derivative instruments, at fair value	$	71,374	$	—	$	71,374	$	—



	Three Months Ended September 30, 2017
	Natural gas cash flow hedges, net of tax				Interest rate cash flow hedges, net of tax				Other post- retirement benefit liability adjustment, net of tax				Accumulated OCI, net of tax
	(Thousands)
Accumulated OCI (loss), net of tax, as of July 1, 2017	$	7,047			$	(627	)		$	(6,713	)		$	(293	)
(Gains) losses reclassified from accumulated OCI, net of tax	(1,451		)	(a)	36			(a)	77			(b)	(1,338		)
Accumulated OCI (loss), net of tax, as of September 30, 2017	$	5,596			$	(591	)		$	(6,636	)		$	(1,631	)



NYMEX Swaps	2017 (a)(b)(c)		2018 (b)(c)		2019
Total Volume (Bcf)	120		189		19
Average Price per Mcf (NYMEX) (d)	$	3.35	$	3.18	$	3.12
Collars
Total Volume (Bcf)	6		18		—
Average Floor Price per Mcf (NYMEX) (d)	$	3.06	$	3.16	$	—
Average Cap Price per Mcf (NYMEX) (d)	$	3.93	$	3.63	$	—



Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (b)
July 2017 (July 1 – July 31)	231	$	59.90	—	700,000
August 2017 (August 1 – August 31)	7,261	61.05		—	700,000
September 2017 (September 1 – September 30)	—	—		—	700,000
Total	7,492	$	61.01	—