000003321312/312023Q2FALSE610.06807400.068391700000332132023-01-012023-06-3000000332132023-07-21xbrli:shares0000033213us-gaap:OilAndGasMember2023-04-012023-06-30iso4217:USD0000033213us-gaap:OilAndGasMember2022-04-012022-06-300000033213us-gaap:OilAndGasMember2023-01-012023-06-300000033213us-gaap:OilAndGasMember2022-01-012022-06-3000000332132023-04-012023-06-3000000332132022-04-012022-06-3000000332132022-01-012022-06-300000033213us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2023-04-012023-06-300000033213us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2022-04-012022-06-300000033213us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2023-01-012023-06-300000033213us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2022-01-012022-06-30iso4217:USDxbrli:shares00000332132023-06-3000000332132022-12-3100000332132021-12-3100000332132022-06-300000033213us-gaap:CommonStockMember2022-03-310000033213us-gaap:TreasuryStockCommonMember2022-03-310000033213us-gaap:RetainedEarningsMember2022-03-310000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000033213us-gaap:NoncontrollingInterestMember2022-03-3100000332132022-03-310000033213us-gaap:RetainedEarningsMember2022-04-012022-06-300000033213us-gaap:NoncontrollingInterestMember2022-04-012022-06-300000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300000033213us-gaap:CommonStockMember2022-04-012022-06-300000033213us-gaap:CommonStockMember2022-06-300000033213us-gaap:TreasuryStockCommonMember2022-06-300000033213us-gaap:RetainedEarningsMember2022-06-300000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000033213us-gaap:NoncontrollingInterestMember2022-06-300000033213us-gaap:CommonStockMember2023-03-310000033213us-gaap:TreasuryStockCommonMember2023-03-310000033213us-gaap:RetainedEarningsMember2023-03-310000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000033213us-gaap:NoncontrollingInterestMember2023-03-3100000332132023-03-310000033213us-gaap:RetainedEarningsMember2023-04-012023-06-300000033213us-gaap:NoncontrollingInterestMember2023-04-012023-06-300000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300000033213us-gaap:CommonStockMember2023-04-012023-06-300000033213us-gaap:CommonStockMember2023-06-300000033213us-gaap:TreasuryStockCommonMember2023-06-300000033213us-gaap:RetainedEarningsMember2023-06-300000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300000033213us-gaap:NoncontrollingInterestMember2023-06-300000033213us-gaap:CommonStockMember2021-12-310000033213us-gaap:TreasuryStockCommonMember2021-12-310000033213us-gaap:RetainedEarningsMember2021-12-310000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000033213us-gaap:NoncontrollingInterestMember2021-12-310000033213us-gaap:RetainedEarningsMember2022-01-012022-06-300000033213us-gaap:NoncontrollingInterestMember2022-01-012022-06-300000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300000033213us-gaap:CommonStockMember2022-01-012022-06-300000033213us-gaap:TreasuryStockCommonMember2022-01-012022-06-300000033213us-gaap:CommonStockMember2022-12-310000033213us-gaap:TreasuryStockCommonMember2022-12-310000033213us-gaap:RetainedEarningsMember2022-12-310000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000033213us-gaap:NoncontrollingInterestMember2022-12-310000033213us-gaap:RetainedEarningsMember2023-01-012023-06-300000033213us-gaap:NoncontrollingInterestMember2023-01-012023-06-300000033213us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-06-300000033213us-gaap:CommonStockMember2023-01-012023-06-300000033213eqt:NaturalGasOilandNGLsSalesMember2023-01-012023-06-300000033213eqt:NaturalGasSalesMember2023-04-012023-06-300000033213eqt:NaturalGasSalesMember2022-04-012022-06-300000033213eqt:NaturalGasSalesMember2023-01-012023-06-300000033213eqt:NaturalGasSalesMember2022-01-012022-06-300000033213eqt:NGLsSalesMember2023-04-012023-06-300000033213eqt:NGLsSalesMember2022-04-012022-06-300000033213eqt:NGLsSalesMember2023-01-012023-06-300000033213eqt:NGLsSalesMember2022-01-012022-06-300000033213eqt:OilSalesMember2023-04-012023-06-300000033213eqt:OilSalesMember2022-04-012022-06-300000033213eqt:OilSalesMember2023-01-012023-06-300000033213eqt:OilSalesMember2022-01-012022-06-300000033213eqt:NetMarketingServicesandOtherMember2023-04-012023-06-300000033213eqt:NetMarketingServicesandOtherMember2022-04-012022-06-300000033213eqt:NetMarketingServicesandOtherMember2023-01-012023-06-300000033213eqt:NetMarketingServicesandOtherMember2022-01-012022-06-3000000332132023-07-01eqt:NaturalGasSalesMember2023-06-3000000332132024-01-01eqt:NaturalGasSalesMember2023-06-300000033213eqt:NaturalGasSalesMember2023-06-300000033213us-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMember2023-01-012023-06-30utr:Bcfutr:MBbls0000033213us-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMember2022-01-012022-12-31xbrli:pure0000033213us-gaap:OverTheCounterMember2022-12-310000033213us-gaap:OverTheCounterMember2023-06-300000033213eqt:ExchangeTradedNaturalGasContractsMember2023-06-300000033213eqt:ExchangeTradedNaturalGasContractsMember2022-12-310000033213us-gaap:CommodityContractMember2023-06-300000033213us-gaap:CommodityContractMember2022-12-310000033213us-gaap:OtherContractMember2022-12-310000033213us-gaap:OtherContractMember2023-06-300000033213us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-06-300000033213us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-06-300000033213us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-06-300000033213us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-06-300000033213us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310000033213us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000033213us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000033213us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000033213us-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2023-06-300000033213us-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2022-12-310000033213us-gaap:SeniorNotesMember2023-06-300000033213us-gaap:SeniorNotesMember2022-12-310000033213us-gaap:FairValueInputsLevel3Membereqt:EQMMidstreamNotesMemberus-gaap:NotesPayableOtherPayablesMember2023-06-300000033213us-gaap:FairValueInputsLevel3Membereqt:EQMMidstreamNotesMemberus-gaap:NotesPayableOtherPayablesMember2022-12-310000033213eqt:EQMMidstreamNotesMemberus-gaap:NotesPayableOtherPayablesMember2023-06-300000033213eqt:EQMMidstreamNotesMemberus-gaap:NotesPayableOtherPayablesMember2022-12-310000033213eqt:A742SeriesBNotesDue2023Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A742SeriesBNotesDue2023Memberus-gaap:SeniorNotesMember2022-12-310000033213us-gaap:SeniorNotesMembereqt:A6125NotesDueFebruary12025Member2023-06-300000033213us-gaap:SeniorNotesMembereqt:A6125NotesDueFebruary12025Member2022-12-310000033213us-gaap:SeniorNotesMembereqt:A5678NotesDueOctober12025Member2023-06-300000033213us-gaap:SeniorNotesMembereqt:A5678NotesDueOctober12025Member2022-12-310000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2022-12-310000033213us-gaap:SeniorNotesMembereqt:A3125NotesDueMay152026Member2023-06-300000033213us-gaap:SeniorNotesMembereqt:A3125NotesDueMay152026Member2022-12-310000033213eqt:A775DebenturesDueJuly152026Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A775DebenturesDueJuly152026Memberus-gaap:SeniorNotesMember2022-12-310000033213eqt:A390NotesDueOctober12027Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A390NotesDueOctober12027Memberus-gaap:SeniorNotesMember2022-12-310000033213eqt:A5700NotesDueApril12028Memberus-gaap:SeniorNotesMember2023-05-100000033213eqt:A5700NotesDueApril12028Memberus-gaap:SeniorNotesMember2022-10-310000033213eqt:A5700NotesDueApril12028Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A5700NotesDueApril12028Memberus-gaap:SeniorNotesMember2022-12-310000033213us-gaap:SeniorNotesMembereqt:A500NotesDueJanuary152029Member2023-06-300000033213us-gaap:SeniorNotesMembereqt:A500NotesDueJanuary152029Member2022-12-310000033213eqt:A7000NotesDueFebruary12030Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A7000NotesDueFebruary12030Memberus-gaap:SeniorNotesMember2022-12-310000033213eqt:A3625NotesDueMay152031Memberus-gaap:SeniorNotesMember2023-06-300000033213eqt:A3625NotesDueMay152031Memberus-gaap:SeniorNotesMember2022-12-310000033213us-gaap:SeniorNotesMembereqt:A6125NotesDueFebruary12025Member2023-01-012023-06-300000033213us-gaap:SeniorNotesMembereqt:A5678NotesDueOctober12025Member2023-01-012023-06-300000033213us-gaap:SeniorNotesMembereqt:A3125NotesDueMay152026Member2023-01-012023-06-300000033213eqt:A390NotesDueOctober12027Memberus-gaap:SeniorNotesMember2023-01-012023-06-300000033213us-gaap:SeniorNotesMembereqt:A500NotesDueJanuary152029Member2023-01-012023-06-300000033213eqt:A7000NotesDueFebruary12030Memberus-gaap:SeniorNotesMember2023-01-012023-06-300000033213eqt:A3625NotesDueMay152031Memberus-gaap:SeniorNotesMember2023-01-012023-06-300000033213us-gaap:SeniorNotesMember2023-01-012023-06-300000033213us-gaap:RevolvingCreditFacilityMembereqt:EQT2.5BillionFacilityMember2023-06-300000033213us-gaap:RevolvingCreditFacilityMembereqt:EQT2.5BillionFacilityMember2022-12-310000033213us-gaap:RevolvingCreditFacilityMembereqt:EQT2.5BillionFacilityMember2023-04-012023-06-300000033213us-gaap:RevolvingCreditFacilityMembereqt:EQT2.5BillionFacilityMember2023-01-012023-06-300000033213us-gaap:RevolvingCreditFacilityMembereqt:EQT2.5BillionFacilityMember2022-01-012022-06-300000033213us-gaap:RevolvingCreditFacilityMembereqt:EQT2.5BillionFacilityMember2022-04-012022-06-300000033213us-gaap:UnsecuredDebtMembereqt:TermLoanAgreementMember2023-06-300000033213us-gaap:SeniorNotesMember2022-10-042022-10-040000033213eqt:A5700NotesDueApril12028Memberus-gaap:SeniorNotesMember2023-05-112023-05-110000033213eqt:A5700NotesDueApril12028Memberus-gaap:SubsequentEventMemberus-gaap:SeniorNotesMember2023-07-052023-07-050000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2020-04-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2020-04-012020-04-30utr:D00000332132020-04-012020-04-300000033213eqt:ConvertibleDebtSettledJanuary2023Member2023-01-012023-01-310000033213eqt:ConvertibleDebtSettledFebruary2023Member2023-02-012023-02-280000033213eqt:ConvertibleDebtSettledMarch2023Member2023-03-012023-03-310000033213eqt:ConvertibleDebtSettledApril2023Member2023-04-012023-04-300000033213eqt:ConvertibleDebtSettledJune2023Member2023-06-012023-06-3000000332132020-04-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2023-01-012023-06-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2023-04-012023-06-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2022-04-012022-06-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2022-01-012022-06-300000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2023-02-172023-02-170000033213eqt:A175ConvertibleNotesDueMay12026Memberus-gaap:SeniorNotesMember2023-05-092023-05-090000033213eqt:OptionsRestrictedStockPerformanceAwardsAndStockAppreciationRightsMember2023-04-012023-06-300000033213eqt:OptionsRestrictedStockPerformanceAwardsAndStockAppreciationRightsMember2022-04-012022-06-300000033213eqt:OptionsRestrictedStockPerformanceAwardsAndStockAppreciationRightsMember2023-01-012023-06-300000033213eqt:OptionsRestrictedStockPerformanceAwardsAndStockAppreciationRightsMember2022-01-012022-06-300000033213us-gaap:ConvertibleDebtSecuritiesMember2023-04-012023-06-300000033213us-gaap:ConvertibleDebtSecuritiesMember2022-04-012022-06-300000033213us-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-06-300000033213us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-06-300000033213eqt:OptionsRestrictedStockPerformanceAwardsAndStockAppreciationRightsMember2023-04-012023-06-300000033213eqt:OptionsRestrictedStockPerformanceAwardsAndStockAppreciationRightsMember2022-01-012022-06-300000033213us-gaap:ConvertibleDebtSecuritiesMember2023-04-012023-06-300000033213us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-06-300000033213eqt:EquitransMidstreamMember2020-03-3100000332132020-03-3100000332132022-01-0100000332132022-01-012022-03-3100000332132022-10-012022-12-31

 

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

or

☐

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: 001-03551

(Exact name of registrant as specified in its charter)

 

(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. Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒  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 accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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 ☒

As of July 21, 2023, 361,657,681 shares of common stock, no par value, of the registrant were outstanding.

See Note 1 for supplemental cash flow information.

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

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

 

The accompanying 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 information and notes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of June 30, 2023 and December 31, 2022, the results of its operations and equity for the three and six month periods ended June 30, 2023 and 2022 and its cash flows for the six month periods ended June 30, 2023 and 2022. Certain previously reported amounts have been reclassified to conform to the current year presentation. In this Quarterly Report on Form 10-Q, references to "EQT" and "the Company" refer collectively to EQT Corporation and its consolidated subsidiaries.

The Condensed Consolidated Balance Sheet at December 31, 2022 has been derived from the audited financial statements at that date. For further information, refer to the Consolidated Financial Statements and accompanying notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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

Under the Company's natural gas, natural gas liquids (NGLs) and oil 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 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, such as fixed price contracts or contracts with a fixed differential to New York Mercantile Exchange (NYMEX) or index prices, contain fixed consideration. The fixed consideration is allocated to each performance obligation on a relative standalone selling price basis, which requires judgment from management. For these contracts, the Company generally concludes that the fixed price or fixed differentials in the contracts are representative of the standalone selling price.

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

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

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $376.9 million and $1,171.9 million in accounts receivable in the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively.

The table below provides disaggregated information on the Company's revenues. Certain other revenue contracts are outside the scope of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. These contracts are reported in net marketing services and other in the Statements of Condensed Consolidated Operations. Derivative contracts are also outside the scope of ASU 2014-09.

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of June 30, 2023. Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of June 30, 2023.

(a)July 1 through December 31.

 

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

The derivative commodity instruments used by the Company are primarily swap, collar and option agreements. These agreements may require payments to, or receipt of payments from, counterparties based on the differential between two prices for the commodity. The Company uses these agreements to hedge its NYMEX and basis exposure. The Company may also use other contractual agreements when executing its commodity hedging strategy. The Company typically enters into over the counter (OTC) derivative commodity instruments 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 in operating revenues in gain (loss) on derivatives 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.

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

The Company's OTC 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 operating activities in the Statements of Condensed Consolidated Cash Flows.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of its expected sales of production and portions of its basis exposure covering approximately 1,711 billion cubic feet (Bcf) of natural gas and 1,545 thousand barrels (Mbbl) of NGLs as of June 30, 2023 and 1,424 Bcf of natural gas and 1,483 Mbbl of NGLs as of December 31, 2022. The open positions at both June 30, 2023 and December 31, 2022 had maturities extending through December 2027.

Certain of the Company's OTC derivative instrument contracts provide that, if the Company's credit rating assigned by Moody's Investors Service, Inc. (Moody's), S&P Global Ratings (S&P) or Fitch Ratings Service (Fitch) is below the agreed-upon credit rating threshold (typically, below investment grade) and if the associated derivative liability exceeds the agreed-upon dollar threshold for such credit rating, the counterparty to such contract can require the Company to deposit collateral. Similarly, if such counterparty's credit rating assigned by Moody's, S&P or Fitch is below the agreed-upon credit rating threshold and if the associated derivative liability exceeds the agreed-upon dollar threshold for such credit rating, the Company can require the counterparty to deposit collateral with the Company. Such collateral can be up to 100% of the derivative liability. Investment grade refers to the quality of a company's credit as assessed by one or more credit rating agencies. To be considered investment grade, a company must be rated "Baa3" or higher by Moody's, "BBB–" or higher by S&P and "BBB–" or higher by Fitch. Anything below these ratings is considered non-investment grade. As of June 30, 2023, the Company's senior notes were rated "Ba1" by Moody's, "BBB–" by S&P and "BBB–" by Fitch.

When the net fair value of any of the Company's OTC derivative instrument contracts represents a liability to the Company that is in excess of the agreed-upon dollar threshold for the Company's then-applicable credit rating, the counterparty has the right to require the Company to remit funds as a margin deposit in an amount equal to the portion of the derivative liability that is in excess of the dollar threshold amount. The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets. As of June 30, 2023 and December 31, 2022, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $30.3 million and $347.6 million, respectively, for which no deposits were required or recorded in the Condensed Consolidated Balance Sheets for either period.

When the net fair value of any of the Company's OTC derivative instrument contracts represents an asset to the Company that is in excess of the agreed-upon dollar threshold for the counterparty's then-applicable credit rating, the Company has the right to require the counterparty to remit funds as a margin deposit in an amount equal to the portion of the derivative asset that is in excess of the dollar threshold amount. The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets. As of both June 30, 2023 and December 31, 2022, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

When the Company enters into exchange traded natural gas contracts, exchanges may require the Company to remit funds to the corresponding broker as good-faith deposits to guard against the risks associated with changing market conditions. The Company is required to make such deposits based on an established initial margin requirement and 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 these deposits as a current liability in the Condensed Consolidated Balance Sheets. The initial margin requirements are established by the exchanges based on the price, volatility and the time to expiration of the contract. The margin requirements are subject to change at the exchanges' discretion. As of June 30, 2023 and December 31, 2022, the Company recorded $27.4 million and $100.6 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

The Company has netting agreements with financial institutions and its brokers that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities. The table below summarizes the impact of netting agreements and margin deposits on gross derivative assets and liabilities.

Henry Hub Cash Bonus. The Consolidated GGA (defined in Note 8) executed in connection with the Equitrans Share Exchange (defined in Note 8) provides for cash bonus payments (the Henry Hub Cash Bonus) payable by the Company during the period beginning on the first day of the quarter in which the Mountain Valley Pipeline is placed in service and ending on the earlier of 36 months thereafter or December 31, 2024. Such payments are conditioned upon the quarterly average of the NYMEX Henry Hub natural gas settlement price exceeding certain price thresholds.

As of December 31, 2022, the Company reduced the derivative liability related to the Henry Hub Cash Bonus to zero given the uncertainties surrounding the in-service date of the Mountain Valley Pipeline and the Company's then-held belief that achieving an in-service date of the Mountain Valley Pipeline prior to December 31, 2024 was not probable.

On June 3, 2023, President Biden signed legislation that raises the United States' debt limit, ratifies and approves all permits and authorizations necessary for the construction and initial operation of the Mountain Valley Pipeline and directs the applicable federal officials and agencies to maintain such authorizations. Further, the legislation requires the Secretary of the Army to issue all permits or verifications necessary to complete project construction and allow for the Mountain Valley Pipeline's operation and maintenance. Given the impact of this legislation, the Company reevaluated its probability-weighted assessment of the achievement of an in-service date of the Mountain Valley Pipeline prior to December 31, 2024 and concluded that, as of June 30, 2023, based on the facts and circumstances that existed as of that date, the derivative liability related to the Henry Hub Cash Bonus had a fair value of approximately $62.1 million.

The fair value of the derivative liability related to the Henry Hub Cash Bonus is based on significant inputs that are interpolated from observable market data and, as such, is a Level 2 fair value measurement. See Note 4 for a description of the fair value hierarchy.

 

The Company records its financial instruments, which are principally derivative instruments, at fair value in the Condensed Consolidated Balance Sheets. The Company estimates the fair value of its financial instruments using quoted market prices when available. If quoted market prices are not available, the fair value is based on models that use market-based parameters, including forward curves, discount rates, volatilities and nonperformance risk, as inputs. Nonperformance risk considers the effect of the Company's credit standing on the fair value of liabilities and the effect of the 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 or counterparty's credit rating and the yield on a risk-free 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 that use Level 2 inputs primarily include the Company's swap, collar and option agreements.

Exchange traded commodity swaps have Level 1 inputs. The fair value of the commodity swaps with Level 2 inputs is based on standard industry income approach models that use significant observable inputs, including, but not limited to, NYMEX natural gas forward curves, LIBOR-based discount rates, basis forward curves and NGLs forward curves. The Company's collars and options are valued using standard industry income approach option models. The significant observable inputs used by the option pricing models include NYMEX forward curves, natural gas volatilities and LIBOR-based discount rates.

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

The carrying values of cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term maturities. The carrying value of any borrowings under the Company's credit facility and the Term Loan Facility (defined in Note 6) approximates fair value as their interest rates are based on prevailing market rates. The Company considers these fair values to be Level 1 fair value measurements.

The Company has an investment in a fund (the Investment Fund) that invests in companies developing technology and operating solutions for exploration and production companies. The Company values the Investment Fund using, as a practical expedient, the net asset value provided in the financial statements received from fund managers.

The Company estimates the fair value of its senior notes using established fair value methodology. Because not all of the Company's senior notes are actively traded, their fair value is a Level 2 fair value measurement. As of June 30, 2023 and December 31, 2022, the Company's senior notes had a fair value of approximately $5.0 billion and $6.1 billion, respectively, and a carrying value of approximately $4.6 billion and $5.6 billion, respectively, inclusive of any current portion. The fair value of the Company's note payable to EQM Midstream Partners, LP (EQM) is estimated using an income approach model with a market-based discount rate and is a Level 3 fair value measurement. As of June 30, 2023 and December 31, 2022, the Company's note payable to EQM had a fair value of approximately $94 million and $96 million, respectively, and a carrying value of approximately $91 million and $94 million, respectively, inclusive of any current portion. See Note 6 for further discussion of the Company's debt.

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.

See Note 3 for a discussion of the fair value measurement of the Henry Hub Cash Bonus. See Note 8 for a discussion of the fair value measurement of the contract asset. See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the fair value measurement of the Company's oil and gas properties and other long-lived assets, including impairment and expiration of leases.

For the six months ended June 30, 2023 and 2022, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period. There were no material changes to the Company's methodology for determining unrecognized tax benefits during the six months ended June 30, 2023.

For the six months ended June 30, 2023 and 2022, the Company recorded income tax expense (benefit) at an effective tax rate of 23.0% and 20.2%, respectively. The Company's effective tax rate for the six months ended June 30, 2023 was higher compared to the U.S. federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits. The Company's effective tax rate for the six months ended June 30, 2022 was lower compared to the U.S. federal statutory rate due primarily to nondeductible repurchase premiums on the Convertible Notes (defined in Note 6), partly offset by state taxes, including valuation allowances limiting certain state tax benefits.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the IRA), which is effective for tax years beginning after December 31, 2022. The IRA establishes a 15% corporate alternative minimum tax for certain corporations, which is not applicable to the Company for 2023 in accordance with the safe harbor provided in IRS Notice 2023-7. The IRA also includes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations and includes new and renewed options for energy credits. These changes do not have a significant impact on the Company's financial statements and disclosures.

The Company intends to maintain a valuation allowance on certain of its state net operating loss deferred tax assets (DTAs) until there is sufficient evidence to support a reversal of all or a portion of such allowance. However, given the Company's anticipated future earnings, the Company believes that there is a reasonable possibility that, in the near term, sufficient positive evidence may become available that supports the release of a portion of the Company's valuation allowance, which would result in the recognition of certain DTAs and a decrease to income tax expense for the period in which the release is recorded. The exact timing and amount of the valuation allowance release would be subject to change based on the level of profitability that the Company can achieve.

The table below summarizes the Company's outstanding debt.

 

(a)For the note payable to EQM, the principal value represents the carrying value. For all other debt, the principal value less the unamortized debt issuance costs and debt discounts represents the carrying value.

(b)Interest rates for this tranche of the Company's senior notes fluctuate based on changes to the credit ratings assigned to the Company's senior notes by Moody's, S&P and Fitch. Interest rates on the Company's other outstanding senior notes do not fluctuate.

(c)As of June 30, 2023, the current portion of debt included the 1.75% convertible notes and a portion of the note payable to EQM. As of December 31, 2022, the current portion of debt included the 7.42% series B notes, the 1.75% convertible notes and a portion of the note payable to EQM.

Debt Repayments. The Company redeemed or repurchased the following debt during the six months ended June 30, 2023.

(a)Includes third-party costs and fees paid to dealer managers and brokers.

Credit Facility. The Company has a $2.5 billion credit facility that matures in June 2027.

As of both June 30, 2023 and December 31, 2022, the Company had approximately $25 million of letters of credit outstanding under its credit facility.

During the three and six months ended June 30, 2023, there were no borrowings under the Company's credit facility. During the three and six months ended June 30, 2022, under the Company's credit facility, the maximum amount of outstanding borrowings was $1,300 million for both periods, the average daily balance was approximately $844 million and $576 million, respectively, and interest was incurred at a weighted average annual interest rate of 2.3% and 2.2%, respectively.

Term Loan Facility. The Company has an unsecured term loan facility (the Term Loan Facility) with aggregate lender commitments thereunder in the principal amount of $1.25 billion to partly finance the pending Tug Hill and XcL Midstream Acquisition (defined and discussed in Note 6 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022). As of June 30, 2023 and December 31, 2022, all commitments under the Term Loan Facility remained undrawn. On April 25, 2023, the Company extended the commitments under the Term Loan Facility to December 29, 2023. Prior to such extension, any unfunded commitments under the Term Loan Facility were scheduled to expire on June 30, 2023.

5.700% Notes Consent Solicitation and Indenture Amendment. On May 10, 2023, following the receipt of the requisite consents of holders of a majority of the aggregate principal amount of the Company's 5.700% senior notes, which were obtained through a solicitation of consents that the Company commenced on May 3, 2023, the Company amended the indenture governing the Company's outstanding 5.700% senior notes to extend the Outside Date (defined below) for the special mandatory redemption provision from June 30, 2023 to December 29, 2023.

In October 2022, the Company issued its 5.700% senior notes to partly finance the pending Tug Hill and XcL Midstream Acquisition. Under the indenture governing the Company's 5.700% senior notes, the Company is required to redeem the outstanding 5.700% senior notes at a redemption price equal to 101% of the principal amount of the 5.700% senior notes plus accrued and unpaid interest, if any, to, but excluding, the date of such mandatory redemption if (i) the Tug Hill and XcL Midstream Acquisition is not consummated on or before June 30, 2023 (the Outside Date) or (ii) the Company notifies the trustee of the 5.700% senior notes that it will not pursue the consummation of the Tug Hill and XcL Midstream Acquisition.

Under the terms set forth in the consent solicitation statement, on May 11, 2023, the Company paid to holders of outstanding 5.700% senior notes who delivered valid consents a consent fee of $3.6 million in the aggregate. In addition, pursuant to the terms set forth in the consent solicitation statement, on July 5, 2023, the Company paid to such holders an additional consent fee of $1.8 million in the aggregate.

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

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

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

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

•if the Company calls any or all of the Convertible Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding such redemption date; and

•upon the occurrence of certain corporate events set forth in the Convertible Notes indenture.

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

The Company was not permitted to redeem the Convertible Notes prior to May 5, 2023. On or after May 5, 2023 and prior to February 1, 2026, the Company may redeem for cash all or any portion of the Convertible Notes at its option at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest up to the redemption date as long as the last reported price per share of EQT Corporation common stock has been at least 130% of the conversion price in effect for at least 20 trading days (consecutive or otherwise) during any 30-consecutive-trading-day period ending on the trading day immediately preceding the date on which the Company delivers notice of redemption. A sinking fund is not provided for the Convertible Notes.

As a result of the cash dividends EQT Corporation paid on its common stock during the first half of 2023, the conversion rate for the Convertible Notes was adjusted as noted in the following table. Future dividend payments by EQT Corporation will result in further adjustments to the conversion rate.

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

The Sale Price Condition for conversion of the Convertible Notes was satisfied as of June 30, 2023, and, accordingly, the Convertible Notes indenture permits holders of the Convertible Notes to convert any of their Convertible Notes at their option at any time during the third quarter of 2023, subject to the terms and conditions set forth in the Convertible Notes indenture. In addition, the Sales Price Condition for conversion of the Convertible Notes was satisfied as of December 31, 2022, and, accordingly, the Convertible Notes indenture permitted holders of the Convertible Notes to convert any of their Convertible Notes at their option at any time during the first quarter of 2023, subject to the terms and conditions set forth in the Convertible Notes indenture. Therefore, as of June 30, 2023 and December 31, 2022, the net carrying value of the Convertible Notes was included in current portion of debt in the Condensed Consolidated Balance Sheets.

The following table summarizes settlements of Convertible Notes conversion right exercises for the six months ended June 30, 2023. The Company elected to settle all such conversions by issuing to the converting holders shares of EQT Corporation common stock.

Upon conversion of the remaining outstanding Convertible Notes, the Company may satisfy its conversion obligation by paying and/or delivering at the Company's election, in the manner and subject to the terms and conditions provided in the Convertible Notes indenture, cash, shares of EQT Corporation common stock or a combination thereof. The Company intends to use a combined settlement approach to satisfy its obligation by paying or delivering to holders of the Convertible Notes cash equal to the principal amount of the obligation and EQT Corporation common stock for amounts that exceed the principal amount of the obligation.

In connection with the Convertible Notes offering, the Company entered into privately negotiated capped call transactions (the Capped Call Transactions), the purpose of which is to reduce the potential dilution to EQT Corporation common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such obligation, with such reduction and offset subject to a cap. The Capped Call Transactions have an initial strike price of $15.00 per share of EQT Corporation common stock and an initial capped price of $18.75 per share of EQT Corporation common stock, each of which are subject to certain customary adjustments, including adjustments as a result of EQT Corporation paying a dividend on its common stock.

Based on the closing stock price of EQT Corporation common stock of $41.13 on June 30, 2023 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $752 million.

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

(a)The fair value is a Level 2 fair value measurement. See Note 4.

The table below summarizes the components of interest expense related to the Convertible Notes. The effective interest rate for the Convertible Notes is 2.4%.

The following table shows the computation for basic and diluted (loss) income per share.

(a)In periods when the Company reports a net loss, all options, restricted stock, performance awards and stock appreciation rights are excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on loss per share. As a result, for the three months ended June 30, 2023 and six months ended June 30, 2022, all such securities of 4.7 million and 6.9 million, respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

In addition, the Company uses the if-converted method to calculate the impact of the Convertible Notes on diluted (loss) income per share. For the three months ended June 30, 2023 and six months ended June 30, 2022, such if-converted securities of approximately 28.3 million and 33.4 million, respectively, as well as the respective related add back of interest expense on the Convertible Notes, net of tax, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

During the first quarter of 2020, the Company sold to Equitrans Midstream Corporation (Equitrans Midstream) approximately 50% of the Company's then-owned equity interest in Equitrans Midstream in exchange for a combination of cash and rate relief under certain of the Company's gathering contracts with an affiliate of Equitrans Midstream (the Equitrans Share Exchange). The rate relief was effected through the execution of a consolidated gas gathering and compression agreement entered into between the Company and an affiliate of Equitrans Midstream (the Consolidated GGA). On the closing date of the Equitrans Share Exchange, the Company recorded in the Condensed Consolidated Balance Sheet a contract asset of $410 million representing the estimated fair value of the rate relief inclusive of the Cash Payment Option (defined below).

Because the Mountain Valley Pipeline was not in service by January 1, 2022, the Consolidated GGA provided the Company the option to forgo a portion of the gathering fee relief that would otherwise be applicable following the Mountain Valley Pipeline in-service date in exchange for a cash payment of approximately $196 million (the Cash Payment Option). During the third quarter of 2022, the Company elected to exercise the Cash Payment Option, and, in the fourth quarter of 2022, the Company received the cash proceeds from the Cash Payment Option.

During 2022, the Company identified indicators that the carrying value of the contract asset may not be fully recoverable, including increased uncertainty of the estimated timing of completion of the Mountain Valley Pipeline due to court rulings and public statements from Equitrans Midstream with respect to its completion. As a result of the Company's impairment evaluation, the Company recognized impairment of the contract asset during the first quarter of 2022 of $184.9 million in the Statement of Condensed Consolidated Operations. During the fourth quarter of 2022, the Company recognized additional impairment of the contract asset of $29.3 million in the Statement of Condensed Consolidated Operations. As of December 31, 2022, the previously recognized impairments plus the election of the Cash Payment Option reduced the carrying value of the contract asset to zero.

The fair value of the contract asset was based on significant inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. See Note 4 for a description of the fair value hierarchy. Key assumptions used in the fair value calculation included the following: (i) a probability-weighted estimate of the in-service date of the Mountain Valley Pipeline; (ii) an estimate of the potential exercise and timing of the Cash Payment Option; (iii) an estimated production volume forecast and (iv) a market-based weighted average cost of capital.

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

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended (the Securities Act). Statements that do not relate strictly to historical or current facts are forward-looking and are usually identified by the use of words such as "anticipate," "estimate," "could," "would," "will," "may," "forecast," "approximate," "expect," "project," "intend," "plan," "believe" and other words of similar meaning, or the negative thereof, in connection with any discussion of future operating or financial matters. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the expectations of our plans, strategies, objectives and growth and anticipated financial and operational performance, including guidance regarding our strategy to develop our reserves; drilling plans and programs, including availability of capital to complete these plans and programs; total resource potential and drilling inventory duration; projected production and sales volume and growth rates; natural gas prices; changes in basis and the impact of commodity prices on our business; potential future impairments of our assets; projected well costs and capital expenditures; infrastructure programs; the cost, capacity, and timing of obtaining regulatory approvals; our ability to successfully implement and execute our operational, organizational, technological and environmental, social and governance (ESG) initiatives, and achieve the anticipated results of such initiatives; projected gathering and compression rates; potential or pending acquisition transactions, including the pending Tug Hill and XcL Midstream Acquisition (defined and discussed in Note 6 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022), or other strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits from any such transactions; the amount and timing of any repayments, redemptions or repurchases of our common stock, outstanding debt securities or other debt instruments; our ability to retire our debt and the timing of such retirements, if any; the projected amount and timing of dividends; projected cash flows and free cash flow and the timing thereof; liquidity and financing requirements, including funding sources and availability; our ability to maintain or improve our credit ratings, leverage levels and financial profile; our hedging strategy and projected margin posting obligations; the effects of litigation, government regulation and tax position; and the expected impact of changes to tax laws.

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. We have based these forward-looking statements on current expectations and assumptions about future events, taking into account all information currently known by us. While we consider 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 our control. These risks and uncertainties include, but are not limited to, volatility of commodity prices; the costs and results of drilling and operations; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying production forecasts; the quality of technical data; our ability to appropriately allocate capital and other resources among our strategic opportunities; access to and cost of capital, including as a result of rising interest rates and other economic uncertainties; our hedging and other financial contracts; inherent hazards and risks normally incidental to drilling for, producing, transporting and storing natural gas, natural gas liquids (NGLs) and oil; cyber security risks and acts of sabotage; availability and cost of drilling rigs, completion services, equipment, supplies, personnel, oilfield services and sand and water required to execute our exploration and development plans, including as a result of inflationary pressures; risks associated with operating primarily in the Appalachian Basin and obtaining a substantial amount of our midstream services from Equitrans Midstream Corporation (Equitrans Midstream); the ability to obtain environmental and other permits and the timing thereof; government regulation or action, including regulations pertaining to methane and other greenhouse gas emissions; negative public perception of the fossil fuels industry; increased consumer demand for alternatives to natural gas; environmental and weather risks, including the possible impacts of climate change; and disruptions to our business due to acquisitions and other significant transactions, including the pending Tug Hill and XcL Midstream Acquisition. These and other risks and uncertainties are described under Item 1A., "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022, and may be updated by Part II, Item 1A., "Risk Factors" in subsequent Quarterly Reports on Form 10-Q and other documents we subsequently file from time to time with the Securities and Exchange Commission.

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

Net loss attributable to EQT Corporation for the three months ended June 30, 2023 was $66.6 million, $0.18 per diluted share, compared to net income attributable to EQT Corporation for the same period in 2022 of $891.4 million, $2.19 per diluted share. The change was attributable primarily to decreased sales of natural gas, NGLs and oil, partly offset by a gain on derivatives in 2023 compared to a loss on derivatives in 2022 and income tax benefit in 2023 compared to income tax expense in 2022.

Net income attributable to EQT Corporation for the six months ended June 30, 2023 was $1,151.9 million, $2.94 per diluted share, compared to net loss attributable to EQT Corporation for the same period in 2022 of $624.7 million, $1.68 per diluted share. The change was attributable primarily to a gain on derivatives in 2023 compared to a loss on derivatives in 2022 and impairment of the contract asset in 2022, partly offset by decreased sales of natural gas, NGLs and oil and income tax expense in 2023 compared to income tax benefit in 2022.

See "Sales Volume and Revenues" and "Operating Expenses" for discussions of items affecting operating income and "Other Income Statement Items" for a discussion of other income statement items. See "Investing Activities" under "Capital Resources and Liquidity" for a discussion of capital expenditures.

Our sales volume and operating expenses on a per Mcfe basis for 2022 and the first half of 2023 were negatively impacted by fewer wells turned-in-line during 2022 compared to our 2022 planned development schedule due to third-party supply chain constraints. In addition, as a result of third-party supply chain constraints in 2022, we shifted the planned development of approximately 30 wells from 2022 to 2023 (the Rescheduled Wells). All of the Rescheduled Wells have been completed and turned-to-sales as of July 20, 2023; however, future supply chain constraints or declines in natural gas prices may result in adjustments to our 2023 planned development schedule. Our sales volume and operating expenses on a per Mcfe basis for the second quarter of 2023 were also negatively impacted by lower-than-expected liquids volumes from unscheduled downtime at an in-basin ethane cracker plant to conduct equipment repairs and maintenance and a delay in the development schedule of certain wells that are not operated by us but in which we have a working interest in the volumes produced from such wells. We cannot control or otherwise influence the development schedule of non-operated wells in which we have a working interest. Adjustments to our 2023 planned development schedule or delays in the development schedule of non-operated wells in which we have a working interest could impact our future sales volume, operating revenues and expenses, per unit metrics and capital expenditures.

The annual inflation rate in the United States was particularly high during 2022, and, although the inflation rate has decreased through the first half of 2023, it still remains elevated compared to historical levels. Inflationary pressures have multiple impacts on our business, including increasing our operating expenses and our cost of capital. While the prices for certain of the raw materials and services we use in our operations have generally decreased from the peak prices experienced during 2022, we will not fully realize the benefit of such reduced prices until we enter into new contracts for such materials and services, and inflationary pressures may cause prices to fluctuate. Additionally, certain of our commitments for demand charges under our existing long-term contracts and processing capacity are subject to consumer price index adjustments. Although we believe our scale and supply chain contracting strategy of using multi-year sand and frac crew contracts allows us to maximize capital and operating efficiencies, future increases in the inflation rate will negatively impact our long-term contracts with consumer price index adjustments.

Additionally, while the prices for natural gas, NGLs and oil have historically been volatile, price volatility was especially pronounced during 2022, with natural gas prices peaking in August 2022 and steadily declining thereafter. While natural gas prices through the first half of 2023 have declined from the high prices experienced during the majority of 2022, we expect commodity price volatility to continue or increase throughout the remainder of 2023 due to macroeconomic uncertainty and geopolitical tensions, including continued developments pertaining to Russia's invasion of Ukraine, which began in February 2022 and has put upward pressure on natural gas and oil prices. Our revenue, profitability, rate of growth, liquidity and financial position will continue to be impacted in the future by the market prices for natural gas and, to a lesser extent, NGLs and oil.

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

(a)Basis represents the difference between the ultimate sales price for natural gas, including the effects of delivered price benefit or deficit associated with our firm transportation agreements, and the New York Mercantile Exchange (NYMEX) natural gas price.

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

(c)Total natural gas and liquids sales, including cash settled derivatives, is also referred to in this report as adjusted operating revenues, a non-GAAP supplemental financial measure.

The table below reconciles adjusted operating revenues, a non-GAAP supplemental financial measure, with total operating revenues, its most directly comparable financial measure calculated in accordance with GAAP. Adjusted operating revenues (also referred to in this report as total natural gas and liquids sales, including cash settled derivatives) is presented because it is an important measure we use to evaluate period-to-period comparisons of earnings trends. Adjusted operating revenues excludes the revenue impacts of changes in the fair value of derivative instruments prior to settlement and net marketing services and other. We use adjusted operating revenues to evaluate earnings trends because, as a result of the measure's exclusion of the often-volatile changes in the fair value of derivative instruments prior to settlement, the measure reflects only the impact of settled derivative contracts. Net marketing services and other consists of the costs of, and recoveries on, pipeline capacity releases, revenues for gathering services provided to third parties and other revenues. Because we consider net marketing services and other to be unrelated to our natural gas and liquids production activities, adjusted operating revenues excludes net marketing services and other. We believe that adjusted operating revenues provides useful information to investors for evaluating period-to-period comparisons of earnings trends.

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

Sales volume decreased for the three months ended June 30, 2023 primarily as a result of sales volume decreases from natural decline of producing wells, fewer wells turned-in-line throughout 2022 as a result of third-party supply chain constraints and a delay in the development schedule of certain non-operated wells in which we have a working interest, partly offset by increased volumes from our operated wells as a result efficiencies realized within our drilling and completions operations. The assets that we intend to acquire in the pending Tug Hill and XcL Midstream Acquisition, which is subject to regulatory approvals, are currently producing approximately 800 MMcfe per day of sales volume, 20% of which is liquids sales volume.

Average realized price decreased for the three months ended June 30, 2023 compared to the same period in 2022 due to lower NYMEX and liquids prices, partly offset by favorable cash settled derivatives and favorable differential. For the three months ended June 30, 2023, we received $212.2 million of net cash settlements on derivatives, composed of $304.8 million of net cash settlements received on our NYMEX natural gas hedge positions and $92.6 million of net cash settlements paid on our basis and liquids hedge positions. For the same period in 2022, we paid $1,753.7 million of net cash settlements on derivatives, composed of $1,747.2 million of net cash settlements paid on our NYMEX natural gas hedge positions and $6.5 million of net cash settlements paid on our basis and liquids hedge positions. Net cash settlements received (paid) on derivatives are included in average realized price but may not be included in operating revenues. For the three months ended June 30, 2023 and 2022, we paid $67.5 million and received $0.3 million, respectively, of premiums for derivatives that settled during the period.

Gain (loss) on derivatives. For the three months ended June 30, 2023, we recognized a gain on derivatives of $164.4 million related primarily to increases in the fair market value of our basis swaps, which were in a liability position as of March 31, 2023, partly offset by a loss on the derivative liability related to the Henry Hub Cash Bonus (defined and discussed in Note 4 to the Condensed Consolidated Financial Statements). For the same period in 2022, we recognized a loss on derivatives of $845.1 million related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices.

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

Sales volume decreased for the six months ended June 30, 2023 primarily as a result of sales volume decreases from natural decline of producing wells, fewer wells turned-in-line throughout 2022 as a result of third-party supply chain constraints and a delay in the development schedule of certain non-operated wells in which we have a working interest, partly offset by increased volumes from our operated wells as a result efficiencies realized within our drilling and completions operations. The assets that we intend to acquire in the pending Tug Hill and XcL Midstream Acquisition, which is subject to regulatory approvals, are currently producing approximately 800 MMcfe per day of sales volume, 20% of which is liquids sales volume.

Average realized price decreased for the six months ended June 30, 2023 compared to the same period in 2022 due to lower NYMEX and liquids prices, partly offset by favorable cash settled derivatives and favorable differential. For the six months ended June 30, 2023 and 2022, we received $369.2 million, composed of $539.0 million of net cash settlements received on our NYMEX natural gas hedge positions and $169.8 million of net cash settlements paid on our basis and liquids hedge positions. For the same period in 2022, we paid $2,639.3 million of net cash settlements on derivatives, composed of $2,522.3 million of net cash settlements paid on our NYMEX natural gas hedge positions and $117.0 million of net cash settlements paid on our basis and liquids hedge positions. Net cash settlements received (paid) on derivatives are included in average realized price but may not be included in operating revenues. For the six months ended June 30, 2023 and 2022, we paid premiums for derivatives that settled during the period of $166.9 million and $32.2 million, respectively.

Gain (loss) on derivatives. For the six months ended June 30, 2023, we recognized a gain on derivatives of $989.2 million related primarily to increases in the fair market value of our NYMEX swaps and options due to decreases in NYMEX forward prices, partly offset by a loss on the derivative liability related to the Henry Hub Cash Bonus. For the same period in 2022, we recognized a loss on derivatives of $3,922.7 million related primarily to decreases in the fair market value of our NYMEX swaps and options due to increases in NYMEX forward prices, partly offset by a gain on the derivative liability related to the Henry Hub Cash Bonus.