Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in Item 8., "Financial Statements and Supplementary Data." For all periods prior to the Separation and Distribution, the results of operations of Equitrans Midstream are reflected as discontinued operations. The Statements of Consolidated Operations for the years ended December 31, 2018 and 2017 have been recast to reflect discontinued operations and include certain transportation and processing expenses in continuing operations that had previously been eliminated in consolidation. Cash flows related to Equitrans Midstream are included in the Statements of Consolidated Cash Flows for all periods prior to the Separation and Distribution. See Note 2 to the Consolidated Financial Statements for amounts attributable to discontinued operations included in the Statements of Consolidated Cash Flows and Statements of Consolidated Operations.

Consolidated Results of Operations

Loss from continuing operations for 2019 was $1,222 million, $4.79 per diluted share, an improvement of $1,159 million compared to loss from continuing operations for 2018 of $2,381 million, $9.12 per diluted share. The variance was attributable primarily to lower impairments of long-lived assets and goodwill and higher dividends received on the Company's investment in Equitrans Midstream, partly offset by lower income tax benefit and higher impairment and expiration of leases, unrealized loss on the Company's investment in Equitrans Midstream and operating revenues.

See Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated herein by reference, for discussion and analysis of consolidated results of operations for the year ended December 31, 2017.

See "Sales Volumes and Revenues," "Production-Related Operating Expenses" and "Other 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.

Average Realized Price Reconciliation

The following table presents detailed natural gas and liquids operational information to assist in the understanding of the Company's consolidated operations, including the calculation of the Company's 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 used by the Company's management to evaluate period-to-period comparisons of earnings trends. Adjusted operating revenues should not be considered as an alternative to total operating revenues. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of adjusted operating revenues with total operating revenues, the most directly comparable financial measure calculated in accordance with GAAP.

	Years Ended December 31,
	2019				2018
	(Thousands, unless otherwise noted)
NATURAL GAS
Sales volume (MMcf)	1,435,134				1,386,718
NYMEX price ($/MMBtu) (a)	$	2.63			$	3.10
Btu uplift	0.13				0.19
Natural gas price ($/Mcf)	$	2.76			$	3.29
Basis ($/Mcf) (b)	$	(0.28	)		$	(0.25	)
Cash settled basis swaps (not designated as hedges) ($/Mcf)	(0.04		)		(0.08		)
Average differential, including cash settled basis swaps ($/Mcf)	$	(0.32	)		$	(0.33	)
Average adjusted price ($/Mcf)	$	2.44			$	2.96
Cash settled derivatives (not designated as hedges) ($/Mcf)	0.21				(0.07		)
Average natural gas price, including cash settled derivatives ($/Mcf)	$	2.65			$	2.89
Natural gas sales, including cash settled derivatives	$	3,805,977			$	4,004,147
LIQUIDS
NGLs, excluding ethane:
Sales volume (MMcfe) (c)	44,082				63,247
Sales volume (Mbbl)	7,348				10,542
Price ($/Bbl)	$	23.63			$	37.63
Cash settled derivatives (not designated as hedges) ($/Bbl)	2.19				(1.07		)
Average NGLs price, including cash settled derivatives ($/Bbl)	$	25.82			$	36.56
NGLs sales	$	189,718			$	385,364
Ethane:
Sales volume (MMcfe) (c)	23,748				33,645
Sales volume (Mbbl)	3,957				5,607
Price ($/Bbl)	$	6.16			$	8.09
Cash settled derivatives (not designated as hedges) ($/Bbl)	1.02				—
Average Ethane price, including cash settled derivatives ($/Bbl)	$	7.18			$	8.09
Ethane sales	$	28,414			$	45,339
Oil:
Sales volume (MMcfe) (c)	4,932				4,079
Sales volume (Mbbl)	822				680
Price ($/Bbl)	$	40.90			$	52.70
Oil sales	$	33,620			$	35,825
Total liquids sales volume (MMcfe) (c)	72,762				100,971
Total liquids sales volume (Mbbl)	12,127				16,829
Total liquids sales	$	251,752			$	466,528
TOTAL
Total natural gas and liquids sales, including cash settled derivatives (d)	$	4,057,729			$	4,470,675
Total sales volume (MMcfe)	1,507,896				1,487,689
Average realized price ($/Mcfe)	$	2.69			$	3.01

(a)	The Company's volume weighted NYMEX natural gas price (actual average NYMEX natural gas price ($/MMBtu)) was $2.63 and $3.09 for the years ended December 31, 2019 and 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 oil were converted to Mcfe at a rate of six Mcfe per barrel.

(d)	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.

Non-GAAP Financial Measures Reconciliation

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 as total natural gas and liquids sales, including cash settled derivatives) is presented because it is an important measure used by the Company's management to evaluate period-to-period comparisons of earnings trends. 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 net marketing services and other. Management uses adjusted operating revenues to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts and, thus, excludes the impact of the often-volatile fluctuations in the fair value of derivatives prior to settlement. Adjusted operating revenues also excludes net marketing services and other because management considers these revenues to be unrelated to revenues from its natural gas and liquids production. Net marketing services and other primarily includes the cost of, and recoveries on, pipeline capacity releases and revenues for gathering services. Management further believes that adjusted operating revenues as presented provides useful information to investors for evaluating period-to-period earnings trends.

	Years Ended December 31,
	2019				2018
	(Thousands, unless otherwise noted)
Total operating revenues	$	4,416,484			$	4,557,868
Add (deduct):
(Gain) loss on derivatives not designated as hedges	(616,634		)		178,591
Net cash settlements received (paid) on derivatives not designated as hedges	246,639				(225,279		)
Premiums received for derivatives that settled during the period	19,676				435
Net marketing services and other	(8,436		)		(40,940		)
Adjusted operating revenues, a non-GAAP financial measure	$	4,057,729			$	4,470,675
Total sales volumes (MMcfe)	1,507,896				1,487,689
Average realized price ($/Mcfe)	$	2.69			$	3.01

Sales Volumes and Revenues

	Years Ended December 31,
	2019				2018				%
	(Thousands, unless otherwise noted)
Sales volume detail (MMcfe):
Marcellus (a)	1,270,352				1,229,934				3.3
Ohio Utica	231,545				209,428				10.6
Other	5,999				48,327				(87.6	)
Total sales volumes (b)	1,507,896				1,487,689				1.4
Average daily sales volumes (MMcfe/d)	4,131				4,076				1.3
Operating revenues:
Sales of natural gas, NGLs and oil	$	3,791,414			$	4,695,519			(19.3	)
Gain (loss) on derivatives not designated as hedges	616,634				(178,591		)		(445.3	)
Net marketing services and other	8,436				40,940				(79.4	)
Total operating revenues	$	4,416,484			$	4,557,868			(3.1	)

(a)	Includes Upper Devonian wells.

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

Sales of natural gas, NGLs and oil decreased for 2019 compared to 2018 due to a lower average realized price, partly offset by a 1.4% increase in sales volumes. Excluding 2018 sales volumes related to the 2018 Divestitures (discussed in Note 7 to the

Consolidated Financial Statements), sales volumes increased by 4.2% in 2019. Average realized price decreased due to lower NYMEX and liquids prices and lower Btu uplift, partly offset by higher cash settled derivatives. For 2019 and 2018, the Company received $266.3 million and paid $224.8 million, respectively, of net cash settlements, including net premiums received, on derivatives not designated as hedges, which are included in average realized price but may not be included in operating revenues.

For 2019 the Company recognized a gain on derivatives not designated as hedges of $616.6 million compared to a loss of $178.6 million for 2018. The gain for 2019 was related to increases in the fair market value of the Company's NYMEX swaps and options due to decreases in NYMEX forward prices. The loss for 2018 was related primarily to settlements of NYMEX swaps and options and basis swaps, partly offset by decreases in NYMEX forward prices.

Net marketing services and other decreased for 2019 compared to 2018 as a result of fewer capacity releases at lower capacity release rates on the Tennessee Gas Pipeline and lower revenues from gathering services following the 2018 Divestitures.

Production-Related Operating Expenses

The following table presents information on the Company's production-related operating expenses.

	Years Ended December 31,
	2019				2018				%
	(Thousands, unless otherwise noted)
Per Unit ($/Mcfe):
Gathering	$	0.56			$	0.54			3.7
Transmission	0.52				0.49				6.1
Processing	0.08				0.11				(27.3	)
Lease operating expenses (LOE), excluding production taxes	0.06				0.07				(14.3	)
Production taxes	0.05				0.06				(16.7	)
Exploration	—				—				—
Selling, general and administrative	0.17				0.19				(10.5	)
Production depletion	1.01				1.04				(2.9	)
Operating expenses:
Gathering	$	842,414			$	801,746			5.1
Transmission	784,534				729,537				7.5
Processing	125,804				165,718				(24.1	)
LOE, excluding production taxes	84,501				100,644				(16.0	)
Production taxes	69,284				95,131				(27.2	)
Exploration	7,223				6,765				6.8
Selling, general and administrative	253,006				284,220				(11.0	)
Production depletion	$	1,524,112			$	1,546,136			(1.4	)
Other depreciation and depletion	14,633				22,902				(36.1	)
Total depreciation and depletion	$	1,538,745			$	1,569,038			(1.9	)

Transportation and processing. Gathering expense increased on an absolute and per Mcfe basis for 2019 compared to 2018 due primarily to the sales volume mix between firm and volumetric gathering contracts. Transmission expense increased on an absolute and per Mcfe basis for 2019 compared to 2018 due primarily to higher costs associated with unreleased capacity on the Tennessee Gas Pipeline, increased transmission capacity and rates contracted to move the Company's natural gas out of the Appalachian Basin and higher volumetric charges, partly offset by lower firm capacity charges following the 2018 Divestitures. Processing expense decreased on an absolute and per Mcfe basis for 2019 compared to 2018 due primarily to lower liquids sales volumes, which were driven by the 2018 Divestitures, and decreased West Virginia production.

Production. LOE decreased on an absolute and per Mcfe basis for 2019 compared to 2018 primarily as a result of the 2018 Divestitures, partly offset by higher salt water disposal costs. Excluding costs related to the 2018 Divestitures, LOE per Mcfe was $0.05 in 2018. Production taxes decreased on an absolute and per Mcfe basis for 2019 compared to 2018 due primarily to (i) lower

Pennsylvania impact fees as a result of less wells spud and lower pricing, (ii) lower severance taxes as a result of decreased West Virginia production and lower pricing and (iii) lower property taxes as a result of the 2018 Divestitures.

Selling, general and administrative. Selling, general and administrative expense decreased on an absolute and per Mcfe basis for 2019 compared to 2018 primarily as a result of lower personnel costs due to reductions in workforce, the $15 million charitable contribution made to the EQT Foundation in 2018 and decreased long-term incentive compensation due to changes in the fair value of awards, partly offset by increased litigation expenses. Long-term incentive compensation may fluctuate with changes in the Company's stock price and performance conditions.

Depreciation and depletion. Production depletion decreased on an absolute and per Mcfe basis for 2019 compared to 2018 due primarily to a lower depletion rate, partly offset by higher sales volumes. Other depreciation and depletion decreased as a result of the 2018 Divestitures.

Other Operating Expenses

Impairment/ loss on sale/exchange of long-lived assets. During the fourth quarter of 2019 the Company recorded impairment of long-lived assets of $1,124.4 million, of which $1,035.7 million was associated with the Company's non-strategic assets located in Ohio Utica and $88.7 million was associated with the Company's Pennsylvania and West Virginia Utica assets. The impairment was due primarily to depressed natural gas prices and changes in the Company's development strategy, including the Company's contemplation of a potential asset divestiture of certain of its non-strategic exploration and production assets. During the third quarter of 2019, the Company recorded a loss on exchange of long-lived assets of $13.9 million related to the Asset Exchange Transaction (defined and discussed in Note 6 to the Consolidated Financial Statements). For 2018, the Company recorded impairment/ loss on sale of long-lived assets of $2.7 billion related to the 2018 Divestitures. See Note 1 to the Consolidated Financial Statements for a discussion of 2019 and 2018 impairment tests and Note 7 to the Consolidated Financial Statements for a discussion of the 2018 Divestitures.

Amortization and impairment of intangible assets. During the third quarter of 2019, the Company recognized impairment of intangible assets associated with non-compete agreements for former Rice Energy Inc. executives who are now employees of the Company. The impairment resulted in decreased amortization in the second half of 2019.

Impairment of goodwill. During the fourth quarter of 2018, the Company recognized impairment of goodwill because the Company's single reporting unit's fair value was below its carrying value. See Note 1 to the Consolidated Financial Statements for further discussion of the 2018 goodwill impairment test.

Impairment and expiration of leases. Impairment and expiration of leases increased from $556.4 million for 2019 compared to $279.7 million for 2018 due primarily to impairment of leases located in non-strategic development areas that are not expected to be developed due to changes in the Company's development strategy, which includes a renewed focus on a refined core operating footprint. To a lesser extent, impairment increased due to lease expirations, a majority of which were related to leases acquired in 2017 and 2016.

Proxy, transaction and reorganization. Proxy, transaction and reorganization expense increased for 2019 compared to 2018 due primarily to reductions in workforce and other strategic alignment initiatives, which resulted in severance and other termination benefits of $74.1 million and contract termination fees of $22.1 million, as well as proxy costs recognized in the first half of 2019 of $19.3 million. Prior period transaction costs were related to the Rice Merger (discussed in Note 8 to the Consolidated Financial Statements).

Other Income Statement Items

The Company's investment in Equitrans Midstream is recorded at fair value, which is calculated by multiplying the closing stock price of Equitrans Midstream's common stock by the number of shares of Equitrans Midstream's common stock owned by the Company. Changes in fair value are recorded in unrealized loss on investment in Equitrans Midstream Corporation in the Statements of Consolidated Operations. The Company's investment in Equitrans Midstream fluctuates with changes in Equitrans Midstream's stock price, which was $13.36 and $20.02 as of December 31, 2019 and 2018, respectively.

Dividend and other income increased due to dividends received on the Company's investment in Equitrans Midstream during the year ended December 31, 2019.

Interest expense decreased for 2019 compared to 2018 due to repayment of the $700 million aggregate principal amount of the Company's 8.125% senior notes that matured on June 1, 2019 and decreased borrowings under the Company's credit facility, partly offset by interest incurred on borrowings under the Term Loan Facility.

See Note 9 to the Consolidated Financial Statements for a discussion of income tax benefit.

Outlook

See Item 1., "Business."

Impairment of Oil and Gas Properties

See "Critical Accounting Policies and Estimates" and Note 1 to the Consolidated Financial Statements for a discussion of the Company's accounting policies and significant assumptions related to impairment of the Company's oil and gas properties.

See Item 1A., "Risk Factors – Natural gas, NGLs and oil price declines, and changes in our development strategy, have resulted in impairment of certain of our assets. Future declines in commodity prices, increases in operating costs or adverse changes in well performance or additional changes in our development strategy may result in additional write-downs of the carrying amounts of our assets, including long-lived intangible assets, which could materially and adversely affect our results of operations in future periods."

Capital Resources and Liquidity

The Statements of Consolidated Cash Flows for the years ended December 31, 2018 and 2017 have not been restated for discontinued operations; therefore, the following discussion of operating, investing and financing activities includes cash flows of both continuing and discontinued operations through the Separation and Distribution. See Note 2 to the Consolidated Financial Statements for amounts attributable to discontinued operations included in the Statements of Consolidated Cash Flows.

Although the Company cannot provide any assurance, it believes cash flows from operating activities and availability under the revolving credit facility should be sufficient to meet the Company's cash requirements inclusive of, but not limited to, normal operating needs, debt service obligations, planned capital expenditures and commitments for at least the next twelve months.

See Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated herein by reference, for discussion and analysis of operating, investing and financing activities for the year ended December 31, 2017.

Operating Activities

Net cash flows provided by operating activities were $1,852 million for 2019 compared to $2,976 million for 2018. The decrease was driven by cash provided by discontinued operations included in 2018 and lower cash operating revenues, partly offset by favorable timing of working capital payments and dividends received on the Company's investment in Equitrans Midstream.

The Company's cash flows from operating activities will be affected by movements in the market price for commodities. The Company is unable to predict such movements outside of the current market view as reflected in forward strip pricing. Refer to Item 1A., "Risk Factors – Natural gas, NGLs and oil price volatility, or a prolonged period of low natural gas, NGLs and oil prices, may have an adverse effect upon our revenue, profitability, future rate of growth, liquidity and financial position." for further information.

Investing Activities

Net cash flows used in investing activities were $1,601 million for 2019 compared to $3,979 million for 2018. The decrease was due primarily to lower capital expenditures as a result of the Company's change in strategic focus from production growth to capital efficiency and cash used for capital expenditures and capital contributions by discontinued operations included in 2018, partly offset by proceeds received from asset sales in 2018.

Capital Expenditures

	Years Ended December 31,
	2019				2018
	(Millions)
Reserve development	$	1,377			$	2,249
Land and lease	195				276
Capitalized overhead	77				130
Capitalized interest	24				29
Other production infrastructure	97				48
Other corporate items	3				7
Total capital expenditures from continuing operations	1,773				2,739
Midstream infrastructure (a)	—				733
Total capital expenditures	1,773				3,472
(Deduct) add non-cash items (b)	(171		)		260
Total cash capital expenditures	$	1,602			$	3,732

(a)	Midstream infrastructure capital expenditures are presented as discontinued operations. See Note 2 to the 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. The impact of accrued capital expenditures includes the reversal of the prior period accrual as well as the current period estimate. The year ended December 31, 2018 included $14.4 million of measurement period adjustments for 2017 acquisitions.

Financing Activities

Net cash flows used in financing activities were $249 million for 2019 compared to net cash flows provided by financing activities of $859 million for 2018. For 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 on the Term Loan Facility. For 2018, the primary source of financing cash flows was net proceeds from a debt offering by EQM Midstream Partners, LP (EQM), the Company's former midstream affiliate, and the primary uses of financing cash flows were the repurchase and retirement of common stock, distributions to noncontrolling interests, net repayments of credit facility borrowings, EQM's acquisition of 25% ownership interest in Strike Force Midstream LLC, net cash transferred in connection with the Separation and Distribution, cash paid for dividends and taxes on share-based incentive awards.

On February 4, 2020, the Company's Board of Directors declared a quarterly cash dividend of three cents per share, payable March 1, 2020 to the Company's shareholders of record at the close of business on February 14, 2020.

On January 21, 2020, the Company issued $1.0 billion aggregate principal amount of 6.125% senior notes due February 1, 2025 and $750 million aggregate principal amount of 7.000% senior notes due February 1, 2030 (together, the Adjustable Rate Notes). The Company used the net proceeds from the Adjustable Rate Notes to repay $500 million aggregate principal amount of the Company's floating rate notes and $500 million aggregate principal amount of the Company's 2.50% senior notes and expects to use the remaining proceeds to repay or redeem other outstanding indebtedness, which may include all or a portion of the Company's outstanding 4.875% senior notes due November 15, 2021. The Adjustable Rate Notes have covenants that are consistent with the Company's existing senior unsecured notes, with an additional interest rate adjustment provision that provides for adjustments to its interest rates based on credit ratings assigned by Moody's, S&P and Fitch to the Adjustable Rate Notes. As a result of the S&P and Fitch downgrades of the Company's senior notes credit rating (discussed in section "Security Ratings and Financing Triggers"), the interest rate on the 6.125% senior notes increased to 6.875% and the interest rate on the 7.000% senior notes increased to 7.750%.

On February 3, 2020, the Company's 2.50% senior notes and floating rate notes, each due October 1, 2020, were fully redeemed by the Company at a redemption price of 100.446% and 100%, respectively, plus accrued but unpaid interest of $4.2 million and $1.2 million, respectively. This resulted in the payment of make whole call premiums of $2.2 million related to the 2.50% senior notes.

On February 12, 2020, the Company announced its commencement of a cash tender offer (the Tender Offer) for up to $400 million aggregate principal amount of its 4.875% senior notes due 2021 (the 4.875% Notes). Consideration paid in the Tender Offer for

the 4.875% Notes that are validly tendered on or prior to March 2, 2020, and accepted for purchase by the Company, will be $1,020 per $1,000 principal amount, including an early tender premium of $30 per $1,000 principal amount. The settlement date for such notes is expected to be March 4, 2020. Consideration paid in the Tender Offer for the 4.875% Notes that are validly tendered after March 2, 2020 and on or prior to March 16, 2020, and accepted for purchase by the Company, will be $990 per $1,000 principal amount. The settlement date for such notes is expected to be March 18, 2020. Payments for the 4.875% Notes purchased will also include accrued and unpaid interest from, and including, the last interest payment date on the 4.875% Notes up to, but not including, the applicable settlement date for such 4.875% Notes accepted for purchase by the Company.

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 Company's liquidity requirements, contractual and legal restrictions and other factors. Additionally, the Company plans to dispose of its remaining retained shares of Equitrans Midstream's common stock and use the proceeds to reduce the Company's debt.

Revolving Credit Facility

The Company primarily uses borrowings under its revolving credit facility to fund working capital needs, timing differences between capital expenditures and other cash uses and cash flows from operating activities, margin deposits on derivative instruments and collateral requirements on midstream services contracts. See section "Security Ratings and Financing Triggers" for further discussion of margin deposits and collateral requirements on the Company's derivative instruments and midstream services contracts. See Note 10 to the Consolidated Financial Statements for further discussion of the Company's credit facility.

Security Ratings and Financing Triggers

The table below reflects the credit ratings and rating outlooks assigned to the Company's debt instruments at February 26, 2020. The Company's credit ratings and rating outlooks are subject to revision or withdrawal at any time by the assigning rating agency, and each rating should be evaluated independent from any other rating. The Company cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by a rating agency if, in its judgment, circumstances so warrant. See Note 4 to the Consolidated Financial Statements for further discussion of what is deemed investment grade.

Rating Service		Senior Notes		Outlook
Moody's Investors Service (Moody's)		Ba1		Negative
Standard & Poor's Ratings Service (S&P)		BB+		Negative
Fitch Ratings Service (Fitch)		BB		Negative

As of December 31, 2019, the Company's senior notes were rated "Baa3" by Moody's, "BBB–" by S&P and "BBB–" by Fitch, each with a "Negative" outlook. In January 2020, Moody's downgraded the Company's senior notes credit rating to "Ba1," and, in February 2020, S&P and Fitch downgraded the Company's senior notes rating to "BB+" and "BB," respectively. The Company is not aware of any current plans of Moody's, S&P or Fitch to further downgrade its rating of the Company's senior notes. Further changes in credit ratings may affect the Company's access to the capital markets, the cost of short-term debt through interest rates and fees under the Company's lines of credit, the interest rate on the Company's Term Loan Facility and Adjustable Rate Notes, the rates available on new long-term debt, the Company's pool of investors and funding sources, the borrowing costs and margin deposit requirements on the Company's derivative instruments and credit assurance requirements, including collateral, in support of the Company's midstream service contracts, joint venture arrangements or construction contracts. Margin deposits on the Company's derivative instruments are also subject to factors other than credit rating, such as natural gas prices and credit thresholds set forth in the agreements between hedging counterparties and the Company. As of February 26, 2020, the Company had sufficient unused borrowing capacity under its credit facility, net of letters of credit, to satisfy any requests for margin deposit or other collateral that its counterparties would be permitted to request of the Company pursuant to the Company's derivative instruments and midstream services contracts in the event that Moody's and S&P downgrade the Company's credit rating two categories further. As of February 26, 2020, such margin deposit or other collateral amounts could be up to approximately $1.4 billion, inclusive of assurances posted of approximately $0.6 billion in the aggregate. See Notes 4 and 10 to the Consolidated Financial Statements for further information.

The Company's debt agreements and other financial obligations contain various provisions that, if not complied with, could result in default or event of default under the Company's credit facility and Term Loan Facility, mandatory partial or full repayment of the amounts outstanding, reduced loan capacity or other similar actions. The most significant covenants and events of default under the debt agreements relate to maintenance of a debt-to-total capitalization ratio, limitations on transactions with affiliates, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of other financial obligations and change

of control provisions. The Company's credit facility and Term Loan Facility each contain financial covenants that require the Company to have a total debt-to-total capitalization ratio no greater than 65%. The calculation of this ratio excludes the effects of accumulated other comprehensive income. As of December 31, 2019, the Company was in compliance with all debt provisions and covenants.

See Note 10 to the Consolidated Financial Statements for a discussion of the borrowings under the Company's credit facility and Term Loan Facility.

Commodity Risk Management

The substantial majority of the Company's commodity risk management program is related to hedging sales of the Company's produced natural gas. The Company's overall objective in its hedging program is to protect cash flows from undue exposure to the risk of changing commodity prices. The derivative commodity instruments currently used by the Company are primarily swap, collar and option agreements. 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.

The following table summarizes the approximate volumes and prices of the Company's NYMEX hedge positions through 2023 as of February 25, 2020.

	2020 (a)				2021				2022				2023				2024
Swaps:
Volume (MMDth)	1,093				155				3				2				2
Average Price ($/Dth)	$	2.75			$	2.43			$	2.72			$	2.67			$	2.67
Calls – Net Short:
Volume (MMDth)	392				209				157				77				15
Average Short Strike Price ($/Dth)	$	2.99			$	2.82			$	2.79			$	2.96			$	3.11
Puts – Net Long:
Volume (MMDth)	154				157				135				69				15
Average Long Strike Price ($/Dth)	$	2.38			$	2.38			$	2.35			$	2.40			$	2.45
Fixed Price Sales (b):
Volume (MMDth)	15				65				4				3				—
Average Price ($/Dth)	$	2.76			$	2.50			$	2.38			$	2.38			$	—

(a)	Full year 2020.

(b)	The difference between the fixed price and NYMEX price is included in average differential presented in the Company's price reconciliation in the "Average Realized Price Reconciliation." The fixed price natural gas sales agreements can be physically or financially settled.

For 2020, 2021, 2022, 2023 and 2024, the Company has natural gas sales agreements for approximately 13 MMDth, 18 MMDth, 18 MMDth, 79 MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of $3.68, $3.17, $3.17, $2.84 and $3.21, respectively. The Company also has derivative instruments to hedge basis. The Company may use other contractual agreements to implement its commodity hedging strategy.

See Item 7A., "Quantitative and Qualitative Disclosures About Market Risk" and Note 4 to the Consolidated Financial Statements for further discussion of the Company's hedging program.

Off-Balance Sheet Arrangements

See Note 17 to the Consolidated Financial Statements for a discussion of the Company's guarantees.

Schedule of Contractual Obligations

The following table presents the Company's long-term contractual obligations as of December 31, 2019.

	Total				2020				2021 – 2022				2023 – 2024				Thereafter
	(Thousands)
Purchase obligations (a)	$	22,598,203			$	1,449,974			$	3,619,488			$	3,397,093			$	14,131,648
Long-term debt, including current portion (b)	4,020,259				1,016,204				1,534,736				22,083				1,447,236
Interest payments on debt (c)	634,504				135,792				200,795				125,409				172,508
Term Loan Facility borrowings (d)	1,000,000				—				1,000,000				—				—
Credit facility borrowings (d)	294,000				—				294,000				—				—
Operating lease obligations (e)	62,603				30,488				17,685				14,402				28
Other liabilities (f)	23,269				7,839				8,360				1,552				5,518
Total contractual obligations	$	28,632,838			$	2,640,297			$	6,675,064			$	3,560,539			$	15,756,938

(a)

Purchase obligations are primarily commitments for demand charges under existing long-term contracts and binding precedent agreements with various pipelines, some of which extend up to 20 years or longer. The Company has entered into agreements to release some of its capacity. Purchase obligations also include commitments for processing capacity in order to extract heavier liquid hydrocarbons from the natural gas stream. Purchase obligations excludes the New EQM Gathering Agreement signed on February 26, 2020.

(b)	See Note 10 to the Consolidated Financial Statements for a discussion of the Company's January 2020 senior notes issuance and February 2020 repayment of the Company's 2.50% senior notes and floating rate notes, which were both due in 2020.

(c)	Interest payments exclude interest related to the Term Loan Facility borrowings**,** credit facility borrowings and the floating rate notes as their interest rates are variable.

(d)	Term Loan Facility borrowings and credit facility borrowings were classified based on their termination dates.

(e)	See Note 15 to the Consolidated Financial Statements for a discussion of the Company's operating lease obligations.

(f)	Other liabilities are primarily commitments for estimated payouts for various liability stock award plans as of December 31, 2019. See "Critical Accounting Policies and Estimates" and Note 13 to the Consolidated Financial Statements for further discussion of factors that affect the ultimate amount of the payout of these obligations.

As discussed in Note 9 to the Consolidated Financial Statements, the Company had a total reserve for unrecognized tax benefits at December 31, 2019 of $259.6 million, of which $113.7 million is offset against deferred tax assets for alternative minimum tax (AMT) and general business tax credit carryforwards and net operating losses (NOLs). The Company is currently unable to make reasonably reliable estimates of the period of cash settlement of these potential liabilities with taxing authorities; therefore, this amount has been excluded from the schedule of contractual obligations.

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 financial condition, results of operations or liquidity. See Note 16 to the Consolidated Financial Statements for a discussion of the Company's commitments and contingencies. See Item 3., "Legal Proceedings."

Recently Issued Accounting Standards

The Company's recently issued accounting standards are described in Note 1 to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The Company's significant accounting policies are described in Note 1 to the Consolidated Financial Statements. Management's discussion and analysis of the Consolidated Financial Statements and results of operations are based on the Company's Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of the Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. The following critical accounting policies, which were

reviewed by the Audit Committee of the Company's Board of Directors (the Audit Committee), relate to the Company's more significant judgments and estimates used in the preparation of its Consolidated Financial Statements. Actual results could differ from those estimates.

Accounting for Oil and Gas Producing Activities. The Company uses the successful efforts method of accounting for its oil and gas producing activities.

The carrying values of the Company's proved oil and gas properties are reviewed for impairment when events or circumstances indicate that the remaining carrying value may not be recoverable. To determine whether impairment has occurred, the Company compares estimated expected undiscounted future cash flows from its oil and gas properties to the carrying values of those properties. The estimated future cash flows used in the recoverability test are based on proved and, if determined reasonable by management, risk-adjusted probable reserves and assumptions generally consistent with the assumptions used by the Company for internal planning and budgeting purposes, including, among other things, the intended use of the asset, anticipated production from reserves, future market prices for natural gas, NGLs and oil adjusted for basis differentials, future operating costs and inflation. Proved oil and gas properties that have carrying amounts in excess of estimated future undiscounted cash flows are written down to fair value, which is estimated by discounting the estimated future cash flows using discount rates and other assumptions that marketplace participants would use in their fair value estimates.

Capitalized costs of unproved oil and gas properties are evaluated for recoverability on a prospective basis at least annually. Indicators of potential impairment include changes due to economic factors, potential shifts in business strategy and historical experience. The likelihood of an impairment of unproved oil and gas properties increases as the expiration of a lease term approaches and drilling activity has not commenced. If the Company does not intend to drill on the property prior to expiration of the lease or does not have the intent and ability to extend, renew, trade or sell the lease prior to expiration, impairment expense is recorded.

The Company believes that the accounting estimate related to the accounting for oil and gas producing activities is a "critical accounting estimate" because the evaluations of impairment of proved properties involve significant judgment about future events, such as future sales prices of natural gas and NGLs, future production costs, estimates of the amount of natural gas and NGLs recorded and the timing of recoveries. See "Impairment of Oil and Gas Properties" and Note 1 to the Consolidated Financial Statements for additional information on the Company's impairments of proved and unproved oil and gas properties.

Oil and Gas Reserves. Proved oil and gas reserves, as defined by SEC Regulation S-X Rule 4-10, are those quantities of oil and gas that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

The Company's estimates of proved reserves are reassessed annually using geological, reservoir and production performance data. Reserve estimates are prepared by the Company's engineers and audited by the Company's independent engineers. Revisions may result from changes in, among other things, reservoir performance, development plans, prices, operating costs, economic conditions and governmental restrictions. Decreases in prices, for example, may cause a reduction in some proved reserves due to reaching economic limits sooner. A material change in the estimated volumes of reserves could have an impact on the depletion rate calculation and the Company's Consolidated Financial Statements.

The Company estimates future net cash flows from natural gas, NGLs and crude oil reserves based on selling prices and costs using a twelve-month average price, which is calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the twelve-month period and, as such, is subject to change in subsequent periods. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation. Income tax expense is computed using future statutory tax rates and giving effect to tax deductions and credits available under current laws related to oil and gas producing activities.

The Company believes that the accounting estimate related to oil and gas reserves is a "critical accounting estimate" because the Company must periodically reevaluate proved reserves along with estimates of future production rates, production costs and the timing of development expenditures. Future results of operations and the strength of the Company's Consolidated Balance Sheet for any quarterly or annual period could be materially affected by changes in the Company's assumptions. See "Impairment of Oil and Gas Properties" for additional information on the Company's oil and gas reserves.

Income Taxes. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company's Consolidated Financial Statements or tax returns.

The Company has recorded deferred tax assets principally resulting from federal and state NOL carryforwards, an AMT credit carryforward, other federal tax credit carryforwards, unrealized capacity contract losses, incentive compensation and investments in securities. The Company has established a valuation allowance against a portion of its deferred tax assets related to the federal and state NOL carryforwards, the separate company state impact of the interest expense limitation imposed with the Tax Cuts and Jobs Act of 2017 (the Tax Cuts and Jobs Act) and the Company's investment in Equitrans Midstream because the Company believes it is more likely than not that those deferred tax assets will not be completely realized. The valuation allowance on the Equitrans Midstream investment relates to the state and part of the federal deferred tax asset as the fair value loss is not expected to be fully realized for tax purposes due to capital loss limitations. In January 2019, the IRS announced that it would no longer subject AMT refunds to sequestration; as such, the Company reversed the related previously recorded valuation allowance in the first quarter of 2019. No other significant valuation allowances have been established as the Company believes that future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize these deferred tax assets. Any determination to change the valuation allowance would impact the Company's income tax expense and net income in the period in which such a determination is made.

The Company also estimates the amount of financial statement benefit to record for uncertain tax positions as described in Note 9 to the Company's Consolidated Financial Statements.

The Company believes that accounting estimates related to income taxes are "critical accounting estimates" because the Company must assess the likelihood that deferred tax assets will be recovered from future taxable income and exercise judgment regarding the amount of financial statement benefit to record for uncertain tax positions. When evaluating whether or not a valuation allowance must be established on deferred tax assets, the Company exercises judgment in determining whether it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is needed, including carrybacks, tax planning strategies, reversal of deferred tax assets and liabilities and forecasted future taxable income. In making the determination related to uncertain tax positions, the Company considers the amounts and probabilities of the outcomes that could be realized upon ultimate settlement of an uncertain tax position using the facts, circumstances and information available at the reporting date to establish the appropriate amount of financial statement benefit. To the extent that an uncertain tax position or valuation allowance is established or increased or decreased during a period, the Company must include an expense or benefit within tax expense in the income statement. Future results of operations for any quarterly or annual period could be materially affected by changes in the Company's assumptions.

Derivative Instruments. The Company enters into derivative commodity instrument contracts primarily to reduce exposure to commodity price risk associated with future sales of natural gas production.

The Company estimates the fair value of its financial instruments using quoted market prices, where available. If quoted market prices are not available, fair value is based 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 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 values reported in the Consolidated Financial Statements change as these estimates are revised to reflect actual results or as market conditions or other factors, many of which are beyond the Company's control, change.

The Company believes that the accounting estimates related to derivative instruments are "critical accounting estimates" because the Company's financial condition and results of operations can be significantly impacted by changes in the market value of the Company's derivative instruments due to the volatility of both NYMEX natural gas prices and basis. Future results of operations for any quarterly or annual period could be materially affected by changes in the Company's assumptions.

Contingencies and Asset Retirement Obligations. The Company is involved in various legal and regulatory proceedings that arise in the ordinary course of business. The Company records a liability for contingencies based on its assessment that a loss is probable and the amount of the loss can be reasonably estimated. The Company considers many factors in making these assessments, including historical experience and matter specifics. Estimates are developed in consultation with legal counsel and are based on an analysis of potential results.

The Company accrues a liability for asset retirement obligations based on an estimate of the timing and amount of settlement. For oil and gas wells, the fair value of the Company's plugging and abandonment obligations is recorded at the time the obligations are incurred, which is typically at the time the wells are spud.

The Company believes that the accounting estimates related to contingencies and asset retirement obligations are "critical accounting estimates" because the Company must assess the probability of loss related to contingencies and the expected amount and timing of asset retirement obligations. In addition, the Company must determine the estimated present value of future liabilities. Future results of operations for any quarterly or annual period could be materially affected by changes in the Company's assumptions.

Share-Based Compensation. The Company awards share-based compensation in connection with specific programs established under the 2009, 2014 and 2019 Long-Term Incentive Plans. Awards to employees are typically made in the form of performance-based awards, time-based restricted stock, time-based restricted units and stock options. Beginning in January 2020, awards to directors are typically made in the form of restricted stock units that vest on the date of the Company's annual meeting of shareholders following the date of grant.

Restricted units and performance-based awards that are expected to be satisfied in cash are treated as liability awards. For liability awards, the Company estimates, on the grant date and on each reporting date thereafter until vesting and payment, the fair value of the ultimate payout based on the expected performance through, and value of the Company's common stock on, the vesting date. The Company then recognizes a proportionate amount of the expense for each period in the Company's Consolidated Financial Statements over the vesting period of the award. The Company reviews assumptions regarding performance and common stock value on a quarterly basis and adjusts its accrual when changes to these assumptions result in a material change in the fair value of the ultimate payouts.

Performance-based awards that are expected to be satisfied in Company common stock are treated as equity awards. For equity awards, the Company determines the grant date fair value of the awards, which is then recognized as expense in the Company's Consolidated Financial Statements over the vesting period of the award. Determination of the grant date fair value of the awards requires judgments and estimates regarding, among other things, the appropriate methodologies to follow in valuing the awards and the related inputs required by those valuation methodologies. Most often, the Company is required to obtain a valuation based on assumptions regarding risk-free rates of return, dividend yields, expected volatilities and the expected term of the award. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on the historical dividend yield of the Company's common stock adjusted for any expected changes and, where applicable, the common stock of the peer group members at the time of grant. Expected volatilities are based on historical volatility of the Company's common stock and, where applicable, the common stock of the peer group members at the time of grant. The expected term represents the period of time elapsing during the applicable performance period.

For time-based restricted stock awards, the grant date fair value of the awards is recognized as expense in the Company's Consolidated Financial Statements over the vesting period, which, historically, has been three years. For director restricted stock units expected to be satisfied in equity, the grant date fair value of the awards is recognized as an expense in the Company's Consolidated Financial Statements in the year of grant. The grant date fair value, in both cases, is determined based on the closing price of the Company's common stock on the date of the grant.

For non-qualified stock options, the grant date fair value is recognized as expense in the Company's Consolidated Financial Statements over the vesting period, which, historically, has been three years. The Company uses the Black-Scholes option pricing model to measure the fair value of stock options, which includes assumptions for a risk-free interest rate, dividend yield, volatility factor and expected term. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on the dividend yield of the Company's common stock at the time of grant. The expected volatility is based on historical volatility of the Company's common stock at the time of grant. The expected term represents the period of time that options granted are expected to be outstanding based on historical option exercise experience at the time of grant.

The Company believes that the accounting estimates related to share-based compensation are "critical accounting estimates" because they may change from period-to-period based on changes in assumptions about factors affecting the ultimate payout of awards, including the number of awards to ultimately vest and the market price and volatility of the Company's common stock. Future results of operations for any quarterly or annual period could be materially affected by changes in the Company's assumptions. See Note 13 to the Consolidated Financial Statements for additional information on the Company's share-based compensation plans.