Item 1. Financial Statements

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Item 1. Financial Statements

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS (UNAUDITED)


	Three Months Ended March 31,
	2023		2022

	(Thousands, except per share amounts)
Operating revenues:
Sales of natural gas, natural gas liquids and oil	$	1,830,358	$	2,486,624
Gain (loss) on derivatives	824,852		(3,077,637)
Net marketing services and other	5,861		11,903
Total operating revenues	2,661,071		(579,110)
Operating expenses:
Transportation and processing	514,984		516,104
Production	47,940		71,012
Exploration	952		772
Selling, general and administrative	51,894		69,096
Depreciation and depletion	387,685		422,098
Loss (gain) on sale/exchange of long-lived assets	16,528		(1,209)
Impairment of contract asset	—		184,945
Impairment and expiration of leases	10,546		29,991
Other operating expenses	19,662		16,347
Total operating expenses	1,050,191		1,309,156
Operating income (loss)	1,610,880		(1,888,266)
(Income) loss from investments	(4,764)		20,785
Dividend and other income	(175)		(3,596)
(Gain) loss on debt extinguishment	(6,606)		6,923
Interest expense, net	46,546		67,902
Income (loss) before income taxes	1,575,879		(1,980,280)
Income tax expense (benefit)	356,646		(465,697)
Net income (loss)	1,219,233		(1,514,583)
Less: Net income attributable to noncontrolling interests	685		1,465
Net income (loss) attributable to EQT Corporation	$	1,218,548	$	(1,516,048)

Income (loss) per share of common stock attributable to EQT Corporation:
Basic:
Weighted average common stock outstanding	361,462		374,142
Net income (loss) attributable to EQT Corporation	$	3.37	$	(4.05)
Diluted (Note 7):
Weighted average common stock outstanding	393,883		374,142
Net income (loss) attributable to EQT Corporation	$	3.10	$	(4.05)

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

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended March 31,
	2023		2022

	(Thousands)
Net income (loss)	$	1,219,233	$	(1,514,583)
Other comprehensive income, net of tax:
Other postretirement benefits liability adjustment, net of tax expense: $15 and $20	164		63
Comprehensive income (loss)	1,219,397		(1,514,520)
Less: Comprehensive income attributable to noncontrolling interests	685		1,465
Comprehensive income (loss) attributable to EQT Corporation	$	1,218,712	$	(1,515,985)

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

EQT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	March 31, 2023		December 31, 2022

	(Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	2,127,262	$	1,458,644
Accounts receivable (less provision for doubtful accounts: $457 and $605)	628,132		1,608,089
Derivative instruments, at fair value	978,351		812,371
Prepaid expenses and other	215,809		135,337
Total current assets	3,949,554		4,014,441

Property, plant and equipment	27,831,803		27,393,919
Less: Accumulated depreciation and depletion	9,598,103		9,226,586
Net property, plant and equipment	18,233,700		18,167,333

Other assets	507,200		488,152
Total assets	$	22,690,454	$	22,669,926

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt	$	413,244	$	422,632
Accounts payable	1,153,258		1,574,610
Derivative instruments, at fair value	805,013		1,393,487
Other current liabilities	292,907		341,491
Total current liabilities	2,664,422		3,732,220


Senior notes	4,971,609		5,167,849
Note payable to EQM Midstream Partners, LP	86,954		88,484
Deferred income taxes	1,880,275		1,442,406
Other liabilities and credits	933,606		1,025,639
Total liabilities	10,536,866		11,456,598

Equity:
Common stock, no par value, shares authorized: 640,000, shares issued: 361,586 and 365,363	9,776,392		9,891,890
Retained earnings	2,338,572		1,283,578
Accumulated other comprehensive loss	(2,830)		(2,994)
Total common shareholders' equity	12,112,134		11,172,474
Noncontrolling interest in consolidated subsidiaries	41,454		40,854
Total equity	12,153,588		11,213,328
Total liabilities and equity	$	22,690,454	$	22,669,926

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

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
	2023		2022

	(Thousands)
Cash flows from operating activities:
Net income (loss)	$	1,219,233	$	(1,514,583)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income tax expense (benefit)	356,618		(473,557)
Depreciation and depletion	387,685		422,098
Impairments of long-lived assets and loss (gain) on sale/exchange of long-lived assets	27,074		213,727
(Income) loss from investments	(4,764)		20,785
(Gain) loss on debt extinguishment	(6,606)		6,923
Share-based compensation expense	11,276		7,470
Distribution of earnings from equity method investments	5,456		2,790
Amortization, accretion and other	3,888		10,389
(Gain) loss on derivatives	(824,852)		3,077,637
Net cash settlements received (paid) on derivatives	157,000		(885,539)
Net premiums (paid) received on derivative instruments	(94,916)		372
Changes in other assets and liabilities:
Accounts receivable	980,908		225,968
Accounts payable	(422,519)		52,867
Other current assets	(80,472)		(107,455)
Other items, net	(52,241)		(38,673)
Net cash provided by operating activities	1,662,768		1,021,219
Cash flows from investing activities:
Capital expenditures	(494,784)		(292,281)




Other investing activities	(3,542)		1,109
Net cash used in investing activities	(498,326)		(291,172)
Cash flows from financing activities:
Proceeds from credit facility borrowings	—		2,721,000
Repayment of credit facility borrowings	—		(2,695,000)


Repayment and retirement of debt	(211,429)		(570,174)
Discounts received (premiums paid) on debt extinguishment	7,981		(6,240)
Dividends paid	(54,070)		(47,063)


Repurchase and retirement of common stock	(201,029)		(216,491)
Distribution to noncontrolling interest, net of contributions	(85)		(341)
Other financing activities	(37,192)		(12,788)
Net cash used in financing activities	(495,824)		(827,097)
Net change in cash and cash equivalents	668,618		(97,050)
Cash and cash equivalents at beginning of period	1,458,644		113,963
Cash and cash equivalents at end of period	$	2,127,262	$	16,913

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

See Note 1 for supplemental cash flow information.

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED EQUITY (UNAUDITED)


	Common Stock
	Shares	No Par Value		Treasury Stock		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Loss (a)		Noncontrolling Interest in Consolidated Subsidiaries		Total Equity

	(Thousands, except per share amounts)
Balance at January 1, 2022	376,399	$	10,071,820	$	(18,046)	$	(94,400)	$	(4,611)	$	16,236	$	9,970,999
Comprehensive loss, net of tax:
Net (loss) income						(1,516,048)				1,465		(1,514,583)
Other postretirement benefits liability adjustment, net of tax expense: $20								63				63
Dividends ($0.125 per share)						(47,063)						(47,063)
Share-based compensation plans	1,207	(18,220)		15,198								(3,022)
Convertible Notes settlements	1	8										8
Repurchase and retirement of common stock	(8,533)	(132,260)				(67,768)						(200,028)
Distribution to noncontrolling interest										(341)		(341)
Balance at March 31, 2022	369,074	$	9,921,348	$	(2,848)	$	(1,725,279)	$	(4,548)	$	17,360	$	8,206,033

Balance at January 1, 2023	365,363	$	9,891,890	$	—	$	1,283,578	$	(2,994)	$	40,854	$	11,213,328
Comprehensive income, net of tax:
Net income						1,218,548				685		1,219,233
Other postretirement benefits liability adjustment, net of tax expense: $15								164				164
Dividends ($0.15 per share)						(54,070)						(54,070)
Share-based compensation plans	2,127	(24,023)										(24,023)
Convertible Notes settlements	2	70										70
Repurchase and retirement of common stock	(5,906)	(91,545)				(109,484)						(201,029)
Distribution to noncontrolling interest										(3,835)		(3,835)
Contribution from noncontrolling interest										3,750		3,750

Balance at March 31, 2023	361,586	$	9,776,392	$	—	$	2,338,572	$	(2,830)	$	41,454	$	12,153,588

Common shares authorized: 640,000. Preferred shares authorized: 3,000. There were no preferred shares issued or outstanding.

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1. Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all 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 March 31, 2023 and December 31, 2022, the results of its operations, its equity and its cash flows for the three month periods ended March 31, 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.


	Three Months Ended March 31,
	2023		2022

	(Thousands)
Cash paid during the period for:
Interest, net of amount capitalized	$	42,650	$	82,698
Income taxes, net	13,526		2,129

Non-cash activity during the period for:
Increase in asset retirement costs and obligations	$	2,686	$	6,475
Capitalization of non-cash equity share-based compensation	1,362		1,033

Issuance of common stock for Convertible Notes settlement (Note 6)	70		8

2. Revenue from Contracts with Customers

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

$448.2 million and $1,171.9 million in accounts receivable in the Condensed Consolidated Balance Sheets as of March 31, 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.


	Three Months Ended March 31,
	2023		2022

	(Thousands)
Revenues from contracts with customers:
Natural gas sales	$	1,712,232	$	2,289,365
NGLs sales	98,828		173,503
Oil sales	19,298		23,756
Total revenues from contracts with customers	$	1,830,358	$	2,486,624

Other sources of revenue:
Gain (loss) on derivatives	824,852		(3,077,637)
Net marketing services and other	5,861		11,903
Total operating revenues	$	2,661,071	$	(579,110)

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of March 31, 2023. Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of March 31, 2023.


	2023 (a)		2024		Total

	(Thousands)
Natural gas sales	$	10,268	$	469	$	10,737

(a)April 1 through December 31.

3. Derivative Instruments

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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 1,556 billion cubic feet (Bcf) of natural gas and 2,079 thousand barrels (Mbbl) of NGLs as of March 31, 2023 and 1,424 Bcf of natural gas and 1,483 Mbbl of NGLs as of December 31, 2022. The open positions at both March 31, 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 March 31, 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 March 31, 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 $90.8 million and $347.6 million, respectively, for which the Company deposited and recorded current assets of zero for both periods.

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 March 31, 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 March 31, 2023 and December 31, 2022, the Company recorded $181.8 million and $100.6 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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.


	Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets		Derivative instruments subject to master netting agreements		Margin requirements with counterparties		Net derivative instruments

	(Thousands)
March 31, 2023
Asset derivative instruments, at fair value	$	978,351	$	(505,796)	$	—	$	472,555
Liability derivative instruments, at fair value	805,013		(505,796)		(181,778)		117,439

December 31, 2022
Asset derivative instruments, at fair value	$	812,371	$	(756,495)	$	—	$	55,876
Liability derivative instruments, at fair value	1,393,487		(756,495)		(100,623)		536,369

4. Fair Value Measurements

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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


			Fair value measurements at reporting date using:
	Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)

	(Thousands)
March 31, 2023
Asset derivative instruments, at fair value	$	978,351	$	40,259	$	938,092	$	—
Liability derivative instruments, at fair value	805,013		186,929		618,084		—

December 31, 2022
Asset derivative instruments, at fair value	$	812,371	$	103,028	$	709,343	$	—
Liability derivative instruments, at fair value	1,393,487		154,601		1,238,886		—

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 Term Loan Facility (defined in Note 6) approximates fair value as the interest rates are based on prevailing market rates. The Company considered all of 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 investment is valued 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 March 31, 2023 and December 31, 2022, the Company's senior notes had a fair value of approximately $5.8 billion and $6.1 billion, respectively, and a carrying value of approximately $5.4 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 March 31, 2023 and December 31, 2022, the Company's note payable to EQM had a fair value of approximately $96 million and $96 million, respectively, and a carrying value of approximately $93 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 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.

5. Income Taxes

For the three months ended March 31, 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 three months ended March 31, 2023.

For the three months ended March 31, 2023 and 2022, the Company recorded income tax expense (benefit) at an effective tax rate of 22.6% and 23.5%, respectively. The Company's effective tax rate was higher compared to the U.S. federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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.

6. Debt

The table below summarizes the Company's outstanding debt.


	March 31, 2023				December 31, 2022
	Principal Value		Carrying Value (a)			Principal Value		Carrying Value (a)

	(Thousands)

Senior notes:

7.42% series B notes due 2023	$	—	$	—		$	10,000	$	10,000
6.125% notes due February 1, 2025 (b)	901,521		898,650			911,467		908,168
5.678% notes due October 1, 2025	500,000		496,899			500,000		496,578
1.75% convertible notes due May 1, 2026	414,761		407,307			414,832		406,796
3.125% notes due May 15, 2026	392,915		389,066			440,857		436,198
7.75% debentures due July 15, 2026	115,000		113,343			115,000		113,218
3.90% notes due October 1, 2027	1,169,503		1,164,610			1,233,008		1,227,582
5.700% notes due April 1, 2028	500,000		494,230			500,000		493,941
5.00% notes due January 15, 2029	318,494		314,624			327,101		322,956
7.000% notes due February 1, 2030 (b)	674,800		670,554			714,800		710,138
3.625% notes due May 15, 2031	435,165		429,633			465,165		459,070
Note payable to EQM	92,891		92,891			94,320		94,320
Total debt	5,515,050		5,471,807			5,726,550		5,678,965
Less: Current portion of debt (c)	420,698		413,244			430,668		422,632
Long-term debt	$	5,094,352	$	5,058,563		$	5,295,882	$	5,256,333

(a)For the Company's credit facility and 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 March 31, 2023, the current portion of debt includes the 1.75% convertible notes and a portion of the note payable to EQM. As of December 31, 2022, the current portion of debt includes the 7.42% series B notes, the 1.75% convertible notes and a portion of the note payable to EQM.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Debt Repayments. The Company redeemed or repurchased the following debt during the three months ended March 31, 2023.


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

	(Thousands)

6.125% notes due February 1, 2025	$	9,946	$	86	$	268	$	10,300


3.125% notes due May 15, 2026	47,942		(3,042)		296		45,196
3.90% notes due October 1, 2027	63,505		(3,534)		781		60,752

5.00% notes due January 15, 2029	8,607		(309)		137		8,435
7.000% notes due February 1, 2030	40,000		2,736		1,313		44,049
3.625% notes due May 15, 2031	30,000		(4,011)		167		26,156
Total	$	200,000	$	(8,074)	$	2,962	$	194,888

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

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

During the three months ended March 31, 2023, there were no borrowings under the Company's credit facility. During the three months ended March 31, 2022, under the Company's credit facility, the maximum amount of outstanding borrowings was $615 million, the average daily balance was approximately $306 million and interest was incurred at a weighted average annual interest rate of 2.0%.

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 partially finance the pending Tug Hill and XcL Midstream Acquisition as defined and described 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 March 31, 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 to better align with the Tug Hill and XcL Midstream Acquisition purchase agreement. Prior to such extension, any unfunded commitments under the Term Loan Facility were scheduled to expire on June 30, 2023.

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company may not 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 dividend the Company paid on its common stock in the first quarter of 2023, effective February 17, 2023, the conversion rate for the Convertible Notes was adjusted to 68.0740 shares of EQT Corporation common stock per $1,000 principal amount of the Convertible Notes. Future dividend payments by the Company will result in further adjustments to the conversion rate. The conversion rate is 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 March 31, 2023 and December 31, 2022, and, accordingly, holders of the Convertible Notes are permitted to convert any of their Convertible Notes at their option at any time during the second quarter of 2023 and the first quarter of 2023, respectively, subject to the terms and conditions set forth in the Convertible Notes indenture. Therefore, as of March 31, 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 the settlement of Convertible Notes conversion right exercises for the three months ended March 31, 2023. The Company elected to settle all such conversions by issuing to the converting holders shares of EQT Corporation common stock.


Settlement Month	Principal Converted		Shares Issued	Average Conversion Price

	(Thousands)






January 2023	$	7	473	$	33.70
February 2023	8		541	30.77
March 2023	6		408	31.46

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 the Company paying a dividend on its common stock.

Based on the closing stock price of EQT Corporation common stock of $31.91 on March 31, 2023 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $486 million.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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


	March 31, 2023		December 31, 2022

	(Thousands)
Principal	$	414,761	$	414,832
Less: Unamortized debt issuance costs	7,454		8,036
Net carrying value of Convertible Notes	$	407,307	$	406,796

Fair value of Convertible Notes (a)	$	919,025	$	967,728

(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%.


	Three Months Ended March 31,
	2023		2022

	(Thousands)
Contractual interest expense	$	1,814	$	2,187
Amortization of issuance costs	581		684
Total Convertible Notes interest expense	$	2,395	$	2,871

7. Earnings (Loss) Per Share

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


	Three Months Ended March 31,
	2023		2022

	(Thousands, except per share amounts)
Net income (loss) attributable to EQT Corporation – basic earnings available to shareholders	$	1,218,548	$	(1,516,048)
Add back: Interest expense on Convertible Notes, net of tax (a)	1,854		—
Diluted earnings (loss) available to shareholders	$	1,220,402	$	(1,516,048)

Weighted average common stock outstanding – basic	361,462		374,142
Options, restricted stock, performance awards and stock appreciation rights (a)	4,226		—
Convertible debt (a)	28,195		—
Weighted average common stock outstanding – diluted	393,883		374,142

Income (loss) per share of common stock attributable to EQT Corporation:
Basic	$	3.37	$	(4.05)
Diluted	$	3.10	$	(4.05)

(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 March 31, 2022, all such securities of 7.3 million were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

In addition, the Company uses the if-converted method to calculate the impact of the Convertible Notes on diluted earnings (loss) per share. For the three months ended March 31, 2022, such if-converted securities of approximately 33.5 million and the 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.

8. Impairment of Contract Asset

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 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 $29.3 million in the Statement of Condensed Consolidated Operations. As of December 31, 2022, the previously recognized impairment 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.

EQT CORPORATION AND SUBSIDIARIES

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

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