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

	(Thousands, except per share amounts)
Operating revenues:
Sales of natural gas, natural gas liquids and oil	$	848,325	$	3,365,211	$	2,678,683	$	5,851,835
Gain (loss) on derivatives	164,386		(845,095)		989,238		(3,922,732)
Net marketing services and other	6,040		7,392		11,901		19,295
Total operating revenues	1,018,751		2,527,508		3,679,822		1,948,398
Operating expenses:
Transportation and processing	523,162		539,704		1,038,146		1,055,808
Production	55,038		82,556		102,978		153,568
Exploration	1,203		1,741		2,155		2,513
Selling, general and administrative	60,163		59,276		112,057		128,372
Depreciation and depletion	395,684		429,143		783,369		851,241
(Gain) loss on sale/exchange of long-lived assets	(225)		(981)		16,303		(2,190)
Impairment of contract asset	—		—		—		184,945
Impairment and expiration of leases	5,325		47,048		15,871		77,039
Other operating expenses	13,394		7,120		33,056		23,467
Total operating expenses	1,053,744		1,165,607		2,103,935		2,474,763
Operating (loss) income	(34,993)		1,361,901		1,575,887		(526,365)
(Income) loss from investments	(1,092)		(3,577)		(5,856)		17,208
Dividend and other income	(562)		(7,313)		(737)		(10,909)
Loss (gain) on debt extinguishment	5,462		104,348		(1,144)		111,271
Interest expense, net	39,883		65,985		86,429		133,887
(Loss) income before income taxes	(78,684)		1,202,458		1,497,195		(777,822)
Income tax (benefit) expense	(11,818)		308,234		344,828		(157,463)
Net (loss) income	(66,866)		894,224		1,152,367		(620,359)
Less: Net (loss) income attributable to noncontrolling interests	(240)		2,863		445		4,328
Net (loss) income attributable to EQT Corporation	$	(66,626)	$	891,361	$	1,151,922	$	(624,687)

(Loss) income per share of common stock attributable to EQT Corporation:
Basic:
Weighted average common stock outstanding	361,982		369,866		361,721		372,023
Net (loss) income attributable to EQT Corporation	$	(0.18)	$	2.41	$	3.18	$	(1.68)
Diluted (Note 7):
Weighted average common stock outstanding	361,982		407,303		393,435		372,023
Net (loss) income attributable to EQT Corporation	$	(0.18)	$	2.19	$	2.94	$	(1.68)

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

EQT CORPORATION AND SUBSIDIARIES

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(Thousands)
Net (loss) income	$	(66,866)	$	894,224	$	1,152,367	$	(620,359)
Other comprehensive income, net of tax:
Other postretirement benefits liability adjustment, net of tax expense: $14, $21, $29 and $41	49		64		213		127
Comprehensive (loss) income	(66,817)		894,288		1,152,580		(620,232)
Less: Comprehensive (loss) income attributable to noncontrolling interests	(240)		2,863		445		4,328
Comprehensive (loss) income attributable to EQT Corporation	$	(66,577)	$	891,425	$	1,152,135	$	(624,560)

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

EQT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30, 2023		December 31, 2022

	(Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,215,492	$	1,458,644
Accounts receivable (less provision for doubtful accounts: $166 and $605)	475,211		1,608,089
Derivative instruments, at fair value	683,612		812,371
Prepaid expenses and other	51,254		135,337
Total current assets	2,425,569		4,014,441

Property, plant and equipment	28,299,959		27,393,919
Less: Accumulated depreciation and depletion	9,976,460		9,226,586
Net property, plant and equipment	18,323,499		18,167,333

Other assets	524,409		488,152
Total assets	$	21,273,477	$	22,669,926

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt	$	413,917	$	422,632
Accounts payable	1,049,895		1,574,610
Derivative instruments, at fair value	485,224		1,393,487
Other current liabilities	233,790		341,491
Total current liabilities	2,182,826		3,732,220


Senior notes	4,172,232		5,167,849
Note payable to EQM Midstream Partners, LP	85,404		88,484
Deferred income taxes	1,877,584		1,442,406
Other liabilities and credits	910,403		1,025,639
Total liabilities	9,228,449		11,456,598

Equity:
Common stock, no par value, shares authorized: 640,000, shares issued: 361,654 and 365,363	9,790,855		9,891,890
Retained earnings	2,217,698		1,283,578
Accumulated other comprehensive loss	(2,781)		(2,994)
Total common shareholders' equity	12,005,772		11,172,474
Noncontrolling interest in consolidated subsidiaries	39,256		40,854
Total equity	12,045,028		11,213,328
Total liabilities and equity	$	21,273,477	$	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)


	Six Months Ended June 30,
	2023		2022

	(Thousands)
Cash flows from operating activities:
Net income (loss)	$	1,152,367	$	(620,359)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income tax expense (benefit)	353,912		(164,677)
Depreciation and depletion	783,369		851,241
Impairment of long-lived assets and loss/gain on sale/exchange of long-lived assets	32,174		259,794
(Income) loss from investments	(5,856)		17,208
(Gain) loss on debt extinguishment	(1,144)		111,271
Share-based compensation expense	23,333		21,558
Distribution of earnings from equity method investments	16,616		13,640
Amortization, accretion and other	7,941		17,616
(Gain) loss on derivatives	(989,238)		3,922,732
Net cash settlements received (paid) on derivatives	369,247		(2,639,271)
Net premiums (paid) received on derivative instruments	(164,843)		14,073
Changes in other assets and liabilities:
Accounts receivable	1,128,033		(626,620)
Accounts payable	(532,223)		360,208
Other current assets	84,082		(190,358)
Other items, net	(157,889)		(96,416)
Net cash provided by operating activities	2,099,881		1,251,640
Cash flows from investing activities:
Capital expenditures	(981,795)		(684,972)



Proceeds from sale of investment shares	—		189,249
Other investing activities	(2,036)		(11,962)
Net cash used in investing activities	(983,831)		(507,685)
Cash flows from financing activities:
Proceeds from credit facility borrowings	—		6,237,000
Repayment of credit facility borrowings	—		(6,137,000)

Debt issuance costs	(3,557)		(9,154)
Repayment and retirement of debt	(1,012,877)		(576,640)
Discounts received (premiums paid) on debt extinguishment	6,402		(15,128)
Dividends paid	(108,318)		(93,272)


Repurchase and retirement of common stock	(201,029)		(216,491)
Distribution to noncontrolling interest, net of contributions	(2,043)		(2,894)
Other financing activities	(37,780)		(594)
Net cash used in financing activities	(1,359,202)		(814,173)
Net change in cash and cash equivalents	(243,152)		(70,218)
Cash and cash equivalents at beginning of period	1,458,644		113,963
Cash and cash equivalents at end of period	$	1,215,492	$	43,745

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 April 1, 2022	369,074	$	9,921,348	$	(2,848)	$	(1,725,279)	$	(4,548)	$	17,360	$	8,206,033
Comprehensive income, net of tax:
Net income						891,361				2,863		894,224
Other postretirement benefits liability adjustment, net of tax expense: $21								64				64
Dividends ($0.125 per share)						(46,209)						(46,209)
Share-based compensation plans	645	27,268										27,268
Convertible Notes settlements	1	30										30

Distribution to noncontrolling interest										(2,553)		(2,553)
Other										11,233		11,233
Balance at June 30, 2022	369,720	$	9,948,646	$	(2,848)	$	(880,127)	$	(4,484)	$	28,903	$	9,090,090

Balance at April 1, 2023	361,586	$	9,776,392	$	—	$	2,338,572	$	(2,830)	$	41,454	$	12,153,588
Comprehensive loss, net of tax:
Net loss						(66,626)				(240)		(66,866)
Other postretirement benefits liability adjustment, net of tax expense: $14								49				49
Dividends ($0.15 per share)						(54,248)						(54,248)
Share-based compensation plans	64	14,451										14,451
Convertible Notes settlements	4	12										12

Distribution to noncontrolling interest										(1,958)		(1,958)


Balance at June 30, 2023	361,654	$	9,790,855	$	—	$	2,217,698	$	(2,781)	$	39,256	$	12,045,028

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

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						(624,687)				4,328		(620,359)
Other postretirement benefits liability adjustment, net of tax expense: $41								127				127
Dividends ($0.25 per share)						(93,272)						(93,272)
Share-based compensation plans	1,852	9,048		15,198								24,246
Convertible Notes settlements	2	38										38
Repurchase and retirement of common stock	(8,533)	(132,260)				(67,768)						(200,028)
Distribution to noncontrolling interest										(2,894)		(2,894)
Other										11,233		11,233
Balance at June 30, 2022	369,720	$	9,948,646	$	(2,848)	$	(880,127)	$	(4,484)	$	28,903	$	9,090,090

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						1,151,922				445		1,152,367
Other postretirement benefits liability adjustment, net of tax expense: $29								213				213
Dividends ($0.30 per share)						(108,318)						(108,318)
Share-based compensation plans	2,191	(9,572)										(9,572)
Convertible Notes settlements	6	82										82
Repurchase and retirement of common stock	(5,906)	(91,545)				(109,484)						(201,029)
Distribution to noncontrolling interest										(5,793)		(5,793)
Contribution from noncontrolling interest										3,750		3,750

Balance at June 30, 2023	361,654	$	9,790,855	$	—	$	2,217,698	$	(2,781)	$	39,256	$	12,045,028

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

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 June 30, 2023 and December 31, 2022, the results of its operations and equity for the three and six month periods ended June 30, 2023 and 2022 and its cash flows for the six month periods ended June 30, 2023 and 2022. Certain previously reported amounts have been reclassified to conform to the current year presentation. In this Quarterly Report on Form 10-Q, references to "EQT" and "the Company" refer collectively to EQT Corporation and its consolidated subsidiaries.

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

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


	Six Months Ended June 30,
	2023		2022

	(Thousands)
Cash paid during the period for:
Interest, net of amount capitalized	$	95,316	$	133,269
Income taxes, net	13,619		6,415

Non-cash activity during the period for:
Increase in asset retirement costs and obligations	$	3,631	$	10,245
Capitalization of non-cash equity share-based compensation	2,997		2,550
Increase in right-of-use assets and lease liabilities, net	507		819
Issuance of common stock for Convertible Notes settlement	82		38

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(Thousands)
Revenues from contracts with customers:
Natural gas sales	$	765,856	$	3,175,155	$	2,478,088	$	5,464,520
NGLs sales	67,899		167,849		166,727		341,352
Oil sales	14,570		22,207		33,868		45,963
Total revenues from contracts with customers	$	848,325	$	3,365,211	$	2,678,683	$	5,851,835

Other sources of revenue:
Gain (loss) on derivatives	164,386		(845,095)		989,238		(3,922,732)
Net marketing services and other	6,040		7,392		11,901		19,295
Total operating revenues	$	1,018,751	$	2,527,508	$	3,679,822	$	1,948,398

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


	2023 (a)		2024		Total

	(Thousands)
Natural gas sales	$	6,548	$	469	$	7,017

(a)July 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 1,711 billion cubic feet (Bcf) of natural gas and 1,545 thousand barrels (Mbbl) of NGLs as of June 30, 2023 and 1,424 Bcf of natural gas and 1,483 Mbbl of NGLs as of December 31, 2022. The open positions at both June 30, 2023 and December 31, 2022 had maturities extending through December 2027.

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

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

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

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

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)
June 30, 2023
Asset derivative instruments, at fair value	$	683,612	$	(360,541)	$	—	$	323,071
Liability derivative instruments, at fair value	485,224		(360,541)		(27,386)		97,297

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

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

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

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

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

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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

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


			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)
June 30, 2023
Asset derivative instruments, at fair value	$	683,612	$	75,675	$	607,937	$	—
Liability derivative instruments, at fair value	485,224		79,149		406,075		—

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 the Term Loan Facility (defined in Note 6) approximates fair value as their interest rates are based on prevailing market rates. The Company considers these fair values to be Level 1 fair value measurements.

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

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

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

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

5. Income Taxes

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

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

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

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

6. Debt

The table below summarizes the Company's outstanding debt.


	June 30, 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)	601,521		599,865			911,467		908,168
5.678% notes due October 1, 2025	—		—			500,000		496,578
1.75% convertible notes due May 1, 2026	414,749		407,879			414,832		406,796
3.125% notes due May 15, 2026	392,915		389,370			440,857		436,198
7.75% debentures due July 15, 2026	115,000		113,467			115,000		113,218
3.90% notes due October 1, 2027	1,169,503		1,164,866			1,233,008		1,227,582
5.700% notes due April 1, 2028	500,000		489,363			500,000		493,941
5.00% notes due January 15, 2029	318,494		314,790			327,101		322,956
7.000% notes due February 1, 2030 (b)	674,800		670,709			714,800		710,138
3.625% notes due May 15, 2031	435,165		429,802			465,165		459,070
Note payable to EQM	91,442		91,442			94,320		94,320
Total debt	4,713,589		4,671,553			5,726,550		5,678,965
Less: Current portion of debt (c)	420,787		413,917			430,668		422,632
Long-term debt	$	4,292,802	$	4,257,636		$	5,295,882	$	5,256,333

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

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

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

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


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

	(Thousands)
6.125% notes due February 1, 2025	$	309,946	$	1,832	$	6,801	$	318,579
5.678% notes due October 1, 2025	500,000		—		6,940		506,940

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	$	1,000,000	$	(6,328)	$	16,435	$	1,010,107

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

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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

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

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

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

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

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

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

during any quarter as long as the last reported price of EQT Corporation common stock for at least 20 trading days (consecutive or otherwise) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price on each such trading day (the Sale Price Condition);
during the five-business-day period after any five-consecutive-trading-day period (the measurement period) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period is less than 98% of the product of the last reported price of EQT Corporation common stock and the conversion rate for the Convertible Notes on each such trading day;
if the Company calls any or all of the Convertible Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding such redemption date; and
upon the occurrence of certain corporate events set forth in the Convertible Notes indenture.

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

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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


Dividend Paid	Effective Date of Adjustment to Conversion Rate	Conversion Shares of EQT Corporation Common Stock per $1,000 Principal Amount
Q1 2023	February 17, 2023	68.0740
Q2 2023	May 9, 2023	68.3917

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

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

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


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
April 2023	58		3,948	32.01

June 2023	4		272	39.06

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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

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


	June 30, 2023		December 31, 2022

	(Thousands)
Principal	$	414,749	$	414,832
Less: Unamortized debt issuance costs	6,870		8,036
Net carrying value of Convertible Notes	$	407,879	$	406,796

Fair value of Convertible Notes (a)	$	939,925	$	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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(Thousands)
Contractual interest expense	$	1,815	$	2,183	$	3,629	$	4,370
Amortization of issuance costs	583		687		1,164		1,371
Total Convertible Notes interest expense	$	2,398	$	2,870	$	4,793	$	5,741

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

7. (Loss) Income Per Share

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(Thousands, except per share amounts)
Net (loss) income attributable to EQT Corporation – Basic (loss) income available to shareholders	$	(66,626)	$	891,361	$	1,151,922	$	(624,687)
Add back: Interest expense on Convertible Notes, net of tax (a)	—		2,279		3,691		—
Diluted (loss) income available to shareholders	$	(66,626)	$	893,640	$	1,155,613	$	(624,687)

Weighted average common stock outstanding – Basic	361,982		369,866		361,721		372,023
Options, restricted stock, performance awards and stock appreciation rights (a)	—		4,132		3,455		—
Convertible Notes (a)	—		33,305		28,259		—
Weighted average common stock outstanding – Diluted	361,982		407,303		393,435		372,023

(Loss) income per share of common stock attributable to EQT Corporation:
Basic	$	(0.18)	$	2.41	$	3.18	$	(1.68)
Diluted	$	(0.18)	$	2.19	$	2.94	$	(1.68)

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

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

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.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

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

EQT CORPORATION AND SUBSIDIARIES

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

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