filings.toolsItem 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, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Thousands, except per share amounts) | |||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||
| Sales of natural gas, natural gas liquids and oil | $ | 1,303,905 | $ | 1,830,358 | |||||||||||||||||||
| Gain on derivatives | 106,511 | 824,852 | |||||||||||||||||||||
| Net marketing services and other | 1,852 | 5,861 | |||||||||||||||||||||
| Total operating revenues | 1,412,268 | 2,661,071 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Transportation and processing | 545,181 | 514,984 | |||||||||||||||||||||
| Production | 102,319 | 47,940 | |||||||||||||||||||||
| Exploration | 916 | 952 | |||||||||||||||||||||
| Selling, general and administrative | 73,053 | 51,894 | |||||||||||||||||||||
| Depreciation and depletion | 486,750 | 387,685 | |||||||||||||||||||||
| Loss on sale/exchange of long-lived assets | 147 | 16,528 | |||||||||||||||||||||
| Impairment and expiration of leases | 9,209 | 10,546 | |||||||||||||||||||||
| Other operating expenses | 11,973 | 19,662 | |||||||||||||||||||||
| Total operating expenses | 1,229,548 | 1,050,191 | |||||||||||||||||||||
| Operating income | 182,720 | 1,610,880 | |||||||||||||||||||||
| Income from investments | (2,260) | (4,764) | |||||||||||||||||||||
| Other income | (205) | (175) | |||||||||||||||||||||
| Loss (gain) on debt extinguishment | 3,449 | (6,606) | |||||||||||||||||||||
| Interest expense, net | 54,371 | 46,546 | |||||||||||||||||||||
| Income before income taxes | 127,365 | 1,575,879 | |||||||||||||||||||||
| Income tax expense | 24,302 | 356,646 | |||||||||||||||||||||
| Net income | 103,063 | 1,219,233 | |||||||||||||||||||||
| Less: Net (loss) income attributable to noncontrolling interests | (425) | 685 | |||||||||||||||||||||
| Net income attributable to EQT Corporation | $ | 103,488 | $ | 1,218,548 | |||||||||||||||||||
| Income per share of common stock attributable to EQT Corporation: | |||||||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Weighted average common stock outstanding | 439,459 | 361,462 | |||||||||||||||||||||
| Net income attributable to EQT Corporation | $ | 0.24 | $ | 3.37 | |||||||||||||||||||
| Diluted (Note 7): | |||||||||||||||||||||||
| Weighted average common stock outstanding | 444,967 | 393,883 | |||||||||||||||||||||
| Net income attributable to EQT Corporation | $ | 0.23 | $ | 3.10 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
EQT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| Net income | $ | 103,063 | $ | 1,219,233 | |||||||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $13 and $15 | 43 | 164 | |||||||||||||||||||||
| Comprehensive income | 103,106 | 1,219,397 | |||||||||||||||||||||
| Less: Comprehensive (loss) income attributable to noncontrolling interests | (425) | 685 | |||||||||||||||||||||
| Comprehensive income attributable to EQT Corporation | $ | 103,531 | $ | 1,218,712 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
EQT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| March 31, 2024 | December 31, 2023 | ||||||||||
| (Thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 648,048 | $ | 80,977 | |||||||
| Accounts receivable (less provision for doubtful accounts: $89 and $663) | 445,156 | 823,695 | |||||||||
| Derivative instruments, at fair value | 817,996 | 978,634 | |||||||||
| Income tax receivable | 90,665 | 91,414 | |||||||||
| Prepaid expenses and other | 93,914 | 38,255 | |||||||||
| Total current assets | 2,095,779 | 2,012,975 | |||||||||
| Property, plant and equipment | 34,360,921 | 33,817,169 | |||||||||
| Less: Accumulated depreciation and depletion | 11,338,339 | 10,866,999 | |||||||||
| Net property, plant and equipment | 23,022,582 | 22,950,170 | |||||||||
| Other assets | 319,959 | 321,953 | |||||||||
| Total assets | $ | 25,438,320 | $ | 25,285,098 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of debt | $ | 606,967 | $ | 292,432 | |||||||
| Accounts payable | 1,124,918 | 1,272,522 | |||||||||
| Derivative instruments, at fair value | 336,104 | 186,363 | |||||||||
| Other current liabilities | 305,644 | 285,523 | |||||||||
| Total current liabilities | 2,373,633 | 2,036,840 | |||||||||
| Term Loan Facility borrowings | 497,390 | 1,244,265 | |||||||||
| Senior notes | 4,319,747 | 4,176,180 | |||||||||
| Note payable to EQM Midstream Partners, LP | 80,637 | 82,236 | |||||||||
| Deferred income taxes | 1,928,228 | 1,904,821 | |||||||||
| Other liabilities and credits | 1,067,284 | 1,059,939 | |||||||||
| Total liabilities | 10,266,919 | 10,504,281 | |||||||||
| Equity: | |||||||||||
| Common stock, no par value, shares authorized: 640,000, shares issued: 441,558 and 419,896 | 12,450,876 | 12,093,986 | |||||||||
| Retained earnings | 2,715,974 | 2,681,898 | |||||||||
| Accumulated other comprehensive loss | (2,641) | (2,684) | |||||||||
| Total common shareholders' equity | 15,164,209 | 14,773,200 | |||||||||
| Noncontrolling interest in consolidated subsidiaries | 7,192 | 7,617 | |||||||||
| Total equity | 15,171,401 | 14,780,817 | |||||||||
| Total liabilities and equity | $ | 25,438,320 | $ | 25,285,098 |
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, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 103,063 | $ | 1,219,233 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Deferred income tax expense | 23,394 | 356,618 | |||||||||
| Depreciation and depletion | 486,750 | 387,685 | |||||||||
| Impairments and loss/gain on sale/exchange of long-lived assets | 9,356 | 27,074 | |||||||||
| Income from investments | (2,260) | (4,764) | |||||||||
| Loss (gain) on debt extinguishment | 3,449 | (6,606) | |||||||||
| Share-based compensation expense | 10,551 | 11,276 | |||||||||
| Distribution of earnings from equity method investment | 2,852 | 5,456 | |||||||||
| Amortization, accretion and other | 2,797 | 3,888 | |||||||||
| Gain on derivatives | (106,511) | (824,852) | |||||||||
| Net cash settlements received on derivatives | 451,004 | 157,000 | |||||||||
| Net premiums paid on derivatives | (33,904) | (94,916) | |||||||||
| Changes in other assets and liabilities: | |||||||||||
| Accounts receivable | 372,654 | 980,908 | |||||||||
| Accounts payable | (117,157) | (422,519) | |||||||||
| Other current assets | (55,501) | (80,472) | |||||||||
| Other items, net | 5,126 | (52,241) | |||||||||
| Net cash provided by operating activities | 1,155,663 | 1,662,768 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (534,468) | (494,784) | |||||||||
| Cash paid for acquisitions | (30,053) | — | |||||||||
| Other investing activities | (2,631) | (3,542) | |||||||||
| Net cash used in investing activities | (567,152) | (498,326) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from revolving credit facility borrowings | 107,000 | — | |||||||||
| Repayment of revolving credit facility borrowings | (107,000) | — | |||||||||
| Proceeds from issuance of debt | 750,000 | — | |||||||||
| Proceeds from net settlement of Capped Call Transactions (Note 6) | 93,290 | — | |||||||||
| Debt issuance costs | (8,147) | — | |||||||||
| Repayment and retirement of debt | (752,112) | (211,429) | |||||||||
| Discounts received on debt extinguishment | — | 7,981 | |||||||||
| Dividends paid | (69,412) | (54,070) | |||||||||
| Repurchase and retirement of common stock | — | (201,029) | |||||||||
| Net distribution to noncontrolling interest | — | (85) | |||||||||
| Other financing activities | (35,059) | (37,192) | |||||||||
| Net cash used in financing activities | (21,440) | (495,824) | |||||||||
| Net change in cash and cash equivalents | 567,071 | 668,618 | |||||||||
| Cash and cash equivalents at beginning of period | 80,977 | 1,458,644 | |||||||||
| Cash and cash equivalents at end of period | $ | 648,048 | $ | 2,127,262 |
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 | Amount | Retained Earnings | Accumulated Other Comprehensive Loss (a) | Noncontrolling Interest in Consolidated Subsidiaries | Total Equity | ||||||||||||||||||||||||||||||
| (Thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||
| 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: $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 | ||||||||||||||||||||||||
| Balance at January 1, 2024 | 419,896 | $ | 12,093,986 | $ | 2,681,898 | $ | (2,684) | $ | 7,617 | $ | 14,780,817 | ||||||||||||||||||||||||
| Comprehensive income, net of tax: | |||||||||||||||||||||||||||||||||||
| Net income (loss) | 103,488 | (425) | 103,063 | ||||||||||||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $13 | 43 | 43 | |||||||||||||||||||||||||||||||||
| Dividends ($0.1575 per share) | (69,412) | (69,412) | |||||||||||||||||||||||||||||||||
| Share-based compensation plans | 1,670 | (22,008) | (22,008) | ||||||||||||||||||||||||||||||||
| Convertible Notes settlements | 19,992 | 285,608 | 285,608 | ||||||||||||||||||||||||||||||||
| Net settlement of Capped Call Transactions | 93,290 | 93,290 | |||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | 441,558 | $ | 12,450,876 | $ | 2,715,974 | $ | (2,641) | $ | 7,192 | $ | 15,171,401 |
Common shares authorized (in thousands): 640,000. Preferred shares authorized (in thousands): 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, 2024 and December 31, 2023 and the results of its operations, equity and cash flows for the three month periods ended March 31, 2024 and 2023. 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 unless otherwise noted.
The Condensed Consolidated Balance Sheet at December 31, 2023 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, 2023.
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, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Thousands) | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest, net of amount capitalized | $ | 49,752 | $ | 42,650 | |||||||
| Income taxes, net | 6,879 | 13,526 | |||||||||
| Non-cash activity during the period for: | |||||||||||
| Issuance of EQT Corporation common stock for Convertible Notes settlement | 285,608 | 70 | |||||||||
| Increase in asset retirement costs and obligations | 6,918 | 2,686 | |||||||||
| Increase in right-of-use assets and lease liabilities, net | 3,634 | — | |||||||||
| Investment in nonconsolidated entity | 2,375 | — | |||||||||
| Capitalization of non-cash equity share-based compensation | 1,771 | 1,362 |
Recently Issued Accounting Standards
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through the requirement of enhanced disclosure of significant segment expenses. In addition, this ASU enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and provides new segment disclosure requirements for entities with a single reportable segment. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company does not expect adoption of ASU 2023-07 to have a material impact on its financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures to improve its income tax disclosure requirements. Under this ASU, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. This ASU is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company does not expect adoption of ASU 2023-09 to have a material impact on its financial statements and related disclosures.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
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 (million British thermal units (MMBtu) or barrel (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 $307.2 million and $584.8 million in accounts receivable in the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023, respectively.
The table below provides disaggregated information on the Company's revenues. Certain other revenue contracts are outside the scope of 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, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| Revenues from contracts with customers: | |||||||||||||||||||||||
| Natural gas sales | $ | 1,121,574 | $ | 1,712,232 | |||||||||||||||||||
| NGLs sales | 156,150 | 98,828 | |||||||||||||||||||||
| Oil sales | 26,181 | 19,298 | |||||||||||||||||||||
| Total revenues from contracts with customers | $ | 1,303,905 | $ | 1,830,358 | |||||||||||||||||||
| Other sources of revenue: | |||||||||||||||||||||||
| Gain on derivatives | 106,511 | 824,852 | |||||||||||||||||||||
| Net marketing services and other | 1,852 | 5,861 | |||||||||||||||||||||
| Total operating revenues | $ | 1,412,268 | $ | 2,661,071 |
As of March 31, 2024, the Company had no remaining performance obligations on its natural gas sales contracts with fixed consideration.
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.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The derivative commodity instruments used by the Company are primarily swap, collar and option agreements. These agreements may result in 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 on derivatives in the Statements of Condensed Consolidated Operations. The Company recognizes all derivative instruments as either assets or liabilities at fair value on a gross basis. These derivative instruments are reported as either current assets or current liabilities due to their highly liquid nature. The Company can net settle its derivative instruments at any time.
Contracts that result in physical delivery of a commodity expected to be sold by the Company in the normal course of business are generally designated as normal sales and are exempt from derivative accounting. Contracts that result in the physical receipt or delivery of a commodity but are not designated or do not meet all of the criteria to qualify for the normal purchase and normal sale scope exception are subject to derivative accounting.
The Company's OTC derivative instruments generally require settlement in cash. The Company also enters into exchange traded derivative commodity instruments that are generally settled with offsetting positions. Settlements of derivative commodity instruments are reported as a component of cash flows from operating activities in the Statements of Condensed Consolidated Cash Flows.
With respect to the derivative commodity instruments held by the Company, the Company hedged portions of its expected sales of production and portions of its basis exposure covering approximately 2,072 billion cubic feet (Bcf) of natural gas and 3,300 thousand barrels (Mbbl) of NGLs as of March 31, 2024 and 2,045 Bcf of natural gas and 1,049 Mbbl of NGLs as of December 31, 2023. The open positions at both March 31, 2024 and December 31, 2023 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, 2024, the Company's senior notes were rated "Baa3" 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, 2024, none of the Company's OTC derivative instruments with credit rating risk-related contingent features were in a net liability position. As of December 31, 2023, the aggregate fair value of the Company's OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $6.4 million, for which no deposits were required or recorded in the Condensed Consolidated Balance Sheet.
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, 2024 and December 31, 2023, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
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, 2024 and December 31, 2023, the Company recorded $69.3 million and $13.0 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.
The Company has netting agreements with financial institutions and its brokers that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities. The table below summarizes the impact of netting agreements and margin deposits on gross derivative assets and liabilities.
| 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, 2024 | |||||||||||||||||||||||
| Asset derivative instruments, at fair value | $ | 817,996 | $ | (221,506) | $ | — | $ | 596,490 | |||||||||||||||
| Liability derivative instruments, at fair value | 336,104 | (221,506) | (69,315) | 45,283 | |||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Asset derivative instruments, at fair value | $ | 978,634 | $ | (112,203) | $ | — | $ | 866,431 | |||||||||||||||
| Liability derivative instruments, at fair value | 186,363 | (112,203) | (13,017) | 61,143 |
Henry Hub Cash Bonus. The consolidated gas gathering and compression agreement, dated February 26, 2020, between the Company and an affiliate of Equitrans Midstream Corporation (Equitrans Midstream) 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 March 31, 2024 and December 31, 2023, the derivative liability related to the Henry Hub Cash Bonus had a fair value of approximately $29 million and $48 million, respectively. 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, SOFR-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 SOFR-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) | |||||||||||||||||||||||
| March 31, 2024 | |||||||||||||||||||||||
| Asset derivative instruments, at fair value | $ | 817,996 | $ | 43,355 | $ | 774,641 | $ | — | |||||||||||||||
| Liability derivative instruments, at fair value | 336,104 | 53,297 | 282,807 | — | |||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Asset derivative instruments, at fair value | $ | 978,634 | $ | 66,302 | $ | 912,332 | $ | — | |||||||||||||||
| Liability derivative instruments, at fair value | 186,363 | 42,218 | 144,145 | — |
The carrying values of cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term maturities. The carrying value of borrowings under the Company's revolving 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 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 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. The Company's senior notes had a fair value of approximately $4.9 billion as of both March 31, 2024 and December 31, 2023 and a carrying value of approximately $4.9 billion and $4.5 billion as of March 31, 2024 and December 31, 2023, respectively, inclusive of any current portion. The fair value of the Company's note payable to EQM Midstream Partners, LP (EQM), a wholly-owned subsidiary of Equitrans Midstream, 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, 2024 and December 31, 2023, the Company's note payable to EQM had a fair value of approximately $88 million and $91 million, respectively, and a carrying value of approximately $87 million and $88 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 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the fair value measurement and any subsequent impairments 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 three months ended March 31, 2024 and 2023, 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, 2024.
For the three months ended March 31, 2024 and 2023, the Company recorded income tax expense at an effective tax rate of 19.1% and 22.6%, respectively. The Company's effective tax rate for the three months ended March 31, 2024 was lower compared to the U.S. federal statutory rate primarily as a result of excess tax benefits from share-based payments partly offset by state taxes. The Company's effective tax rate for the three months ended March 31, 2023 was higher compared to the U.S. federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits.
6. Debt
The table below summarizes the Company's outstanding debt.
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Principal Value | Carrying Value (a) | Principal Value | Carrying Value (a) | ||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| Term Loan Facility due June 30, 2026 (b) | $ | 500,000 | $ | 497,390 | $ | 1,250,000 | $ | 1,244,265 | |||||||||||||||
| Senior notes: | |||||||||||||||||||||||
| 6.125% notes due February 1, 2025 (b) | 601,521 | 600,650 | 601,521 | 600,389 | |||||||||||||||||||
| 1.75% convertible notes due May 1, 2026 (c) | — | — | 290,177 | 286,185 | |||||||||||||||||||
| 3.125% notes due May 15, 2026 | 392,915 | 390,282 | 392,915 | 389,978 | |||||||||||||||||||
| 7.75% debentures due July 15, 2026 | 115,000 | 113,840 | 115,000 | 113,716 | |||||||||||||||||||
| 3.90% notes due October 1, 2027 | 1,169,503 | 1,165,710 | 1,169,503 | 1,165,439 | |||||||||||||||||||
| 5.700% notes due April 1, 2028 | 500,000 | 490,942 | 500,000 | 490,376 | |||||||||||||||||||
| 5.00% notes due January 15, 2029 | 318,494 | 315,287 | 318,494 | 315,121 | |||||||||||||||||||
| 7.000% notes due February 1, 2030 (b) | 674,800 | 671,175 | 674,800 | 671,020 | |||||||||||||||||||
| 3.625% notes due May 15, 2031 | 435,165 | 430,310 | 435,165 | 430,141 | |||||||||||||||||||
| 5.750% notes due February 1, 2034 | 750,000 | 742,201 | — | — | |||||||||||||||||||
| Note payable to EQM | 86,954 | 86,954 | 88,483 | 88,483 | |||||||||||||||||||
| Total debt | 5,544,352 | 5,504,741 | 5,836,058 | 5,795,113 | |||||||||||||||||||
| Less: Current portion of debt (d) | 607,838 | 606,967 | 296,424 | 292,432 | |||||||||||||||||||
| Long-term debt | $ | 4,936,514 | $ | 4,897,774 | $ | 5,539,634 | $ | 5,502,681 |
(a)For the Company's 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 the Term Loan Facility, the Company's 6.125% senior notes and the Company's 7.000% 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 for the Company's other outstanding debt do not fluctuate.
(c)As of December 31, 2023, the fair value of the Company's 1.75% convertible notes was $768.6 million and was a Level 2 fair value measurement. See Note 4.
(d)As of March 31, 2024, the current portion of debt included the Company's 6.125% senior notes and a portion of the note payable to EQM. As of December 31, 2023, the current portion of debt included the Company's 1.75% convertible notes and a portion of the note payable to EQM.
Revolving Credit Facility. The Company has a $2.5 billion revolving credit facility that matures on June 28, 2027.
As of both March 31, 2024 and December 31, 2023, the Company had approximately $15 million of letters of credit outstanding under its revolving credit facility.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Under the Company's revolving credit facility, for the three months ended March 31, 2024, the maximum amount of outstanding borrowings was $107 million, the average daily balance was approximately $11 million and interest was incurred at a weighted average annual interest rate of 6.9%. For the three months ended March 31, 2023, there were no borrowings under the Company's revolving credit facility.
Term Loan Facility. On November 9, 2022, the Company entered into a Credit Agreement (as amended on December 23, 2022 and April 25, 2023, the Term Loan Agreement) with PNC Bank, National Association, as administrative agent, and the other lenders party thereto, under which such lenders agreed to make to the Company unsecured term loans in a single draw in an aggregate principal amount of up to $1.25 billion (the Term Loan Facility) to partly fund the Tug Hill and XcL Midstream Acquisition (defined in Note 9). On August 21, 2023, the Company borrowed $1.25 billion under the Term Loan Facility, receiving net proceeds of $1,242.9 million.
On January 16, 2024, the Company entered into a third amendment to the Term Loan Agreement to, among other things, extend the maturity date of the Term Loan Agreement from June 30, 2025 to June 30, 2026. The third amendment to the Term Loan Agreement became effective on January 19, 2024 upon the Company's prepayment of $750 million principal amount of the term loans outstanding under the Term Loan Facility (funded with the net proceeds from the issuance of the Company's 5.750% senior notes and cash on hand) and the satisfaction of other closing conditions. Pursuant to the Term Loan Agreement, the Company may voluntarily prepay, in whole or in part, borrowings under the Term Loan Facility without premium or penalty but subject to reimbursement of funding losses with respect to prepayment of loans that bear interest based on the Term SOFR Rate (as defined in the Term Loan Agreement). Borrowings under the Term Loan Facility that are repaid may not be re-borrowed.
At the Company's election, the term loans outstanding under the Term Loan Facility bear interest at a Term SOFR Rate plus the SOFR Adjustment or Base Rate (all terms defined in the Term Loan Agreement), each plus a margin based on the Company's credit ratings. For the three months ended March 31, 2024, interest was incurred under the Term Loan Facility at a weighted average annual interest rate of 6.9%.
5.750% Senior Notes. On January 19, 2024, the Company issued $750 million aggregate principal amount of 5.750% senior notes due February 1, 2034. The Company used net proceeds of $742.0 million, composed of the principal amount of $750 million net of capitalized debt issuance costs and underwriters' discount of $8.0 million, and cash on hand to prepay $750 million principal amount of the term loans outstanding under the Term Loan Facility. The covenants of the 5.750% senior notes are consistent with the Company's existing senior unsecured notes.
Convertible Notes. In April 2020, the Company issued $500 million aggregate principal amount of 1.75% convertible senior notes (the Convertible Notes). The effective interest rate for the Convertible Notes was 2.4%.
On January 2, 2024, in accordance with the indenture governing the Convertible Notes (the Convertible Notes Indenture), the Company issued an irrevocable notice of redemption for all of the outstanding Convertible Notes and announced that the Company would redeem any of the Convertible Notes outstanding on January 17, 2024 in cash for 100% of the principal amount, plus accrued and unpaid interest on such Convertible Notes to, but excluding, such redemption date (the Redemption Price).
Pursuant to the Convertible Notes Indenture, between January 2, 2024 and the conversion deadline of 5:00 p.m., New York City time, on January 12, 2024, certain holders of the Convertible Notes exercised their right to convert their Convertible Notes prior to the redemption and validly surrendered an aggregate principal amount of $289.6 million of Convertible Notes. Based on a conversion rate of 69.0364 shares of EQT Corporation common stock per $1,000 principal amount of Convertible Notes, the Company issued to such holders an aggregate 19,992,482 shares of EQT Corporation common stock. Settlement of such Convertible Note conversion right exercises net of unamortized deferred issuance costs increased shareholder's equity by $285.6 million.
The remaining $0.6 million in outstanding principal amount of Convertible Notes was redeemed on January 17, 2024 in cash for the Redemption Price.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Inclusive of January 2024 settlements of Convertible Notes conversion right exercises that were exercised in December 2023, during January 2024, the Company settled $290.2 million aggregate principal amount of Convertible Notes conversion right exercises by issuing an aggregate 20,036,639 shares of EQT Corporation common stock to the converting holders at an average conversion price of $38.03.
Settlement and Termination of Capped Call Transactions. In connection with, but separate from, the issuance of the Convertible Notes, in 2020, the Company entered into capped call transactions (the Capped Call Transactions) with certain financial institutions (the Capped Call Counterparties) to reduce the potential dilution to EQT Corporation common stock upon any conversion of Convertible Notes at maturity and/or offset any cash payments that the Company is required to make in excess of the principal amount of such converted notes. The Capped Call Transactions had an initial strike price of $15.00 per share of EQT Corporation common stock and an initial cap price of $18.75 per share of EQT Corporation common stock, each of which were subject to certain customary adjustments, including adjustments as a result of the Company paying dividends on its common stock, and were set to expire in April 2026. The Company recorded the cost to purchase the Capped Call Transactions of $32.5 million as a reduction to shareholders' equity.
On January 18, 2024, the Company entered into separate termination agreements with each of the Capped Call Counterparties, pursuant to which the Capped Call Counterparties paid the Company an aggregate $93.3 million (the Termination Payments), and the Capped Call Transactions were terminated. The Company received the Termination Payments on January 22, 2024. The Termination Payments were recorded as an increase to shareholders' equity.
7. Income Per Share
The table below provides the computation for basic and diluted income per share.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Thousands, except per share amounts) | |||||||||||||||||||||||
| Net income attributable to EQT Corporation – Basic income available to shareholders | $ | 103,488 | $ | 1,218,548 | |||||||||||||||||||
| Add back: Interest expense on Convertible Notes, net of tax | 76 | 1,854 | |||||||||||||||||||||
| Diluted income available to shareholders | $ | 103,564 | $ | 1,220,402 | |||||||||||||||||||
| Weighted average common stock outstanding – Basic | 439,459 | 361,462 | |||||||||||||||||||||
| Options, restricted stock, performance awards and stock appreciation rights | 4,026 | 4,226 | |||||||||||||||||||||
| Convertible Notes | 1,482 | 28,195 | |||||||||||||||||||||
| Weighted average common stock outstanding – Diluted | 444,967 | 393,883 | |||||||||||||||||||||
| Income per share of common stock attributable to EQT Corporation: | |||||||||||||||||||||||
| Basic | $ | 0.24 | $ | 3.37 | |||||||||||||||||||
| Diluted | $ | 0.23 | $ | 3.10 |
8. Stock-based Compensation
In 2024, the Management Development and Compensation Committee of the Company's Board of Directors (the Compensation Committee) adopted the 2024 Incentive Performance Share Unit Program (2024 Incentive PSU Program) under the 2020 Long-Term Incentive Plan. During the three months ended March 31, 2024, a total of 371,500 share units were granted under the 2024 Incentive PSU Program. The payout of the share units will vary between zero and 200% of the number of outstanding units contingent upon the Company's absolute total shareholder return and total shareholder return relative to a predefined peer group over the period of January 1, 2024 through December 31, 2026.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
During the three months ended March 31, 2024, the Compensation Committee granted 976,270 restricted stock unit equity awards that will follow a three-year graded vesting schedule commencing with the date of grant, assuming continued employment through each vesting date. The share total includes the Company's "equity-for-all" program, instituted in 2021, pursuant to which the Company grants equity awards to all permanent employees.
9. Acquisitions and Divestiture
Tug Hill and XcL Midstream Acquisition. On August 22, 2023, the Company completed its acquisition (the Tug Hill and XcL Midstream Acquisition) of the upstream assets from THQ Appalachia I, LLC and the gathering and processing assets from THQ-XcL Holdings I, LLC through the acquisition of all of the issued and outstanding membership interests of each of THQ Appalachia I Midco, LLC and THQ-XcL Holdings I Midco, LLC. The purchase price for the Tug Hill and XcL Midstream Acquisition consisted of 49,599,796 shares of EQT Corporation common stock and approximately $2.4 billion in cash, subject to customary post-closing adjustments.
The Company accounted for the Tug Hill and XcL Midstream Acquisition as a business combination using the acquisition method. The Company completed the purchase price allocation for the Tug Hill and XcL Midstream Acquisition during the first quarter of 2024. The purchase accounting adjustments recorded in 2024 were not material.
NEPA Gathering System Acquisition. The Company operates and has historically owned a 50% interest in gathering assets located in northeast Pennsylvania (collectively, the NEPA Gathering System). On April 11, 2024, the Company completed its acquisition of a minority equity partner's 33.75% interest in the NEPA Gathering System (increasing the Company's interest in the NEPA Gathering System to approximately 83.75%) for a purchase price of approximately $205 million (the NEPA Gathering System Acquisition), subject to customary post-closing adjustments.
NEPA Non-Operated Asset Divestiture. On April 12, 2024, the Company entered into an agreement with Equinor USA Onshore Properties Inc. and its affiliates (collectively, the Equinor Parties), pursuant to which the Company agreed to sell to the Equinor Parties an undivided 40% interest in the Company's non-operated natural gas assets in Northeast Pennsylvania. In exchange, the Company will receive from the Equinor Parties $500 million of cash, certain operated upstream assets and the remaining 16.25% equity interest in the NEPA Gathering System. The transaction (the NEPA Non-Operated Asset Divestiture) is subject to customary closing adjustments, required regulatory approvals and clearances. In addition, the Company has agreed with the Equinor Parties to, upon consummation of the NEPA Non-Operated Asset Divestiture, enter into a gas buy-back agreement with respect to the assets to be received by the Company in the NEPA Non-Operated Asset Divestiture, whereby the Equinor Parties will purchase a specified amount of natural gas from the Company at a premium to in-basin pricing through the first quarter of 2028.
Following the completion of the NEPA Non-Operated Asset Divestiture, the Company will own 100% of the NEPA Gathering System.
10. Equitrans Midstream Merger
On March 10, 2024, EQT Corporation, Humpty Merger Sub Inc., an indirect wholly owned subsidiary of EQT Corporation (Merger Sub), and Humpty Merger Sub LLC, an indirect wholly owned subsidiary of EQT Corporation (LLC Sub), entered into an agreement and plan of merger (the Merger Agreement) with Equitrans Midstream. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Equitrans Midstream (the First Merger), with Equitrans Midstream surviving as an indirect wholly owned subsidiary of EQT Corporation (the First Step Surviving Corporation), and, as the second step in a single integrated transaction with the First Merger, the First Step Surviving Corporation will merge with and into LLC Sub (the Second Merger and, together with the First Merger, the Equitrans Midstream Merger), with LLC Sub surviving the Second Merger as an indirect wholly owned subsidiary of EQT Corporation.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
As a result of the Equitrans Midstream Merger, except as otherwise provided in the Merger Agreement, among other things, each share of common stock, no par value, of Equitrans Midstream (Equitrans Midstream common stock) that is issued and outstanding immediately prior to the effective time of the First Merger (other than shares of Equitrans Midstream common stock owned by Equitrans Midstream or its subsidiaries or by the Company) will be converted into the right to receive, without interest, 0.3504 shares of EQT Corporation common stock (with cash in lieu of fractional shares). It is currently expected that, upon closing of the Equitrans Midstream Merger, EQT Corporation's existing shareholders will own approximately 74% of the combined company and Equitrans Midstream's shareholders will own approximately 26% of the combined company. Also upon closing of the Equitrans Midstream Merger, three representatives from Equitrans Midstream will join EQT Corporation's Board of Directors.
The transaction is currently expected to close during the fourth quarter of 2024 and is subject to the satisfaction or waiver of certain closing conditions, including (i) the approval of the Merger Agreement and the Equitrans Midstream Merger by the holders of a majority of the outstanding shares of Equitrans Midstream common stock and Series A Perpetual Convertible Preferred Shares, no par value per share, of Equitrans Midstream (on an as-converted basis) voting as a single class, (ii) the approval of the issuance of the shares of EQT Corporation common stock in connection with the First Merger and an amendment to the Restated Articles of Incorporation of EQT Corporation to increase the number of shares of EQT Corporation common stock authorized thereunder, in each case by a majority of the votes cast at the special meeting of shareholders of EQT Corporation to be held in connection with the Equitrans Midstream Merger, (iii) there being no law, injunction, order or decree prohibiting consummation of the transaction and (iv) the expiration or termination of (a) all waiting periods (and any extensions thereof) applicable to the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (b) any commitment to, or any agreement with, any governmental entity to delay the consummation of the transaction or to not consummate the transaction (such condition, the HSR Act Condition). The obligation of EQT Corporation to consummate the First Merger is also conditioned on (but which may be waived by EQT Corporation), among other things, Mountain Valley Pipeline, LLC having received authorization from the Federal Energy Regulatory Commission to place the Mountain Valley Pipeline Facilities (as defined in the Merger Agreement) into service and such authorization being in full force and effect as of the closing date of the Equitrans Midstream Merger without any material limitations, modifications or conditions that would prevent the Mountain Valley Pipeline Facilities from commencing full service.
The Merger Agreement contains certain termination rights for both EQT Corporation and Equitrans Midstream, including the right of either party, subject to certain limitations specified therein, to terminate the Merger Agreement if the First Merger is not consummated on or prior to March 10, 2025, which date will be automatically extended until September 10, 2025 if all of the conditions to closing, other than the condition relating to the absence of law, injunction, order or decree prohibiting consummation of the Equitrans Midstream Merger or the HSR Act Condition, have been satisfied. Upon termination of the Merger Agreement under certain circumstances specified therein, (i) Equitrans Midstream will be required to pay EQT Corporation a termination fee equal to $191 million or (ii) EQT Corporation will be required to pay Equitrans Midstream a termination fee equal to $176 million or $545 million, depending on the circumstances which led to the termination.
EQT CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of Operations
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