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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (Thousands, except per share amounts) | |||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||
| Sales of natural gas, natural gas liquids and oil | $ | 1,099,752 | $ | 1,001,883 | $ | 3,293,174 | $ | 3,680,566 | |||||||||||||||
| Gain on derivatives | 66,816 | 177,906 | 234,660 | 1,167,144 | |||||||||||||||||||
| Pipeline, net marketing services and other | 117,234 | 6,313 | 120,748 | 18,214 | |||||||||||||||||||
| Total operating revenues | 1,283,802 | 1,186,102 | 3,648,582 | 4,865,924 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Transportation and processing | 440,845 | 554,788 | 1,529,093 | 1,592,934 | |||||||||||||||||||
| Production | 93,842 | 62,858 | 273,042 | 163,963 | |||||||||||||||||||
| Operating and maintenance | 40,518 | 4,235 | 65,824 | 6,108 | |||||||||||||||||||
| Exploration | 282 | 447 | 2,576 | 2,602 | |||||||||||||||||||
| Selling, general and administrative | 88,470 | 56,942 | 228,730 | 168,999 | |||||||||||||||||||
| Depreciation, depletion and amortization | 589,299 | 446,886 | 1,542,031 | 1,230,255 | |||||||||||||||||||
| Loss (gain) on sale/exchange of long-lived assets | 10,117 | 1,511 | (309,865) | 17,814 | |||||||||||||||||||
| Impairment and expiration of leases | 12,095 | 6,419 | 58,963 | 22,290 | |||||||||||||||||||
| Other operating expenses | 290,174 | 36,209 | 354,337 | 69,265 | |||||||||||||||||||
| Total operating expenses | 1,565,642 | 1,170,295 | 3,744,731 | 3,274,230 | |||||||||||||||||||
| Operating (loss) income | (281,840) | 15,807 | (96,149) | 1,591,694 | |||||||||||||||||||
| (Income) loss from investments | (34,242) | 546 | (36,674) | (5,310) | |||||||||||||||||||
| Other income | (3,960) | (132) | (23,596) | (869) | |||||||||||||||||||
| Loss (gain) on debt extinguishment | 365 | 1,089 | 5,651 | (55) | |||||||||||||||||||
| Interest expense, net | 158,299 | 60,427 | 268,390 | 146,856 | |||||||||||||||||||
| (Loss) income before income taxes | (402,302) | (46,123) | (309,920) | 1,451,072 | |||||||||||||||||||
| Income tax (benefit) expense | (104,870) | (126,853) | (124,790) | 217,975 | |||||||||||||||||||
| Net (loss) income | (297,432) | 80,730 | (185,130) | 1,233,097 | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 3,391 | (525) | 2,688 | (80) | |||||||||||||||||||
| Net (loss) income attributable to EQT Corporation | $ | (300,823) | $ | 81,255 | $ | (187,818) | $ | 1,233,177 | |||||||||||||||
| (Loss) income per share of common stock attributable to EQT Corporation: | |||||||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Weighted average common stock outstanding | 559,603 | 383,359 | 480,354 | 368,936 | |||||||||||||||||||
| Net (loss) income attributable to EQT Corporation | $ | (0.54) | $ | 0.21 | $ | (0.39) | $ | 3.34 | |||||||||||||||
| Diluted (Note 9): | |||||||||||||||||||||||
| Weighted average common stock outstanding | 559,603 | 416,190 | 480,354 | 401,859 | |||||||||||||||||||
| Net (loss) income attributable to EQT Corporation | $ | (0.54) | $ | 0.20 | $ | (0.39) | $ | 3.08 |
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| Net (loss) income | $ | (297,432) | $ | 80,730 | $ | (185,130) | $ | 1,233,097 | |||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $13, $15, $39 and $44 | 28 | 57 | 114 | 270 | |||||||||||||||||||
| Comprehensive (loss) income | (297,404) | 80,787 | (185,016) | 1,233,367 | |||||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests | 3,391 | (525) | 2,688 | (80) | |||||||||||||||||||
| Comprehensive (loss) income attributable to EQT Corporation | $ | (300,795) | $ | 81,312 | $ | (187,704) | $ | 1,233,447 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
EQT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| September 30, 2024 | December 31, 2023 | ||||||||||
| (Thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 88,980 | $ | 80,977 | |||||||
| Accounts receivable (less provision for doubtful accounts: $9,135 and $663) | 577,599 | 823,695 | |||||||||
| Derivative instruments, at fair value | 251,657 | 978,634 | |||||||||
| Income tax receivable | 92,791 | 91,414 | |||||||||
| Prepaid expenses and other | 71,265 | 38,255 | |||||||||
| Total current assets | 1,082,292 | 2,012,975 | |||||||||
| Property, plant and equipment | 44,884,752 | 33,817,169 | |||||||||
| Less: Accumulated depreciation and depletion | 12,338,210 | 10,866,999 | |||||||||
| Net property, plant and equipment | 32,546,542 | 22,950,170 | |||||||||
| Investment in the MVP Joint Venture | 3,358,346 | — | |||||||||
| Net intangible assets | 268,308 | 22,595 | |||||||||
| Goodwill | 2,178,236 | — | |||||||||
| Other assets | 511,865 | 299,358 | |||||||||
| Total assets | $ | 39,945,589 | $ | 25,285,098 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of debt | $ | 400,150 | $ | 292,432 | |||||||
| Accounts payable | 1,042,393 | 1,272,522 | |||||||||
| Derivative instruments, at fair value | 197,712 | 186,363 | |||||||||
| Accrued interest | 189,965 | 80,520 | |||||||||
| Other current liabilities | 283,730 | 205,003 | |||||||||
| Total current liabilities | 2,113,950 | 2,036,840 | |||||||||
| Revolving credit facility borrowings | 2,297,000 | — | |||||||||
| Term Loan Facility borrowings | 497,970 | 1,244,265 | |||||||||
| Senior notes | 10,598,428 | 4,176,180 | |||||||||
| Note payable to EQM Midstream Partners, LP | — | 82,236 | |||||||||
| Deferred income taxes | 2,746,292 | 1,904,821 | |||||||||
| Other liabilities and credits | 1,203,631 | 1,059,939 | |||||||||
| Total liabilities | 19,457,271 | 10,504,281 | |||||||||
| Equity: | |||||||||||
| Common stock, no par value, shares authorized: 1,280,000 and 640,000, shares issued: 596,268 and 419,896 | 18,076,243 | 12,093,986 | |||||||||
| Retained earnings | 2,261,086 | 2,681,898 | |||||||||
| Accumulated other comprehensive loss | (2,570) | (2,684) | |||||||||
| Total common shareholders' equity | 20,334,759 | 14,773,200 | |||||||||
| Noncontrolling interest in consolidated subsidiaries | 153,559 | 7,617 | |||||||||
| Total equity | 20,488,318 | 14,780,817 | |||||||||
| Total liabilities and equity | $ | 39,945,589 | $ | 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)
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net (loss) income | $ | (185,130) | $ | 1,233,097 | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
| Deferred income tax (benefit) expense | (123,725) | 227,701 | |||||||||
| Depreciation, depletion and amortization | 1,542,031 | 1,230,255 | |||||||||
| Gain/loss on sale/exchange of long-lived assets and impairments | (250,902) | 40,104 | |||||||||
| Income from investments | (36,674) | (5,310) | |||||||||
| Loss (gain) on debt extinguishment | 5,651 | (55) | |||||||||
| Share-based compensation expense | 141,578 | 38,179 | |||||||||
| Distributions from equity method investments | 11,187 | 18,073 | |||||||||
| Other | 13,160 | 12,022 | |||||||||
| Gain on derivatives | (234,660) | (1,167,144) | |||||||||
| Net cash settlements received on derivatives | 1,037,321 | 625,051 | |||||||||
| Net premiums paid on derivatives | (41,970) | (231,343) | |||||||||
| Changes in other assets and liabilities: | |||||||||||
| Accounts receivable | 331,452 | 1,122,843 | |||||||||
| Accounts payable | (122,252) | (515,879) | |||||||||
| Other current assets | (10,150) | 91,946 | |||||||||
| Other items, net | (6,220) | (165,076) | |||||||||
| Net cash provided by operating activities | 2,070,697 | 2,554,464 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (1,662,112) | (1,485,898) | |||||||||
| Cash paid for acquisitions | (864,242) | (2,288,201) | |||||||||
| Proceeds from sale/exchange of assets | 451,906 | 4,831 | |||||||||
| Capital contributions to equity method investments | (87,804) | (5,000) | |||||||||
| Other investing activities | (80) | 159 | |||||||||
| Net cash used in investing activities | (2,162,332) | (3,774,109) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from revolving credit facility borrowings | 3,578,000 | 313,000 | |||||||||
| Repayment of revolving credit facility borrowings | (2,316,000) | (313,000) | |||||||||
| Proceeds from issuance of debt | 750,000 | 1,250,000 | |||||||||
| Proceeds from net settlement of Capped Call Transactions (Note 7) | 93,290 | — | |||||||||
| Debt issuance costs | (18,854) | (5,336) | |||||||||
| Repayment and retirement of debt | (1,655,706) | (1,014,346) | |||||||||
| (Premiums paid) discounts received on debt extinguishment | (1,543) | 5,313 | |||||||||
| Dividends paid | (232,603) | (162,567) | |||||||||
| Repurchase and retirement of common stock | — | (201,029) | |||||||||
| Net distribution to noncontrolling interest | (1,640) | (7,322) | |||||||||
| Cash paid for taxes to net settle share-based incentive awards | (92,492) | (41,238) | |||||||||
| Other financing activities | (2,814) | 2,276 | |||||||||
| Net cash provided by (used in) financing activities | 99,638 | (174,249) | |||||||||
| Net change in cash and cash equivalents | 8,003 | (1,393,894) | |||||||||
| Cash and cash equivalents at beginning of period | 80,977 | 1,458,644 | |||||||||
| Cash and cash equivalents at end of period | $ | 88,980 | $ | 64,750 |
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 July 1, 2023 | 361,654 | $ | 9,790,855 | $ | 2,217,698 | $ | (2,781) | $ | 39,256 | $ | 12,045,028 | ||||||||||||||||||||||||
| Comprehensive income, net of tax: | |||||||||||||||||||||||||||||||||||
| Net income (loss) | 81,255 | (525) | 80,730 | ||||||||||||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $15 | 57 | 57 | |||||||||||||||||||||||||||||||||
| Dividends ($0.15 per share) | (54,249) | (54,249) | |||||||||||||||||||||||||||||||||
| Share-based compensation plans | 56 | 14,939 | 14,939 | ||||||||||||||||||||||||||||||||
| Convertible Notes settlements | 1 | 16 | 16 | ||||||||||||||||||||||||||||||||
| Tug Hill and XcL Midstream Acquisition | 49,600 | 2,152,631 | 2,152,631 | ||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | (5,279) | (5,279) | |||||||||||||||||||||||||||||||||
| Dissolution of consolidated variable interest entity | (25,227) | (25,227) | |||||||||||||||||||||||||||||||||
| Other | 911 | 911 | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | 411,311 | $ | 11,958,441 | $ | 2,245,615 | $ | (2,724) | $ | 8,225 | $ | 14,209,557 | ||||||||||||||||||||||||
| Balance at July 1, 2024 | 441,597 | $ | 12,464,492 | $ | 2,655,940 | $ | (2,598) | $ | 6,914 | $ | 15,124,748 | ||||||||||||||||||||||||
| Comprehensive loss, net of tax: | |||||||||||||||||||||||||||||||||||
| Net (loss) income | (300,823) | 3,391 | (297,432) | ||||||||||||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $13 | 28 | 28 | |||||||||||||||||||||||||||||||||
| Dividends ($0.1575 per share) | (94,031) | (94,031) | |||||||||||||||||||||||||||||||||
| Share-based compensation plans | 2,243 | 63,143 | 63,143 | ||||||||||||||||||||||||||||||||
| Equitrans Midstream Merger | 152,428 | 5,548,608 | 144,894 | 5,693,502 | |||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | (1,640) | (1,640) | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | 596,268 | $ | 18,076,243 | $ | 2,261,086 | $ | (2,570) | $ | 153,559 | $ | 20,488,318 |
Common shares authorized (in thousands): 640,000 and 1,280,000. 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
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 (loss) | 1,233,177 | (80) | 1,233,097 | ||||||||||||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $44 | 270 | 270 | |||||||||||||||||||||||||||||||||
| Dividends ($0.45 per share) | (162,567) | (162,567) | |||||||||||||||||||||||||||||||||
| Share-based compensation plans | 2,247 | 5,367 | 5,367 | ||||||||||||||||||||||||||||||||
| Convertible Notes settlements | 7 | 98 | 98 | ||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | (5,906) | (91,545) | (109,484) | (201,029) | |||||||||||||||||||||||||||||||
| Tug Hill and XcL Midstream Acquisition | 49,600 | 2,152,631 | 2,152,631 | ||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | (11,072) | (11,072) | |||||||||||||||||||||||||||||||||
| Contribution from noncontrolling interest | 3,750 | 3,750 | |||||||||||||||||||||||||||||||||
| Dissolution of consolidated variable interest entity | (25,227) | (25,227) | |||||||||||||||||||||||||||||||||
| Other | 911 | 911 | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | 411,311 | $ | 11,958,441 | $ | 2,245,615 | $ | (2,724) | $ | 8,225 | $ | 14,209,557 | ||||||||||||||||||||||||
| Balance at January 1, 2024 | 419,896 | $ | 12,093,986 | $ | 2,681,898 | $ | (2,684) | $ | 7,617 | $ | 14,780,817 | ||||||||||||||||||||||||
| Comprehensive loss, net of tax: | |||||||||||||||||||||||||||||||||||
| Net (loss) income | (187,818) | 2,688 | (185,130) | ||||||||||||||||||||||||||||||||
| Other postretirement benefits liability adjustment, net of tax: $39 | 114 | 114 | |||||||||||||||||||||||||||||||||
| Dividends ($0.4725 per share) | (232,994) | (232,994) | |||||||||||||||||||||||||||||||||
| Share-based compensation plans | 3,952 | 54,751 | 54,751 | ||||||||||||||||||||||||||||||||
| Convertible Notes settlements | 19,992 | 285,608 | 285,608 | ||||||||||||||||||||||||||||||||
| Net settlement of Capped Call Transactions | 93,290 | 93,290 | |||||||||||||||||||||||||||||||||
| Equitrans Midstream Merger | 152,428 | 5,548,608 | 144,894 | 5,693,502 | |||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | (1,640) | (1,640) | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | 596,268 | $ | 18,076,243 | $ | 2,261,086 | $ | (2,570) | $ | 153,559 | $ | 20,488,318 |
Common shares authorized (in thousands): 640,000 and 1,280,000. 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
Nature of Operations. EQT Corporation is an integrated natural gas production, gathering and transmission company with operations focused in the Appalachian Basin.
In this Quarterly Report on Form 10-Q, references to "EQT" refer to EQT Corporation and references to the "Company" refer collectively to EQT Corporation and its consolidated subsidiaries in each case unless otherwise noted or indicated.
Basis of Presentation. 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 the Company as of September 30, 2024 and December 31, 2023, the results of its operations and equity for the three and nine month periods ended September 30, 2024 and 2023 and its cash flows for the nine month periods ended September 30, 2024 and 2023. Certain previously reported amounts have been reclassified to conform to the current period presentation. In addition, as discussed further in Note 2, certain prior period amounts have been recast to reflect the Company's change in reportable segments from one reportable segment to three reportable segments consisting of Production, Gathering and Transmission.
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.
Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of EQT and all subsidiaries, ventures and partnerships in which EQT directly or indirectly holds a controlling interest. Intercompany accounts and transactions have been eliminated in consolidation.
Upon the closing of the Equitrans Midstream Merger (defined in Note 12), the Company acquired a controlling 60% interest in Eureka Midstream Holdings, LLC (Eureka Midstream Holdings) and an equity method investment in Mountain Valley Pipeline, LLC (the MVP Joint Venture).
Eureka Midstream Holdings is a joint venture that owns a gathering header pipeline system that is operated by a subsidiary of EQT. Because the Company is the primary beneficiary of Eureka Midstream Holdings, the Company consolidates Eureka Midstream Holdings and records noncontrolling interest in its Condensed Consolidated Financial Statements. See Note 7 for discussion of the revolving credit facility of Eureka Midstream, LLC (Eureka), a wholly-owned subsidiary of Eureka Midstream Holdings.
The MVP Joint Venture is a joint venture formed among a subsidiary of EQT and, as applicable, affiliates of each of NextEra Energy, Inc., Consolidated Edison, Inc., AltaGas Ltd. and RGC Resources, Inc. for purposes of constructing and operating the Mountain Valley Pipeline (the MVP) and the MVP Southgate project (MVP Southgate). See Note 8 for further discussion of the MVP Joint Venture, the MVP and MVP Southgate. Because the Company has the ability to exercise significant influence over the MVP Joint Venture but does not have the power to direct the activities that most significantly affect the MVP Joint Venture's economic performance, the Company applies the equity method of accounting to the MVP Joint Venture.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
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.
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Thousands) | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest, net of amount capitalized | $ | 196,632 | $ | 145,787 | |||||||
| Income taxes, net | 4,850 | 13,441 | |||||||||
| Non-cash activity during the period for: | |||||||||||
| Equity issued as consideration for acquisition (Notes 12 and 11) | $ | 5,548,608 | $ | 2,152,631 | |||||||
| Issuance of EQT common stock for Convertible Notes settlement (Note 7) | 285,608 | 98 | |||||||||
| NEPA Non-Operated Asset Divestiture (Note 11) | 155,241 | — | |||||||||
| Increase in right-of-use assets and lease liabilities, net | 11,501 | 25,849 | |||||||||
| Increase in asset retirement costs and obligations | 7,947 | 5,216 | |||||||||
| Capitalization of non-cash equity share-based compensation | 5,273 | 4,587 | |||||||||
| Investments in nonconsolidated entities | 17,598 | — | |||||||||
| Dissolution of consolidated variable interest entity | — | 25,227 |
Common Stock. On July 18, 2024, following approval by its shareholders, EQT amended its Restated Articles of Incorporation to increase the authorized number of shares of EQT common stock from 640,000,000 shares to 1,280,000,000 shares.
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. Early adoption is permitted. The Company does not expect adoption of ASU 2023-07 to have a material impact on its currently-presented 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. 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.
2. Financial Information by Business Segment
Prior to the completion of the Equitrans Midstream Merger, the Company's operations consisted of one reportable segment. Historically, the Company administered all properties as a whole rather than by discrete operating segments and measured financial performance as a single enterprise and not on an area-by-area basis.
As a result of the completion of the Equitrans Midstream Merger, the Company adjusted its internal reporting structure and the Company's chief operating decision maker changed the manner in which he allocates resources and measures financial performance to incorporate the gathering and transmission assets acquired by the Company in the Equitrans Midstream Merger. Hence, the Company's operations expanded to comprise three discrete operating segments reflective of its three lines of business consisting of Production, Gathering and Transmission. Accordingly, the manner in which the Company reports its operations has been changed retrospectively, with certain prior period amounts recast between Production and Gathering.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Certain amounts, including cash and cash equivalents, debt, income taxes and other amounts related to the Company's headquarters function as well as amounts related to the Company's energy transition initiatives, are managed on a consolidated basis and, as such, have not been allocated to the Company's reportable segments and are presented as "Other" along with intersegment eliminations. Water assets acquired in the Equitrans Midstream Merger primarily support the Company's production operations and, as such, have been included in the Company's Production segment.
Substantially all of the Company's operating revenues and assets are generated and located in the United States.
Profit and loss metric with reconciliation to net (loss) income attributable to EQT Corporation for the three months ended September 30, 2024
| Production | Gathering | Transmission | Other and intersegment eliminations | EQT Corporation | |||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||||||||
| Sales of natural gas, natural gas liquids and oil | $ | 1,099,752 | $ | — | $ | — | $ | — | $ | 1,099,752 | |||||||||||||||||||
| Gain (loss) on derivatives | 72,489 | (5,673) | — | — | 66,816 | ||||||||||||||||||||||||
| Pipeline, net marketing services and other | 5,826 | 276,829 | 87,384 | (252,805) | 117,234 | ||||||||||||||||||||||||
| Total operating revenues | 1,178,067 | 271,156 | 87,384 | (252,805) | 1,283,802 | ||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Transportation and processing | 693,670 | — | — | (252,825) | 440,845 | ||||||||||||||||||||||||
| Production | 93,842 | — | — | — | 93,842 | ||||||||||||||||||||||||
| Operating and maintenance | — | 30,712 | 9,806 | — | 40,518 | ||||||||||||||||||||||||
| Exploration | 282 | — | — | — | 282 | ||||||||||||||||||||||||
| Selling, general and administrative (a) | 62,952 | 11,366 | 5,492 | 8,660 | 88,470 | ||||||||||||||||||||||||
| Depreciation, depletion and amortization | 530,745 | 37,773 | 17,109 | 3,672 | 589,299 | ||||||||||||||||||||||||
| Loss on sale/exchange of long-lived assets | 9,708 | — | 409 | — | 10,117 | ||||||||||||||||||||||||
| Impairment and expiration of leases | 12,095 | — | — | — | 12,095 | ||||||||||||||||||||||||
| Other operating expenses (b) | 10,206 | — | — | 279,968 | 290,174 | ||||||||||||||||||||||||
| Total operating expenses | 1,413,500 | 79,851 | 32,816 | 39,475 | 1,565,642 | ||||||||||||||||||||||||
| Operating (loss) income | $ | (235,433) | $ | 191,305 | $ | 54,568 | $ | (292,280) | $ | (281,840) | |||||||||||||||||||
| Reconciliation of profit and loss metric to net (loss) income attributable to EQT Corporation | |||||||||||||||||||||||||||||
| Loss (income) from investments | $ | 1,671 | $ | (597) | $ | (35,616) | $ | 300 | $ | (34,242) | |||||||||||||||||||
| Other income | (3,488) | (128) | (75) | (269) | (3,960) | ||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | 365 | 365 | ||||||||||||||||||||||||
| Interest expense, net | — | — | — | 158,299 | 158,299 | ||||||||||||||||||||||||
| (Loss) income before income taxes | (233,616) | 192,030 | 90,259 | (450,975) | (402,302) | ||||||||||||||||||||||||
| Income tax benefit | — | — | — | (104,870) | (104,870) | ||||||||||||||||||||||||
| Net (loss) income | (233,616) | 192,030 | 90,259 | (346,105) | (297,432) | ||||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | — | 3,687 | — | (296) | 3,391 | ||||||||||||||||||||||||
| Net (loss) income attributable to EQT Corporation | $ | (233,616) | $ | 188,343 | $ | 90,259 | $ | (345,809) | $ | (300,823) |
(a)Selling, general and administrative expense incurred prior to the Equitrans Midstream Merger closing date was not recast as the necessary information is not available and the cost to develop such information would be excessive.
(b)Corporate other operating expenses consisted primarily of transaction costs related to the Equitrans Midstream Merger. See Note 12.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Profit and loss metric with reconciliation to net income attributable to EQT Corporation for the three months ended September 30, 2023
| Production | Gathering | Other and intersegment eliminations | EQT Corporation | ||||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||||||||
| Sales of natural gas, natural gas liquids and oil | $ | 1,001,883 | $ | — | $ | — | $ | 1,001,883 | |||||||||||||||||||||
| Gain on derivatives | 177,906 | — | — | 177,906 | |||||||||||||||||||||||||
| Pipeline, net marketing services and other | 3,456 | 42,057 | (39,200) | 6,313 | |||||||||||||||||||||||||
| Total operating revenues | 1,183,245 | 42,057 | (39,200) | 1,186,102 | |||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Transportation and processing | 593,988 | — | (39,200) | 554,788 | |||||||||||||||||||||||||
| Production | 62,858 | — | — | 62,858 | |||||||||||||||||||||||||
| Operating and maintenance | — | 4,235 | — | 4,235 | |||||||||||||||||||||||||
| Exploration | 447 | — | — | 447 | |||||||||||||||||||||||||
| Selling, general and administrative (a) | 56,942 | — | — | 56,942 | |||||||||||||||||||||||||
| Depreciation, depletion and amortization | 440,360 | 4,054 | 2,472 | 446,886 | |||||||||||||||||||||||||
| Loss on sale/exchange of long-lived assets | 1,511 | — | — | 1,511 | |||||||||||||||||||||||||
| Impairment and expiration of leases | 6,419 | — | — | 6,419 | |||||||||||||||||||||||||
| Other operating expenses (b) | (621) | — | 36,830 | 36,209 | |||||||||||||||||||||||||
| Total operating expenses | 1,161,904 | 8,289 | 102 | 1,170,295 | |||||||||||||||||||||||||
| Operating income (loss) | $ | 21,341 | $ | 33,768 | $ | (39,302) | $ | 15,807 | |||||||||||||||||||||
| Reconciliation of profit and loss metric to net income attributable to EQT Corporation | |||||||||||||||||||||||||||||
| Loss (income) from investments | $ | 424 | $ | (255) | $ | 377 | $ | 546 | |||||||||||||||||||||
| Other income | — | — | (132) | (132) | |||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | 1,089 | 1,089 | |||||||||||||||||||||||||
| Interest expense, net | — | — | 60,427 | 60,427 | |||||||||||||||||||||||||
| Income (loss) before income taxes | 20,917 | 34,023 | (101,063) | (46,123) | |||||||||||||||||||||||||
| Income tax benefit | — | — | (126,853) | (126,853) | |||||||||||||||||||||||||
| Net income | 20,917 | 34,023 | 25,790 | 80,730 | |||||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 149 | — | (674) | (525) | |||||||||||||||||||||||||
| Net income attributable to EQT Corporation | $ | 20,768 | $ | 34,023 | $ | 26,464 | $ | 81,255 |
(a)Selling, general and administrative expense incurred prior to the Equitrans Midstream Merger closing date was not recast as the necessary information is not available and the cost to develop such information would be excessive.
(b)Corporate other operating expenses consisted primarily of transaction costs related to the Tug Hill and XcL Midstream Acquisition (defined in Note 11).
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Profit and loss metric with reconciliation to net (loss) income attributable to EQT Corporation for the nine months ended September 30, 2024
| Production | Gathering | Transmission | Other and intersegment eliminations | EQT Corporation | |||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||||||||
| Sales of natural gas, natural gas liquids and oil | $ | 3,293,174 | $ | — | $ | — | $ | — | $ | 3,293,174 | |||||||||||||||||||
| Gain (loss) on derivatives | 240,333 | (5,673) | — | — | 234,660 | ||||||||||||||||||||||||
| Pipeline, net marketing services and other | 2,757 | 415,491 | 87,384 | (384,884) | 120,748 | ||||||||||||||||||||||||
| Total operating revenues | 3,536,264 | 409,818 | 87,384 | (384,884) | 3,648,582 | ||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Transportation and processing | 1,914,010 | — | — | (384,917) | 1,529,093 | ||||||||||||||||||||||||
| Production | 273,042 | — | — | — | 273,042 | ||||||||||||||||||||||||
| Operating and maintenance | — | 56,018 | 9,806 | — | 65,824 | ||||||||||||||||||||||||
| Exploration | 2,576 | — | — | — | 2,576 | ||||||||||||||||||||||||
| Selling, general and administrative (a) | 180,767 | 11,366 | 5,492 | 31,105 | 228,730 | ||||||||||||||||||||||||
| Depreciation, depletion and amortization | 1,470,966 | 45,282 | 17,109 | 8,674 | 1,542,031 | ||||||||||||||||||||||||
| (Gain) loss on sale/exchange of long-lived assets | (310,252) | (22) | 409 | — | (309,865) | ||||||||||||||||||||||||
| Impairment and expiration of leases | 58,963 | — | — | — | 58,963 | ||||||||||||||||||||||||
| Other operating expenses (b) | 23,650 | — | — | 330,687 | 354,337 | ||||||||||||||||||||||||
| Total operating expenses | 3,613,722 | 112,644 | 32,816 | (14,451) | 3,744,731 | ||||||||||||||||||||||||
| Operating (loss) income | $ | (77,458) | $ | 297,174 | $ | 54,568 | $ | (370,433) | $ | (96,149) | |||||||||||||||||||
| Reconciliation of profit and loss metric to net (loss) income attributable to EQT Corporation | |||||||||||||||||||||||||||||
| (Income) loss from investments | $ | (371) | $ | (2,109) | $ | (35,616) | $ | 1,422 | $ | (36,674) | |||||||||||||||||||
| Other income | (17,638) | (5,153) | (75) | (730) | (23,596) | ||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | 5,651 | 5,651 | ||||||||||||||||||||||||
| Interest expense, net | — | — | — | 268,390 | 268,390 | ||||||||||||||||||||||||
| (Loss) income before income taxes | (59,449) | 304,436 | 90,259 | (645,166) | (309,920) | ||||||||||||||||||||||||
| Income tax benefit | — | — | — | (124,790) | (124,790) | ||||||||||||||||||||||||
| Net (loss) income | (59,449) | 304,436 | 90,259 | (520,376) | (185,130) | ||||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | — | 3,687 | — | (999) | 2,688 | ||||||||||||||||||||||||
| Net (loss) income attributable to EQT Corporation | $ | (59,449) | $ | 300,749 | $ | 90,259 | $ | (519,377) | $ | (187,818) |
(a)Selling, general and administrative expense incurred prior to the Equitrans Midstream Merger closing date was not recast as the necessary information is not available and the cost to develop such information would be excessive.
(b)Corporate other operating expenses consisted primarily of transaction costs related to the Equitrans Midstream Merger. See Note 12.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Profit and loss metric with reconciliation to net income (loss) attributable to EQT Corporation for the nine months ended September 30, 2023
| Production | Gathering | Other and intersegment eliminations | EQT Corporation | ||||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||||||||
| Sales of natural gas, natural gas liquids and oil | $ | 3,680,566 | $ | — | $ | — | $ | 3,680,566 | |||||||||||||||||||||
| Gain on derivatives | 1,167,144 | — | — | 1,167,144 | |||||||||||||||||||||||||
| Pipeline, net marketing services and other | 9,675 | 95,753 | (87,214) | 18,214 | |||||||||||||||||||||||||
| Total operating revenues | 4,857,385 | 95,753 | (87,214) | 4,865,924 | |||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Transportation and processing | 1,680,009 | — | (87,075) | 1,592,934 | |||||||||||||||||||||||||
| Production | 163,963 | — | — | 163,963 | |||||||||||||||||||||||||
| Operating and maintenance | — | 6,108 | — | 6,108 | |||||||||||||||||||||||||
| Exploration | 2,602 | — | — | 2,602 | |||||||||||||||||||||||||
| Selling, general and administrative (a) | 168,999 | — | — | 168,999 | |||||||||||||||||||||||||
| Depreciation, depletion and amortization | 1,214,882 | 8,077 | 7,296 | 1,230,255 | |||||||||||||||||||||||||
| Loss on sale/exchange of long-lived assets | 17,814 | — | — | 17,814 | |||||||||||||||||||||||||
| Impairment and expiration of leases | 22,290 | — | — | 22,290 | |||||||||||||||||||||||||
| Other operating expenses (b) | 7,645 | — | 61,620 | 69,265 | |||||||||||||||||||||||||
| Total operating expenses | 3,278,204 | 14,185 | (18,159) | 3,274,230 | |||||||||||||||||||||||||
| Operating income (loss) | $ | 1,579,181 | $ | 81,568 | $ | (69,055) | $ | 1,591,694 | |||||||||||||||||||||
| Reconciliation of profit and loss metric to net income (loss) attributable to EQT Corporation | |||||||||||||||||||||||||||||
| (Income) loss from investments | $ | (2,675) | $ | (4,004) | $ | 1,369 | $ | (5,310) | |||||||||||||||||||||
| Other income | (395) | — | (474) | (869) | |||||||||||||||||||||||||
| Gain on debt extinguishment | — | — | (55) | (55) | |||||||||||||||||||||||||
| Interest expense, net | — | — | 146,856 | 146,856 | |||||||||||||||||||||||||
| Income (loss) before income taxes | 1,582,251 | 85,572 | (216,751) | 1,451,072 | |||||||||||||||||||||||||
| Income tax expense | — | — | 217,975 | 217,975 | |||||||||||||||||||||||||
| Net income (loss) | 1,582,251 | 85,572 | (434,726) | 1,233,097 | |||||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 1,588 | — | (1,668) | (80) | |||||||||||||||||||||||||
| Net income (loss) attributable to EQT Corporation | $ | 1,580,663 | $ | 85,572 | $ | (433,058) | $ | 1,233,177 |
(a)Selling, general and administrative expense incurred prior to the Equitrans Midstream Merger closing date was not recast as the necessary information is not available and the cost to develop such information would be excessive.
(b)Corporate other operating expenses consisted primarily of transaction costs related to the Tug Hill and XcL Midstream Acquisition.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Assets by segment as of September 30, 2024
| Production | Gathering | Transmission | Other and intersegment eliminations | EQT Corporation | |||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||
| Investment in the MVP Joint Venture | $ | — | $ | — | $ | 3,358,346 | $ | — | $ | 3,358,346 | |||||||||||||||||||
| Goodwill | — | — | 1,289,759 | 888,477 | 2,178,236 | ||||||||||||||||||||||||
| Other segment assets (a) | 22,890,299 | 8,187,601 | 2,962,486 | 368,621 | 34,409,007 | ||||||||||||||||||||||||
| Total assets | $ | 22,890,299 | $ | 8,187,601 | $ | 7,610,591 | $ | 1,257,098 | $ | 39,945,589 |
(a)Other segment assets in other and intersegment eliminations includes cash and cash equivalents.
Assets by segment as of September 30, 2023
| Production | Gathering | Other and intersegment eliminations | EQT Corporation | ||||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||
| Total assets (a) | $ | 23,138,353 | $ | 1,167,766 | $ | 248,869 | $ | 24,554,988 |
(a)Total assets in other and intersegment eliminations includes cash and cash equivalents.
The Company did not have an investment in the MVP Joint Venture or goodwill as of September 30, 2023.
Capital expenditures by segment
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| Capital expenditures: | |||||||||||||||||||||||
| Production (a) | $ | 454,772 | $ | 435,646 | $ | 1,539,904 | $ | 1,366,669 | |||||||||||||||
| Gathering (b) | 79,597 | 6,941 | 111,644 | 11,521 | |||||||||||||||||||
| Transmission | 10,118 | — | 10,118 | — | |||||||||||||||||||
| Other | 13,402 | 1,998 | 21,345 | 8,546 | |||||||||||||||||||
| Total capital expenditures | $ | 557,889 | $ | 444,585 | $ | 1,683,011 | $ | 1,386,736 |
(a)Production capital expenditures included capital expenditures attributable to the noncontrolling interest in The Mineral Company LLC (a joint venture formed between a subsidiary of EQT and a third-party investor for the purpose of purchasing certain mineral rights in the Appalachian Basin) of approximately $8.5 million for the nine months ended September 30, 2023. The Mineral Company LLC was dissolved in the third quarter of 2023.
(b)Gathering capital expenditures included capital expenditures attributable to the noncontrolling interest in Eureka Midstream Holdings of approximately $1.6 million for both the three and nine months ended September 30, 2024. See Notes 1 and 12.
Intersegment contracts
On February 26, 2020, EQT and certain of its affiliates (such parties, collectively, the EQT Producer) entered into a gas gathering and compression agreement (the Consolidated GGA) with an affiliate of EQM Midstream Partners, LP (EQM), which became an indirect wholly-owned subsidiary of EQT upon the closing of the Equitrans Midstream Merger. Pursuant to the terms of the Consolidated GGA, among other things, the EQM affiliate agreed to provide gas gathering services to the EQT Producer, and the EQT Producer committed to an initial annual minimum volume commitment (MVC) of 3.0 Bcf per day and an acreage dedication in Pennsylvania and West Virginia. The Consolidated GGA is effective through December 31, 2035 and will renew annually thereafter unless terminated by the parties thereto.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The Consolidated GGA provides for cash bonus payments (the Henry Hub Cash Bonus) payable by the EQT Producer to the EQM affiliate during each quarter beginning with the first day of the quarter in which the MVP In-Service Date (as defined in the Consolidated GGA) occurs 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. Upon commencement of long-term firm capacity obligations, the MVP In-Service Date occurred on July 1, 2024. See Note 8.
The EQT Producer's derivative liability and any gain or loss realized related to the Henry Hub Cash Bonus are included in the Company's Production segment; the EQM affiliate's derivative asset and any gain or loss realized related to the Henry Hub Cash Bonus are included in the Company's Gathering segment. All balances and gains or losses related to the Henry Hub Cash Bonus have been eliminated in consolidation. As of September 30, 2024 and December 31, 2023, the derivative related to the Henry Hub Cash Bonus had a fair value of approximately $15 million and $48 million, respectively. The fair value of the derivative asset and 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 5 for a description of the fair value hierarchy.
3. Revenue from Contracts with Customers
Sales of natural gas, NGLs and oil. 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.
Pipeline revenue. The Company recognizes revenue under gathering and transmission and storage contracts when it satisfies certain performance obligations.
The Company provides firm and interruptible gathering and transmission and storage services. Firm service contracts generally require the customer to pay a firm reservation fee, which is a fixed, monthly charge to reserve an agreed upon amount of pipeline or storage capacity regardless of whether the customer uses the capacity. Volumetric-based fees, which are charges based on the volume of gas gathered, transported or stored, can also be charged under firm contracts for each firm contracted volume gathered, transported or stored, as well as for volumes gathered, transported or stored in excess of the firm contracted volume so long as capacity exists. Interruptible service contracts require the customer to pay volumetric-based fees and generally do not guarantee access to the pipeline or storage facility.
Gathering and transmission and storage services contracts can be short-term or long-term in duration. Firm and interruptible gathering service contracts are invoiced on a one-month lag, with payment typically due within 21 days of the invoice date. Revenue for gathering services provided but not yet invoiced is estimated based on contract data, preliminary throughput and allocation measurements on a monthly basis. Firm and interruptible transmission and storage service contracts are invoiced at the end of each calendar month, with payment typically due within 10 days of the invoice date.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Under its firm service contracts, the Company has a stand-ready obligation to provide the firm service over the life of the contract. The performance obligation for revenue from firm reservation fees is satisfied over time as the pipeline capacity is made available to the customer. As such, the Company recognizes firm reservation fee revenue evenly over the contract period using a time-elapsed output method to measure progress. The performance obligation for revenue from volumetric-based fees is generally satisfied upon the Company's monthly invoicing to the customer for volumes gathered, transported or stored during the month. The amount invoiced generally corresponds directly to the value of the Company's performance to date as the customer obtains value as each volume is gathered, transported or stored.
For all of the Company's gathering and transmission and storage services contracts, the Company allocates the transaction price to each performance obligation based on the estimated relative standalone selling price. Any excess of consideration received over revenue recognized results in the deferral of those amounts until future periods based on a units-of-production or straight-line methodology as these methods align with the consumption of services provided to the customer. The units-of-production methodology requires the use of judgment to estimate future production volumes.
Certain of the Company's gathering service agreements are structured with MVCs, which specify minimum quantities that the customer will be charged regardless of whether such quantities are gathered. Revenue is recognized for MVCs when the performance obligation has been met, which is the earlier of when the gas is gathered or when the likelihood that the customer will be able to meet its MVC is remote. If a customer fails to meet its MVC for a specified period (thus not exercising all the contractual rights to gathering services within the specified period), the customer is obligated to pay a contractually-determined fee based on the shortfall between actual volume gathered and the MVC.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Disaggregated revenue information. 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 pipeline, net marketing services and other revenues in the Statements of Condensed Consolidated Operations. Derivative contracts are also outside the scope of ASU 2014-09.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| Revenues from contracts with customers: | |||||||||||||||||||||||
| Production: | |||||||||||||||||||||||
| Sales of natural gas, NGLs and oil | |||||||||||||||||||||||
| Natural gas sales | $ | 938,911 | $ | 859,512 | $ | 2,791,190 | $ | 3,337,600 | |||||||||||||||
| NGLs sales | 139,697 | 108,205 | 435,581 | 274,932 | |||||||||||||||||||
| Oil sales | 21,144 | 34,166 | 66,403 | 68,034 | |||||||||||||||||||
| Sales of natural gas, NGLs and oil | 1,099,752 | 1,001,883 | 3,293,174 | 3,680,566 | |||||||||||||||||||
| Gathering: | |||||||||||||||||||||||
| Pipeline revenues | |||||||||||||||||||||||
| Firm reservation fee revenues (a) | 136,752 | — | 136,752 | — | |||||||||||||||||||
| Volumetric-based fee revenues | 140,077 | 42,057 | 278,739 | 95,753 | |||||||||||||||||||
| Total | 276,829 | 42,057 | 415,491 | 95,753 | |||||||||||||||||||
| Transmission: | |||||||||||||||||||||||
| Pipeline revenues | |||||||||||||||||||||||
| Firm reservation fee revenues | 73,034 | — | 73,034 | — | |||||||||||||||||||
| Volumetric-based fee revenues | 14,226 | — | 14,226 | — | |||||||||||||||||||
| Total | 87,260 | — | 87,260 | — | |||||||||||||||||||
| Other and intersegment eliminations | (252,805) | (39,200) | (384,884) | (87,214) | |||||||||||||||||||
| Total revenues from contracts with customers | $ | 1,211,036 | $ | 1,004,740 | $ | 3,411,041 | $ | 3,689,105 | |||||||||||||||
| Other sources of revenue: | |||||||||||||||||||||||
| Gain on derivatives | $ | 66,816 | $ | 177,906 | $ | 234,660 | $ | 1,167,144 | |||||||||||||||
| Net marketing services and other revenues | 5,950 | 3,456 | 2,881 | 9,675 | |||||||||||||||||||
| Total other sources of revenue | $ | 72,766 | $ | 181,362 | $ | 237,541 | $ | 1,176,819 | |||||||||||||||
| Total operating revenues | $ | 1,283,802 | $ | 1,186,102 | $ | 3,648,582 | $ | 4,865,924 |
(a)Firm reservation fee revenues for the three and nine months ended September 30, 2024 included unbilled revenues supported by MVCs of approximately $1.8 million.
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 $443.3 million and $584.8 million in accounts receivable in the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, respectively.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Summary of remaining performance obligations. The following table summarizes the transaction price allocated to the Company's remaining obligations on all contracts with fixed consideration as of September 30, 2024. The table excludes contracts that qualified for the exception to the relative standalone selling price method as of September 30, 2024. The MVP Joint Venture is accounted for as an equity method investment and, as such, its remaining performance obligations have been excluded from the table.
| 2024 (a) | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||||||||||||||||||||
| Gathering firm reservation fees: | |||||||||||||||||||||||||||||||||||||||||
| Third-party contracts | $ | 25,850 | $ | 101,137 | $ | 92,186 | $ | 85,651 | $ | 85,651 | $ | 457,444 | $ | 847,919 | |||||||||||||||||||||||||||
| Affiliate contracts | 22,445 | 87,075 | 80,698 | 80,362 | 76,670 | 1,188,383 | 1,535,633 | ||||||||||||||||||||||||||||||||||
| Total Gathering firm reservation fees | 48,295 | 188,212 | 172,884 | 166,013 | 162,321 | 1,645,827 | 2,383,552 | ||||||||||||||||||||||||||||||||||
| Gathering revenues supported by MVCs: | |||||||||||||||||||||||||||||||||||||||||
| Third-party contracts | 21,036 | 82,257 | 89,078 | 80,765 | 77,014 | 250,652 | 600,802 | ||||||||||||||||||||||||||||||||||
| Affiliate contracts | 90,630 | 372,446 | 397,966 | 410,621 | 411,740 | 2,453,073 | 4,136,476 | ||||||||||||||||||||||||||||||||||
| Total Gathering revenues supported by MVCs | 111,666 | 454,703 | 487,044 | 491,386 | 488,754 | 2,703,725 | 4,737,278 | ||||||||||||||||||||||||||||||||||
| Transmission firm reservation fees: | |||||||||||||||||||||||||||||||||||||||||
| Third-party contracts | 48,754 | 175,010 | 174,191 | 171,750 | 169,393 | 980,973 | 1,720,071 | ||||||||||||||||||||||||||||||||||
| Affiliate contracts | 57,415 | 227,116 | 225,588 | 225,588 | 225,260 | 1,752,347 | 2,713,314 | ||||||||||||||||||||||||||||||||||
| Total Transmission firm reservation fees | 106,169 | 402,126 | 399,779 | 397,338 | 394,653 | 2,733,320 | 4,433,385 | ||||||||||||||||||||||||||||||||||
| Total | $ | 266,130 | $ | 1,045,041 | $ | 1,059,707 | $ | 1,054,737 | $ | 1,045,728 | $ | 7,082,872 | $ | 11,554,215 |
(a)October 1 through December 31.
As of September 30, 2024, the Company had no remaining performance obligations on its natural gas sales contracts with fixed consideration.
Based on total projected contractual revenues, the Company's firm gathering affiliate contracts and firm transmission and storage affiliate contracts had weighted average remaining terms of approximately 13 years and 11 years, respectively, as of September 30, 2024. Based on total projected contractual revenues, the Company's firm gathering third-party contracts and firm transmission and storage third-party contracts had weighted average remaining terms of approximately 12 years and 11 years, respectively, as of September 30, 2024.
4. 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 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.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
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 2,574 Bcf of natural gas and 1,464 thousand barrels (Mbbl) of NGLs as of September 30, 2024 and 2,045 Bcf of natural gas and 1,049 Mbbl of NGLs as of December 31, 2023. The open positions at both September 30, 2024 and December 31, 2023 had maturities extending through December 2027.
Certain of the Company's OTC derivative instrument contracts provide that, if EQT'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 September 30, 2024, EQT'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 September 30, 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 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 September 30, 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 September 30, 2024 and December 31, 2023, there were $17.5 million and $13.0 million, respectively, of such deposits recorded 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) | |||||||||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||
| Asset derivative instruments, at fair value | $ | 251,657 | $ | (152,115) | $ | — | $ | 99,542 | |||||||||||||||
| Liability derivative instruments, at fair value | 197,712 | (152,115) | (17,488) | 28,109 | |||||||||||||||||||
| 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 |
5. 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 EQT's or the counterparty's credit rating and the yield on a risk-free instrument.
The Company has categorized its assets and liabilities recorded at fair value into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Assets and liabilities that use Level 2 inputs primarily include the Company's swap, collar and option agreements.
Exchange traded commodity swaps have Level 1 inputs. The fair value of the commodity swaps with Level 2 inputs is based on standard industry income approach models that use significant observable inputs, including, but not limited to, NYMEX natural gas forward curves, 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.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The table below summarizes assets and liabilities measured at fair value on a recurring basis.
| Fair value measurements at reporting date using: | |||||||||||||||||||||||
| Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||
| Asset derivative instruments, at fair value | $ | 251,657 | $ | 41,772 | $ | 209,885 | $ | — | |||||||||||||||
| Liability derivative instruments, at fair value | 197,712 | 17,402 | 180,310 | — | |||||||||||||||||||
| 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 value of cash equivalents, accounts receivable and accounts payable approximates fair value due to their short-term maturities. The carrying value of borrowings under EQT's revolving credit facility, Eureka's revolving credit facility and the Term Loan Facility (defined in Note 7) approximates fair value as each facility's interest rate is 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. As of September 30, 2024 and December 31, 2023, the Company's senior notes had a fair value of approximately $11.2 billion and $4.9 billion, respectively, and a carrying value of approximately $11.0 billion and $4.5 billion, respectively, inclusive of any current portion. See Note 7 for further discussion of the Company's debt.
Upon the closing of the Equitrans Midstream Merger, EQT's note payable to EQM became an intercompany transaction on a consolidated basis and, as such, was effectively settled on July 22, 2024. See Note 12. As of December 31, 2023, the fair value of EQT's note payable to EQM was estimated using an income approach model with a market-based discount rate and was considered a Level 3 fair value measurement. As of December 31, 2023, EQT's note payable to EQM had a fair value and carrying value of approximately $91 million and $88 million, respectively, inclusive of any current portion.
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 2 for a discussion of the fair value measurement of the Henry Hub Cash Bonus (which became an intercompany derivative asset and liability upon the closing of the Equitrans Midstream Merger). See Note 11 for a discussion of the fair value measurement of the NEPA Non-Operated Asset Divestiture (defined therein). See Note 12 for a discussion of the fair value measurement of the Equitrans Midstream Merger. 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)
6. Income Taxes
For the nine months ended September 30, 2024 and 2023, the Company calculated the provision for income taxes 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 nine months ended September 30, 2024.
For the nine months ended September 30, 2024 and 2023, the Company recorded income tax (benefit) expense at an effective tax rate of 40.3% and 15.0%, respectively. The Company's effective tax rate for the nine months ended September 30, 2024 was higher compared to the U.S. federal statutory rate primarily as a result of recognition of tax benefits related to higher losses on the Company's state tax-paying entities and the utilization of some its capital loss carryforwards with the capital gain generated from the NEPA Non-Operated Asset Divestiture, which resulted in the release of the associated valuation allowance. The Company's effective tax rate for the nine months ended September 30, 2023 was lower compared to the U.S. federal statutory rate due primarily to the release of valuation allowances limiting certain state deferred tax assets and net state deferred tax benefits related to a rate reduction from a Pennsylvania tax law change enacted in July 2022 and the Tug Hill and XcL Midstream Acquisition.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
7. Debt
The table below summarizes the Company's outstanding debt.
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Principal Value | Carrying Value (a) | Principal Value | Carrying Value (a) | ||||||||||||||||||||
| (Thousands) | |||||||||||||||||||||||
| EQT's revolving credit facility maturing July 23, 2029 | $ | 1,967,000 | $ | 1,967,000 | $ | — | $ | — | |||||||||||||||
| Eureka's revolving credit facility maturing November 13, 2025 | 330,000 | 330,000 | — | — | |||||||||||||||||||
| Term Loan Facility due June 30, 2026 (b) | 500,000 | 497,970 | 1,250,000 | 1,244,265 | |||||||||||||||||||
| Debentures and senior notes: | |||||||||||||||||||||||
| EQT's 6.125% notes due February 1, 2025 (b) | — | — | 601,521 | 600,389 | |||||||||||||||||||
| EQM's 6.000% notes due July 1, 2025 | 400,000 | 400,150 | — | — | |||||||||||||||||||
| EQT's 1.75% convertible notes due May 1, 2026 (c) | — | — | 290,177 | 286,185 | |||||||||||||||||||
| EQT's 3.125% notes due May 15, 2026 | 392,915 | 390,889 | 392,915 | 389,978 | |||||||||||||||||||
| EQT's 7.75% debentures due July 15, 2026 | 115,000 | 114,088 | 115,000 | 113,716 | |||||||||||||||||||
| EQM's 4.125% notes due December 1, 2026 | 500,000 | 487,340 | — | — | |||||||||||||||||||
| EQM's 7.500% notes due June 1, 2027 | 500,000 | 512,554 | — | — | |||||||||||||||||||
| EQM's 6.500% notes due July 1, 2027 | 900,000 | 917,091 | — | — | |||||||||||||||||||
| EQT's 3.90% notes due October 1, 2027 | 1,169,503 | 1,166,252 | 1,169,503 | 1,165,439 | |||||||||||||||||||
| EQT's 5.700% notes due April 1, 2028 | 500,000 | 492,074 | 500,000 | 490,376 | |||||||||||||||||||
| EQM's 5.500% notes due July 15, 2028 | 850,000 | 846,328 | — | — | |||||||||||||||||||
| EQT's 5.00% notes due January 15, 2029 | 318,494 | 315,619 | 318,494 | 315,121 | |||||||||||||||||||
| EQM's 4.50% notes due January 15, 2029 | 800,000 | 764,360 | — | — | |||||||||||||||||||
| EQM's 6.375% notes due April 1, 2029 | 600,000 | 609,177 | — | — | |||||||||||||||||||
| EQT's 7.000% notes due February 1, 2030 (b) | 674,800 | 671,486 | 674,800 | 671,020 | |||||||||||||||||||
| EQM's 7.500% notes due June 1, 2030 | 500,000 | 537,317 | — | — | |||||||||||||||||||
| EQM's 4.75% notes due January 15, 2031 | 1,100,000 | 1,042,951 | — | — | |||||||||||||||||||
| EQT's 3.625% notes due May 15, 2031 | 435,165 | 430,649 | 435,165 | 430,141 | |||||||||||||||||||
| EQT's 5.750% notes due February 1, 2034 | 750,000 | 742,598 | — | — | |||||||||||||||||||
| EQM's 6.500% notes due July 15, 2048 | 550,000 | 557,655 | — | — | |||||||||||||||||||
| EQT's note payable to EQM (d) | — | — | 88,483 | 88,483 | |||||||||||||||||||
| Total debt | 13,852,877 | 13,793,548 | 5,836,058 | 5,795,113 | |||||||||||||||||||
| Less: Current portion of debt (e) | 400,000 | 400,150 | 296,424 | 292,432 | |||||||||||||||||||
| Long-term debt | $ | 13,452,877 | $ | 13,393,398 | $ | 5,539,634 | $ | 5,502,681 |
(a)For EQT's revolving credit facility, Eureka's revolving credit facility and, as of December 31, 2023, EQT'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 and, for EQM's senior notes, the unamortized fair value adjustments recorded with Equitrans Midstream Merger purchase price accounting represents the carrying value.
(b)Interest rates for the Term Loan Facility and EQT's 7.000% senior notes fluctuate based on changes to the credit ratings assigned to EQT's senior notes by Moody's, S&P and Fitch. Prior to EQT's redemption of all of its outstanding 6.125% senior notes, interest rates for EQT's 6.125% senior notes fluctuated based on changes to the credit ratings assigned to EQT'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 EQT's 1.75% convertible notes was $768.6 million and was a Level 2 fair value measurement. See Note 5.
(d)As a result of the Equitrans Midstream Merger, EQT's note payable to EQM has been eliminated in consolidation.
(e)As of September 30, 2024, the current portion of debt included EQM's 6.000% senior notes. As of December 31, 2023, the current portion of debt included EQT's 1.75% convertible notes and a portion of EQT's note payable to EQM.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Debt Repayments. The Company repaid, redeemed or repurchased the following debt during the nine months ended September 30, 2024.
| Debt Tranche | Principal | Premiums | Accrued but Unpaid Interest | Total Cost | ||||||||||||||||||||||
| (Thousands) | ||||||||||||||||||||||||||
| EQM's 4.00% notes due August 1, 2024 (a) | $ | 300,000 | $ | — | $ | 6,000 | $ | 306,000 | ||||||||||||||||||
| EQT's 6.125% notes due February 1, 2025 | 601,521 | 1,178 | 13,612 | 616,311 | ||||||||||||||||||||||
| Term Loan Facility due June 30, 2026 | 750,000 | — | 332 | 750,332 | ||||||||||||||||||||||
| EQT's 1.75% convertible notes due May 1, 2026 | 583 | — | — | 583 | ||||||||||||||||||||||
| Total | $ | 1,652,104 | $ | 1,178 | $ | 19,944 | $ | 1,673,226 |
(a)EQM's 4.00% senior notes, which were consolidated by the Company as a result of the Equitrans Midstream Merger, were redeemed at maturity.
EQT's Revolving Credit Facility. EQT has a $3.5 billion revolving credit facility. On July 22, 2024, EQT entered into a Fourth Amended and Restated Credit Agreement (the Fourth A&R Credit Agreement) with PNC Bank National Association, as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto, amending and restating the Third Amended and Restated Credit Agreement, dated June 28, 2022 (the Credit Agreement), under which such lenders agreed to make to EQT unsecured revolving loans in an aggregate principal amount of up to $3.5 billion. The Fourth A&R Credit Agreement, among other things, (i) extends the maturity date of the commitments and loans under the Credit Agreement to July 23, 2029 and provides, at EQT's option, two one-year extensions thereafter, subject to satisfaction of certain conditions, and (ii) allows for additional commitment increases up to $1 billion, subject to the agreement of EQT and new or existing lenders. EQT can obtain Base Rate Loans (as defined in the Fourth A&R Credit Agreement) or Term SOFR Rate Loans (as defined in the Fourth A&R Credit Agreement). Base Rate Loans are denominated in dollars and bear interest at a Base Rate (as defined in the Fourth A&R Credit Agreement) plus a margin ranging from 12.5 basis points to 100 basis points determined on the basis of EQT's credit ratings. Term SOFR Rate Loans bear interest at a Term SOFR Rate (as defined in the Fourth A&R Credit Agreement) plus an additional 10 basis point credit spread adjustment plus a margin ranging from 112.5 basis points to 200 basis points determined on the basis of EQT's credit ratings.
As of September 30, 2024, the Company had approximately $1 million of letters of credit outstanding under EQT's revolving credit facility and no letters of credit outstanding under Eureka's revolving credit facility. As of December 31, 2023, the Company had approximately $15 million of letters of credit outstanding under EQT's revolving credit facility.
During the three months ended September 30, 2024 and 2023, under EQT's revolving credit facility, the maximum amount of outstanding borrowings was $2,301 million and $158 million, respectively, and the average daily balance was approximately $1,608 million and $28 million, respectively. During the nine months ended September 30, 2024 and 2023, under EQT's revolving credit facility, the maximum amount of outstanding borrowings was $2,301 million and $158 million, respectively, and the average daily balance was approximately $551 million and $9 million, respectively. For each of the three and nine month periods ended September 30, 2024 and 2023, interest under EQT's revolving credit facility was incurred at a weighted average annual interest rate of 6.9%.
Eureka's Revolving Credit Facility. Upon the closing of the Equitrans Midstream Merger, the Company acquired a controlling interest in Eureka Midstream Holdings. See Notes 1 and 12. Eureka, a wholly-owned subsidiary of Eureka Midstream Holdings, has a $400 million senior secured revolving credit facility with Sumitomo Mitsui Banking Corporation, as administrative agent, the lenders party thereto from time to time and any other persons party thereto from time to time.
For the period beginning on July 22, 2024 and ending on September 30, 2024, under Eureka's revolving credit facility, both the maximum amount of outstanding borrowings and average daily balance was $330 million, and interest was incurred at a weighted average annual interest rate of 8.1%.
Eureka's revolving credit facility contains negative covenants that, among other things, limit restricted payments, incurrence of debt, dispositions, mergers and other fundamental changes and transactions with affiliates, in each case and as applicable, subject to certain specified exceptions. In addition, Eureka's revolving credit facility contains certain specified events of default, including insolvency, nonpayment of scheduled principal or interest obligations, loss and failure to replace certain material contracts, change of control and cross-default provisions related to the acceleration or default of certain other financial obligations.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
EQM's revolving credit facility. Immediately following the closing of the Equitrans Midstream Merger, on July 22, 2024, EQM repaid outstanding obligations under that certain Third Amended and Restated Credit Agreement, dated October 31, 2018, by and among EQM, Wells Fargo Bank, National Association, as administrative agent, swing line lender and L/C issuer, and the other financial institutions from time to time party thereto for principal of $705 million and interest and fees of $4.5 million using cash on hand and cash contributions from EQT funded by borrowings under EQT's revolving credit facility, and, thereafter, EQM terminated its revolving credit facility.
Term Loan Facility. On November 9, 2022, EQT entered into a Credit Agreement (as amended on December 23, 2022, April 25, 2023, January 16, 2024 and July 22, 2024, 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 EQT 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. On August 21, 2023, EQT borrowed $1.25 billion under the Term Loan Facility, receiving net proceeds of $1,242.9 million.
On January 16, 2024, EQT 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 EQT'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 EQT's 5.750% senior notes and cash on hand) and the satisfaction of other closing conditions. On July 22, 2024, EQT entered into a fourth amendment to the Term Loan Agreement to, among other things, make certain conforming changes to the Term Loan Agreement in alignment with the Fourth A&R Credit Agreement. Pursuant to the Term Loan Agreement, EQT 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 EQT'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 (both terms defined in the Term Loan Agreement), each plus a margin based on EQT's credit ratings. For both the three and nine months ended September 30, 2024, interest under the Term Loan Facility was incurred at a weighted average annual interest rate of 6.9%. For the period beginning on August 21, 2023 and ending on September 30, 2023, interest under the Term Loan Facility was incurred at a weighted average annual interest rate of 7.0%.
EQM's Senior Notes. Upon the closing of the Equitrans Midstream Merger, EQM became an indirect wholly-owned subsidiary of EQT, and EQM's outstanding senior notes were consolidated by the Company.
The indentures governing EQM's senior notes contain certain restrictive financial and operating covenants, including covenants that restrict, among other things, EQM's ability to incur, as applicable, indebtedness, incur liens, enter into sale and leaseback transactions, complete acquisitions, merge, sell assets and perform certain other corporate actions. Certain of EQM's senior notes also include an offer to repurchase provision applicable upon the occurrence of certain change of control events specified in the applicable indentures.
As of September 30, 2024, aggregate maturities for EQM's senior notes are zero for the three months ended December 31, 2024, $400 million in 2025, $500 million in 2026, $1,400 million in 2027, $850 million in 2028, $1,400 million in 2029 and $2,150 million thereafter.
EQT's 5.750% Senior Notes. On January 19, 2024, EQT 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 EQT's existing senior unsecured notes.
EQT's 1.75% Convertible Notes. In April 2020, EQT 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%.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
On January 2, 2024, in accordance with the indenture governing the Convertible Notes (the Convertible Notes Indenture), EQT issued an irrevocable notice of redemption for all of the outstanding Convertible Notes and announced that EQT 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 common stock per $1,000 principal amount of Convertible Notes, EQT issued to such holders an aggregate 19,992,482 shares of EQT 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.
Inclusive of January 2024 settlements of Convertible Notes conversion right exercises that were exercised in December 2023, during January 2024, EQT settled $290.2 million aggregate principal amount of Convertible Notes conversion right exercises by issuing an aggregate 20,036,639 shares of EQT 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, EQT entered into capped call transactions (the Capped Call Transactions) with certain financial institutions (the Capped Call Counterparties) to reduce the potential dilution to EQT 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 common stock and an initial cap price of $18.75 per share of EQT common stock, each of which were subject to certain customary adjustments, including adjustments as a result of EQT 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, EQT entered into separate termination agreements with each of the Capped Call Counterparties, pursuant to which the Capped Call Counterparties paid EQT an aggregate $93.3 million (the Termination Payments), and the Capped Call Transactions were terminated. EQT received the Termination Payments on January 22, 2024. The Termination Payments were recorded as an increase to shareholders' equity.
8. Investment in the MVP Joint Venture
The MVP Joint Venture. Upon the closing of the Equitrans Midstream Merger, the Company acquired an equity method investment in the MVP Joint Venture.
The MVP. The Company owned a 49.2% interest in the MVP as of September 30, 2024 and is the operator of the MVP. The MVP is a 303-mile long, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that spans from the Company's transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia. Following receipt of authorization from the Federal Energy Regulatory Commission (the FERC), the MVP entered into service on June 14, 2024 and became available for interruptible or short-term firm transportation service. On July 1, 2024, the MVP commenced long-term firm capacity obligations. Estimated total project cost of the MVP is approximately $8.1 billion, excluding allowance for funds used during construction.
As of September 30, 2024, the Company had a negative basis difference between the carrying value of its equity method investment and its proportionate share of the MVP's net assets, which are composed of fixed assets. The basis difference is accreted over the life of the fixed assets and presented in income from investments in the Company's Statements of Condensed Consolidated Operations.
In September 2024, the MVP Joint Venture issued a capital call notice for the funding of the MVP project to the Company for $15.2 million, which was paid in October 2024. The capital contributions payable, which is presented in other current liabilities, and corresponding increase to the investment asset are included in the Condensed Consolidated Balance Sheet as of September 30, 2024.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
MVP Southgate. As of September 30, 2024, the Company owned a 47.2% interest in MVP Southgate. MVP Southgate is a contemplated interstate pipeline that was approved by the FERC and was initially designed to extend approximately 75 miles from the MVP in Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina using 24-inch and 16-inch diameter pipe.
In December 2023, the MVP Joint Venture entered into precedent agreements with Public Service Company of North Carolina, Inc. and Duke Energy Carolinas, LLC. The precedent agreements contemplate an amended project and, among other things, describe certain conditions precedent to the parties' respective obligations regarding MVP Southgate. As amended, the natural gas interstate pipeline would extend approximately 31 miles from the terminus of the MVP in Pittsylvania County, Virginia to planned new delivery points in Rockingham County, North Carolina using 30-inch diameter pipe and have a targeted capacity of 550,000 dekatherms per day. Completion of the MVP Southgate pipeline is targeted for June 2028. The Company expects to operate the MVP Southgate pipeline.
Pursuant to the MVP Joint Venture's limited liability company agreement and upon the closing of the Equitrans Midstream Merger, the Company is obligated to provide performance assurances with respect to MVP Southgate that may take the form of a guarantee from EQM (provided that, in accordance with the requirements of the MVP Joint Venture's limited liability company agreement, EQM's debt is assigned an investment grade credit rating), a letter of credit or cash collateral. Upon receipt of the FERC's initial release to begin construction of the MVP Southgate project, the Company will be obligated to provide performance assurance in an amount equal to 33% of its share of MVP Southgate's remaining capital commitments.
9. (Loss) Income Per Share
The table below provides the computation for basic and diluted (loss) income per share.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (Thousands, except per share amounts) | |||||||||||||||||||||||
| Net (loss) income attributable to EQT Corporation – Basic (loss) income available to shareholders | $ | (300,823) | $ | 81,255 | $ | (187,818) | $ | 1,233,177 | |||||||||||||||
| Add back: Interest expense on Convertible Notes, net of tax (a) | — | 2,042 | — | 6,117 | |||||||||||||||||||
| Diluted (loss) income available to shareholders | $ | (300,823) | $ | 83,297 | $ | (187,818) | $ | 1,239,294 | |||||||||||||||
| Weighted average common stock outstanding – Basic | 559,603 | 383,359 | 480,354 | 368,936 | |||||||||||||||||||
| Options, restricted stock, performance awards and stock appreciation rights (a) | — | 4,398 | — | 4,606 | |||||||||||||||||||
| Convertible Notes (a) | — | 28,433 | — | 28,317 | |||||||||||||||||||
| Weighted average common stock outstanding – Diluted | 559,603 | 416,190 | 480,354 | 401,859 | |||||||||||||||||||
| (Loss) income per share of common stock attributable to EQT Corporation: | |||||||||||||||||||||||
| Basic | $ | (0.54) | $ | 0.21 | $ | (0.39) | $ | 3.34 | |||||||||||||||
| Diluted | $ | (0.54) | $ | 0.20 | $ | (0.39) | $ | 3.08 |
(a)In periods when the Company reports a net loss, all options, restricted stock, performance awards and stock appreciation awards, as applicable, 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 and nine months ended September 30, 2024, all such securities of 7.6 million and 6.0 million, respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.
In addition, prior to EQT's redemption of the Convertible Notes, the Company used the if-converted method to calculate the impact of the Convertible Notes on diluted (loss) income per share. For the nine months ended September 30, 2024, such if-converted securities of approximately 0.5 million as well as the related add back of interest expense on the Convertible Notes, net of tax, were excluded from potentially dilutive securities because of their anti-dilutive effect on loss per share.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
10. Share-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 nine months ended September 30, 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.
During the nine months ended September 30, 2024, the Compensation Committee granted 995,620 restricted stock unit equity awards that 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.
In conjunction with the Equitrans Midstream Merger, the Company assumed all outstanding and unvested share-based compensation awards of Equitrans Midstream Corporation (Equitrans Midstream) and converted those assumed awards into 5,175,814 restricted stock unit equity awards that maintained the assumed awards' prior vesting schedules, assuming continued employment through each vesting date.
11. Acquisitions and Divestitures
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 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 for a purchase price of approximately $205 million (the NEPA Gathering System Acquisition), subject to customary post-closing adjustments. The NEPA Gathering System Acquisition was accounted for as an asset acquisition and, as such, its purchase price was allocated to property, plant and equipment.
NEPA Non-Operated Asset Divestiture. On May 31, 2024, the Company completed the divestiture (the NEPA Non-Operated Asset Divestiture) of an undivided 40% interest in the Company's non-operated natural gas assets in Northeast Pennsylvania with a carrying amount of approximately $522 million to Equinor USA Onshore Properties Inc. and its affiliates (collectively, the Equinor Parties). The carrying value was composed of approximately $549 million of property, plant and equipment, approximately $7 million of other current liabilities and approximately $20 million of other liabilities and credits. In exchange, as consideration, the Company received from the Equinor Parties cash of $500 million, subject to customary post-closing purchase price adjustments, certain upstream assets and the remaining 16.25% equity interest in the NEPA Gathering System. The total fair value of consideration received, net of liabilities assumed, was approximately $842 million, subject to customary post-closing purchase price adjustments, and included $413 million of property, plant and equipment.
As a result of the NEPA Non-Operated Asset Divestiture, for the nine months ended September 30, 2024, the Company recognized a gain of approximately $312 million in loss (gain) on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations, inclusive of an $8 million loss recognized for the three months ended September 30, 2024. The gain was calculated as the carrying value of divested assets less the fair value of consideration received, net of liabilities assumed and divestiture costs incurred of approximately $8 million. Cash proceeds from the NEPA Non-Operated Asset Divestiture were used to partly fund EQT's redemption of its 6.125% senior notes.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The fair values of the natural gas properties received as consideration for the NEPA Non-Operated Asset Divestiture were measured using discounted cash flow valuation techniques based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. Significant inputs include future commodity prices, projections of estimated quantities of reserves, estimated future rates of production, projected reserve recovery factors, timing and amount of future development and operating costs and a weighted average cost of capital.
The fair value of the undeveloped properties received as consideration for the NEPA Non-Operated Asset Divestiture were measured using the guideline transaction method based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. Significant inputs include future development plans from a market participant perspective.
The fair value of the interest in the NEPA Gathering System received as consideration for the NEPA Non-Operated Asset Divestiture was measured using the cost approach based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. Significant inputs include replacement cost for similar assets, relative age of the assets and potential economic or functional obsolescence.
See Note 5 for a description of the fair value hierarchy.
In addition, subsequent to the completion of the NEPA Non-Operated Asset Divestiture, the Company and the Equinor Parties entered into a gas buy-back agreement with respect to the assets received by the Company as consideration for the NEPA Non-Operated Asset Divestiture, whereby the Equinor Parties agreed to purchase a specified amount of natural gas from the Company through the first quarter of 2028.
Remaining NEPA Non-Operated Assets Divestiture. On October 29, 2024, the Company entered into an agreement with the Equinor Parties, pursuant to which the Company agreed to sell to the Equinor Parties the Company's remaining, undivided 60% interest in the Company's non-operated natural gas assets in Northeast Pennsylvania. In exchange, the Company will receive from the Equinor Parties $1.25 billion of cash (the Remaining NEPA Non-Operated Assets Divestiture). The Company intends to use the proceeds from the Remaining NEPA Non-Operated Assets Divestiture for repayment of the Company's debt. The Remaining NEPA Non-Operated Assets Divestiture is subject to customary closing adjustments, required regulatory approvals and clearances.
12. Equitrans Midstream Merger
On July 22, 2024, the Company completed the Equitrans Midstream Merger pursuant to the agreement and plan of merger dated March 10, 2024 (the Merger Agreement), by and among EQT, Humpty Merger Sub Inc., an indirect wholly-owned subsidiary of EQT (Merger Sub), Humpty Merger Sub LLC, an indirect wholly-owned subsidiary of EQT (LLC Sub), and Equitrans Midstream.
Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Equitrans Midstream (the First Merger), with Equitrans Midstream surviving as an indirect wholly-owned subsidiary of EQT (the First Step Surviving Corporation), and, as the second step in a single integrated transaction with the First Merger, the First Step Surviving Corporation merged 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.
Upon the closing of the Equitrans Midstream Merger, each share of common stock, no par value, of Equitrans Midstream (Equitrans Midstream common stock) that was 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) was converted into the right to receive, without interest, 0.3504 shares of EQT common stock, which totaled 152,427,848 shares of EQT common stock with an aggregate value of $5.5 billion, based on an EQT common stock share price of $35.88. In addition, in connection with the closing of the Equitrans Midstream Merger, the Company paid an aggregate of $79.5 million of equity consideration to employees of Equitrans Midstream who did not continue with the Company following the Equitrans Midstream Merger closing date.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Immediately prior to the completion of the Equitrans Midstream Merger, on July 22, 2024, using borrowings under EQT's revolving credit facility, the Company paid $685.3 million to effect the purchase and redemption of all of the issued and outstanding Series A Perpetual Convertible Preferred Shares, no par value, of Equitrans Midstream (the Equitrans Midstream preferred stock).
Immediately following the closing of the Equitrans Midstream Merger, on July 22, 2024, EQM repaid all of its outstanding obligations under EQM's revolving credit facility using cash on hand and cash contributions from EQT, and, thereafter, EQM terminated its revolving credit facility. See Note 7.
Upon completion of the Equitrans Midstream Merger, the pre-existing contractual relationships between the Company, as producer, and Equitrans Midstream, as gathering and transmission services provider, are treated as intercompany transactions on a consolidated basis and, as such, were effectively settled on July 22, 2024. Likewise, upon completion of the Equitrans Midstream Merger, EQT's note payable to EQM became an intercompany transaction on a consolidated basis and, as such, was effectively settled on July 22, 2024.
For the three and nine months ended September 30, 2024, the Company recognized $274.6 million and $298.7 million, respectively, of transaction costs related to the Equitrans Midstream Merger within other operating expenses in the Statements of Condensed Consolidated Operations.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Allocation of Purchase Price. The Equitrans Midstream Merger was accounted for as a business combination using the acquisition method. The table below summarizes the preliminary purchase price and estimated fair values of assets acquired and liabilities assumed as of July 22, 2024 with the excess of purchase price over estimated fair value of the identified net assets recognized as goodwill. Certain information necessary to complete the purchase price allocation is not yet available, including, but not limited to, final appraisals of assets acquired and liabilities assumed and final income tax computations. The Company expects to complete the purchase price allocation once it has received all necessary information, at which time the value of the assets acquired and liabilities assumed will be revised if necessary.
| Preliminary Purchase Price Allocation | |||||
| (Thousands) | |||||
| Consideration: | |||||
| Equity | $ | 5,548,608 | |||
| Cash (paid in lieu of fractional shares) | 29 | ||||
| Redemption of Equitrans Midstream preferred stock | 685,337 | ||||
| Settlement of pre-existing relationships | (237,662) | ||||
| Total consideration | $ | 5,996,312 | |||
| Fair value of assets acquired: | |||||
| Cash and cash equivalents | $ | 58,767 | |||
| Accounts receivable, net | 85,308 | ||||
| Income tax receivable | 2,192 | ||||
| Prepaid expenses and other | 22,048 | ||||
| Property, plant and equipment | 9,387,823 | ||||
| Investment in the MVP Joint Venture | 3,222,311 | ||||
| Net intangible assets | 250,000 | ||||
| Other assets | 240,248 | ||||
| Noncontrolling interest in consolidated subsidiaries | (144,894) | ||||
| Amount attributable to assets acquired | $ | 13,123,803 | |||
| Fair value of liabilities assumed: | |||||
| Current portion of debt | $ | 699,837 | |||
| Accounts payable | 65,761 | ||||
| Accrued interest | 47,996 | ||||
| Other current liabilities | 76,563 | ||||
| Revolving credit facility borrowings | 1,035,000 | ||||
| Senior notes | 6,273,941 | ||||
| Deferred income taxes | 961,894 | ||||
| Other liabilities and credits | 144,735 | ||||
| Amount attributable to liabilities assumed | $ | 9,305,727 | |||
| Goodwill | $ | 2,178,236 |
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The fair value of Equitrans Midstream's property, plant and equipment, which primarily includes gathering systems, transmission and storage systems and water infrastructure assets, and Equitrans Midstream's equity method investment in the MVP Joint Venture was measured using a combination of a cost and income approach based on inputs that are not observable in the market and, as such, are Level 3 fair value measurements. Significant inputs to the valuation of Equitrans Midstream's property, plant and equipment and investment in the MVP Joint Venture include replacement costs for similar assets, relative age of the assets, any potential economic or functional obsolescence associated with the assets, future revenue estimates and future operating cost assumptions and estimated weighted average costs of capital.
The fair value of the noncontrolling interest in Eureka Midstream Holdings was calculated using the noncontrolling interest ownership percentage and the enterprise value of Eureka Midstream Holdings, which was measured using a combination of a cost and income approach based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. Significant inputs to the valuation of the noncontrolling interest in Eureka Midstream Holdings include replacement costs for similar assets, relative age of the assets, any potential economic or functional obsolescence associated with the assets, future revenue estimates, future operating cost assumptions and estimated weighted average cost of capital.
As part of the preliminary purchase price allocation, the Company identified intangible assets related to certain of Equitrans Midstream's transmission services contracts. The fair value of the identified intangible assets was determined using the income approach based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. Significant inputs to the valuation of the identified intangible assets include future revenue estimates, future cost assumptions, estimated contract renewals, a discount rate assumption and an estimated required rate of return on the assets. The identified intangible assets are amortized over their useful life of 15 years on a straight-line basis, which reflects the pattern in which the Company expects to consume the economic benefits of the assets.
The fair value of EQM's senior notes was measured using established fair value methodology. Because not all of EQM's senior notes are actively traded, their fair value is a Level 2 fair value measurement. The difference between the fair value and principal amount of the assumed senior notes is amortized over the remaining life of the debt. The unamortized amount is presented as a reduction of debt in the Condensed Consolidated Balance Sheet. Because the carrying value of borrowings under EQM's revolving credit facility and Eureka's revolving credit facility approximated their respective fair value (as each facility's interest rate is based on prevailing market rates), the Company considers their fair values to be Level 1 fair value measurements.
Goodwill is attributable to the Company's qualitative assumptions of long-term value that the Equitrans Midstream Merger creates for EQT shareholders. Of the total goodwill, the Company attributed $1.3 billion to synergies expected from the vertical integration of the business, including from the elimination of contracted transportation and processing costs with Equitrans Midstream as the Company is unable to recognize intangible assets related to its significant long-term customer contracts with Equitrans Midstream as such contracts became intercompany transactions upon the closing of the Equitrans Midstream Merger. In addition, the Company attributed $0.9 billion of total goodwill to additional deferred tax liabilities that arose from the differences between the preliminary purchase price allocation based on fair value and tax basis that carried over from Equitrans Midstream to the Company. The Company allocated all of the goodwill from the Equitrans Midstream Merger to the Company's Transmission segment. Differences between the preliminary purchase price allocation and the final purchase price allocation may change the amount of goodwill recognized.
In conjunction with the Equitrans Midstream Merger, as of the Equitrans Midstream Merger closing date, the Company had unamortized carryover tax basis of $647.2 million of tax deductible goodwill.
See Note 5 for a description of the fair value hierarchy.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Post-Acquisition Operating Results. The table below summarizes amounts contributed by the assets acquired in the Equitrans Midstream Merger, inclusive of intercompany eliminations, to the Company's consolidated results for the period beginning on July 22, 2024 and ending on September 30, 2024.
| July 22, 2024 through September 30, 2024 | ||||||||
| (Thousands) | ||||||||
| Loss on derivatives | $ | (5,673) | ||||||
| Pipeline, net marketing services and other | 110,403 | |||||||
| Total operating revenues | $ | 104,730 | ||||||
| Net loss | $ | (159,313) | ||||||
| Less: Net income attributable to noncontrolling interests | 3,687 | |||||||
| Net loss attributable to EQT Corporation | $ | (163,000) |
Unaudited Pro Forma Information. The table below summarizes the Company's results as though the Equitrans Midstream Merger had been completed on January 1, 2023. Certain historical amounts were reclassified to conform to the Company's current financial presentation of operations. Such unaudited pro forma information is provided for informational purposes only and does not represent what consolidated results of operations would have been had the Equitrans Midstream Merger occurred on January 1, 2023 nor are they indicative of future consolidated results of operations.
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Thousands, except per share amounts) | |||||||||||
| Pro forma operating revenues: | |||||||||||
| Pro forma sales of natural gas, NGLs and oil | $ | 3,293,174 | $ | 3,680,566 | |||||||
| Pro forma gain on derivatives | 201,228 | 1,221,557 | |||||||||
| Pro forma pipeline, net marketing services and other | 454,136 | 456,082 | |||||||||
| Pro forma total operating revenues | $ | 3,948,538 | $ | 5,358,205 | |||||||
| Pro forma net income | $ | 19,543 | $ | 1,677,891 | |||||||
| Less: Pro forma net income attributable to noncontrolling interests | 17,696 | 21,891 | |||||||||
| Pro forma net income attributable to EQT Corporation | $ | 1,847 | $ | 1,656,000 | |||||||
| Pro forma income per share of common stock attributable to EQT Corporation: | |||||||||||
| Pro forma net income attributable to EQT Corporation – Basic | $ | 0.00 | $ | 4.49 | |||||||
| Pro forma net income attributable to EQT Corporation – Diluted | $ | 0.00 | $ | 4.14 |
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
13. Commitments and Contingencies
Purchase Obligations
The following table summarizes the Company's commitments to pay demand charges under long-term contracts and binding precedent agreements with various pipelines and charges for processing capacity. The table presents the year or years in which such commitments are to be paid as of September 30, 2024 and December 31, 2023.
| As of September 30, 2024 | As of December 31, 2023 | ||||||||||
| (Billions) | |||||||||||
| 2024 (a) | $ | 0.2 | $ | 1.8 | |||||||
| 2025 | 0.8 | 1.8 | |||||||||
| 2026 | 0.7 | 1.7 | |||||||||
| 2027 | 0.7 | 1.7 | |||||||||
| 2028 | 0.6 | 1.4 | |||||||||
| Thereafter | 4.2 | 13.6 | |||||||||
| Total | $ | 7.2 | $ | 22.0 |
(a)As of September 30, 2024, the noted amount represented commitments payable for the three months ended December 31, 2024; as of December 31, 2023, the noted amount represented commitments payable for the year ended December 31, 2024.
The following table summarizes the Company's commitments to pay for services related to its operations, including electric hydraulic fracturing services, and purchase equipment, materials and sand. The table presents the year or years in which such commitments are to be paid as of September 30, 2024 and December 31, 2023.
| As of September 30, 2024 | As of December 31, 2023 | ||||||||||
| (Millions) | |||||||||||
| 2024 (a) | $ | 60.7 | $ | 228.8 | |||||||
| 2025 | 194.6 | 164.5 | |||||||||
| 2026 | 148.4 | 138.0 | |||||||||
| 2027 | 88.2 | 111.0 | |||||||||
| 2028 | 37.9 | 72.9 | |||||||||
| Thereafter | — | 107.9 | |||||||||
| Total | $ | 529.8 | $ | 823.1 |
(a)As of September 30, 2024, the noted amount represented commitments payable for the three months ended December 31, 2024; as of December 31, 2023, the noted amount represented commitments payable for the year ended December 31, 2024.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Legal and Regulatory Proceedings
In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company. While the amounts claimed may be substantial, the Company is unable to predict with certainty the ultimate outcome of such claims and proceedings.
The Company evaluates its legal proceedings, including litigation and regulatory and governmental investigations and inquiries, on a regular basis and accrues a loss for such matters when the Company believes that it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. In such cases, if some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued; however, when no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. Any such accruals are adjusted thereafter as appropriate to reflect changed circumstances. In the event the Company determines that (i) it is probable a liability has been incurred but the amount of the loss cannot be reasonably estimated, or (ii) it less likely than probable but is reasonably possible that a liability has been incurred, then the Company is required to disclose the matter in its Annual Report on Form 10-K with any update thereto in this Quarterly Report on Form 10-Q, as applicable, although the Company is not required to accrue such loss.
When able, the Company determines an estimate of reasonably possible losses or ranges of reasonably possible losses, whether in excess of any related accrued loss or where there is no accrued loss, for legal proceedings. In instances where such estimates can be made, any such estimates are based on the Company's analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties and may change as new information is obtained.
The ultimate outcome of the matters described below is inherently uncertain. Furthermore, due to the inherent subjectivity of the assessments and unpredictability of outcomes of legal proceedings, any amounts accrued or estimated as possible losses may not represent the ultimate loss to the Company from the legal proceedings in question and the Company's exposure and ultimate losses may be higher, and possibly significantly so, than the amounts accrued or estimated.
Securities Class Action Litigation. On December 6, 2019, an amended putative class action complaint was filed in the United States District Court for the Western District of Pennsylvania by Cambridge Retirement System, Government of Guam Retirement Fund, Northeast Carpenters Annuity Fund, and Northeast Carpenters Pension Fund, on behalf of themselves and all those similarly situated, against EQT, and certain former executives and current and former board members of EQT (the Securities Class Action). The complaint alleges that certain statements made by EQT regarding its merger with Rice Energy Inc. in 2017 were materially false and violated various federal securities laws. Pursuant to the complaint, the plaintiffs seek compensatory or rescissory damages in an unspecified amount for all damages allegedly sustained by the class as a result of alleged negative impacts to EQT's stock price in 2018 and 2019.
Additionally, following the filing of the Securities Class Action complaint, several other lawsuits were filed in the United States District Court for the Western District of Pennsylvania and the Court of Common Pleas of Allegheny County, Pennsylvania by certain shareholders of EQT against EQT and certain former executives and current and former board members of EQT asserting substantially the same allegations as those raised in the Securities Class Action. These matters are currently pending, the majority of which have been stayed pending a ruling on dispositive motions in the Securities Class Action.
Following the commencement of the Securities Class Action, the parties engaged in fact and expert discovery. In June 2024, the discovery phase of the Securities Class Action was completed. On June 27, 2024, the parties to the Securities Class Action participated in a mediation (the Mediation), which did not result in resolution. A trial date for the Securities Class Action has not been determined.
EQT CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
In the second quarter of 2024, the Company recorded an accrual for estimated loss contingencies associated with the Securities Class Action in an amount equal to the settlement offer the Company tendered at the Mediation. Due to the inherent subjectivity of the assessments and unpredictability of outcomes of legal proceedings, the amount accrued for estimated losses associated with the Securities Class Action may not represent the ultimate loss to the Company, and the Company's exposure and ultimate losses may be higher, and possibly significantly so, than the amounts accrued or estimated. The amount accrued for such estimated losses is based on the Company's analysis of currently available information and is subject to significant judgment and a variety of assumptions and uncertainties and may change as new information is obtained. While the parties have completed discovery, various motions, including dispositive motions, have not yet been decided, the matters present meaningful legal uncertainties, and predicting the outcome depends on making assumptions about future decisions of courts and the behavior of other parties for which the Company does not currently have sufficient information. Given these uncertainties, the Company is unable at this time to reasonably estimate the range of possible additional losses above the amount accrued. The Company disputes the claims asserted in the Securities Class Action and related litigation and believes it has meritorious defenses, but unpredictability is inherent in litigation and the Company cannot predict the outcomes with any certainty.
See Note 11 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for additional discussion of the Company's commitments and contingencies, including certain other pending legal and regulatory proceedings and other contingent matters. As of September 30, 2024, except as disclosed herein, there have been no material changes to such matters disclosed therein.
EQT CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of Operations
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