UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~SEPTEMBER 30, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE TRANSITION PERIOD FROM TO

	COMMISSION FILE NUMBER 001-03551

EQT CORPORATION

(Exact name of registrant as specified in its charter)



PENNSYLVANIA		25-0464690
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

625 Liberty Avenue, Suite 1700, Pittsburgh, Pennsylvania		15222
(Address of principal executive offices)		(Zip code)

(412) 553-5700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer x		Accelerated Filer ¨	Emerging Growth Company ¨
Non-Accelerated Filer ¨	~~(Do not check if a~~ ~~smaller reporting company)~~	Smaller Reporting Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~March 31,~~September 30, 2018, ~~265~~254,426 (in ~~millions)~~thousands) shares of common stock, no par value, of the registrant were outstanding.

Table of Contents

EQT CORPORATION AND SUBSIDIARIES

Index



		Page No.
Part I. Financial Information:

Item 1.	Financial Statements (Unaudited):

	Statements of Consolidated Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2018 and 2017	3

	Statements of Consolidated Comprehensive Income for the Three and Nine Months Ended ~~March 31,~~September 30, 2018 and 2017	4

	Statements of Condensed Consolidated Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2018 and 2017	5

	Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2018 and December 31, 2017	6

	Statements of Condensed Consolidated Equity for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2018 and 2017	8

	Notes to the Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3029

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4849

Item 4.	Controls and Procedures	5051

Part II. Other Information:

Item 1.	Legal Proceedings	5152

Item 1A.	Risk Factors	5153

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5456

Item 6.	Exhibits	5557

Signature		5658

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EQT CORPORATION AND SUBSIDIARIES

Statements of Consolidated Operations (Unaudited)


	Three Months Ended March 31,					Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017		2018			2017			2018			2017
	(Thousands, except per share amounts)					(Thousands, except per share amounts)
Revenues:
Sales of natural gas, oil and NGLs	$	1,226,374		$	673,465	$	1,046,989		$	552,953		$	3,264,728		$	1,803,132
Pipeline, water and net marketing services	144,617			79,962		114,956			70,835			376,776			216,499
Gain on derivatives not designated as hedges	62,592			140,742
(Loss) gain on derivatives not designated as hedges						(3,075		)	35,625			5,620			222,693
Total operating revenues	1,433,583			894,169		1,158,870			659,413			3,647,124			2,242,324

Operating expenses:
Transportation and processing	190,140			133,706		186,407			136,219			576,597			404,743
Operation and maintenance	25,740			16,817		29,892			19,589			82,218			54,721
Production	60,123			45,672		42,751			39,513			149,471			129,461
Exploration	5,104			3,122		15,772			2,436			42,058			9,039
Selling, general and administrative	52,615			71,957		65,400			66,263			195,828			190,891
Depreciation, depletion and amortization	437,893			231,918
Impairment of long-lived assets	2,329,045			—
Depreciation and depletion						435,311			246,560			1,290,876			719,295
Impairment/loss on sale of long-lived assets						259,279			—			2,706,438			—
Transaction costs	35,711			—		31,506			10,806			93,176			15,044
Amortization of intangible assets	20,728			—		20,728			—			62,185			—
Total operating expenses	3,157,099			503,192		1,087,046			521,386			5,198,847			1,523,194

Operating (loss) income	(1,723,516		)	390,977
Operating income (loss)						71,824			138,027			(1,551,723		)	719,130

Other income	9,585			3,048		21,755			6,526			43,092			15,880
Interest expense	70,013			42,655		93,042			50,377			240,059			137,110
(Loss) income before income taxes	(1,783,944		)	351,370
Income (loss) before income taxes						537			94,176			(1,748,690		)	597,900
Income tax (benefit) expense	(338,965		)	100,665		(62,911		)	(11,281		)	(503,505		)	119,093
Net (loss) income	(1,444,979		)	250,705
Net income (loss)						63,448			105,457			(1,245,185		)	478,807
Less: Net income attributable to noncontrolling interests	141,015			86,713		103,141			82,117			362,696			250,349
Net (loss) income attributable to EQT Corporation	$	(1,585,994	)	$	163,992	$	(39,693	)	$	23,340		$	(1,607,881	)	$	228,458

Earnings per share of common stock attributable to EQT Corporation:
Basic:
Weighted average common stock outstanding	264,877			173,213		259,560			173,476			262,816			173,368
Net (loss) income	$	(5.99	)	$	0.95	$	(0.15	)	$	0.13		$	(6.12	)	$	1.32
Diluted:
Weighted average common stock outstanding	264,877			173,511		259,560			173,675			262,816			173,572
Net (loss) income	$	(5.99	)	$	0.95	$	(0.15	)	$	0.13		$	(6.12	)	$	1.32
Dividends declared per common share	$	0.03		$	0.03	$	0.03		$	0.03		$	0.09		$	0.09

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

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EQT CORPORATION AND SUBSIDIARIES

Statements of Consolidated Comprehensive (Loss) Income (Unaudited)

Three Months Ended March 31,
2018 2017
(Thousands)
Net (loss) income $ (1,444,979 ) $ 250,705

Other comprehensive (loss) income, net of tax:

Net change in cash flow hedges:

Natural gas, net of tax benefit of $(100) and $(584) (287 ) (888 )
Interest rate, net of tax expense of $18 and $25 44
36
Other post-retirement benefits liability adjustment, net of tax expense of $30 and $49 86
76
Other comprehensive loss (157 ) (776 )
Comprehensive (loss) income (1,445,136 ) 249,929
Less: Comprehensive income attributable to noncontrolling interests 141,015
86,713
Comprehensive (loss) income attributable to EQT Corporation $ (1,586,151 ) $ 163,216



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Thousands)
Net income (loss)	$	63,448		$	105,457		$	(1,245,185	)	$	478,807

Other comprehensive income (loss), net of tax:
Net change in cash flow hedges:
Natural gas, net of tax benefit of $(150), $(955), $(413), and $(2,640)	(430		)	(1,451		)	(1,183		)	(4,011		)
Interest rate, net of tax expense of $10, $26, $54, and $78	52			36			132			108
Other post-retirement benefits liability adjustment, net of tax expense of $29, $49, $89, and $148	86			77			258			230
Other comprehensive loss	(292		)	(1,338		)	(793		)	(3,673		)
Comprehensive income (loss)	63,156			104,119			(1,245,978		)	475,134
Less: Comprehensive income attributable to noncontrolling interests	103,141			82,117			362,696			250,349
Comprehensive (loss) income attributable to EQT Corporation	$	(39,985	)	$	22,002		$	(1,608,674	)	$	224,785

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

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EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated Cash Flows (Unaudited)


	Three Months Ended March 31,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Thousands)						(Thousands)
Cash flows from operating activities:
Net (loss) income	$	(1,444,979	)	$	250,705		$	(1,245,185	)	$	478,807
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Deferred income taxes	(338,734		)	100,665			(502,853		)	121,704
Depreciation, depletion and amortization	437,893			231,918
Depreciation and depletion							1,290,876			719,295
Amortization of intangibles	20,728			—			62,185			—
Amortization of financing costs	2,872			1,806			9,591			—
Asset and lease impairments	2,332,924			1,837			2,742,022			5,053
Reduction of allowance for doubtful accounts	(1,138		)	(1,607		)
Provision for (recoveries of) losses on accounts receivable							9			(1,230		)
Other income	(9,585		)	(3,048		)	(43,092		)	(15,880		)
Stock-based compensation expense	5,892			14,765			23,137			27,894
Gain on derivatives not designated as hedges	(62,592		)	(140,742		)	(5,620		)	(222,693		)
Cash settlements paid on derivatives not designated as hedges	(38,629		)	(8,967		)	(27,401		)	(6,837		)
Changes in other assets and liabilities:
Accounts receivable	62,423			64,374			(7,713		)	64,057
Accounts payable	307			(15,225		)	205,360			(15,446		)
Other items, net	(62,970		)	18,336			(55,926		)	56,648
Net cash provided by operating activities	904,412			514,817			2,445,390			1,211,372

Cash flows from investing activities:
Capital expenditures	(732,417		)	(311,399		)	(2,854,670		)	(1,152,865		)
Capital expenditures for acquisitions	—			(669,479		)	—			(818,957		)
Proceeds from Huron Divestiture (see Note Q)							523,595			—
Sales of investments in trading securities	—			283,758			—			283,758
Capital contributions to Mountain Valley Pipeline, LLC	(117,019		)	(19,760		)	(446,049		)	(103,448		)
Proceeds from sale of Permian Basin assets							57,664			—
Net cash used in investing activities	(849,436		)	(716,880		)	(2,719,460		)	(1,791,512		)

Cash flows from financing activities:
Proceeds from issuance of EQM Midstream Partners, LP (formerly known as EQT Midstream Partners, LP) Senior Notes							2,500,000			—
Increase in borrowings on credit facilities	1,217,500			—			6,219,500			334,000
Repayment of borrowings on credit facilities	(1,086,500		)	—			(7,508,500		)	(229,000		)
Dividends paid	(7,942		)	(5,206		)	(23,736		)	(15,620		)
Distributions to noncontrolling interests	(88,896		)	(54,636		)	(279,539		)	(172,498		)
Repayments and retirements of Senior Notes	(7,999		)	—			(7,999		)	—
Proceeds and excess tax benefits from awards under employee compensation plans	1,946			—
Proceeds from awards under employee compensation plans							1,946			—
Cash paid for taxes related to net settlement of share-based incentive awards	(20,009		)	(17,253		)	(21,910		)	(18,030		)
Debt discount and issuance costs and revolving credit facility origination fees							(34,249		)	(13,679		)
Acquisition of 25% of Strike Force Midstream LLC							(175,000		)	—
Repurchase and retirement of common stock							(538,876		)	—
Repurchase of common stock	(9		)	(7		)	(27		)	(15		)
Net cash used in financing activities	8,091			(77,102		)
Net cash provided by (used in) financing activities							131,610			(114,842		)
Net change in cash, cash equivalents and restricted cash	63,067			(279,165		)	(142,460		)	(694,982		)
Cash, cash equivalents and restricted cash at beginning of period	147,315			1,178,540			147,315			1,178,540
Cash and cash equivalents at end of period	$	210,382		$	899,375		$	4,855		$	483,558

Cash paid during the period for:
Interest, net of amount capitalized	$	27,519		$	17,845		$	163,688		$	113,618
Income taxes, net	$	(9	)	$	(87	)	$	193		$	9,702

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

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EQT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)


	March 31, 2018		December 31, 2017		September 30, 2018		December 31, 2017
	(Thousands)				(Thousands)
Assets

Current assets:
Cash and cash equivalents	$	210,382	$	147,315	$	4,855	$	147,315
Accounts receivable (less accumulated provision for doubtful accounts: $7,089 at March 31, 2018 and $8,226 at December 31, 2017)	674,104		725,236
Accounts receivable (less accumulated provision for doubtful accounts: $8,235 at September 30, 2018 and $8,226 at December 31, 2017)					882,386		725,236
Derivative instruments, at fair value	262,283		241,952		315,564		241,952
Prepaid expenses and other	44,812		48,552		31,853		48,552
Total current assets	1,191,581		1,163,055		1,234,658		1,163,055

Property, plant and equipment	27,083,946		30,990,309		28,022,769		30,990,309
Less: accumulated depreciation and depletion	4,208,106		6,105,294		4,892,875		6,105,294
Net property, plant and equipment	22,875,840		24,885,015		23,129,894		24,885,015

Intangible assets, net	715,631		736,360		674,175		736,360
Goodwill	1,998,726		1,998,726		1,998,726		1,998,726
Investment in nonconsolidated entity	546,428		460,546		1,300,430		460,546
Other assets	304,140		278,902		323,446		278,902
Total assets	$	27,632,346	$	29,522,604	$	28,661,329	$	29,522,604

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

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EQT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)


	March 31, 2018			December 31, 2017			September 30, 2018			December 31, 2017
	(Thousands)						(Thousands)
Liabilities and Shareholders’ Equity

Current liabilities:
Current portion of Senior Notes	$	—		$	7,999		$	699,527		$	7,999
Accounts payable	699,520			654,624			978,757			654,624
Derivative instruments, at fair value	59,198			139,089			183,677			139,089
Other current liabilities	349,958			430,525			784,115			430,525
Total current liabilities	1,108,676			1,232,237			2,646,076			1,232,237

Credit facility borrowings	1,892,000			1,761,000			472,000			1,761,000
Senior Notes	5,564,826			5,562,555			7,336,570			5,562,555
Deferred income taxes	1,431,148			1,768,900			1,212,867			1,768,900
Other liabilities and credits	771,934			783,299			776,424			783,299
Total liabilities	10,768,584			11,107,991			12,443,937			11,107,991

Equity:
Shareholders’ equity:
Common stock, no par value, authorized 320,000 shares, shares issued: 267,871 at March 31, 2018 and 267,871 at December 31, 2017	9,363,289			9,388,903
Treasury stock, shares at cost: 2,871 at March 31, 2018 (including 299 held in rabbi trust) and 3,551 at December 31, 2017 (including 253 held in rabbi trust)	(51,304		)	(63,602		)
Common stock, no par value, authorized 320,000 shares, shares issued: 257,225 at September 30, 2018 and 267,871 at December 31, 2017							8,684,169			9,388,903
Treasury stock, shares at cost: 2,799 at September 30, 2018 (including 299 held in rabbi trust) and 3,551 at December 31, 2017 (including 253 held in rabbi trust)							(50,014		)	(63,602		)
Retained earnings	2,406,952			3,996,775			2,369,271			3,996,775
Accumulated other comprehensive (loss)	(2,615		)	(2,458		)
Accumulated other comprehensive loss							(3,251		)	(2,458		)
Total common shareholders’ equity	11,716,322			13,319,618			11,000,175			13,319,618
Noncontrolling interests in consolidated subsidiaries	5,147,440			5,094,995			5,217,217			5,094,995
Total equity	16,863,762			18,414,613			16,217,392			18,414,613
Total liabilities and equity	$	27,632,346		$	29,522,604		$	28,661,329		$	29,522,604

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

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EQT CORPORATION AND SUBSIDIARIES

Statements of Condensed Consolidated Equity (Unaudited)


	Common Stock							Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests in Consolidated Subsidiaries							Common Stock									Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests in Consolidated Subsidiaries
	Shares Outstanding	No Par Value			Retained Earnings						Total Equity				Shares Outstanding			No Par Value				Retained Earnings					Total Equity
	(Thousands)																		(Thousands)
Balance, January 1, 2017	172,827	$	3,349,166		$	2,509,073				$	2,042					$	3,258,966			$	9,119,247		172,827		$	3,349,166			$	2,509,073		$	2,042		$	3,258,966	$	9,119,247
Comprehensive income (net of tax):
Net income					163,992							86,713				250,705									228,458						250,349			478,807
Net change in cash flow hedges:
Natural gas, net of tax benefit of $(584)								(888		)						(888		)
Interest rate, net of tax expense of $25								36								36
Other post-retirement benefits liability adjustment, net of tax expense of $49								76								76
Dividends ($0.03 per share)					(5,206		)									(5,206		)
Natural gas, net of tax benefit of $(2,640)																												(4,011		)				(4,011		)
Interest rate, net of tax expense of $78																												108						108
Other post-retirement benefits liability adjustment, net of tax expense of $148																												230						230
Dividends ($0.09 per share)																									(15,620		)							(15,620		)
Stock-based compensation plans, net	489	1,052										190				1,242			516			18,224									190			18,414
Distributions to noncontrolling interests ($0.85 and $0.177 per common unit from EQT Midstream Partners, LP and EQT GP Holdings, LP, respectively)												(54,636		)		(54,636		)
Balance, March 31, 2017	173,316	$	3,350,218		$	2,667,859		$	1,266			$	3,291,233			$	9,310,576
Distributions to noncontrolling interests ($2.675 and $0.578 per common unit from EQM Midstream Partners, LP and EQGP Holdings, LP (formerly known as EQT GP Holdings, LP), respectively)																															(172,498		)	(172,498		)
Balance, September 30, 2017																			173,343			$	3,367,390		$	2,721,911		$	(1,631	)	$	3,337,007		$	9,424,677

Balance, January 1, 2018	264,320	$	9,325,301		$	3,996,775		$	(2,458	)		$	5,094,995			$	18,414,613		264,320			$	9,325,301		$	3,996,775		$	(2,458	)	$	5,094,995		$	18,414,613
Comprehensive income (net of tax):
Net (loss) income					(1,585,994		)					141,015				(1,444,979		)							(1,607,881		)				362,696			(1,245,185		)
Net change in cash flow hedges:
Natural gas, net of tax benefit of $(100)								(287		)						(287		)
Interest rate, net of tax expense of $18								44								44
Other post-retirement benefit liability adjustment, net of tax expense of $30								86								86
Dividends ($0.03 per share)					(7,942		)									(7,942		)
Natural gas, net of tax benefit of $(413)																												(1,183		)				(1,183		)
Interest rate, net of tax expense of $54																												132						132
Other post-retirement benefit liability adjustment, net of tax expense of $89																												258						258
Dividends ($0.09 per share)																									(23,736		)							(23,736		)
Stock-based compensation plans, net	680	(13,365		)								390				(12,975		)	752			4,472									953			5,425
Distributions to noncontrolling interests ($1.025, $0.244 and $0.2917 per common unit from EQT Midstream Partners, LP, EQT GP Holdings, LP, and Rice Midstream Partners LP, respectively)												(88,896		)		(88,896		)
Distributions to noncontrolling interests ($3.18, $0.808 and $0.5966 per common unit from EQM Midstream Partners, LP, EQGP Holdings, LP, and RM Partners LP (formerly known as Rice Midstream Partners LP), respectively)																															(279,539		)	(279,539		)
Change in accounting principle (a)					4,113											4,113									4,113									4,113
Repurchase and retirement of common stock																			(10,646	)		(538,876		)										(538,876		)
Purchase of Strike Force Midstream LLC noncontrolling interests																						1,818									(176,818		)	(175,000		)
Change in ownership of consolidated subsidiaries		49										(64		)		(15		)				(158,560		)							214,930			56,370
Balance, March 31, 2018	265,000	$	9,311,985		$	2,406,952		$	(2,615	)		$	5,147,440			$	16,863,762
Balance, September 30, 2018																			254,426			$	8,634,155		$	2,369,271		$	(3,251	)	$	5,217,217		$	16,217,392

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

(a) Related to adoption of ASU No. 2016-01. See ~~Note~~Notes K and S for additional information.

Table of Contents

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

A. Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of ~~March 31,~~September 30, 2018 and December 31, 2017, ~~and~~ the results of its operations for the three and nine month periods ended September 30, 2018 and 2017 and its cash flows and equity for the ~~three~~nine month periods ended ~~March 31,~~September 30, 2018 and 2017. Certain previously reported amounts have been reclassified to conform to the current year presentation. In this Quarterly Report on Form 10-Q, references to “we,” “us,” “our,” “EQT,” “EQT Corporation,” and the “Company” refer collectively to EQT Corporation and its consolidated subsidiaries.

~~Prior to the Rice Merger (as defined in Note~~ B), the Company reported its results of operations through three business segments: EQT Production, EQT Gathering and EQT Transmission. These reporting segments reflected the Company's lines of business and were reported in the same manner in which the Company evaluated its operating performance through September 30, 2017. Following the Rice Merger, the Company adjusted its internal reporting structure to incorporate the newly acquired assets. The Company now conducts its business through five business segments: EQT Production, EQM Gathering (formerly known as EQT Gathering), EQM Transmission (formerly known as EQT Transmission), RMP Gathering and RMP Water.

In February 2018, the Company's Board of Directors unanimously approved a plan to separate its upstream and midstream businesses, creating a standalone publicly traded corporation (NewCo) that will focus on midstream operations. NewCo will own the midstream interests held by EQT. The separation is intended to qualify as tax-free to EQT shareholders for U.S. federal income tax purposes and is expected to be completed by the end of the third quarter 2018. Under the separation plan, EQT shareholders will retain their shares of EQT stock and receive a pro-rata share of the new independent midstream company. The Company also announced that it plans to pursue (i) a sale of Rice retained midstream assets acquired by EQT in connection with the Rice Merger to EQM; (ii) a merger of EQM and RMP; and (iii) a sale of RMP’s incentive distribution rights to EQGP.

The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and related footnotes as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

B.~~Rice Merger~~During the third quarter of 2018, the Company repurchased 9,946,382 shares at an average price of $50.29 pursuant to the Company's previously announced $500 million share repurchase program. This exhausted the Company's share repurchase authorization under such program.

On November 13, 2017, the Company completed its previously announced acquisition of Rice Energy Inc. (Rice) pursuant to the Agreement and Plan of Merger, dated June 19, 2017 (as amended, the Rice Merger Agreement), by and among the Company, Rice and a wholly owned indirect subsidiary of the Company (RE Merger Sub). Pursuant to the terms of the Rice Merger Agreement, on November 13, 2017, RE Merger Sub merged with and into Rice (the Rice Merger) with Rice continuing as the surviving corporation and a wholly owned indirect subsidiary of the Company. Immediately ~~after the effective time of the Rice Merger (the Effective Time),~~thereafter, Rice merged with and into another wholly owned indirect subsidiary of the Company.

As a result of the Rice Merger, the Company also acquired Rice's interests in RM Partners LP (formerly known as Rice Midstream Partners LPLP) (RMP) ~~(NYSE: RMP), as disclosed in~~. See Note E.

The ~~Company recorded $15.9 million in acquisition-related expenses related to~~purchase price allocation for the Rice Merger during the three months ended March 31, 2018. The Rice Merger acquisition-related expenses included $6.8 million for compensation arrangements and $5.9 million for professional fees and are included in transaction costs in the Statement of Consolidated Operations.

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~~EQT Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Allocation of Purchase Price~~

~~The Rice Merger was accounted for as a business combination, using the acquisition method. The following table summarizes the~~remains preliminary ~~purchase price and the preliminary estimated fair values of assets and liabilities assumed~~ as of November 13, 2017, with any excess of the purchase price over the estimated fair value of the identified net assets acquired recorded as goodwill. Approximately, $549.2 million and $1,449.5 million of goodwill has been allocated to EQT Production and RMP Gathering, respectively. Goodwill primarily relates to the value of RMP that cannot be assigned to other assets recognized under GAAP as substantially all of RMP's revenues are from affiliates, deferred tax liabilities arising from differences between the purchase price allocated to Rice’s assets and liabilities based on fair value and the tax basis of these assets and liabilities that carried over to the Company in the Rice Merger, and the Company’s ability to control the Rice acquired assets and recognize synergies. Certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, title defect analysis and final appraisals of assets acquired and liabilities assumed and the finalization of certain income tax computations. The Company expects to complete the purchase price allocation once the Company has received all of the necessary information, at which time the value of the assets and liabilities will be revised as appropriate.

(in thousands) Preliminary Purchase Price Allocation
Consideration given:
Equity consideration $ 5,943,289
Cash consideration 1,299,407
Buyout of preferred equity in Rice Midstream Holdings LLC 429,708
Buyout of Common Units in RMGP 125,828
Settlement of pre-existing relationships (14,699 )
   Total consideration 7,783,533

Fair value of liabilities assumed:
Current liabilities 566,774
Long-term debt 2,151,656
Deferred income taxes 1,106,000
Other long-term liabilities 67,533
   Amount attributable to liabilities assumed 3,891,963

Fair value of assets acquired:
Cash 294,671
Accounts receivable 337,007
Current assets 109,465
Net property, plant and equipment 9,903,938
Intangible assets 747,300
Noncontrolling interests (1,715,611 )
   Amount attributable to assets acquired 9,676,770
Goodwill $ 1,998,726

The fair values of natural gas and oil properties were based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair values of natural gas and oil properties were measured using valuation techniques that convert future cash flows into a single discounted amount. Significant inputs to the valuation of natural gas and oil properties included estimates of: (i) recoverable reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted average cost of capital. These inputs required significant judgments and estimates by management, are still under review, and may be subject to change. These inputs have a significant impact on the valuation of oil and gas properties and future changes may occur. The fair value of undeveloped property was determined based upon a market approach of comparable transactions using Level 3 inputs.

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~~EQT Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The estimated fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, were estimated using the cost approach. Significant unobservable inputs in the estimate of fair value include management’s assumptions about the replacement costs for similar assets, the relative age of the acquired assets and any potential economic or functional obsolescence associated with the acquired assets. As a result, the estimated fair value of the midstream facilities and equipment represents a Level 3 fair value measurement.

The non-controlling interest in the acquired business is comprised of the limited partner units in RMP which were not acquired by EQT as well as the non-controlling interest in Strike Force Midstream LLC (Strike Force Midstream). The RMP limited partner units are actively traded on the New York Stock Exchange, and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value measurement. The non-controlling interest in Strike Force Midstream was calculated based on the enterprise value of Strike Force Midstream and the percentage ownership not acquired by EQT. Significant unobservable inputs in the estimate of the enterprise value of Strike Force Midstream include future revenue estimates and future cost assumptions. As a result, the non-controlling interest in Strike Force Midstream represents a Level 3 fair value measurement.

As part of the preliminary purchase price allocation, the Company identified intangible assets for customer relationships with third party customers and non-compete agreements with certain former Rice executives. The fair value of the identified intangible assets was determined using the income approach, which requires a forecast of the expected future cash flows generated and an estimated market-based weighted average cost of capital. Significant unobservable inputs in the determination of fair value include future production levels, future revenue estimates, future cost assumptions, the estimated probability that former executives would compete in the absence of such non-compete agreements and estimated customer retention rates. As a result, the estimated fair value of the identified intangible assets represents a Level 3 fair value measurement. Differences between the preliminary purchase price allocation and the final purchase price allocation may change the amount of intangible assets and goodwill ultimately recognized in conjunction with the Rice Merger.

~~In conjunction with the Rice Merger, the Company has carryover tax basis of $422.5 million of tax deductible goodwill.~~September 30, 2018.

Unaudited Pro Forma Information

The following unaudited pro forma combined financial information presents the Company’s results as though the Rice Merger had been completed at January 1, 2017. The pro forma combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the Rice Merger taken place on January 1, 2017; furthermore, the financial information is not intended to be a projection of future results.


(in thousands, except per share data) (unaudited)	Three Months Ended March 31, 2017		Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Pro forma operating revenues	$	1,266,383	$	1,042,363		$	3,491,790
Pro forma net income	$	236,070	$	120,301		$	602,684
Pro forma net income attributable to noncontrolling interests	$	109,085	$	(118,353	)	$	(338,546	)
Pro forma net income attributable to EQT	$	126,985	$	1,948		$	264,138
Pro forma income per share (basic)	$	0.48	$	0.01		$	1.00
Pro forma income per share (diluted)	$	0.48	$	—		$	0.99

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EQT Corporation and Subsidiaries

Notes to ~~the~~ Condensed Consolidated Financial Statements (Unaudited)

B.Midstream Streamlining Transactions and Financing

In February 2018, the Company's Board of Directors unanimously approved a plan to separate its upstream and midstream businesses, creating a standalone publicly traded corporation, Equitrans Midstream Corporation (Equitrans Midstream), which will focus on midstream operations (the Separation). Equitrans Midstream will own the midstream interests held by EQT. The Separation is intended to qualify as tax-free to EQT shareholders for U.S. federal income tax purposes. Under the Separation plan, EQT shareholders will retain their shares of the Company's stock and receive a pro-rata distribution of 80.1% of the outstanding shares of Equitrans Midstream common stock. In connection with announcing the planned Separation, the Company also announced its plans to pursue (i) a sale of Rice retained midstream assets acquired by EQT in connection with the Rice Merger to EQM Midstream Partners, LP (formerly known as EQT Midstream Partners, LP) (EQM) (NYSE: EQM), (ii) a merger of EQM and RMP, and (iii) a sale of RMP’s incentive distribution rights (RMP IDRs) to EQGP Holdings, LP (formerly known as EQT GP Holdings, LP) (EQGP) (NYSE: EQGP)((i), (ii) and (iii) collectively, the Midstream Streamlining Transactions).

On April 25, 2018, EQT, Rice Midstream Holdings LLC (Rice Midstream), a wholly owned subsidiary of the Company, EQM and EQM Gathering Holdings, LLC (EQM Gathering), a wholly owned subsidiary of EQM, entered into a contribution and sale agreement pursuant to which EQM Gathering agreed to acquire all the outstanding limited liability company interests in each of (i) EQM West Virginia Midstream Holdings LLC (formerly known as Rice West Virginia Midstream LLC) (Rice West Virginia), (ii) EQM Olympus Midstream LLC (formerly known as Rice Olympus Midstream LLC) (Rice Olympus) and (iii) Strike Force Midstream Holdings LLC (Strike Force Holdings), which owns a 75% limited liability company interest in Strike Force Midstream LLC (Strike Force Midstream), in exchange for an aggregate of 5,889,282 EQM common units and cash consideration of $1.15 billion, plus working capital adjustments (the Drop-Down Transaction). The Drop-Down Transaction was completed on May 22, 2018 with an effective date of May 1, 2018. In connection with the Drop-Down Transaction, the Company recorded a $15.5 million gain to additional paid-in-capital, a decrease in noncontrolling interest in consolidated subsidiary of $20.3 million and an increase to deferred tax liability of $4.8 million.

On May 1, 2018, pursuant to the Purchase and Sale Agreement dated April 25, 2018, by and among EQM, EQM Gathering, Gulfport Energy Corporation (Gulfport) and an affiliate of Gulfport, EQM Gathering acquired the remaining 25% limited liability company interest in Strike Force Midstream not owned by Strike Force Holdings for $175 million (the Gulfport Transaction). As a result, EQM has owned 100% of Strike Force Midstream since May 1, 2018.

On May 22, 2018, pursuant to an Incentive Distribution Rights Purchase and Sale Agreement dated April 25, 2018, by and among the Company, Rice Midstream GP Holdings LP (Rice Midstream GP Holdings), a wholly owned subsidiary of the Company that owned the RMP IDRs, and EQGP, EQGP acquired all of the issued and outstanding RMP IDRs in exchange for 36,293,766 EQGP common units (the RMP IDR Purchase). As a result of the RMP IDR Purchase, EQT's percentage ownership of the outstanding EQGP common units increased from approximately 90.1% to approximately 91.3%. In connection with the RMP IDR Purchase, the Company recorded a $35.1 million loss to additional paid-in-capital, an increase in noncontrolling interest in consolidated subsidiary of $46.1 million and a decrease to deferred tax liability of $11.0 million.

On April 25, 2018, EQM entered into an Agreement and Plan of Merger (the Midstream Merger Agreement) with RMP, EQM Midstream Management LLC (formerly known as Rice Midstream Management LLC), the general partner of RMP (the RMP General Partner), EQM Midstream Services, LLC (formerly known as EQT Midstream Services, LLC), the general partner of EQM (the EQM General Partner), EQM Acquisition Sub, LLC, a wholly owned subsidiary of EQM (Merger Sub), EQM GP Acquisition Sub, LLC, a wholly owned subsidiary of EQM (GP Merger Sub), and, solely for certain limited purposes set forth therein, the Company. Pursuant to the Midstream Merger Agreement, on July 23, 2018, Merger Sub and GP Merger Sub merged with and into RMP and the RMP General Partner, respectively, with RMP and the RMP General Partner surviving as wholly owned subsidiaries of EQM (the Midstream Mergers). Pursuant to the Midstream Merger Agreement, each of the RMP common units issued and outstanding immediately prior to the effective time of the Midstream Mergers was converted into the right to receive 0.3319 EQM common units (the Midstream Mergers Consideration), the issued and outstanding RMP IDRs were canceled and each outstanding award of phantom units in respect of RMP common units fully vested and converted into the right to receive the Midstream Mergers Consideration, less applicable tax withholding, in respect of each RMP common unit subject thereto. The aggregate Midstream Mergers Consideration consisted of approximately 34 million EQM common units. Following completion of the Midstream Mergers, RMP's common units ceased to be publicly traded. An indirect wholly owned subsidiary of the Company received 9,554,530 EQM common units as Midstream Mergers Consideration. In connection with the Midstream Mergers, the Company recorded a $138.8 million loss to additional paid-in capital, an increase in noncontrolling interest in consolidated subsidiary of $189.1 million and a decrease to deferred tax liability of approximately $50.3 million.

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EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Also in connection with the completion of the Midstream Mergers, on July 23, 2018, EQM repaid approximately $260 million of borrowings outstanding under the Credit Agreement, dated as of December 22, 2014, by and among RMP, as parent guarantor, RM Operating LLC (formerly known as Rice Midstream OpCo LLC), a wholly owned subsidiary of RMP (RMP OpCo), as borrower, Wells Fargo Bank, N.A., as administrative agent, and the lenders and other parties from time to time party thereto (the RMP Credit Agreement), and the RMP Credit Agreement was terminated.

On April 25, 2018, EQM entered a $2.5 billion unsecured multi-draw 364-day term loan facility with a syndicate of lenders (the EQM Term Loan Facility). The EQM Term Loan Facility was used to fund the cash consideration for the Drop-Down Transaction, to repay borrowings under EQM’s $1 billion credit facility, and for other general partnership purposes. During the second quarter of 2018, the balance outstanding under the EQM Term Loan Facility was repaid, and the EQM Term Loan Facility was terminated on June 25, 2018 in connection with EQM's issuance of the EQM 2018 Senior Notes (described in the following section).

During the second quarter of 2018, EQM issued 4.75% senior notes due July 15, 2023 in the aggregate principal amount of $1.1 billion, 5.50% senior notes due July 15, 2028 in the aggregate principal amount of $850 million and 6.50% senior notes due July 15, 2048 in the aggregate principal amount of $550 million (collectively, the EQM 2018 Senior Notes). The offering of the EQM 2018 Senior Notes resulted in net proceeds of approximately $2,465.8 million, inclusive of a discount of $11.8 million and estimated debt issuance costs of $22.4 million. The net proceeds were used to repay the balance outstanding under the EQM Term Loan Facility and the RMP Credit Agreement and the remainder is expected to be used for general partnership purposes. The EQM 2018 Senior Notes were issued pursuant to new supplemental indentures to EQM's existing indenture dated August 1, 2014. The EQM 2018 Senior Notes contain covenants that limit EQM's ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of substantially all of EQM's assets.

C. ~~EQT GP~~EQGP Holdings, LP

In January 2015, the Company formed ~~EQT GP Holdings, LP (EQGP) (NYSE: EQGP), a Delaware limited partnership,~~EQGP to own the Company's partnership interests in ~~EQT Midstream Partners, LP (EQM) (NYSE: EQM).~~EQM. As of September 30, 2018, EQT owns ~~239,715,000~~276,008,766 EQGP common units, which represent a ~~90.1%~~91.3% limited partner interest, and the entire non-economic general partner interest in EQGP. EQGP owned the following EQM partnership interests as of ~~March 31,~~September 30, 2018, which represent EQGP’s only cash-generating assets: 21,811,643 EQM common units, representing a ~~26.6%~~17.9% limited partner interest in EQM; 1,443,015 EQM general partner units, representing a ~~1.8%~~1.2% general partner interest in EQM; and all of EQM’s incentive distribution rights ~~or IDRs,~~(IDRs), which entitle EQGP to receive up to 48.0% of all incremental cash distributed in a quarter after $0.5250 has been distributed in respect of each common unit and general partner unit of EQM for that quarter. Through EQGP's general partner interest, limited partner interest and IDRs in EQM, EQGP has a controlling financial interest in EQM; therefore, EQGP consolidates EQM. The Company is the ultimate parent company of EQGP and EQM.

The Company consolidates the results of EQGP but records an income tax provision only on its ownership percentage of EQGP earnings. The Company records the noncontrolling interest of the EQGP and EQM public limited partners (i.e., the EQGP limited partner interests not owned by the Company and the EQM limited partner interests not owned by EQGP) in its financial statements.

On ~~April 24,~~October 23, 2018, the Board of Directors of EQGP's general partner declared a cash distribution to EQGP’s unitholders for the ~~first~~third quarter of 2018 of ~~$0.258~~$0.315 per common unit, or approximately ~~$68.7~~$95.3 million. The distribution will be paid on ~~May 24,~~November 14, 2018 to unitholders of record, including the Company, at the close of business on ~~May 4,~~November 2, 2018. Based on the EQGP common units outstanding on October 25, 2018, the cash distributions by EQGP to EQT for the third quarter 2018 will be approximately $87.0 million.

D. ~~EQT~~EQM Midstream Partners, LP

In January 2012, the Company formed EQM to own, operate, acquire and develop midstream assets in the Appalachian Basin. EQM provides midstream services to the Company and third parties. EQM is consolidated in the Company’s financial statements. The Company records the noncontrolling interest of the EQM public limited partners in its financial statements.

In addition to the EQM common units owned by EQGP, as of September 30, 2018, EQT owned 5,889,282 EQM common units representing an additional 6.7% limited partner interest in EQM.

On ~~April 24,~~October 23, 2018, the Board of Directors of EQM's general partner declared a cash distribution to EQM’s unitholders for the ~~first~~third quarter of 2018 of ~~$1.065~~$1.115 per common unit. The cash distribution will be paid on ~~May 15,~~November 14, 2018 to unitholders of record, including EQGP, atas of the close of business on ~~May 4,~~November 2, 2018. Based on the ~~80,591,366~~ EQM common units outstanding on ~~April 26,~~October 25, 2018, the cash distributions by EQM to EQGP for the ~~first~~third quarter 2018 will be approximately ~~$69.7~~$97.8 million consisting of: ~~$23.2~~$24.3 million in respect of its limited partner interest, ~~$2.3~~$2.5 million in respect of its general partner interest and ~~$44.2~~$71.0 million in respect of its IDRs. ~~These~~The distribution amounts to EQGP related to its general partner interest and IDRs in EQM are subject to change if EQM issues additional common units on or prior to the record date for the ~~first~~third quarter 2018 distribution. Based on the EQM

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EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

common units outstanding on October 25, 2018, the cash distributions by EQM to EQT for the third quarter 2018 will be approximately $17.2 million.

E. ~~Rice Midstream~~RM Partners LP

In connection with the Rice Merger, the Company acquired a 28.1% limited partner interest, all of the IDRs and the entire non-economic general partner interest in RMP. The Company is the ultimate parent of RMP, and the Company records the noncontrolling interest of the RMP public limited partners in its financial statements. RMP owns, operates and develops midstream assets in the Appalachian Basin. RMP's ~~assets consist of gathering pipelines and compressor stations,~~common units ceased to be publicly traded as ~~well as water handling and treatment facilities. RMP provides gathering and water services to the Company and third parties.~~

As a result of the ~~declaration of RMP’s fourth quarter 2017 cash distribution, which was paid on February 14, 2018,~~Midstream Mergers. See the ~~subordination period with respect to RMP’s subordinated units expired on February 15, 2018 and all~~discussion of the ~~outstanding~~ RMP ~~subordinated units converted into RMP common units on a one-for-one basis on that day.~~IDR Purchase and Midstream Mergers in Note B.

On April 24, 2018, the Board of Directors of the general partner of RMP declared a cash distribution to RMP’s unitholders for the first quarter of 2018 of $0.3049 per common unit. The cash distribution will be paid on May 15, 2018 to unitholders of record at the close of business on May 4, 2018. Based on the 102,303,108 RMP common units outstanding on April 26, 2018, distributions by RMP to the Company for the first quarter 2018 will be approximately $13.2 million, consisting of $8.8 million in respect of its limited partner interest and $4.4 million in respect of its IDRs in RMP. The distribution amounts related to IDRs in RMP are subject to change if RMP issues additional common units on or prior to the record date for the first quarter 2018 distribution.

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~~EQT Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

F. Revenue from Contracts with Customers

As discussed in Note S, the Company adopted Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018 using the modified retrospective method of adoption. Adoption of the ASU did not require an adjustment to the opening balance of equity and did not materially change the Company's amount and timing of revenues. The Company applied the ASU only to contracts that were not completed as of January 1, 2018. The Company has elected to exclude all taxes from the measurement of transaction price.

For the sale of natural gas, oil and natural gas liquids (NGLs), the Company generally considers the delivery of each unit (MMBtu or Bbl) to be a separate performance obligation that is satisfied upon delivery. These contracts typically require payment within 25 days of the end of the calendar month in which the gas 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 contain fixed consideration (i.e. fixed price contracts or contracts with a fixed differential to ~~NYMEX~~New York Mercantile Exchange (NYMEX) or index prices). 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, oil and NGLs are satisfied at a point in time because the customer obtains control and legal title of the asset when the natural gas, oil or NGL is delivered to the designated sales point.

The sales of natural gas, oil and NGLs as presented on the Statements of Consolidated Operations represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling natural gas, oil and NGLs on behalf of royalty owners or working interest owners, ~~EQT~~the Company is acting as an agent and thus reports the revenue on a net basis.

The Company provides gathering, transmission and storage services in two manners: firm service and interruptible service. Firm service contracts are typically long term and include firm reservation fees, which are fixed, monthly charges for the guaranteed reservation of pipeline or storage capacity. Volumetric based fees under firm contracts include usage fees and charges for actual volumes transported, gathered or stored in excess of firm contracted volume. Interruptible service contracts include volumetric based fees, which are charges for the volume of gas actually gathered, transported or stored and do not ~~guaranty~~guarantee access to the pipeline or storage facility. These contracts can be short or long term. ~~Volumetric based fees can also be charged under firm contracts for actual volumes transported, gathered or stored in excess of the firm contracted volume.~~ Firm and interruptible contracts are billed at the end of each calendar month, with payment typically due within 21 days.

Based on total projected contractual revenues and including contracts associated with expected future capacity from expansion projects that are not yet fully constructed but for which EQM has entered into firm contracts, EQM's firm gathering contracts and firm transmission and storage contracts had weighted average remaining terms of approximately 8 and 15 years, respectively, as of December 31, 2017.

Under a firm contract, the Company has a stand-ready obligation to provide the service over the life of the contract. The performance obligation for firm reservation fee ~~revenues~~revenue 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 volumetric based ~~fee revenues~~fees under firm and interruptible contracts is generally satisfied upon the Company's monthly billing to the customer for actual volumes gathered, transported or stored during the month. The amount billed 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.

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EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Certain of EQM's gas gathering agreements are structured with minimum volume commitments (MVC), which specify minimum quantities for which a customer will be charged regardless of actual quantities gathered under the contract. Revenue is recognized for MVCs when the performance obligation has been met, which is the earlier of when the gas is gathered or when it is remote that the producer will be able to meet its MVC.

Water services revenues primarily represent fees charged by ~~RMP~~EQM for the delivery of fresh water to a customer at a specified delivery point. All of ~~RMP’s~~EQM’s water services revenues are generated pursuant to variable price per volume contracts with customers in the Appalachian Basin. For water services contracts, the only performance obligation in each contract is for ~~RMP~~EQM to provide water (usually a minimum daily volume) to the customer at any designated delivery point. This performance obligation is generally satisfied upon ~~RMP’s~~EQM’s monthly billing to the customer for the volume of water provided during the month. For water services arrangements, the customer is typically invoiced on a monthly basis with payment due 21 days after the receipt of the invoice.

Because the Company's performance obligations have been satisfied and an unconditional right to consideration exists as of the balance sheet date, the Company has recognized amounts due from contracts with customers of ~~$438.6~~$488.7 million as accounts receivable within the Condensed Consolidated Balance Sheet.

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~~EQT Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The table below provides disaggregated information regarding the Company’s revenues, presented consistently with the Company’s segment reporting. Certain contracts that provide for the release of capacity that is not used to transport the Company’s produced volumes were deemed to be outside the scope of Revenue from Contracts with Customers. The cost of, and recoveries on, that capacity are reported within pipeline and net marketing services at EQT Production. Derivative contracts are also outside the scope of Revenue from Contracts with Customers.


Three Months Ended March 31, 2018	Revenues from contracts with customers			Other sources of revenue		Total
Three Months Ended September 30, 2018									Revenues from contracts with customers			Other sources of revenue			Total
	(Thousands)								(Thousands)
Natural gas sales	$	1,089,760		$	—	$	1,089,760		$	931,976		$	—		$	931,976
NGLs sales	125,468			—		125,468			106,621			—			106,621
Oil sales	11,146			—		11,146			8,392			—			8,392
Sales of natural gas, oil and NGLs	$	1,226,374		$	—	$	1,226,374		$	1,046,989		$	—		$	1,046,989

Pipeline and net marketing services at EQT Production	$	38,843		$	20,793	$	59,636		$	2,605		$	3,527		$	6,132
EQM Gathering:
Firm reservation fee revenues	109,933			—		109,933			112,598			—			112,598
Volumetric based fee revenues:
Usage fees under firm contracts	12,108			—		12,108			8,661			—			8,661
Usage fees under interruptible contracts	3,867			—		3,867			131,602			—			131,602
EQM Transmission:
Firm reservation fee revenues	97,775			—		97,775			82,669			—			82,669
Volumetric based fee revenues:
Usage fees under firm contracts	3,822			—		3,822			5,331			—			5,331
Usage fees under interruptible contracts	5,337			—		5,337			1,350			—			1,350
RMP Gathering:
Gathering revenues	52,730			—		52,730
Compression revenues	8,771			—		8,771
Water services at RMP Water	22,963			—		22,963
Water services at EQM Water									22,373			—			22,373
Intersegment eliminations	(232,325		)	—		(232,325		)	(255,760		)	—			(255,760		)
Pipeline, water and net marketing services	$	123,824		$	20,793	$	144,617		$	111,429		$	3,527		$	114,956

Gain on derivatives not designated as hedges	$	—		$	62,592	$	62,592
Loss on derivatives not designated as hedges									$	—		$	(3,075	)	$	(3,075	)

Total operating revenues	$	1,350,198		$	83,385	$	1,433,583		$	1,158,418		$	452		$	1,158,870

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EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Nine Months Ended September 30, 2018	Revenues from contracts with customers			Other sources of revenue		Total
	(Thousands)
Natural gas sales	$	2,877,660		$	—	$	2,877,660
NGLs sales	357,746			—		357,746
Oil sales	29,322			—		29,322
Sales of natural gas, oil and NGLs	$	3,264,728		$	—	$	3,264,728

Pipeline and net marketing services at EQT Production	$	14,273		$	28,109	$	42,382
EQM Gathering:
Firm reservation fee revenues	334,233			—		334,233
Volumetric based fee revenues:
Usage fees under firm contracts	30,725			—		30,725
Usage fees under interruptible contracts	366,482			—		366,482
EQM Transmission:
Firm reservation fee revenues	262,666			—		262,666
Volumetric based fee revenues:
Usage fees under firm contracts	13,981			—		13,981
Usage fees under interruptible contracts	8,782			—		8,782
Water services at EQM Water	93,438			—		93,438
Intersegment eliminations	(775,913		)	—		(775,913		)
Pipeline, water and net marketing services	$	348,667		$	28,109	$	376,776

Gain on derivatives not designated as hedges	$	—		$	5,620	$	5,620

Total operating revenues	$	3,613,395		$	33,729	$	3,647,124

The following table includes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration. The table excludes all contracts that qualified for the exception to the relative standalone selling price method. Gathering firm reservation fees and transmission and storage firm reservation fees include amounts related to affiliate contracts.


	2018 (a)		2019		2020		2021		2022		Thereafter		Total		2018 (a)		2019		2020		2021		2022		Thereafter		Total
	(Thousands)														(Thousands)
Natural gas sales	$	54,946	$	15,207	$	—	$	—	$	—	$	—	$	70,153	$	20,173	$	32,322	$	1,237	$	—	$	—	$	—	$	53,732
Gathering firm reservation fees	$	338,978	$	449,124	$	448,896	$	448,896	$	447,607	$	1,485,787	$	3,619,288	$	114,771	$	481,425	$	557,352	$	567,351	$	566,062	$	2,834,111	$	5,121,072
Gathering revenues supported by MVCs															$	—	$	65,700	$	71,370	$	71,175	$	71,175	$	136,875	$	416,295
Transmission and storage firm reservation fees	$	294,044	$	384,018	$	381,788	$	377,619	$	372,544	$	3,039,812	$	4,849,825	$	94,077	$	346,893	$	344,328	$	339,588	$	334,522	$	2,477,808	$	3,937,216

(a) ~~April~~October 1 through December 31.

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EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

G. Investment in Nonconsolidated Entity

~~As of March 31, 2018, EQM owned a 45.5% interest (the MVP Interest) in~~The Mountain Valley Pipeline, LLC (MVP Joint Venture)~~. The MVP Joint Venture~~ is constructing the Mountain Valley Pipeline (MVP), an estimated 300-mile natural gas interstate pipeline spanning from northern West Virginia to southern Virginia. EQM is the operator of the MVP and owned a 45.5% interest in the MVP Joint Venture as of September 30, 2018. The MVP Joint Venture ~~has secured a total of 2.0 Bcf per day of 20-year firm capacity commitments, including a 1.29 Bcf per day firm capacity commitment by the Company.~~

In October 2017, the Federal Energy Regulatory Commission (FERC) issued the Certificate of Public Convenience and Necessity for the project. In early 2018, the MVP Joint Venture received limited notice to proceed with certain construction activities from the FERC. The MVP Joint Venture commenced construction on the MVP in the first quarter of 2018, which is ~~targeted to be placed in-service during the fourth quarter of 2018.~~

~~The MVP Joint Venture has been determined to be~~ a variable interest entity because it has insufficient equity to finance its activities during the construction stage of the project. EQM is not the primary beneficiary because it does not have the power to direct the activities of the MVP Joint Venture that most significantly impact its economic performance. Certain business decisions require the approval of owners holding more than a 66 2/3% interest in the MVP Joint Venture and no one member owns more than a 66 2/3% interest. The MVP Joint Venture is an equity method investment for accounting purposes as EQM has the ability to exercise significant influence over operating and financial policies of the MVP Joint Venture. As currently designed, the MVP is estimated to cost a total of approximately $4.6 billion, excluding Allowance for Funds Used During Construction (AFUDC), with EQM funding approximately $2.2 billion through capital contributions made to the MVP Joint Venture, which includes approximately $65 million in excess of EQM's ownership interest. In 2018, EQM expects to provide capital contributions of $0.8 billion to $1.0 billion to the MVP Joint Venture.

In ~~February~~September 2018, the MVP Joint Venture issued a capital call notice to MVP Holdco, LLC (MVP Holdco), a direct wholly owned subsidiary of EQM, for ~~$65.8~~$456.0 million, of which $175.2 million was paid as of October 2018, and $280.8 million is expected to be paid in ~~May~~the fourth quarter of 2018. In addition, in September 2018, the MVP Joint Venture issued a capital call notice to MVP Holdco for $7.7 million for funding of the MVP Southgate project that is expected to be paid in the fourth quarter of 2018. The capital contribution ~~payable has~~payables have been reflected on the ~~consolidated balance sheet~~Condensed Consolidated Balance Sheet as of ~~March 31,~~September 30, 2018 with a corresponding ~~increase~~increases to the Company's investment in the MVP Joint Venture.

~~EQM’s ownership share~~Equity income is EQM's portion of the MVP Joint Venture's ~~earnings for~~AFUDC on construction of the three months ended March 31, 2018 and 2017 was $8.8 million and $4.3 million, respectively. These earnings are reported in other income on the Statements of Consolidated Operations for the periods presented.MVP.

As of ~~March 31,~~September 30, 2018, EQM had issued a $91 million performance guarantee in favor of the MVP Joint ~~Venture to provide~~Venture. The guarantee provides performance assurances ~~for~~of MVP Holdco's obligations to fund its proportionate share of the MVP construction ~~budget for the MVP.~~budget. As of ~~March 31,~~September 30, 2018, EQM's maximum financial statement exposure related to the MVP Joint Venture was approximately ~~$637~~$1,391 million, which consists of the investment in nonconsolidated entity balance on the Condensed Consolidated Balance Sheet as of ~~March 31,~~September 30, 2018 and amounts ~~which~~that could have become due under EQM's performance guarantee as of that date. Following the completion of the Separation, EQM expects the MVP Joint Venture guarantee will be approximately $345 million based on MVP Holdco's share of the estimated remaining MVP construction budget and terms of the agreement.

In April 2018, the MVP Joint Venture announced the MVP Southgate project, a proposed 70-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. This MVP Southgate project is anchored by a firm capacity commitment from PSNC Energy. The preliminary MVP Southgate project cost estimate is $350 million to $500 million, which is expected to be spent in 2019 and 2020. As of September 30, 2018, EQM had a 32.7% ownership interest in the MVP Southgate project and will operate the pipeline. Subject to approval by the FERC, the MVP Southgate project has a targeted in-service date of the fourth quarter 2020.

H. Consolidated Variable Interest Entities

~~The~~As of September 30, 2018, the Company determined EQGP ~~EQM, RMP~~ and ~~Strike Force Midstream~~EQM to be variable interest entities. In addition, as of December 31, 2017, RMP was also a variable interest entity. As discussed in Note B, on July 23, 2018, pursuant to the Midstream Merger Agreement, RMP and RMP's general partner were acquired by EQM and became wholly owned subsidiaries of EQM. Through EQT's ownership and control of EQGP's general partner, ~~RMP's general partner,~~ EQM's general partner and ~~Strike Force Midstream Holdings LLC (Strike Force Midstream Holdings), which owns a 75% limited liability company interest in Strike Force Midstream,~~RMP's general partner, EQT has or had the power to direct the activities that most significantly impact the economic performance of EQGP, EQM ~~RMP~~ and ~~Strike Force Midstream.~~RMP. In addition, through EQT's limited partner interest in EQGP and EQGP's general partner interest, limited partner interest and IDRs in EQM, EQT has the obligation to absorb the losses of EQGP and EQM and the right to receive benefits from EQGP and EQM, in accordance with such interests. Furthermore, through EQT's limited partner interest and IDRs in RMP, ~~and majority ownership interest in Strike Force Midstream,~~ EQT ~~has~~had the obligation to absorb the losses of RMP and ~~Strike Force Midstream and~~ the right to receive benefits from RMP, ~~and Strike Force Midstream,~~ in accordance with such interests. As EQT has or had a controlling financial interest in, and is the primary beneficiary of, EQGP, EQM ~~RMP~~ and ~~Strike Force Midstream,~~RMP, EQT consolidates EQGP, EQM ~~RMP~~ and ~~Strike Force Midstream.~~did consolidate RMP. See Note 13 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for additional information related to the consolidated variable interest entities.

The risks associated with the operations of EQGP, EQM and RMP are discussed in their respective Annual Reports on Form 10-K for the year ended December 31, 2017, as updated by any Quarterly Reports on Form 10-Q. The risks associated with the operations of Strike Force Midstream are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, as updated by any Quarterly Reports on Form 10-Q. See further discussion of the impact that EQT's ownership and control of EQGP, EQM and RMP ~~and Strike Force Midstream~~ have or had on EQT's financial position, results of operations and ~~cash flows included in EQT's Annual Report on Form 10-K for the year ended December 31, 2017, including in the section captioned~~

Table of Contents

EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~"Management's~~cash flows included in EQT's Annual Report on Form 10-K for the year ended December 31, 2017, including in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations." See Notes C, D, and E for further discussion of EQGP, EQM and RMP, respectively.

The following table presents amounts included in the Company's Condensed Consolidated Balance Sheets that were for the use or obligation of EQGP or EQM as of ~~March 31,~~September 30, 2018 and December 31, 2017.


Classification	March 31, 2018		December 31, 2017		September 30, 2018		December 31, 2017
	(Thousands)				(Thousands)
Assets:
Cash and cash equivalents	$	9,301	$	2,857	$	6,062	$	2,857
Accounts receivable	29,481		28,804		58,358		28,804
Prepaid expenses and other	12,860		8,470		4,798		8,470
Property, plant and equipment, net	2,864,040		2,804,059		5,608,358		2,804,059
Goodwill					1,384,872		—
Intangible assets, net					586,500		—
Investment in nonconsolidated entity					1,300,430		460,546
Other assets	568,594		483,004		23,599		22,458
Liabilities:
Accounts payable	$	48,212	$	47,042	$	134,027	$	47,042
Other current liabilities	92,667		133,531		526,299		133,531
Credit facility borrowings	317,000		180,000		22,000		180,000
Senior Notes	987,756		987,352		3,455,296		987,352
Other liabilities and credits	20,880		20,273		31,010		20,273

The following table summarizes EQGP's Statements of Consolidated Operations and Cash Flows for the three and nine months ended ~~March 31,~~September 30, 2018 and ~~2017, inclusive of affiliate amounts.~~2017.


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017
	(Thousands)						(Thousands)
Operating revenues	$	232,842		$	200,072		$	364,584		$	207,193		$	1,110,307		$	609,585
Operating expenses	55,727			55,976			133,665			62,230			370,880			180,218
Other expenses	1,108			2,108			23,534			2,556			37,632			6,418
Net income	$	176,007		$	141,988		$	207,385		$	142,407		$	701,795		$	422,949

Net cash provided by operating activities	$	181,755		$	160,769		$	422,938		$	159,911		$	863,009		$	479,566
Net cash used in investing activities	(199,954		)	(81,687		)	(575,624		)	(117,637		)	(2,252,293		)	(324,936		)
Net cash provided by (used in) financing activities	24,643			(96,767		)
Net cash (used in) provided by financing activities							(536,246		)	(48,128		)	1,340,446			(208,150		)

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EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents ~~summary information of assets and liabilities of RMP~~amounts included in the Company’s Condensed Consolidated Balance ~~Sheets~~Sheet that ~~are~~is for the use or obligation of RMP as of ~~March 31, 2018 and~~ December 31, 2017.


Classification	March 31, 2018		December 31, 2017		December 31, 2017
	(Thousands)				(Thousands)
Assets:
Cash and cash equivalents	$	46,518	$	10,538	$	10,538
Accounts receivable	7,205		12,246		12,246
Prepaid expenses and other	2,208		1,327		1,327
Property, plant and equipment, net	1,440,196		1,431,802		1,431,802
Goodwill	1,346,918		1,346,918		1,346,918
Other assets	6,123		—
Liabilities:
Accounts payable	$	22,312	$	24,634	$	24,634
Other current liabilities	4,530		4,200		4,200
Credit facility borrowings	325,000		286,000		286,000
Other liabilities and credits	9,465		9,360		9,360

I.Financial Information by Business Segment

Prior to the Rice Merger, the Company reported its results of operations through three business segments: EQT Production, EQT Gathering and EQT Transmission. These reporting segments reflected the Company's lines of business and were reported in the same manner in which the Company evaluated its operating performance through September 30, 2017. Following the Rice Merger, the Company adjusted its internal reporting structure to incorporate the newly acquired assets. The ~~following table summarizes RMP’s Statements~~Company conducted its business through five business segments: EQT Production, EQM Gathering (formerly known as EQT Gathering), EQM Transmission (formerly known as EQT Transmission), RMP Gathering and RMP Water. On July 23, 2018, pursuant to the Midstream Merger Agreement, RMP and the RMP General Partner each became wholly owned subsidiaries of ~~Consolidated Operations~~EQM as a result of the Midstream Mergers. The Company now conducts its business through four business segments: EQT Production, EQM Gathering, EQM Transmission and ~~Cash Flows for~~EQM Water.

Rice Olympus, Strike Force Holdings and Rice West Virginia were businesses and the ~~three months ended March 31, 2018 and 2017, inclusive of affiliate amounts.~~

Three Months Ended March 31,
2018 2017
(Thousands)
Operating revenues $ 84,464
$ —
Operating expenses 28,999
—
Other expenses 1,948
—
Net income $ 53,517
$ —

Net cash provided by operating activities $ 62,536
$ —
Net cash used in investing activities (32,712 ) —
Net cash provided by financing activities 6,156
—

~~The following table presents summary information of~~Drop-Down Transaction was a transaction between entities under common control; therefore, EQM recorded the assets and liabilities of ~~Strike Force Midstream~~these entities at their carrying amounts to EQT on the effective date of the transaction. EQM also recast its consolidated financial statements to retrospectively reflect the pre-acquisition results as if the entities were owned by EQM from the date of the Rice Merger, November 13, 2017, as that is the date those entities came under the common control of EQT.

In addition, the assets associated with the investment in the MVP Joint Venture were included within the headquarters segment assets balance prior to June 30, 2018. The investment in the MVP Joint Venture is now included in the ~~Company’s Condensed Consolidated Balance Sheets that are for~~transmission segment as this segment classification better aligns with the ~~use or obligation~~ultimate operations of ~~Strike Force Midstream as of March 31, 2018 and~~the MVP. Segment asset balances at December 31, ~~2017.~~2017 have been reclassified to conform to this presentation.

Classification March 31, 2018 December 31, 2017
(Thousands)
Assets:

Cash and cash equivalents $ 22,136
$ 43,938
Accounts receivable 20,193
12,477
Other current assets 107
—
Property, plant and equipment, net 377,112
356,346
Intangible assets, net 450,291
457,992
Liabilities:
Other current liabilities 12,874
24,341



Three Months Ended September 30, 2018	EQT Production			EQM Gathering		EQM Transmission		EQM Water		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	1,046,989		$	—	$	—	$	—	$	—		$	1,046,989
Pipeline, water and net marketing services	6,132			252,861		89,350		22,373		(255,760		)	114,956
Loss on derivatives not designated as hedges	(3,075		)	—		—		—		—			(3,075		)
Total operating revenues	$	1,050,046		$	252,861	$	89,350	$	22,373	$	(255,760	)	$	1,158,870

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EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

~~The following table summarizes Strike Force Midstream’s Statements of Consolidated Operations and Cash Flows the three months ended March 31, 2018 and 2017, inclusive of affiliate amounts.~~

Three Months Ended March 31,
2018 2017
(Thousands)
Operating revenues $ 22,810
$ —
Operating expenses 12,953
—
Other (income) (116 ) —
Net income $ 9,973
$ —

Net cash provided by operating activities $ 13,620
$ —
Net cash (used in) investing activities (32,423 ) —
Net cash (used in) financing activities (3,000 ) —

I.~~Financial Information by Business Segment~~

~~As discussed in Note~~ A, the Company adjusted its internal reporting structure following the Rice Merger to incorporate the newly acquired assets. The Company now conducts its business through five business segments: EQT Production, EQM Gathering, EQM Transmission, RMP Gathering and RMP Water.

Three Months Ended March 31, 2018 EQT Production EQM Gathering EQM Transmission RMP
Gathering RMP
Water Intersegment Eliminations EQT Corporation
Revenues: (Thousands)
Sales of natural gas, oil and NGLs $ 1,226,374
$ —
$ —
$ —
$ —
$ —
$ 1,226,374
Pipeline, water and net marketing services 59,636
125,908
106,934
61,501
22,963
(232,325 ) 144,617
Gain on derivatives not designated as hedges 62,592
—
—
—
—
—
62,592
Total operating revenues $ 1,348,602
$ 125,908
$ 106,934
$ 61,501
$ 22,963
$ (232,325 ) $ 1,433,583


Three Months Ended March 31, 2017	EQT Production		EQM Gathering		EQM Transmission		Intersegment Eliminations			EQT Corporation
Three Months Ended September 30, 2017												EQT Production		EQM Gathering		EQM Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)											(Thousands)
Sales of natural gas, oil and NGLs	$	673,465	$	—	$	—	$	—		$	673,465	$	552,953	$	—	$	—	$	—		$	552,953
Pipeline and net marketing services	14,455		102,329		97,743		(134,565		)	79,962		9,140		116,522		89,771		(144,598		)	70,835
Gain on derivatives not designated as hedges	140,742		—		—		—			140,742		35,625		—		—		—			35,625
Total operating revenues	$	828,662	$	102,329	$	97,743	$	(134,565	)	$	894,169	$	597,718	$	116,522	$	89,771	$	(144,598	)	$	659,413




Nine Months Ended September 30, 2018	EQT Production		EQM Gathering		EQM Transmission		EQM Water		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	3,264,728	$	—	$	—	$	—	$	—		$	3,264,728
Pipeline and net marketing services	42,382		731,440		285,429		93,438		(775,913		)	376,776
Gain on derivatives not designated as hedges	5,620		—		—		—		—			5,620
Total operating revenues	$	3,312,730	$	731,440	$	285,429	$	93,438	$	(775,913	)	$	3,647,124




Nine Months Ended September 30, 2017	EQT Production		EQM Gathering		EQM Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	1,803,132	$	—	$	—	$	—		$	1,803,132
Pipeline and net marketing services	31,656		330,996		272,184		(418,337		)	216,499
Gain on derivatives not designated as hedges	222,693		—		—		—			222,693
Total operating revenues	$	2,057,481	$	330,996	$	272,184	$	(418,337	)	$	2,242,324



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Thousands)
Operating income (loss):
EQT Production (a)	$	(121,678	)	$	12,201		$	(2,127,323	)	$	322,634
EQM Gathering	177,902			85,932			510,755			243,061
EQM Transmission	58,691			59,770			198,784			189,237
EQM Water	(3,093		)	—			35,627			—
Unallocated expenses and intersegment eliminations (b)	(39,998		)	(19,876		)	(169,566		)	(35,802		)
Total operating income (loss)	$	71,824		$	138,027		$	(1,551,723	)	$	719,130



(a)									Impairment of long-lived assets of $0.3 billion and $2.7 billion are included in EQT Production operating income for the three and nine months ended September 30, 2018, respectively. See Note Q.



(b)									Unallocated expenses consist of compensation expense, administrative costs and the amortization expense related to non-compete agreements with former Rice executives. Administrative costs include transaction costs of $29.3 million and $85.7 million for the three and nine months ended September 30, 2018, respectively. Amortization expense related to non-compete agreements with former Rice executives was $10.4 million and $31.0 million for the three and nine months ended September 30, 2018, respectively.

Intersegment eliminations include the elimination of profit on water services that are provided to EQT Production and capitalized as part of development costs of $3.2 million and $50.7 million for the three and nine months ended September 30, 2018, respectively.

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EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Three Months Ended March 31,
2018 2017
(Thousands)
Operating (loss) income:

EQT Production (a) $ (1,893,807 ) $ 257,549
EQM Gathering 98,891
73,704
EQM Transmission 79,451
71,604
RMP Gathering 44,095
—
RMP Water 11,370
—
Unallocated expenses and intersegment eliminations (b) (63,516 ) (11,880 )
Total operating (loss) income $ (1,723,516 ) $ 390,977


~~(a)~~	~~Impairment of long-lived assets of $2.3 billion is included in EQT Production operating income for the three months ended March 31, 2018. See Note~~ Q.


~~(b)~~	Unallocated expenses consist primarily of compensation expense and administrative costs, including transaction costs of $35.7 million. Intersegment eliminations include water services that are provided to EQT Production and capitalized as part of development costs.

Reconciliation of operating income (loss) ~~income~~ to net income (loss) ~~income:~~:


	Three Months Ended March 31,					Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017		2018			2017			2018			2017
	(Thousands)					(Thousands)
Total operating (loss) income	$	(1,723,516	)	$	390,977
Total operating income (loss)						$	71,824		$	138,027		$	(1,551,723	)	$	719,130
Other income	9,585			3,048		21,755			6,526			43,092			15,880
Interest expense	70,013			42,655		93,042			50,377			240,059			137,110
Income tax (benefit) expense	(338,965		)	100,665		(62,911		)	(11,281		)	(503,505		)	119,093
Net (loss) income	$	(1,444,979	)	$	250,705
Net income (loss)						$	63,448		$	105,457		$	(1,245,185	)	$	478,807

March 31, 2018 December 31, 2017
(Thousands)
Segment assets:

EQT Production $ 20,633,392
$ 22,711,854
EQM Gathering 1,449,871
1,411,857
EQM Transmission 1,475,214
1,462,881
RMP Gathering 2,741,744
2,720,305
RMP Water 163,458
185,079
Total operating segments 26,463,679
28,491,976
Headquarters assets, including cash and short-term investments 1,168,667
1,030,628
Total assets $ 27,632,346
$ 29,522,604

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~



	September 30, 2018		December 31, 2017
	(Thousands)
Segment assets:
EQT Production	$	19,278,308	$	21,015,132
EQM Gathering	5,994,891		5,681,404
EQM Transmission	2,813,644		1,923,427
EQM Water	141,403		185,079
Total operating segments	28,228,246		28,805,042
Headquarters assets, including cash and short-term investments	433,083		717,562
Total assets	$	28,661,329	$	29,522,604


	Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
	2018			2017		2018		2017		2018			2017
	(Thousands)					(Thousands)
Depreciation, depletion and amortization: (c)
Depreciation and depletion: (c)
EQT Production	$	400,058		$	211,097	$	391,083	$	224,103	$	1,161,718		$	654,411
EQM Gathering	10,738			8,860		25,359		9,983		72,309			28,398
EQM Transmission	12,441			11,687		12,357		12,261		37,228			35,793
RMP Gathering	8,124			—
RMP Water	5,771			—
EQM Water						5,851		—		17,420			—
Other	761			274		661		213		2,201			693
Total	$	437,893		$	231,918	$	435,311	$	246,560	$	1,290,876		$	719,295

Expenditures for segment assets (d):
Expenditures for segment assets: (d)
EQT Production (e)	$	675,028		$	945,458	$	855,494	$	449,303	$	2,225,435		$	1,850,482
EQM Gathering	68,933			48,838		194,477		48,182		515,072			150,728
EQM Transmission	18,929			21,389		37,626		22,312		84,517			73,679
RMP Gathering	20,940			—
RMP Water	2,375			—
EQM Water						7,981		—		17,358			—
Other and intersegment eliminations (f)	(21,223		)	1,628		10,284		2,502		(32,864		)	7,097
Total	$	764,982		$	1,017,313	$	1,105,862	$	522,299	$	2,809,518		$	2,081,986


(c)	Excludes amortization of intangible assets.

(d)

Includes the capitalized portion of non-cash stock-based compensation costs, non-cash acquisitions and the impact of capital accruals. The impact of accrued capital expenditures includes the reversal of the prior period accrual as well as the current period estimate, both of which are non-cash items. The net impact of these non-cash items was $(51.8) million and $44.3 million for the three months ended September 30, 2018 and 2017, respectively, and $(45.2) million and $102.7 million for the nine months ended September 30, 2018 and 2017, respectively. These non-cash items are excluded from capital expenditures on the Statements of Condensed Consolidated Cash Flows. Expenditures for segment assets does not include consideration for the Rice Merger.

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EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(e)

~~Expenditures for segment assets in the EQT Production segment~~The three and nine months ended September 30, 2017 included ~~$36.8~~$7.8 million and $42.7 million for fill-ins and bolt-ons associated with legacy EQT acreage for the three months ended March 31, 2018 and 2017, respectively. Expenditures included $44.3 million associated with retained midstream assets during the three months ended March 31, 2018. The three months ended March 31, 2017 included $669.5$819.0 million of cash capital expenditures, respectively, and ~~$15.4~~the nine months ended September 30, 2017 included $7.5 million of non-cash capital expenditures for the acquisitions discussed in Note P.


(f)	Intersegment eliminations include profit on water services that are provided to EQT Production and capitalized as part of development costs.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

J. Derivative Instruments

The Company’s primary market risk exposure is the volatility of future prices for natural gas and NGLs, which can affect the operating results of the Company primarily at EQT Production. The Company’s overall objective in its hedging program is to protect cash flows from undue exposure to the risk of changing commodity prices.

The Company primarily uses over the counter (OTC) derivative commodity instruments, primarily swap, collar and option agreements that are typically placed with financial institutions. The creditworthiness of all counterparties is regularly monitored. Swap agreements involve payments to or receipts from counterparties based on the differential between two prices for the commodity. Collar agreements require the counterparty to pay the Company if the index price falls below the floor price and the Company to pay the counterparty if the index price rises above the cap price. The Company ~~also~~ sells call options that require the Company to pay the counterparty if the index price rises above the strike price and purchases call options that require the counterparty to pay the Company if the index price rises above the strike price. The Company engages in basis swaps to protect earnings from undue exposure to the risk of geographic disparities in commodity prices and interest rate swaps to hedge exposure to fluctuations in interest rates. The Company ~~has~~ also ~~engaged~~engages in a limited number of ~~swaptions and power-indexed natural gas sales and swaps that are accounted for as derivative commodity instruments.~~swaptions.

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.

The Company discontinued cash flow hedge accounting in 2014; therefore, all changes in fair value of the Company’s derivative instruments are recognized within operating revenues in the Statements of Consolidated Operations.

In connection with the Rice Merger, the Company assumed all outstanding derivative commodity instruments held by Rice. The assets and liabilities assumed were recognized at fair value at the closing date and subsequent changes in fair value were recognized within operating revenues in the Statements of Consolidated Operations. The derivative commodity instruments assumed were substantially similar to instruments previously held by the Company.

Contracts which result in physical delivery of a commodity expected to be used or sold by the Company in the normal course of business are designated as normal purchases and sales and are exempt from derivative accounting.

OTC arrangements 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 operations in the accompanying Statements of Condensed Consolidated Cash Flows.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of equity production and portions of its basis exposure covering approximately ~~2,314~~3,005 Bcf of natural gas and ~~1,238~~2,058 Mbbls of NGLs as of ~~March 31,~~September 30, 2018, and 2,148 Bcf of natural gas and 1,460 Mbbls of NGLs as of December 31, 2017. The open positions at ~~March 31,~~September 30, 2018 and December 31, 2017 had maturities extending through December ~~2023~~2024 and December 2022, respectively.

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 reflects the impact of netting agreements and margin deposits on gross derivative assets and liabilities as of ~~March 31,~~September 30, 2018 and December 31, 2017.

As of March 31, 2018
Derivative
instruments,
recorded in the
Condensed
Consolidated
Balance
Sheet, gross

Derivative
instruments
subject to
master
netting
agreements

Margin
deposits
remitted to
counterparties

Derivative
instruments, net
(Thousands)
Asset derivatives:

Derivative instruments, at fair value $ 262,283
$ (50,056 ) $ (601 ) $ 211,626
Liability derivatives:

Derivative instruments, at fair value $ 59,198
$ (50,056 ) $ —
$ 9,142
The margin deposit within the table as of September 30, 2018 represents funds remitted to a broker for exchange traded derivative commodity instruments.

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Notes to the Condensed Consolidated Financial Statements (Unaudited)



As of September 30, 2018	Derivative instruments, recorded in the Condensed Consolidated Balance Sheet, gross		Derivative instruments subject to master netting agreements			Margin deposits remitted to counterparties			Derivative instruments, net
	(Thousands)
Asset derivatives:
Derivative instruments, at fair value	$	315,564	$	(104,559	)	$	—		$	211,005
Liability derivatives:
Derivative instruments, at fair value	$	183,677	$	(104,559	)	$	(11,110	)	$	68,008



As of December 31, 2017	Derivative instruments, recorded in the Condensed Consolidated Balance Sheet, gross		Derivative instruments subject to master netting agreements			Margin deposits remitted to counterparties		Derivative instruments, net
	(Thousands)
Asset derivatives:
Derivative instruments, at fair value	$	241,952	$	(86,856	)	$	—	$	155,096
Liability derivatives:
Derivative instruments, at fair value	$	139,089	$	(86,856	)	$	—	$	52,233

Certain of the Company’s OTC derivative instrument contracts provide that if the Company’s credit ratings by Standard & Poor’s Rating Service (S&P) or Moody’s Investors Service (Moody’s) are lowered below investment grade, additional collateral must be deposited with the counterparty if the amounts outstanding on those contracts exceed certain thresholds. The additional collateral can be up to 100% of the derivative liability. As of ~~March 31,~~September 30, 2018, the aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a net liability position was ~~$9.0~~$109.2 million, for which the Company had no collateral posted on ~~March 31,~~September 30, 2018. If the Company’s credit rating by S&P or Moody’s had been downgraded below investment grade on ~~March 31,~~September 30, 2018, the Company would not have been required to post any additional collateral under the agreements with the respective counterparties. The required margin on the Company’s derivative instruments is subject to significant change as a result of factors other than credit rating, such as gas prices and credit thresholds set forth in agreements between the hedging counterparties and the Company. Investment grade refers to the quality of the Company’s credit as assessed by one or more credit rating agencies. The Company’s senior unsecured debt was rated BBB by S&P and Baa3 by Moody’s at ~~March 31,~~September 30, 2018. In order to be considered investment grade, the Company must be rated BBB- or higher by S&P and Baa3 or higher by Moody’s. Anything below these ratings is considered non-investment grade. See also "Security Ratings and Financing Triggers" under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

K. Fair Value Measurements

The Company records its financial instruments, principally derivative instruments, at fair value in its Condensed Consolidated Balance Sheets. The Company estimates the fair value using quoted market prices, where available. If quoted market prices are not available, fair value is based upon models that use market-based parameters as inputs, including forward curves, discount rates, volatilities and nonperformance risk. Nonperformance risk considers the effect of the Company’s credit standing on the fair value of liabilities and the effect of the counterparty’s credit standing on the fair value of assets. The Company estimates nonperformance risk by analyzing publicly available market information, including a comparison of the yield on debt instruments with credit ratings similar to the Company’s or counterparty’s credit rating and the yield of a risk-free instrument and credit default swaps rates where available.

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 in Level 2 primarily include the Company’s swap, collar and option agreements.

Table of Contents

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Exchange traded commodity swaps are included in Level 1. The fair value of the commodity swaps included in Level 2 is based on standard industry income approach models that use significant observable inputs, including but not limited to ~~New York Mercantile Exchange (NYMEX)~~NYMEX natural gas ~~and propane~~ forward curves, LIBOR-based discount rates, basis forward curves and ~~basis~~natural gas liquids forward curves. The Company’s collars, options and swaptions are valued using standard industry income approach option models. The significant observable inputs utilized by the option pricing models include NYMEX forward curves, natural gas volatilities and LIBOR-based discount rates. The NYMEX natural gas ~~and propane~~ forward curves, LIBOR-based discount rates, natural gas volatilities, basis forward curves and ~~basis~~NGLs forward curves are validated to external sources at least monthly.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

The following assets and liabilities were measured at fair value on a recurring basis during the applicable period:


			Fair value measurements at reporting date using								Fair value measurements at reporting date using
Description	As of March 31, 2018		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		As of September 30, 2018		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Thousands)								(Thousands)
Assets
Derivative instruments, at fair value	$	262,283	$	—	$	262,283	$	—	$	315,564	$	7,661	$	307,903	$	—
Liabilities
Derivative instruments, at fair value	$	59,198	$	—	$	59,198	$	—	$	183,677	$	12,058	$	171,619	$	—



			Fair value measurements at reporting date using
Description	As of December 31, 2017		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Thousands)
Assets
Derivative instruments, at fair value	$	241,952	$	—	$	241,952	$	—
Liabilities
Derivative instruments, at fair value	$	139,089	$	—	$	139,089	$	—

The carrying values of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of the instruments. The carrying values of borrowings under the Company's various credit facilities approximate fair value as the interest rates are based on prevailing market rates.

The ~~company~~Company also has an immaterial investment in a fund that invests in companies developing technology and operating solutions for exploration and production companies for which it recognized a cumulative effect of accounting change in the first quarter 2018. The investment is valued using the net asset value as a practical expedient as provided in the financial statements received from fund managers.

The Company estimates the fair value of its Senior Notes using its established fair value methodology. Because not all of the Company’s Senior Notes are actively traded, the fair value of the Company's Senior Notes are a Level 2 fair value measurement. Fair value for the Company's non-traded Senior Notes are estimated using a standard industry income approach model that utilizes a discount rate based on market rates for debt with similar remaining time to maturity and credit risk. The estimated fair value of Senior Notes (including EQM’s Senior Notes) on the Condensed Consolidated Balance Sheets was approximately ~~$5.6~~$8.1 billion at ~~March 31,~~September 30, 2018 and $5.7 billion at December 31, 2017.

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.

For information on the fair values of assets related to the impairments of proved and unproved oil and gas properties and of other long-lived assets, see Note Q and Note 1 in EQT's Annual Report on Form 10-K for the year ended December 31, 2017. For information on the assets acquired in the Rice Merger and the assets acquired in other acquisition transactions, see Notes BA and P.

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

L. Income Taxes

On December 22, 2017, the U.S. Congress enacted the law known as the Tax Cuts and Jobs Act of 2017 (Tax Reform Legislation), which made significant changes to U.S. federal income tax law, including lowering the federal corporate tax rate to 21% from 35% beginning January 1, 2018. The Company is still analyzing certain aspects of the Tax Reform Legislation and refining calculations, which could potentially impact the measurement of deferred tax balances or potentially give rise to new deferred tax amounts. The Company will refine its estimates to incorporate new or better information as it comes available through the filing date of its 2017 U.S. income tax returns in the fourth quarter of 2018.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and 2017, the Company calculated the provision for income taxes by applying 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 quarter.

All of EQGP's, RMP’s and Strike Force Midstream’s income is included in the Company's pre-tax income (loss). However, the Company is not required to record income tax expense ~~with respect to the portion of EQGP's and RMP’s~~on income allocated to the noncontrolling public limited partners of EQGP and EQM, ~~and~~or to the noncontrolling public limited partners of RMP prior to the Midstream Mergers or to the portion of Strike Force Midstream’s income allocated to the minority owner prior to the closing of the Gulfport Transaction. The exclusion of this income is allocated to noncontrolling interest from the Company's taxable income which reduces the Company's effective tax rate in periods when the Company has consolidated pre-tax income and increases the Company's effective tax rate in periods when the Company has consolidated pre-tax loss.

The Company recorded income tax benefit at an effective tax rate of ~~19.0%~~28.8% for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and income tax expense at an effective tax rate of ~~28.6%~~19.9% for the ~~three~~nine months ended ~~March 31,~~September 30, 2017. The Company’s forecasted annual effective tax rate for ~~the period ended December 31,~~ 2018 was higher than the statutory rate due to the impact of income allocated to non-controlling limited partners on a forecasted consolidated pre-tax loss and the impact of state taxes. The state taxes increased the forecasted annual effective tax rate as compared to the statutory rate as a result of the pre-tax loss on entities with higher state applicable rates and pre-tax income on entities with lower state applicable rates. The Company’s effective tax rate for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 was ~~significantly lowered~~lower because the amount of benefit recorded for the ~~quarter~~year-to-date is limited to the amount of benefit forecasted for the entire year. The Company’s effective tax rate for the three months ended March 31, 2017 was lower than the statutory rate due to the impact of income allocated to non-controlling limited partners on forecasted consolidated pre-tax income.

There were no material changes to the Company’s methodology for determining unrecognized tax benefits during the three months ended ~~March 31,~~September 30, 2018.

M. Revolving Credit Facilities

The Company has a $2.5 billion revolving credit facility that expires in July 2022. The Company had ~~$1.3~~$0.5 billion in borrowings and no letters of credit outstanding under ~~its~~the credit facility as of ~~March 31,~~September 30, 2018. The Company had $1.3 billion in borrowings and $159.4 million of letters of credit outstanding under ~~its~~the credit facility as of December 31, 2017. The maximum amount of outstanding borrowings at any time under the credit facility during the three and nine months ended ~~March 31,~~September 30, 2018 was $0.7 billion and $1.6 billion, respectively, and the average daily balance of borrowings outstanding was approximately ~~$1.4~~$0.3 billion and $0.9 billion, respectively, at a weighted average annual interest rate of approximately ~~3.1%.~~3.6% and 3.3%, respectively. The Company had no borrowings or letters of credit outstanding under its credit facility at any time during the three and nine months ended ~~March 31,~~September 30, 2017.

EQM has a $1 billion revolving credit facility that expires in July 2022. EQM had ~~$317~~$22 million in borrowings and no$1 million of letters of credit outstanding under the credit facility as of ~~March 31,~~September 30, 2018. EQM had $180 million in borrowings and no letters of credit outstanding under the credit facility as of December 31, 2017. The maximum amount of outstanding borrowings under EQM’s revolving credit facility at any time during the three and nine months ended ~~March 31,~~September 30, 2018 was $74 million and $420 million, respectively, and the average daily balance of borrowings outstanding was approximately $22 million and $147 million, respectively. EQM incurred interest at a weighted average annual interest rate of approximately 3.7% and 3.2% for the three and nine months ended September 30, 2018, respectively. The maximum amount of outstanding borrowings under EQM's revolving credit facility at any time during each of the three and nine months ended September 30, 2017 was $177 million and the average daily balance of borrowings outstanding was approximately ~~$301~~$95 million and $32 million, respectively. EQM incurred interest at a weighted average annual interest rate of approximately ~~3.0%. EQM had no borrowings or letters of credit outstanding under its revolving credit facility any time during~~2.7% for both the three and nine months ended ~~March 31,~~September 30, 2017. Prior to the Separation, EQM intends to increase its borrowing capacity from $1 billion up to $3 billion.

Rice Midstream OpCo LLC (RMP OpCo), a direct wholly owned subsidiary of RMP, has an $850 million, secured revolving credit facility that expires in December 2019. RMP OpCo had $325 million in borrowings and $1 million of letters of credit outstanding under the credit facility as of March 31, 2018. RMP had $286 million in borrowings and $1 million of letters of credit outstanding under the credit facility as of December 31, 2017. The maximum amount of outstanding borrowings under RMP’s revolving credit facility at any time during the three months ended March 31, 2018 was $336 million, and the average daily balance of borrowings outstanding was approximately $308 million at a weighted average annual interest rate of approximately 3.6%.

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

See Note B to the Condensed Consolidated Financial Statements for a discussion of the borrowings on the EQM Term Loan Facility. As a result of the termination of the EQM Term Loan Facility, EQM expensed $3 million of deferred issuance costs. From April 25, 2018 through June 25, 2018, the maximum amount of EQM's outstanding borrowings under the EQM Term Loan Facility at any time was $1,825 million and the average daily balance was approximately $1,231 million. EQM incurred interest at a weighted average annual interest rate of approximately 3.3% for the period from April 25, 2018 through June 25, 2018.

In connection with the completion of the Midstream Mergers discussed in Note B, on July 23, 2018, EQM repaid the approximately $260 million of borrowings outstanding under the RMP Credit Agreement and the RMP Credit Agreement was terminated. RMP OpCo had $286 million in borrowings and $1 million of letters of credit outstanding under the RMP Credit Agreement as of December 31, 2017. The maximum amount of outstanding borrowings under the RMP Credit Agreement at any time from July 1, 2018 through July 23, 2018 and from January 1, 2018 through July 23, 2018 was $260 million and $375 million, respectively, and the average daily balance of borrowings outstanding during such periods was approximately $249 million and $300 million, respectively, at a weighted average annual interest rate of approximately 4.1% and 3.8%, respectively.

N. Earnings Per Share

In periods when the Company reports a net loss, all options and restricted stock are excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on loss per share. As a result, all options and all restricted stock ~~totaling 1,896,224~~ were excluded from the calculation of diluted earnings per share for the three and nine months ended ~~March 31,~~September 30, 2018. Potentially dilutive securities (options and restricted stock awards) included in the calculation of diluted earnings per share totaled ~~298,297~~199,376 and 204,080 for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively. Options to purchase common stock excluded from potentially dilutive securities because they were anti-dilutive totaled ~~440,325~~425,100 and 431,190 for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively. The impact of EQM’s ~~EQGP’s~~ and ~~RMP's~~EQGP’s dilutive units did not have a material impact on the Company’s earnings per share calculations for ~~either~~any of the periods presented.

O. Changes in Accumulated Other Comprehensive Income by Component

The following tables explain the changes in accumulated ~~OCI~~other comprehensive income (OCI) by component during the applicable period:

Three Months Ended March 31, 2018

Natural gas cash
flow hedges, net of tax

Interest rate
cash flow
hedges, net
of tax

Other post-
retirement
benefit liability
adjustment,
net of tax

Accumulated
OCI, net of tax
(Thousands)
Accumulated OCI (loss), net of tax, as of January 1, 2018
$ 4,625
$ (555 ) $ (6,528 ) $ (2,458 )
(Gains) losses reclassified from accumulated OCI, net of tax (287 ) (a) 44
(a) 86
(b) (157 )
Accumulated OCI (loss), net of tax, as of March 31, 2018
$ 4,338
$ (511 ) $ (6,442 ) $ (2,615 )



	Three Months Ended September 30, 2018
	Natural gas cash flow hedges, net of tax				Interest rate cash flow hedges, net of tax				Other post- retirement benefit liability adjustment, net of tax				Accumulated OCI, net of tax
	(Thousands)
Accumulated OCI (loss), net of tax, as of July 1, 2018	$	3,872			$	(475	)		$	(6,356	)		$	(2,959	)
(Gains) losses reclassified from accumulated OCI, net of tax	(430		)	(a)	52			(a)	86			(b)	(292		)
Accumulated OCI (loss), net of tax, as of September 30, 2018	$	3,442			$	(423	)		$	(6,270	)		$	(3,251	)

Three Months Ended March 31, 2017
Natural gas cash
flow hedges, net of tax Interest rate
cash flow
hedges, net
of tax Other post-
retirement
benefit liability
adjustment,
net of tax Accumulated
OCI, net of tax
(Thousands)
Accumulated OCI (loss), net of tax, as of January 1, 2017 $ 9,607
$ (699 ) $ (6,866 ) $ 2,042
(Gains) losses reclassified from accumulated OCI, net of tax (888 ) (a) 36
(a) 76
(b) (776 )
Accumulated OCI (loss), net of tax, as of March 31, 2017 $ 8,719
$ (663 ) $ (6,790 ) $ 1,266



	Three Months Ended September 30, 2017
	Natural gas cash flow hedges, net of tax				Interest rate cash flow hedges, net of tax				Other post- retirement benefit liability adjustment, net of tax				Accumulated OCI, net of tax
	(Thousands)
Accumulated OCI (loss), net of tax, as of July 1, 2017	$	7,047			$	(627	)		$	(6,713	)		$	(293	)
(Gains) losses reclassified from accumulated OCI, net of tax	(1,451		)	(a)	36			(a)	77			(b)	(1,338		)
Accumulated OCI (loss), net of tax, as of September 30, 2017	$	5,596			$	(591	)		$	(6,636	)		$	(1,631	)

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EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)




	Nine Months Ended September 30, 2018
	Natural gas cash flow hedges, net of tax				Interest rate cash flow hedges, net of tax				Other post- retirement benefit liability adjustment, net of tax				Accumulated OCI, net of tax
	(Thousands)
Accumulated OCI (loss), net of tax, as of January 1, 2018	$	4,625			$	(555	)		$	(6,528	)		$	(2,458	)
(Gains) losses reclassified from accumulated OCI, net of tax	(1,183		)	(a)	132			(a)	258			(b)	(793		)
Accumulated OCI (loss), net of tax, as of September 30, 2018	$	3,442			$	(423	)		$	(6,270	)		$	(3,251	)




	Nine Months Ended September 30, 2017
	Natural gas cash flow hedges, net of tax				Interest rate cash flow hedges, net of tax				Pension and other post- retirement benefits liability adjustment, net of tax				Accumulated OCI, net of tax
	(Thousands)
Accumulated OCI (loss), net of tax, as of January 1, 2017	$	9,607			$	(699	)		$	(6,866	)		$	2,042
(Gains) losses reclassified from accumulated OCI, net of tax	(4,011		)	(a)	108			(a)	230			(b)	(3,673		)
Accumulated OCI (loss), net of tax, as of September 30, 2017	$	5,596			$	(591	)		$	(6,636	)		$	(1,631	)

(a) ~~Gains (losses)~~(Gains) losses reclassified from accumulated OCI, net of tax related to natural gas cash flow hedges were reclassified into operating revenues. Losses from accumulated OCI, net of tax related to interest rate cash flow hedges were reclassified into interest expense.

(b) The accumulated OCI reclassification is attributable to the net actuarial loss and net prior service cost related to the Company’s post-retirement benefit plans. See Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for additional information.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

P. Acquisitions

On February 1, 2017, the Company acquired approximately 14,000 net Marcellus acres located in Marion, Monongalia and Wetzel Counties of West Virginia from a third-party.

On February 27, 2017, the Company acquired approximately 85,000 net Marcellus acres, including drilling rights on approximately 44,000 net Utica acres and current natural gas production of approximately 110 MMcfe per day, from Stone Energy Corporation. The acquired acres are primarily located in Wetzel, Marshall, Tyler and Marion Counties of West Virginia. The acquired assets also included 174 Marcellus wells, 120 of which were producing at the time of the acquisition, and 20 miles of gathering pipeline.

~~During~~On June 30, 2017, the ~~first quarter 2017,~~Company acquired approximately 11,000 net Marcellus acres, and the associated Utica drilling rights from a third-party. The acquired acres are primarily located in Allegheny, Washington and Westmoreland Countries of Pennsylvania.

The Company paid net cash of ~~$652.5~~$740.1 million for the 2017 acquisitions during the nine months ended September 30, 2017. The preliminary fair value assigned to the acquired property, plant and ~~assumed liabilities estimated at $11.9 million~~equipment as of ~~March 31, 2017. Furthermore,~~the opening balance sheet dates totaled $750.1 million. In connection with the 2017 acquisitions, the Company ~~paid $17.0 million and recorded an additional $3.5~~assumed approximately $5.3 million of ~~non-cash capital expenditures as a result~~net current liabilities and $4.7 million of ~~post-closing adjustments on 2016 acquisitions in the first quarter 2017.~~non-current liabilities.

Fair Value Measurement

As these acquisitions qualified as business combinations under GAAP, the fair value of the acquired assets was determined using a market approach for the undeveloped acreage and a discounted cash flow model under the income approach for the wells. Significant unobservable inputs used in the analysis included the determination of estimated developed reserves and forward pricing estimates. As a result, valuation of the acquired assets was a Level 3 fair value measurement.

~~Q. Impairment~~

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Q. Divestitures

On June 19, 2018, the Company sold its non-core Permian Basin assets located in Texas for net proceeds of $57.7 million, subject to final purchase price adjustments (the Permian Divestiture). The assets sold in the Permian Divestiture included approximately 970 productive wells with current net production of approximately 20 MMcfe per day, approximately 350 miles of low-pressure gathering lines and 26 compressors.

On July 18, 2018, the Company sold approximately 2.5 million non-core, net acres in the Huron Play for net proceeds of $523.6 million, subject to final purchase price adjustments (the Huron Divestiture). The assets sold in the Huron Divestiture included approximately 12,000 productive wells with current net production of approximately 200 MMcfe per day, approximately 6,400 miles of low-pressure gathering lines and 59 compressor stations. The Company retained the deep drilling rights across the divested acreage.

During the first quarter of 2018, the Company recorded an impairment of $2.3 billion associated with ~~certain non-core~~the production and related ~~pipeline~~midstream assets in the Huron and Permian Plays. The impairment of these properties and ~~the~~ related pipeline assets recorded during the first quarter of 2018 was due to the carrying value of ~~these~~the assets exceeding the ~~expected~~ undiscounted cash flows which were expected to result from the continued use and potential disposition of the underlying assets ~~and based on~~as well as management’s determination that it no longer ~~intends~~intended to develop the associated unproved properties. ~~These~~The first quarter of 2018 impairment reduced these assets ~~were reduced~~ to their estimated fair value at that time of approximately $1 billion.

The fair value of the impaired assets, as determined at March 31, 2018, was based on significant inputs that were not observable in the market and as such are considered to be Level 3 fair value measurements. See Note K for a description of the fair value hierarchy and Note 1 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for our policy on impairment of proved and unproved properties. Key assumptions included in the calculation of the fair value of the impaired assets as of March 31, 2018 included (i) reserves, including risk adjustments for probable and possible reserves; (ii) future commodity prices; (iii) to the extent available, market based indicators of fair value including estimated proceeds which could be realized upon a potential disposition; (iv) production rates based on the Company's experience with similar properties in which it operates; (v) estimated future operating and development costs; and (vi) a market-based weighted average cost of capital. ~~See Note~~ R ~~for~~

In connection with the Permian Divestiture and the Huron Divestiture, the Company recorded an additional ~~information~~impairment/loss on sale of long-lived assets of $118.1 million during the second quarter of 2018 to write down the carrying value of the disposal groups to the estimated amounts to be received upon the closing of the transactions.

In connection with the closing of the Huron Divestiture, the Company recorded a loss of $259.3 million during the third quarter of 2018 related to ~~our expected disposition~~certain capacity contracts that the Company no longer has existing production to satisfy and does not plan to utilize in the future. The loss was recorded within operating expenses under the impairment/loss on sale of ~~Permian assets.~~long-lived assets caption within the Statements of Consolidated Operations.

The fair value of the loss for the initial measurement was based upon significant inputs that were not observable in the market and as such is considered a Level 3 fair value measurement. The key unobservable input in the calculation is the amount, if any, of potential future economic benefit from the contracts.

R. Subsequent Events

~~EQM-RMP Merger~~

On ~~April 25,~~October 24, 2018, ~~EQM and RMP entered into an Agreement and Plan~~the Company’s Board of ~~Merger~~Directors approved the completion of the Separation by means of a pro-rata distribution (the ~~Midstream Merger Agreement) with Rice Midstream Management LLC,~~Distribution) of 80.1% of the ~~general partner~~outstanding common stock of ~~RMP (the RMP General Partner), EQT~~Equitrans Midstream Services, LLC, the general partner of EQM (the EQM General Partner), EQM Acquisition Sub, LLC, a wholly owned subsidiary of EQM (Merger Sub), EQM GP Acquisition Sub, LLC, a wholly owned subsidiary of EQM (GP Merger Sub), and, solely for certain limited purposes set forth therein, the Company. Pursuant to the ~~Midstream Merger Agreement, Merger Sub and GP Merger Sub will merge with and into RMP and~~Company’s shareholders of record as of the ~~RMP General Partner, respectively, with RMP and the RMP General Partner surviving as wholly owned subsidiaries~~close of ~~EQM~~business on November 1, 2018 (the ~~Midstream Mergers)~~Record Date). Pursuant to the plan of Distribution approved by the Company’s Board of Directors, each Company shareholder will receive 0.80 shares of Equitrans Midstream ~~Merger Agreement, each RMP~~ common ~~unit issued and outstanding immediately prior to the effective time~~stock for every one share of the Company’s common stock held as of the close of business on the Record Date. Shareholders will receive cash in lieu of fractional shares of Equitrans Midstream ~~Mergers~~common stock. After considering that EQT will retain an additional 19.9% of Equitrans Midstream's common stock, total Equitrans Midstream shares outstanding after the Distribution are expected to be ~~converted~~approximately 255 million shares.

In connection with the Separation, the Company and its subsidiaries will enter into certain agreements with Equitrans Midstream to implement the ~~right to receive 0.3319 EQM common units.~~

~~The~~legal and structural separation between the two companies, govern the relationship between the Company and Equitrans Midstream after completion of the Separation, and allocate between the Company and Equitrans Midstream, ~~Mergers is subject to the satisfaction or waiver of certain customary closing conditions,~~various assets, liabilities and obligations, including, but not limited to: (i) approval of the Midstream Merger Agreement by a majority of RMP’s unitholders, (ii) expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the completion of the Drop-Down Transactions (as defined below), and (iv) the completion of the IDR Transaction (as defined below). Theamong other things, employee benefits, litigation, contracts, equipment, real property,

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Notes to Condensed Consolidated Financial Statements (Unaudited)

intellectual property and tax-related assets and liabilities. These agreements include a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and Shareholder and Registration Rights Agreement, the form of which has been approved by the Company’s Board of Directors.

The accompanying unaudited Condensed Consolidated Financial Statements include the historical results of Equitrans Midstream, ~~Merger Agreement provides that, upon termination~~as the Distribution is expected to be effective at 11:59 p.m. eastern time on November 12, 2018, which is after the most recent period reported in this Form 10-Q. In future filings, the historical results of the businesses that comprise Equitrans Midstream ~~Merger Agreement under certain circumstances, RMP may~~Corporation will be ~~required to pay EQM a termination fee equal to $63.4 million less any previous reimbursements by RMP. The Midstream Merger Agreement also provides that, upon termination of~~reported as discontinued operations in the ~~Midstream Merger Agreement under certain circumstances, EQM may be required to reimburse RMP's expenses up to $5.0 million, and RMP may be required to reimburse EQM's expenses up to $5.0 million.~~Company’s Consolidated Financial Statements. As a result of the ~~Midstream Mergers, RMP’s common units will no longer be publicly traded. EQM~~Separation and ~~RMP expect to complete~~Distribution, the ~~Midstream Mergers during the third quarter of 2018.~~

~~RMP IDR Purchase and Sale Agreement~~

On April 25, 2018, the Company, Rice Midstream GP Holdings LP, a wholly owned subsidiary of the Company that owns the RMP IDRs, and EQGP entered into an Incentive Distribution Rights Purchase and Sale Agreement pursuant to which EQGP will acquire all of the issued and outstanding RMP IDRs in exchange for 36,293,766 EQGP common units (the IDR Transaction). If the unit consideration is issued and the Midstream Mergers are not consummated on or prior to December 31, 2018 or the Midstream Merger Agreement is earlier terminated, 8,539,710 of the EQGP common units issued to the Company will be canceled and the Company will pay to EQGP an amount in cash equal to the aggregate amount of any distributions paid by EQGP to the Company related to the forfeited EQGP common units. The completion of the IDR Transaction is subject to certain customary closing conditions. Pursuant to the terms of the Midstream Merger Agreement, the RMP IDRs will be canceled effective at the time of the Midstream Mergers. The Company expects to complete the IDR Transaction during the second quarter of 2018.

~~Drop-Down Transactions and Gulfport Transaction~~

On April 25, 2018, the Company, Rice Midstream Holdings LLC, a wholly owned subsidiary of the Company, EQM and EQM Gathering Holdings, LLC, a wholly owned subsidiary of EQM (EQM Gathering), entered into a Contribution and Sale Agreement (the Drop-Down Agreement) pursuant to which EQM Gathering will acquire, in one or more transactions, from the Company all of the Company’s interests in Rice Olympus Midstream LLC, Rice West Virginia Midstream LLC and Strike Force Midstream Holdings in exchange for an aggregate of 5,889,282 EQM common units and aggregate cash consideration of $1.15 billion, subject to customary post-closing purchase price adjustments (collectively, the Drop-Down Transactions). Strike Force Midstream Holdings owns a 75% limited liability company interest in Strike Force Midstream. The completion of the Drop-Down Transactions is subject to certain customary closing conditions.

Also on April 25, 2018, EQM, EQM Gathering, Gulfport Energy Corporation (Gulfport), and an affiliate of Gulfport, entered into a Purchase and Sale Agreement pursuant to which EQM will acquire the remaining 25% limited liability company interest in Strike Force Midstream not owned by the Company for $175 million (the Gulfport Transaction). The completion of the Gulfport Transaction is subject to certain customary closing conditions.

~~The Company expects to complete the Drop-Down Transactions and the Gulfport Transaction during the second quarter of 2018.~~

~~EQM Term Loan~~

On April 25, 2018, EQM entered into a $2.5 billion unsecured multi-draw 364-day term loan facility with a syndicate of lenders (the EQM Term Loan Facility). The EQM Term Loan Facility is available to fund the cash consideration for the Drop-Down Transactions, to repay borrowings under EQM’s $1 billion revolving credit facility and, following the Midstream Mergers, under RMP’s $850 million revolving credit facility, to fund ongoing working capital requirements and for other general partnership purposes. Unused commitments under the EQM Term Loan Facility will terminate automatically on December 31, 2018. The EQM Term Loan Facility matures on April 24, 2019 and includes mandatory prepayment and commitment reduction requirements related to the receipt by EQM of net cash proceeds from certain debt transactions, equity issuances, asset sales and joint venture distributions.

~~Permian Sale~~

EQT entered into an agreement to sell its Permian Basin assets located in Texas for $64 million. The sale, expected to close by end of June 2018, will reduce the Company’s 2018 production sales volume guidance by 5 Bcfe.

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~~Notes to~~accompanying unaudited, interim Condensed Consolidated Financial Statements ~~(Unaudited)~~are not indicative of the Company’s future financial position, results of operations or cash flows.

S. Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard requires an entity to recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on January 1, 2018 using the modified retrospective method of adoption. Adoption of the ASU did not require an adjustment to the opening balance of equity. The Company does not expect the standard to have a significant effect on its results of operations, liquidity or financial position in 2018. The Company implemented processes and controls to ensure new contracts are reviewed for the appropriate accounting treatment and to generate the disclosures required under the new standard in the first quarter of 2018. For the disclosures required by this ASU, see Note F.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The standard ~~primarily~~ affects accounting for equity investments and financial liabilities under the fair value option, ~~and~~ the presentation and disclosure requirements for financial instruments, and eliminates the cost method of accounting for equity investments. The Company adopted this standard in the first quarter of 2018 which resulted in a cumulative effect adjustment of $4.1 million ~~shown~~ on the Statement of Condensed Consolidated Equity.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires an entity to record assets and obligations for contracts currently recognized as operating leases. ~~Lessees~~In July 2018, the FASB issued targeted improvements to this ASU in ASU 2018-11. This update provides entities with an optional transition method, which permits an entity to initially apply the new leases standard at the adoption date and ~~lessors must apply~~recognize a ~~modified retrospective~~cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has elected to utilize the optional transition ~~approach.~~method. The ASU will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. The Company ~~has completed~~is utilizing a ~~high-level identification~~lease accounting system to document its current population of ~~agreements covered by this standard and~~contracts classified as leases, which will ~~continue~~be updated as the lease population changes. The Company continues to evaluate new business processes and related internal controls and is assessing and documenting the ~~effect this standard~~accounting impacts related to the new standard. Although the evaluation is ongoing, the Company expects that the adoption will ~~have on~~impact its financial statements ~~internal controls~~as the standard requires recognition on the balance sheet of a right of use asset and ~~related disclosures.~~corresponding lease liability.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this ASU eliminates the probable initial recognition threshold in current GAAP and ~~instead,~~ requires an entity to reflect its current estimate of all expected credit losses. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The ASU will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The Company is currently evaluating the effect this standard will have on its financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The Company adopted this standard in the first quarter of 2018. The Company had $75 million restricted cash at December 31, 2016. In accordance with ASU 2016-18, restricted cash is included in the beginning of period cash balance and excluded from investing activities on the Statements of Condensed Consolidated Cash Flows for the ~~three~~

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Notes to Condensed Consolidated Financial Statements (Unaudited)

nine months ended ~~March 31,~~September 30, 2017. The Company had no restricted cash on the Condensed Consolidated Balance Sheet from March 31, 2017 through the current period.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be ~~accounted for~~recorded as acquisitions (or disposals) of assets or businesses. The Company adopted this standard in the first quarter of 2018 with no significant effect on its financial statements or related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test of Goodwill Impairment. This ASU simplifies the quantitative goodwill impairment test requirements by eliminating the requirement to calculate the implied fair value of ~~goodwill (Step 2 of the current goodwill impairment test).~~goodwill. Instead, a company would record an impairment charge based on the excess of a reporting unit’s carrying value over its fair ~~value (measured in Step 1 of the current goodwill impairment test). Entities will apply the~~value. The standard’s provisions are to be applied prospectively. The Company adopted this standard in the first quarter of 2018 with no significant effect on its financial statements or related disclosures.

In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU provides additional guidance on the presentation

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~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

of net benefit cost in the income statement and on the components eligible for capitalization in assets. The Company adopted this standard in the first quarter of 2018 with no significant effect on its financial statements or related disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting. This ASU provides guidance regarding which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company adopted this standard in the first quarter of 2018 with no significant effect on its financial statements or related disclosures. This ASU will be applied prospectively to awards modified on or after the adoption date.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows companies to reclassify stranded tax effects resulting from the Tax Reform Legislation from accumulated other comprehensive income to retained earnings. The ASU is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The reclassification permitted under this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Legislation is recognized. The Company is currently evaluating the effect this standard will have on its financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes to the hierarchy associated with Level 1, 2 and 3 fair value measurements and the related disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect this standard will have on its financial statements and related disclosures but does not expect the adoption of this standard to have a material impact on its financial statements and related disclosures.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of financial condition and results of operations in conjunction with the Condensed Consolidated Financial Statements, and the notes thereto, included elsewhere in this report.

CAUTIONARY STATEMENTS

Disclosures in this Quarterly Report on Form 10-Q contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other words of similar meaning, or the negative thereof, in connection with any discussion of future operating or financial matters. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the matters discussed in the section captioned “Outlook” in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of the Company and its subsidiaries, including guidance regarding the Company’s strategy to develop its Marcellus, Utica, Upper Devonian and other reserves; drilling plans and programs (including the number, type, feet of pay, average lateral lengths and location of wells to be drilled and the availability of capital to complete these plans and programs); production sales volumes (including liquids volumes) and growth rates; gathering, transmission and ~~transmission~~water volumes; infrastructure programs (including the timing, cost and capacity of the gathering, transmission and ~~transmission~~water expansion projects); the cost, capacity, timing of regulatory approvals and anticipated in-service date of the Mountain Valley Pipeline (MVP) ~~project;~~and MVP Southgate projects; the ultimate terms, partners and structure of Mountain Valley Pipeline, LLC (the MVP Joint Venture); monetization transactions, including asset sales, joint ventures or other transactions involving the Company’s assets; acquisition transactions; whether any of the Company’s sale of the Rice Energy Inc. (Rice) retained midstream assets to EQT Midstream Partners, LP (EQM), the Company’s sale of the Rice Midstream Partners LP (RMP) incentive distribution rights (IDRs) to EQT GP Holdings, LP (EQGP) and the merger of EQM and RMP (collectively, the Midstream Streamlining Transactions) will be completed and the timing of each transaction or transactions; the risk that EQM or RMP may be unable to obtain governmental and regulatory approvals required for the proposed merger of EQM and RMP, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; the risk that a condition to closing of the merger may not be satisfied, including approval of the merger by RMP’s unitholders; the possible diversion of management’s time on issues related to the merger; the impact and outcome of pending and future litigation, ~~including litigation, if any, relating to the merger;~~ whether the separation of the Company’s production and midstream businesses (the Separation) will be completed and the timing and terms of the Separation; the timing and structure of any dispositions of the Company's 19.9% retained common stock of Equitrans Midstream Corporation (Equitrans Midstream) following the Separation and the Company's planned use of the proceeds from any such dispositions; whether EQGP will enter into a transaction to eliminate its incentive distribution rights following the Separation, including the timing and terms of such transaction; the Company’s ability to achieve the anticipated synergies, operational efficiencies and returns from its acquisition of ~~Rice;~~Rice Energy Inc. (Rice) and the Midstream Streamlining Transactions (as defined in Note B to the Condensed Consolidated Financial Statements); natural gas prices, changes in basis and the impact of commodity prices on the Company's business; reserves, including potential future downward adjustments; projected capital expenditures and capital contributions; ~~the amount and timing of any repurchases under the Company’s share repurchase authorization;~~ liquidity and financing requirements, including funding sources and ~~availability;~~availability and EQM's plan to increase its borrowing capacity to up to $3 billion; hedging strategy; the effects of government ~~regulation and litigation;~~regulation; the expected impact of the Tax Cuts and Jobs Act of 2017; and tax position. The forward-looking statements included in this Quarterly Report on Form 10-Q involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company has based these forward-looking statements on current expectations and assumptions about future events. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond the Company’s control. The risks and uncertainties that may affect the operations, performance and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors”, and elsewhere in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as updated by Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

In reviewing any agreements incorporated by reference in or filed with this Quarterly Report on Form 10-Q, please remember that such agreements are included to provide information regarding the terms of such agreements and are not intended to provide any other factual or disclosure information about the Company. The agreements may contain representations and warranties by the Company, which should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties to such agreements should those statements prove to be inaccurate. The representations and warranties were made only as of the date of the relevant agreement or such other date or dates as may be specified in such agreement and are subject

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~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

to more recent developments. Accordingly, these representations and warranties alone may not describe the actual state of affairs of the Company or its affiliates as of the date they were made or at any other time.

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

CORPORATE OVERVIEW

Three Months Ended ~~March 31,~~September 30, 2018 vs. Three Months Ended ~~March 31,~~September 30, 2017

Net loss attributable to EQT Corporation for the three months ended ~~March 31,~~September 30, 2018 was ~~$1,586.0~~$39.7 million, a loss of ~~$5.99~~$0.15 per diluted share, compared to net income attributable to EQT Corporation of ~~$164.0~~$23.3 million, ~~$0.95~~$0.13 per diluted share, for the three months ended ~~March 31,~~September 30, 2017. The decrease was primarily attributable to ~~an impairment charge~~higher operating costs, including a loss of ~~$2.3 billion~~$259.3 million recorded in the third quarter of 2018 primarily associated with the divestiture of certain non-core production and related pipeline assets in the Huron Play, higher interest expense and ~~Permian Plays. Net income was also negatively impacted by increases in other operating costs, lower gains on derivatives not designated as hedges, a $0.17 decrease in the average realized price,~~ higher net income attributable to noncontrolling ~~interests and higher interest expense.~~interests. These ~~decreases~~expenses were partly offset by higher revenues primarily from an ~~88%~~82.5% increase in production sales volumes, ana larger income tax benefit for the three months ended ~~March 31,~~September 30, 2018 compared to the income tax ~~expense~~benefit for the three months ended ~~March 31,~~September 30, 2017, and higher ~~pipeline and net marketing services revenue.~~other income.

During the three months ended ~~March 31,~~September 30, 2018, the Company recorded transaction costs of approximately ~~$35.7~~$31.5 million. Transaction costs include ~~$19.8~~$17.8 million for the Company's sum-of-the-parts review and Midstream Streamlining Transactions and ~~$15.9~~$13.7 million for the Rice Merger (as defined in Note BA) to the Condensed Consolidated Financial Statements). Transaction costs are reflected in unallocated expenses as they are not allocated to any operating segment.

In connection with the Rice Merger, the Company obtained intangible assets composed of customer relationships and non-compete agreements with former Rice executives. Amortization expense for the three months ended ~~March 31, 2018 related to customer relationships is approximately $10.4 million and is shown in EQT Production's operating expense. Amortization expense for the three months ended March 31,~~September 30, 2018 related to non-compete agreements with former Rice executives is approximately ~~$10.3~~$10.4 million and is not allocated to any operating segment.

Nine Months Ended September 30, 2018 vs. Nine Months Ended September 30, 2017

Net loss attributable to EQT ~~Production paid $38.6 million and $9.0 million of net cash settlements for derivatives not designated as hedges~~Corporation for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 was $1,607.9 million, a loss of $6.12 per diluted share, compared to net income attributable to EQT Corporation of $228.5 million, $1.32 per diluted share, for the nine months ended September 30, 2017. The decrease was primarily due to higher operating expenses, including impairment/loss on sale of $2.7 billion associated with the divestiture of certain non-core production and ~~2017, respectively, that are included~~related pipeline assets in the ~~average realized price but are not in GAAP operating revenues.~~

~~Net~~Huron and Permian Plays, higher net income attributable to noncontrolling interests ~~was $141.0~~and higher interest expense. These decreases were partly offset by higher revenues primarily from an 84.4% increase in production sales volumes, an income tax benefit for the nine months ended September 30, 2018 compared to income tax expense for the nine months ended September 30, 2017, and higher other income.

During the nine months ended September 30, 2018, the Company recorded transaction costs of $93.2 million. Transaction costs include $55.9 million for the ~~three months ended March 31, 2018 compared to $86.7~~Company's sum-of-the-parts review and Midstream Streamlining Transactions and $37.3 million for the ~~three~~Rice Merger and are reflected in unallocated expenses as they are not allocated to any operating segment.

In connection with the Rice Merger, the Company obtained intangible assets composed of customer relationships and non-compete agreements with former Rice executives. Amortization expense for the nine months ended ~~March 31, 2017. The $54.3~~September 30, 2018 related to non-compete agreements with former Rice executives is approximately $31.0 million ~~increase was primarily the result of the noncontrolling interests in RMP~~ and ~~Strike Force Midstream LLC (Strike Force Midstream) as well as increased net income at EQM.~~is not allocated to any operating segment.

See “Business Segment Results of Operations” for a discussion of segment operating expenses ~~production sales volumes~~ and ~~gathering and transmission~~ revenues.

See “Investing Activities” under the caption “Capital Resources and Liquidity” for a discussion of capital expenditures.

Consolidated Operational Data

The following table presents detailed natural gas and liquids operational information to assist in the understanding of the Company’s consolidated operations, including the calculation of the Company's average realized price ($/Mcfe), which is based on EQT Production adjusted operating revenues, a non-GAAP supplemental financial measure. EQT Production adjusted operating revenues is presented because it is an important measure used by the Company’s management to evaluate period-to-period comparisons of earnings trends. EQT Production adjusted operating revenues should not be considered as an alternative to EQT Production total operating revenues. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of EQT Production adjusted operating revenues to EQT Production total operating revenues and Note I to the Condensed Consolidated Financial Statements for a reconciliation of EQT Production total operating revenues to EQT Corporation total operating revenues.

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	Three Months Ended March 31,								Three Months Ended September 30,								Nine Months Ended September 30,
in thousands (unless noted)	2018 (e)			2017			%		2018 (e)			2017			%		2018 (e)			2017			%
NATURAL GAS
Sales volume (MMcf)	329,404			164,464			100.3		350,297			176,311			98.7		1,013,836			508,457			99.4
NYMEX price ($/MMBtu) (a)	$	2.98		$	3.31		(10.0	)	$	2.90		$	3.00		(3.3	)	$	2.89		$	3.16		(8.5	)
Btu uplift	0.20			0.28			(28.6	)	0.17			0.30			(43.3	)	0.19			0.28			(32.1	)
Natural gas price ($/Mcf)	$	3.18		$	3.59		(11.4	)	$	3.07		$	3.30		(7.0	)	$	3.08		$	3.44		(10.5	)

Basis ($/Mcf) (b)	$	0.13		$	(0.16	)	(181.3	)	$	(0.41	)	$	(0.81	)	(49.4	)	$	(0.24	)	$	(0.53	)	(54.7	)
Cash settled basis swaps (not designated as hedges) ($/Mcf)	(0.15		)	0.03			(600.0	)	(0.06		)	(0.04		)	50.0		(0.07		)	(0.02		)	250.0
Average differential, including cash settled basis swaps ($/Mcf)	$	(0.02	)	$	(0.13	)	(84.6	)	$	(0.47	)	$	(0.85	)	(44.7	)	$	(0.31	)	$	(0.55	)	(43.6	)

Average adjusted price ($/Mcf)	$	3.16		$	3.46		(8.7	)	$	2.60		$	2.45		6.1		$	2.77		$	2.89		(4.2	)
Cash settled derivatives (cash flow hedges) ($/Mcf)	—			0.01			(100.0	)	—			0.01			(100.0	)	—			0.01			(100.0	)
Cash settled derivatives (not designated as hedges) ($/Mcf)	0.04			(0.07		)	(157.1	)	0.03			0.13			(76.9	)	0.05			0.01			400.0
Average natural gas price, including cash settled derivatives ($/Mcf)	$	3.20		$	3.40		(5.9	)	$	2.63		$	2.59		1.5		$	2.82		$	2.91		(3.1	)

Natural gas sales, including cash settled derivatives	$	1,055,065		$	559,199		88.7		$	922,974		$	456,347		102.3		$	2,862,582		$	1,484,711		92.8

LIQUIDS
NGLs (excluding ethane):
Sales volume (MMcfe) (c)	18,391			17,140			7.3		13,964			19,054			(26.7	)	51,299			55,089			(6.9	)
Sales volume (Mbbls)	3,065			2,857			7.3		2,328			3,176			(26.7	)	8,550			9,182			(6.9	)
Price ($/Bbl)	$	37.50		$	31.41		19.4		$	40.73		$	29.81		36.6		$	37.97		$	28.33		34.0
Cash settled derivatives (not designated as hedges) ($/Bbl)	(1.21		)	(0.54		)	124.1		(2.28		)	(0.44		)	418.2		(1.39		)	(0.43		)	223.3
Average NGL price, including cash settled derivatives ($/Bbl)	$	36.29		$	30.87		17.6
Average NGLs price, including cash settled derivatives ($/Bbl)									$	38.45		$	29.37		30.9		$	36.58		$	27.90		31.1

NGL sales	$	111,236		$	88,197		26.1
NGLs sales									$	89,498		$	93,273		(4.0	)	$	312,768		$	256,123		22.1
Ethane:
Sales volume (MMcfe) (c)	7,997			6,973			14.7		9,002			8,226			9.4		25,413			24,970			1.8
Sales volume (Mbbls)	1,333			1,162			14.7		1,501			1,371			9.5		4,236			4,162			1.8
Price ($/Bbl)	$	7.90		$	6.65		18.8		$	7.88		$	5.92		33.1		$	7.82		$	6.45		21.2
Ethane sales	$	10,532		$	7,732		36.2		$	11,822		$	8,119		45.6		$	33,108		$	26,858		23.3
Oil:
Sales volume (MMcfe) (c)	1,213			1,357			(10.6	)	974			1,476			(34.0	)	3,234			4,565			(29.2	)
Sales volume (Mbbls)	202			226			(10.6	)	162			246			(34.1	)	539			761			(29.2	)
Price ($/Bbl)	$	55.15		$	43.75		26.1		$	51.73		$	36.86		40.3		$	54.41		$	39.96		36.2
Oil sales	$	11,146		$	9,896		12.6		$	8,392		$	9,072		(7.5	)	$	29,322		$	30,198		(2.9	)

Total liquids sales volume (MMcfe) (c)	27,601			25,470			8.4		23,940			28,756			(16.7	)	79,946			84,624			(5.5	)
Total liquids sales volume (Mbbls)	4,600			4,245			8.4		3,991			4,793			(16.7	)	13,325			14,105			(5.5	)

Liquids sales	$	132,914		$	105,825		25.6		$	109,712		$	110,464		(0.7	)	$	375,198		$	313,179		19.8

TOTAL PRODUCTION
Total natural gas & liquids sales, including cash settled derivatives (d)	$	1,187,979		$	665,024		78.6		$	1,032,686		$	566,811		82.2		$	3,237,780		$	1,797,890		80.1
Total sales volume (MMcfe)	357,005			189,934			88.0		374,237			205,067			82.5		1,093,782			593,081			84.4

Average realized price ($/Mcfe)	$	3.33		$	3.50		(4.9	)	$	2.76		$	2.76		—		$	2.96		$	3.03		(2.3	)


(a)	The Company’s volume weighted NYMEX natural gas price (actual average NYMEX natural gas price ($/MMBtu) was ~~$3.00~~$2.90 and ~~$3.32~~$3.00 for the three months ended ~~March 31,~~September 30, 2018 and 2017, respectively, and $2.90 and $3.17 for the nine months ended September 30, 2018 and 2017, respectively).


(b)	Basis represents the difference between the ultimate sales price for natural gas and the NYMEX natural gas price.


(c)	NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods.


(d)	Also referred to in this report as EQT Production adjusted operating revenues, a non-GAAP supplemental financial measure.


(e)	EQT Production includes the results of production operations acquired in the Rice Merger, which occurred on November 13, 2017.

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

Reconciliation of Non-GAAP Financial Measures

The table below reconciles EQT Production adjusted operating revenues, a non-GAAP supplemental financial measure, to EQT Production total operating revenues reported under EQT Production Results of Operations, its most directly comparable financial measure calculated in accordance with GAAP. See Note I to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a reconciliation of EQT Production operating revenues to EQT Corporation total operating revenues as reported in the Statements of Consolidated Operations.

EQT Production adjusted operating revenues (also referred to as total natural gas & liquids sales, including cash settled derivatives) is presented because it is an important measure used by the Company’s management to evaluate period-over-period comparisons of earnings trends. EQT Production adjusted operating revenues excludes the revenue impact of changes in the fair value of derivative instruments prior to settlement and the revenue impact of certain pipeline and net marketing services. Management utilizes EQT Production adjusted operating revenues to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts and thus does not impact the revenue from natural gas sales with the often volatile fluctuations in the fair value of derivatives prior to settlement. EQT Production adjusted operating revenues also excludes ~~"Pipeline~~pipeline and net marketing ~~services"~~services because management considers these revenues to be unrelated to the revenues for its natural gas and liquids production. ~~"Pipeline~~Pipeline and net marketing ~~services"~~services primarily includes revenues for gathering services provided to third-parties as well as both the cost of and recoveries on third-party pipeline capacity not used for EQT Production sales volumes. Management further believes that EQT Production adjusted operating revenues as presented provides useful information to investors for evaluating period-over-period earnings trends.


Calculation of EQT Production adjusted operating revenues	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
$ in thousands (unless noted)	2018			2017			2018			2017			2018			2017
EQT Production total operating revenues	$	1,348,602		$	828,662		$	1,050,046		$	597,718		$	3,312,730		$	2,057,481
(Deduct) add back:
Gain on derivatives not designated as hedges	(62,592		)	(140,742		)
Net cash settlements paid on derivatives not designated as hedges	(38,629		)	(8,967		)
Premiums received for derivatives that settled during the period	234			526
Add back (deduct):
Loss (gain) on derivatives not designated as hedges							3,075			(35,625		)	(5,620		)	(222,693		)
Net cash settlements (paid) received on derivatives not designated as hedges							(14,285		)	13,321			(27,401		)	(6,837		)
Premiums (paid) received for derivatives that settled during the period							(18		)	537			453			1,595
Pipeline and net marketing services	(59,636		)	(14,455		)	(6,132		)	(9,140		)	(42,382		)	(31,656		)
EQT Production adjusted operating revenues, a non-GAAP financial measure	$	1,187,979		$	665,024		$	1,032,686		$	566,811		$	3,237,780		$	1,797,890

Total sales volumes (MMcfe)	357,005			189,934			374,237			205,067			1,093,782			593,081

Average realized price ($/Mcfe)	$	3.33		$	3.50		$	2.76		$	2.76		$	2.96		$	3.03

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

Business Segment Results of Operations

Business segment operating results are presented in the segment discussions and financial tables on the following pages. Operating segments are evaluated on their contribution to the Company’s consolidated results based on operating income. Other income, interest and income taxes are managed on a consolidated basis. Headquarters’ costs are billed to the operating segments based upon a fixed allocation of the headquarters’ annual operating budget. Unallocated expenses incurred in 2018 consist primarily of incentive compensation and administrative costs, which included transaction costs associated with the Company's sum-of-the-parts review, the Midstream Streamlining Transactions and the Rice Merger.

The Company has reported the components of each segment’s operating income and various operational measures in the sections below, and where appropriate, has provided information describing how a measure was derived. EQT’s management believes that presentation of this information provides useful information to management and investors regarding the financial condition, operations and trends of each of EQT’s business segments without being obscured by the financial condition, operations and trends for the other segments or by the effects of corporate allocations of interest, income taxes and other income. In addition, management uses these measures for budget planning purposes. The Company has reconciled each segment’s operating income to the Company’s consolidated operating income and net income in Note I to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

On July 23, 2018, pursuant to the Midstream Merger Agreement, RMP and the RMP General Partner each became wholly owned subsidiaries of EQM as a result of the Midstream Mergers. The Company now conducts its business through four business segments: EQT Production, EQM Gathering, EQM Transmission and EQM Water.

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

EQT PRODUCTION

RESULTS OF OPERATIONS


	Three Months Ended March 31,							Three Months Ended September 30,								Nine Months Ended September 30,
	2018 (a)			2017		%		2018 (a)			2017			%		2018 (a)			2017		%
OPERATIONAL DATA

Sales volume detail (MMcfe):
Marcellus (b)	288,773			166,369		73.6		316,740			181,650			74.4		899,642			523,122		72.0
Ohio Utica	47,510			130		36,446.2		52,400			(4		)	(1,310,100.0	)	147,706			247		59,700.0
Other	20,722			23,435		(11.6	)	5,097			23,421			(78.2	)	46,434			69,712		(33.4	)
Total production sales volumes (c)	357,005			189,934		88.0		374,237			205,067			82.5		1,093,782			593,081		84.4

Average daily sales volumes (MMcfe/d)	3,967			2,110		88.0		4,068			2,229			82.5		4,007			2,172		84.5

Average realized price ($/Mcfe)	$	3.33		$	3.50	(4.9	)	$	2.76		$	2.76		—		$	2.96		$	3.03	(2.3	)

Gathering to EQM Gathering and RMP Gathering ($/Mcfe)	$	0.46		$	0.48	(4.2	)
Gathering to EQM Gathering ($/Mcfe)								$	0.50		$	0.47		6.4		$	0.50		$	0.48	4.2
Transmission to EQM Transmission ($/Mcfe)	$	0.13		$	0.23	(43.5	)	$	0.12		$	0.23		(47.8	)	$	0.13		$	0.23	(43.5	)
Third-party gathering and transmission ($/Mcfe)	$	0.41		$	0.48	(14.6	)	$	0.40		$	0.45		(11.1	)	$	0.41		$	0.46	(10.9	)
Processing ($/Mcfe)	$	0.13		$	0.23	(43.5	)	$	0.10		$	0.22		(54.5	)	$	0.12		$	0.23	(47.8	)
Lease operating expenses (LOE), excluding production taxes ($/Mcfe)	$	0.10		$	0.13	(23.1	)	$	0.06		$	0.13		(53.8	)	$	0.08		$	0.13	(38.5	)
Production taxes ($/Mcfe)	$	0.07		$	0.11	(36.4	)	$	0.06		$	0.07		(14.3	)	$	0.06		$	0.09	(33.3	)
Production depletion ($/Mcfe)	$	1.07		$	1.04	2.9		$	1.03		$	1.03		—		$	1.03		$	1.03	—

Depreciation, depletion and amortization (DD&A) (thousands):
Depreciation and depletion (thousands):
Production depletion	$	380,464		$	197,462	92.7		$	384,965		$	210,393		83.0		$	1,128,248		$	613,379	83.9
Other DD&A	19,594			13,635		43.7
Total DD&A	$	400,058		$	211,097	89.5
Other depreciation and depletion								6,118			13,710			(55.4	)	33,470			41,032		(18.4	)
Total depreciation and depletion								$	391,083		$	224,103		74.5		$	1,161,718		$	654,411	77.5

Capital expenditures (thousands) (d)	$	675,028		$	945,458	(28.6	)	$	855,494		$	449,303		90.4		$	2,225,435		$	1,850,482	20.3

FINANCIAL DATA (thousands)

Revenues:
Sales of natural gas, oil and NGLs	$	1,226,374		$	673,465	82.1		$	1,046,989		$	552,953		89.3		$	3,264,728		$	1,803,132	81.1
Pipeline and net marketing services	59,636			14,455		312.6		6,132			9,140			(32.9	)	42,382			31,656		33.9
Gain on derivatives not designated as hedges	62,592			140,742		(55.5	)
(Loss) gain on derivatives not designated as hedges								(3,075		)	35,625			(108.6	)	5,620			222,693		(97.5	)
Total operating revenues	1,348,602			828,662		62.7		1,050,046			597,718			75.7		3,312,730			2,057,481		61.0

Operating expenses:
Gathering	176,465			106,915		65.1		199,475			116,921			70.6		587,844			334,801		75.6
Transmission	178,016			118,596		50.1		182,932			119,729			52.8		548,106			354,534		54.6
Processing	45,023			42,760		5.3		38,340			44,166			(13.2	)	129,523			133,745		(3.2	)
LOE, excluding production taxes	35,415			25,194		40.6		21,480			26,060			(17.6	)	83,069			77,171		7.6
Production taxes	24,520			20,478		19.7		21,254			13,453			58.0		66,162			52,290		26.5
Exploration	5,104			3,122		63.5		15,772			2,437			547.2		42,058			9,040		365.2
Selling, general and administrative (SG&A)	38,376			42,951		(10.7	)	42,109			38,648			9.0		115,135			118,855		(3.1	)
DD&A	400,058			211,097		89.5
Amortization of intangible assets	10,387			—		100.0
Impairment of long-lived assets	2,329,045			—		100.0
Depreciation and depletion								391,083			224,103			74.5		1,161,718			654,411		77.5
Impairment/loss on sale of long-lived assets								259,279			—			100.0		2,706,438			—		100.0
Total operating expenses	3,242,409			571,113		467.7		1,171,724			585,517			100.1		5,440,053			1,734,847		213.6
Operating (loss) income	$	(1,893,807	)	$	257,549	(835.3	)	$	(121,678	)	$	12,201		(1,097.3	)	$	(2,127,323	)	$	322,634	(759.4	)


(a)	Operational ~~Data~~data for EQT Production includes results of operations for production ~~operations and retained midstream~~ operations acquired in the Rice Merger, which occurred on November 13, 2017.


(b)	Includes Upper Devonian wells.


(c)	NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods.

(d)

Expenditures for segment assets in the EQT Production segment included ~~$36.8~~$35.7 million and ~~$42.7~~$50.7 million for fill-ins and bolt-ons associated with legacy EQT acreage for the three months ended ~~March 31,~~September 30, 2018 and 2017, respectively, and $113.8 million and $140.4 million for fill-ins and bolt-ons associated with legacy EQT acreage for the nine months ended September 30, 2018 and 2017, respectively. ~~Expenditures included $44.3 million associated with retained midstream assets during the~~The three and nine months ended ~~March 31, 2018. The three months ended March 31,~~September 30, 2017 included ~~$669.5~~$7.8 million and $819.0 million of cash capital expenditures, respectively, and ~~$15.4~~the nine months ended September 30, 2017 included $7.5 million of non-cash capital expenditures for the acquisitions discussed in Note P.

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

Three Months Ended ~~March 31,~~September 30, 2018 vs. Three Months Ended ~~March 31,~~September 30, 2017

EQT Production’s operating loss was ~~$1,893.8~~$121.7 million for the three months ended ~~March 31,~~September 30, 2018 compared to operating income of ~~$257.5~~$12.2 million for the three months ended ~~March 31,~~September 30, 2017. The decrease was primarily due to ~~an impairment charge~~higher operating costs, including a loss recorded in the ~~first~~third quarter of 2018 associated with certain ~~non-core~~capacity contracts that the Company will no longer have existing production to satisfy and ~~related pipeline assets~~does not plan to utilize in the future as a result of the Huron Divestiture and ~~Permian Plays, higher other operating expenses, lower gains~~a loss on derivatives not designated as hedges ~~and~~compared to a ~~lower average realized price, partially~~gain on derivatives not designated as hedges in the prior year partly offset by increased sales volumes of produced natural ~~gas and NGLs.~~gas. These variances include the impact of ~~operations of~~operating the assets acquired from Rice for the three months ended ~~March 31,~~September 30, 2018, as the Rice Merger was completed in the fourth quarter of 2017. These variances also include the impacts of the divestiture of the non-core Permian assets, which was completed in the second quarter of 2018, and the divestiture of the non-core Huron assets, which was completed in the third quarter of 2018 (collectively, the 2018 Divestitures).

Total operating revenues were ~~$1,348.6~~$1,050.0 million for the three months ended ~~March 31,~~September 30, 2018 compared to ~~$828.7~~$597.7 million for the three months ended ~~March 31,~~September 30, 2017. Sales of natural gas, oil and NGLs increased as a result of an ~~88%~~82.5% increase in production sales volumes in the current period which was primarily a result of the Rice Merger ~~as well as~~and increased production from the 2016 and 2017 drilling programs, partly offset by the 2018 Divestitures and the normal production decline in the Company’s producing wells. The ~~increase in production sales volumes was partly offset by a lower~~ average realized ~~price.~~price for the three months ended September 30, 2018 was comparable to the average realized price for the three months ended September 30, 2017. EQT Production paid ~~$38.6~~$14.3 million and ~~$9.0~~received $13.3 million of net cash settlements for derivatives not designated as hedges during the three months ended ~~March 31,~~September 30, 2018 and 2017,, respectively, that are included in the average realized price but are not in GAAP operating revenues.

~~The $0.17~~There was no change in average realized price quarter over quarter as a $0.38 per ~~Mcfe decrease~~Mcf improvement in the average ~~realized price for the three months ended March 31, 2018~~natural gas differential was ~~primarily due to~~offset by a decrease in the average NYMEX natural gas price net of cash settled derivatives of ~~$0.30~~$0.34 per Mcf ~~partly offset by an $0.11 per Mcf increase~~and a decrease in higher priced liquids sales as a result of the ~~average natural gas differential and higher liquids prices.~~2018 Divestitures. The improvement in the average differential ~~primarily~~ related to higher ~~prices~~basis in the Appalachian Basin and at certain sales points reached through the ~~Company’s~~Company's transportation portfolio, ~~particularly in~~which increased following the ~~United States Northeast where colder weather led to increased demand.~~Rice Merger.

Pipeline and net marketing services primarily includes gathering revenues from gathering services provided to third parties and both the cost of, and recoveries on, third-party pipeline capacity not used to transport EQT Production’s produced volumes. The ~~increase~~decrease in these revenues primarily related to ~~increased~~reduced gathering revenues ~~for services provided to third parties on gathering lines acquired in~~as a result of the ~~Rice Merger and increased recoveries on the Company’s Tennessee Gas Pipeline capacity.~~Huron Divestiture.

EQT Production total operating revenues for the three months ended ~~March 31,~~September 30, 2018 ~~and 2017~~ included a ~~$62.6~~$3.1 million ~~and $140.7~~loss on derivatives not designated as hedges compared to a $35.6 million gain on derivatives not designated as hedges ~~respectively. The gains~~ for the three months ended ~~March 31,~~September 30, 2017. The losses for the three months ended September 30, 2018 primarily related to a decrease in the fair market value of EQT Production’s basis swaps due to an increase in basis prices, partially offset by an increase in the fair market value of EQT ~~Production’s~~Production's NYMEX swaps and NYMEX options ~~and basis swaps~~ due to a decrease in NYMEX prices during the ~~first~~third quarter of 2018.

Gathering expense increased consistent with production sales volumes, partly offset by a lower gathering rate per unit on gathering capacity acquired in the Rice ~~acquisition.~~Merger. Transmission expense increased due to increased third party capacity incurred to move EQT Production’s natural gas out of the Appalachian Basin, primarily due to firm capacity acquired in connection with the Rice Merger as well as the Company's capacity on the Rover pipeline, which started in 2018, partly offset by reduced firm capacity costs as a result of the Huron Divestiture. Processing expenses decreased primarily as a result of the 2018 Divestitures. On a per unit basis, these costs and other operating costs are lower for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 reflecting the savings achieved through the Rice Merger as well as the 2018 Divestitures.

LOE decreased primarily as a result of the 2018 Divestitures partly offset by higher salt water disposal costs and higher personnel costs due to increased activity in EPC Production's Marcellus and Utica operations. Production taxes increased primarily as a result of increased development activity in Pennsylvania as well as the increased asset base and production volumes in Ohio following the Rice Merger, partly offset by the lower asset base and production volumes in Kentucky, West Virginia, Virginia and Texas following the 2018 Divestitures. Exploration expense increased primarily due to an increase in the number of leases expiring during the third quarter of 2018 and increased delay rentals on leases acquired in the Rice Merger.

Depreciation and depletion expense increased as a result of higher produced volumes in the third quarter of 2018, partly offset by lower depreciation as a result of the 2018 Divestitures.

Table of Contents

EQT Corporation and Subsidiaries

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

Nine Months Ended September 30, 2018 vs. Nine Months Ended September 30, 2017

EQT Production's operating loss was $2,127.3 million for the nine months ended September 30, 2018 compared to operating income of $322.6 million for the nine months ended September 30, 2017. The decrease was primarily due to impairment charges recorded in 2018 associated with the 2018 Divestitures, including the third quarter loss associated with related capacity contracts that the Company will no longer have existing production to satisfy and does not plan to utilize in the future. Excluding the impairments, EQT Production's higher operating expenses, lower gains on derivatives not designated as hedges and a lower average realized price were more than offset by the increased sales volumes of produced natural gas. These variances include the impact of operating the assets acquired from Rice for the nine months ended September 30, 2018, as the Rice Merger was completed in the fourth quarter of 2017. These variances also include the impacts of the 2018 Divestitures which were completed in the second and third quarters of 2018.

Total operating revenues were $3,312.7 million for the nine months ended September 30, 2018 compared to $2,057.5 million for the nine months ended September 30, 2017. Sales of natural gas, oil and NGLs increased as a result of an 84.4% increase in production sales volumes in the current period which was primarily a result of the Rice Merger and increased production from the 2016 and 2017 drilling programs, partly offset by the 2018 Divestitures and the normal production decline in the Company's producing wells. The increase in production sales volumes was partly offset by a lower average realized price. EQT Production paid $27.4 million and $6.8 million of net cash settlements for derivatives not designated as hedges during the nine months ended September 30, 2018 and 2017, respectively, that are included in the average realized price but are not in the GAAP operating revenues.

The $0.07 per Mcfe decrease in the average realized price for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 was primarily due to a decrease in the average NYMEX natural gas price net of cash settled derivatives of $0.33 per Mcf, partly offset by a $0.24 per Mcf improvement in the average natural gas differential and higher liquids prices. The increase in the average differential primarily related to higher prices during the first quarter of 2018 at sales points in the United States Northeast where colder weather led to increased demand, higher Appalachian Basin basis as well as increased sales volumes at higher priced Gulf Coast and Midwest markets accessible through the Company's increased transportation portfolio following the Rice Merger.

The increase in pipeline and net marketing services primarily related to favorable price spreads on the Company's Tennessee Gas Pipeline capacity, partly offset by reduced gathering revenues due to the Huron Divestiture.

EQT Production total operating revenues for the nine months ended September 30, 2018 and 2017 included a $5.6 million and $222.7 million gain on derivatives not designated as hedges, respectively. The gains for the nine months ended September 30, 2018 primarily related to an increase in the fair market value of EQT Production's NYMEX swaps and NYMEX options due to a decrease in NYMEX prices, partially offset by a decrease in the fair market value of EQT Production's basis swaps due to an increase in basis prices during the first nine months of 2018.

Gathering expense increased consistent with production sales volumes, partly offset by a lower gathering rate per unit on gathering capacity acquired in the Rice Merger. ~~Additionally, a portion~~Transmission expense increased due to increased third party capacity incurred to move EQT Production’s natural gas out of the Appalachian Basin, primarily due to firm capacity acquired in connection with the Rice Merger as well as the Company’s capacity on the Rover pipeline, which started in ~~the first quarter of 2018. Processing~~2018, partly offset by reduced firm capacity costs ~~increased consistent with the increase in NGL volumes.~~

~~The increase in LOE was~~as a result of the ~~growth in volumes as reflected in the lower~~Huron Divestiture. On a per unit ~~cost.~~ basis, these costs and other operating costs were lower for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 reflecting the savings achieved through the Rice Merger as well as the 2018 Divestitures.

On an absolute basis, LOE increased primarily due to increased salt water disposal costs in 2018 related to increased activity from the Rice Merger and higher personnel ~~costs.~~costs, partly offset by the reduced costs resulting from the 2018 Divestitures. Production taxes increased primarily as a result of increased development activity in ~~Pennsylvania.~~Pennsylvania as well as the increased asset base and production volumes in Ohio following the Rice Merger. SG&A expense decreased primarily due to decreased legal reserves, partly offset by higher personnel costs including corporate overhead allocations. Exploration expense increased primarily due to an increase in the number of leases expiring during the first nine months of 2018 and increased delay rentals on leases acquired in the Rice Merger.

~~DD&A~~Depreciation and depletion expense increased as a result of higher produced volumes ~~and~~in 2018, partly offset by lower depreciation as a ~~higher overall depletion rate in~~result of the ~~first quarter of~~ 2018 primarily due to recording the properties acquired in the Rice Merger at fair value. EQT Production recognized an intangible asset related to the Rice Merger, which resulted in amortization of intangible assets during the first quarter of 2018.Divestitures.

See Note Q to the Condensed Consolidated Financial Statements for a discussion of the asset impairment.

Table of Contents

EQT Corporation and Subsidiaries

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

EQM GATHERING

RESULTS OF OPERATIONS


	Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017		%		2018 (a)		2017		%	2018 (a)		2017		%
	(Thousands, other than per day amounts)						(Thousands, other than per day amounts)
FINANCIAL DATA
Firm reservation fee revenues	$	109,933	$	94,271	16.6		$	112,598	$	104,772	7.5	$	334,233	$	300,901	11.1
Volumetric based fee revenues:
Usage fees under firm contracts ~~(a)~~(b)	12,108		4,821		151.2		8,661		7,873		10.0	30,725		19,173		60.3
Usage fees under interruptible contracts(c)	3,867		3,237		19.5		131,602		3,877		3,294.4	366,482		10,922		3,255.4
Total volumetric based fee revenues	15,975		8,058		98.3		140,263		11,750		1,093.7	397,207		30,095		1,219.8
Total operating revenues	125,908		102,329		23.0		252,861		116,522		117.0	731,440		330,996		121.0

Operating expenses:
Operating and maintenance	10,625		10,340		2.8		18,850		10,104		86.6	54,551		30,737		77.5
SG&A	5,654		9,425		(40.0	)	20,363		10,503		93.9	62,665		28,800		117.6
Depreciation and amortization	10,738		8,860		21.2
Depreciation							25,359		9,983		154.0	72,309		28,398		154.6
Amortization of intangible assets							10,387		—		100.0	31,160		—		100.0
Total operating expenses	27,017		28,625		(5.6	)	74,959		30,590		145.0	220,685		87,935		151.0

Operating income	$	98,891	$	73,704	34.2		$	177,902	$	85,932	107.0	$	510,755	$	243,061	110.1

OPERATIONAL DATA
Gathered volumes (BBtu per day)
Firm capacity reservation	1,964		1,728		13.7		2,114		1,838		15.0	2,029		1,783		13.8
Volumetric based services (b)	600		224		167.9
Volumetric based services (d)							4,437		370		1,099.2	4,291		292		1,369.5
Total gathered volumes	2,564		1,952		31.4		6,551		2,208		196.7	6,320		2,075		204.6

Capital expenditures	$	68,933	$	48,838	41.1		$	194,477	$	48,182	303.6	$	515,072	$	150,728	241.7


(a)	Includes the pre-acquisition results of the Drop-Down Transaction and the Midstream Mergers, which were effective May 1, 2018 and July 23, 2018, respectively. The recast is for the period the acquired businesses were under the common control of EQT, which began on November 13, 2017 as a result of the Rice Merger.


(b)	Includes fees on volumes gathered in excess of firm contracted capacity.


~~(b)~~(c)	Includes volumes from contracts under which EQM has agreed to hold capacity available without charging a capacity reservation fee.


(d)	Includes volumes gathered under interruptible contracts and volumes gathered in excess of firm contracted capacity.

Three Months Ended ~~March 31,~~September 30, 2018 vs. Three Months Ended ~~March 31,~~September 30, 2017

~~EQM~~ Gathering revenues increased by ~~$23.6~~$136.3 million for the three months ended ~~March 31,~~September 30, 2018 compared to the three months ended ~~March 31,~~September 30, 2017 primarily driven by the Midstream Mergers, the Drop-Down Transaction and affiliate and third party production development in the Marcellus ~~Shale.~~and Utica Shales. Firm reservation fee revenues increased primarily as a result of ~~the completion of the Range Resources Corporation (Range Resources) header pipeline project and~~ increased affiliate contracted gathering capacity and higher rates on various affiliate wellhead expansion projects in the current period. Usage fees under firm contracts increased due to increased third party volumes gathered in excess of firm contracted capacity. Usage fees under interruptible contracts increased as a result of the Midstream Mergers and the Drop-Down Transaction, which added revenues of $69.7 million and $58.4 million, respectively, for the three months ended September 30, 2018.

Operating expenses increased by $44.4 million for the three months ended September 30, 2018 compared to the three months ended September 30, 2017. Operating expenses increased $17.9 million and $24.5 million as a result of RMP and the former Rice assets acquired in the Drop-Down Transaction (the Drop-Down Entities), respectively. In addition, operating and maintenance expense increased due to higher repairs and maintenance expense consistent with the growth of the business. Selling, general and administrative also increased due to transaction costs of $2.2 million. Depreciation expense also increased as a result of additional assets placed in-service. Amortization of intangible assets relates to the customer contract intangible associated with the Drop-Down Entities.

Table of Contents

EQT Corporation and Subsidiaries

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

Nine Months Ended September 30, 2018 vs. Nine Months Ended September 30, 2017

Gathering revenues increased by $400.4 million for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 primarily driven by RMP, the Drop-Down Entities and affiliate and third party production development in the Marcellus and Utica Shales. Firm reservation fee revenues increased primarily as a result of increased affiliate and third party contracted gathering capacity and higher rates on various affiliate wellhead expansion projects in the current period. Usage fees under firm contracts increased due to increased third party and affiliate volumes gathered in excess of firm contracted capacity. Usage fees under interruptible contracts increased ~~primarily due to an additional affiliate contract~~as a result of RMP and the Drop-Down Entities, which added revenues of $193.5 million and $161.9 million, respectively, for ~~interruptible capacity, partly offset by~~ the ~~additional contracts for firm capacity.~~nine months ended September 30, 2018.

Operating expenses ~~decreased~~increased by ~~$1.6~~$132.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2017. Operating expenses increased $53.2 million and $72.8 million as a result of RMP and the Drop-Down Entities, respectively. In addition, operating and maintenance expense increased due to higher repairs and maintenance expense consistent with the growth of the business. Selling, general and administrative ~~expense decreased~~also increased due to ~~a shift in the strategic focus, which continued the trend~~transaction costs of ~~lower allocated costs.~~$7.5 million. Depreciation ~~and amortization~~ expense also increased as a result of additional assets placed in-service, including those associated with the Range Resources header pipeline project and various ~~affiliate~~ wellhead gathering expansion projects.

Amortization of intangible assets relates to the customer contract intangible associated with the Drop-Down Entities.

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EQT Corporation and Subsidiaries

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

EQM TRANSMISSION

RESULTS OF OPERATIONS


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		%		2018		2017		%		2018		2017		%
	(Thousands, other than per day amounts)						(Thousands, other than per day amounts)
FINANCIAL DATA
Firm reservation fee revenues	$	97,775	$	92,274	6.0		$	82,669	$	84,438	(2.1	)	$	262,666	$	256,224	2.5
Volumetric based fee revenues:
Usage fees under firm contracts (a)	3,822		2,857		33.8		5,331		3,427		55.6		13,981		9,787		42.9
Usage fees under interruptible contracts	5,337		2,612		104.3		1,350		1,906		(29.2	)	8,782		6,173		42.3
Total volumetric based fee revenues	9,159		5,469		67.5		6,681		5,333		25.3		22,763		15,960		42.6
Total operating revenues	106,934		97,743		9.4		89,350		89,771		(0.5	)	285,429		272,184		4.9

Operating expenses:
Operating and maintenance	7,551		6,477		16.6		10,721		9,485		13.0		27,082		23,984		12.9
SG&A	7,491		7,975		(6.1	)	7,581		8,255		(8.2	)	22,335		23,170		(3.6	)
Depreciation and amortization	12,441		11,687		6.5
Depreciation							12,357		12,261		0.8		37,228		35,793		4.0
Total operating expenses	27,483		26,139		5.1		30,659		30,001		2.2		86,645		82,947		4.5

Operating income	$	79,451	$	71,604	11.0		$	58,691	$	59,770	(1.8	)	$	198,784	$	189,237	5.0

Equity income							$	16,087	$	6,025	167.0		$	35,836	$	15,413	132.5

OPERATIONAL DATA
Transmission pipeline throughput (BBtu per day)
Firm capacity reservation	2,815		2,119		32.8		2,927		2,517		16.3		2,857		2,288		24.9
Volumetric based services (b)	42		31		35.5		104		21		395.2		62		22		181.8
Total transmission pipeline throughput	2,857		2,150		32.9		3,031		2,538		19.4		2,919		2,310		26.4

Average contracted firm transmission reservation commitments (BBtu per day)	4,140		3,743		10.6		3,658		3,474		5.3		3,801		3,519		8.0

Capital expenditures	$	18,929	$	21,389	(11.5	)	$	37,626	$	22,312	68.6		$	84,517	$	73,679	14.7


(a)	Includes fees on volumes transported in excess of firm contracted capacity as well as ~~commodity charges~~usage fees and fees on all volumes transported under firm contracts.


(b)	Includes volumes transported under interruptible contracts and volumes transported in excess of firm contracted capacity.

Three Months Ended ~~March 31,~~September 30, 2018 vs. Three Months Ended ~~March 31,~~September 30, 2017

~~EQM~~ Transmission and storage revenues ~~increased~~decreased by ~~$9.2~~$0.4 million for the three months ended ~~March 31,~~September 30, 2018 compared to the three months ended ~~March 31,~~September 30, 2017. Firm reservation fee revenues decreased as a result of a third quarter 2017 FERC-approved retroactive negotiated rate adjustment of approximately $3.4 million for the period from October 1, 2016 through June 30, 2017 partially offset by increased ~~due to~~affiliate firm capacity and higher contractual rates on existing contracts with third parties ~~and affiliates~~ in the current ~~period and third parties contracting for additional firm capacity.~~period. Usage fees under firm contracts increased primarily due to higher affiliate and third party volumes and increased commodity charges on higher firm contracted volumes. The ~~increase~~decrease in usage fees under interruptible contracts primarily relates to ~~higher storage and~~lower parking revenue, which does not have associated pipeline throughput.

Operating expenses increased by ~~$1.3~~$0.7 million for the three months ended ~~March 31,~~September 30, 2018 compared to the three months ended ~~March 31,~~September 30, 2017 primarily ~~driven by increased~~as a result of higher operating and maintenance personnel ~~expense.~~costs partly offset by lower selling, general and administrative expenses resulting from lower allocations from EQT and professional fees.

~~Table of Contents~~

~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~RMP GATHERING~~

~~RESULTS OF OPERATIONS~~

Three Months Ended March 31,
2018 2017(a) %
FINANCIAL DATA (in thousands)
Operating revenues:
Gathering revenues $ 52,730
$ —
100.0
Compression revenues 8,771
—
100.0
Total operating revenues 61,501
—
100.0

Operating expenses:
Operation and maintenance expense 3,189
—
100.0
General and administrative expense 6,093
—
100.0
Depreciation expense 8,124
—
100.0
Total operating expenses 17,406
—
100.0

Operating income (loss) $ 44,095
$ —
100.0

OPERATIONAL DATA
Gathered volumes (BBtu/d) 1,697
—
100.0
Compression volumes (BBtu/d) 1,248
—
100.0

Capital expenditures (in thousands) $ 20,940
$ —
100.0


~~(a)~~	~~This table sets forth selected financial and operational data for RMP Gathering. The Company acquired RMP Gathering on November 13, 2017 as part of the Rice Merger.~~

The majority of RMP Gathering revenues are from contracts with EQT Production to gather gas in Washington and Greene Counties, Pennsylvania. RMP Gathering provides all services under long-term contracts that are supported in most cases by acreage dedications. RMP Gathering charges separate rates for gathering and compression services based on the actual volumes gathered and compressed. During the three months ended March 31, 2018, operating expenses are composed of customary expenses for a gathering business.

Table of Contents

EQT Corporation and Subsidiaries

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

~~RMP~~The increase in equity income of $10.1 million for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 was related to the increase in the MVP Joint Venture's AFUDC on the MVP.

Nine Months Ended September 30, 2018 vs. Nine Months Ended September 30, 2017

Transmission and storage revenues increased by $13.2 million for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. Firm reservation fee revenues increased due to higher contractual rates on existing contracts with third parties and affiliates in the current period and affiliates contracting for additional firm capacity. Usage fees under firm contracts increased primarily due to increased commodity charges. The increase in usage fees under interruptible contracts primarily relates to higher parking revenue, which does not have associated pipeline throughput.

Operating expenses increased by $3.7 million for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 consistent with the growth of the business.

Equity income increased $20.4 million for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 due to the increase in the MVP Joint Venture's AFUDC on the MVP.

Table of Contents

EQT Corporation and Subsidiaries

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

EQM WATER

RESULTS OF OPERATIONS

Three Months Ended March 31,
2018 2017(a) %
FINANCIAL DATA (in thousands) (Thousands, other than per day amounts)
Water services revenues 22,963
—
100.0

Operating expenses:
Operation and maintenance expense 4,711
—
100.0
General and administrative expense 1,111
—
100.0
Depreciation expense 5,771
—
100.0
Total operating expenses 11,593
—
100.0

Operating income $ 11,370
$ —
100.0

OPERATIONAL DATA
Water services volumes (in MMgal) 434
—
100.0

Capital expenditures (in thousands) $ 2,375
$ —
100.0



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018 (a)			2017		%	2018 (a)		2017		%
FINANCIAL DATA	(Thousands, other than per day amounts)
Water services revenues	$	22,373		$	—	100.0	$	93,438	—		$	100.0

Operating expenses:
Operation and maintenance	18,521			—		100.0	36,901		—		100.0
SG&A	1,094			—		100.0	3,490		—		100.0
Depreciation	5,851			—		100.0	17,420		—		100.0
Total operating expenses	25,466			—		100.0	57,811		—		100.0

Operating (loss) income	$	(3,093	)	$	—	100.0	$	35,627	$	—	100.0

OPERATIONAL DATA
Water services volumes (MMgal)	449			—		100.0	1,740		—		100.0

Capital expenditures	$	7,981		$	—	100.0	$	17,358	$	—	100.0


(a)	This table sets forth selected financial and operational data for RMP Water. The Company acquired the water assets that constitute RMP Water on November 13, 2017 as part of the Rice Merger. On July 23, 2018, following the completion of the Midstream Mergers, RMP Water became EQM Water.

~~RMP~~EQM Water provides fresh water for well completions operations in the Marcellus and Utica Shales and collects ~~and recycles or disposes of~~ flowback and produced ~~water. The majority~~water for recycling or disposal. Substantially all of ~~RMP~~EQM Water's services are provided to ~~EQT Production. RMP~~EQT's Production business. EQM Water offers its water services on a volumetric basis, supported by an acreage dedication from EQT ~~Production~~ for certain drilling areas. ~~RMP~~The fee EQM Water charges ~~customers a fee~~ per gallon of ~~water; this fee~~water is tiered and thus is lower on a per gallon basis once ~~the customer meets~~ certain volumetric ~~thresholds.~~thresholds are met. During the three and nine months ended ~~March 31,~~September 30, 2018, operating expenses ~~are~~were composed of customary expenses for a water ~~business.~~services business, including water procurement costs. The operating loss for the three months ended September 30, 2018 was due to timing of costs related to activities on drilling pads.

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EQT Corporation and Subsidiaries

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

Other Income Statement Items

Other Income

For the three months ended ~~March 31,~~September 30, 2018 and 2017, the Company recorded equity in earnings of nonconsolidated investments of ~~$8.8~~$16.1 million and ~~$4.3~~$6.0 million, respectively, related to EQM's portion of the MVP Joint Venture's ~~Allowance for Funds Used During Construction (AFUDC)~~AFUDC on the MVP. For the nine months ended September 30, 2018 and 2017, the Company recorded equity in earnings of nonconsolidated investments of $35.8 million and $15.4 million, respectively, related to EQM's portion of the MVP ~~project.~~Joint Venture's AFUDC on the MVP. EQT includes the equity investment in MVP in the EQM Transmission segment.

Other income also includes AFUDC - equity which varies based on EQM's level of spending on regulated projects.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2017, other income was partly offset by losses on the sale of trading securities. As of March 31, 2017, the Company closed its positions on all trading securities.

~~Other income also decreased by $0.6 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily driven by decreased AFUDC - equity.~~

Interest Expense

Interest expense increased by ~~$27.4~~$42.7 million for the three months ended ~~March 31,~~September 30, 2018 compared to the three months ended ~~March 31,~~September 30, 2017, which was primarily driven by ~~$24.0~~$24.8 million of interest incurred on EQT's Senior Notes issued in October 2017, $33.7 million of interest incurred on EQM's Senior Notes issued in June 2018 and ~~$16.4~~$3.3 million of interest incurred on credit facility borrowings partly offset by a $10.7 million decrease due to the early extinguishment of certain EQT Senior ~~Notes.~~Notes and a decrease of $6.8 million related to expense incurred in 2017 on the Company's senior unsecured bridge loans.

Interest expense increased by $102.9 million for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017, which was primarily driven by $72.9 million of interest incurred on EQT's Senior Notes issued in October 2017, $35.9 million of interest incurred on EQM'S Senior Notes issued in June 2018, $38.9 million of interest incurred on credit facility borrowings and $3.0 million of deferred fees expensed upon termination of the EQM Term Loan Facility partly offset by a $32.1 million decrease due to the early extinguishment of certain EQT Senior Notes and a decrease of $7.6 million related to expense incurred in 2017 on the Company's senior unsecured bridge loans.

Income Tax Expense

~~On December 22, 2017, the U.S. Congress enacted the law known as the Tax Cuts and Jobs Act~~See discussion of ~~2017 (the Tax Reform Legislation), which made significant changes to U.S. federal income tax law, including lowering the federal corporate tax rate to 21% from 35% beginning January 1, 2018.~~

~~All of EQGP's, RMP's and Strike Force Midstream's income is included in the Company's pre-tax (loss) income. However, the Company is not required to record~~ income tax expense ~~with respect~~in Note L to the portions of EQGP's and RMP's income allocated to the noncontrolling public limited partners of EQGP, EQM, and RMP or to the minority owner of Strike Force Midstream, which reduces the Company's effective tax rate in periods when the Company has consolidated pre-tax income and increases the Company's effective tax rate in periods when the Company has consolidated pre-tax loss.

The Company recorded income tax benefit at an effective tax rate of 19.0% for the three months ended March 31, 2018, compared to income tax expense at an effective rate rate of 28.6% for the three months ended March 31, 2017. The Company’s forecasted annual effective tax rate for the period ended December 31, 2018 is higher than the statutory rate due to the impact of income allocated to non-controlling limited partners on a forecasted consolidated pre-tax loss and the impact of state taxes. The state taxes increased the forecasted annual effective tax rate at a higher rate than the statutory rate as a result of the mix of earnings. The Company generated pre-tax losses on entities with higher state rates and pre-tax income on entities with lower state rates. The Company’s effective tax rate for the three months ended March 31, 2018 was significantly lower than the forecasted annual effective tax rate because the amount of benefit recorded for the quarter is limited to the amount of benefit forecasted for the entire year. The Company’s effective tax rate for the three months ended March 31, 2017 was lower than the statutory rate due to the impact of income allocated to non-controlling limited partners on forecasted consolidated pre-tax income.Condensed Consolidated Financial Statements.

Net Income Attributable to Noncontrolling Interests

The increase in net income attributable to noncontrolling interests for the three months and nine months ended ~~March 31,~~September 30, 2018 was the result of higher net income at EQM and noncontrolling interests in RMP and Strike Force Midstream as a result of the Rice Merger on November 13, 2017.

As described in Note B to the Condensed Consolidated Financial Statements, Strike Force Midstream and RMP are now wholly owned subsidiaries of EQM following the Gulfport Transaction and the Midstream Mergers, respectively.

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

OUTLOOK

On February 21, 2018, the Company announced a plan to separate its upstream and midstream businesses, creating a standalone publicly traded corporation, ~~(NewCo)~~Equitrans Midstream, that will focus on midstream operations. Following the Separation, Equitrans Midstream will own the midstream interests held by the Company, including the interests in EQGP and EQM. The ~~separation~~Separation is intended to qualify as tax-free to ~~EQT~~the Company’s shareholders for U.S. federal income tax ~~purposes~~purposes.

On October 24, 2018, the Company’s Board of Directors approved the completion of the Separation by means of a pro-rata distribution (the Distribution) by the Company of 80.1% of the outstanding common stock of Equitrans Midstream to the Company’s shareholders of record as of the close of business on November 1, 2018 (the Record Date). Pursuant to the plan of Distribution approved by the Company’s Board of Directors, each Company shareholder will receive 0.80 shares of Equitrans Midstream common stock for every one share of the Company’s common stock held as of the close of business on the Record Date. Shareholders will receive cash in lieu of fractional shares of Equitrans Midstream common stock. After considering that EQT will retain an additional 19.9% of Equitrans Midstream's common stock, total Equitrans Midstream shares outstanding after the Distribution are expected to be approximately 255 million shares.

In connection with the Separation, the Company and certain of its subsidiaries will enter into agreements with Equitrans Midstream to implement the legal and structural separation between the two companies, govern the relationship between the Company and Equitrans Midstream after completion of the Separation, and allocate between the Company and Equitrans Midstream, various assets, liabilities and obligations, including, among other things, employee benefits, litigation, contracts, equipment, real property, intellectual property and tax-related assets and liabilities. These agreements include a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and Shareholder and Registration Rights Agreement, the forms of which have been approved by the Company’s Board of Directors and will be filed with the SEC following the Separation.

The Company plans to dispose of all of its retained Equitrans Midstream common stock, which may include dispositions through one or more subsequent exchanges for debt or a sale of its shares for cash. The Company expects to dispose its retained Equitrans Midstream common stock in order to reduce the Company's post Separation debt.

The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented on a consolidated basis for the Company, which includes the results of the businesses that comprise Equitrans Midstream, as the Distribution is expected to be ~~completed by~~effective at 11:59 p.m. eastern time, on November 12, 2018, which is after the ~~end~~most recent period reported in this Form 10-Q. In future filings, the historical results of the ~~third quarter 2018. Under the separation plan, EQT shareholders~~businesses that comprise Equitrans Midstream will ~~retain their shares of EQT stock and receive~~be presented as discontinued operations. As a ~~pro-rata share~~result of the ~~new independent midstream company.~~

~~The Company had also announced a plan~~Separation and Distribution, Management’s Discussion and Analysis of ~~action for the Midstream Streamlining Transactions as discussed in Note~~ R ~~to the Condensed Consolidated~~ Financial ~~Statements.~~

~~The Company’s plan to separate the midstream business~~Condition and Results of Operations is not ~~contingent on~~indicative of the ~~EQM/RMP merger.~~Company’s future financial position, results of operations or cash flows.

The Company is committed to profitably and safely developing its Appalachian Basin natural gas and NGLs reserves through environmentally responsible, cost-effective and technologically advanced horizontal drilling. The Company believes the long-term outlook for its business is favorable due to the Company’s substantial resource base, low cost structure, financial strength, risk management, including its commodity hedging strategy, and disciplined investment of capital. The Company believes the combination of these factors provide it with an opportunity to exploit and develop its positions and maximize efficiency through economies of scale in its strategic operating area.

The ~~Company monitors current~~Company’s production business strategy is transitioning from one focused on volume growth to one focused on capital efficiency and ~~expected market conditions, including~~free cash flow generation. In preparation for the ~~commodity price environment, and its liquidity needs and may adjust its capital investment plan accordingly. While the tactics continue to evolve based on market conditions,~~Separation, the Company ~~periodically considers arrangements~~has been evaluating EQT Production's long-term pace of development in order to ~~monetize~~achieve the ~~value of certain mature assets for re-deployment into the highest value development opportunities. Upon the closing of the Rice Merger, the Company’s consolidation goals were largely met~~optimal balance between free cash flow generation and volume growth. Based on this evaluation, the Company ~~plans~~is currently targeting mid-single digit annual production growth over the next five years. This is expected to ~~focus on integrating~~result in lower annual drilling and capital expenditures in the Rice assets and realizing higher returns through longer laterals and achieving an even lower operating cost structure. The Company will also continue to pursue tactical acquisitions of fill-in acreage to extend laterals.future.

EQT Production ~~expects to spend approximately $2.2 billion~~capital expenditures estimate for 2018 well development ~~(primarily drilling~~increased by $300 million to $2.5 billion. This was driven by inefficiencies resulting from higher activity levels, the learning curve on ultra-long laterals and ~~completion) in 2018.~~service cost increases. Estimated sales volumes are expected to be ~~1,520~~1,460 - ~~1,550~~1,480 Bcfe for 2018.

To support continued growth in production, the Company plans to invest approximately $1.5 billion on midstream infrastructure through EQM in 2018, including capital contributions to the MVP Joint Venture of $1.1 billion. RMP investments in organic projects are expected to total approximately $260 million in 2018, including $215 million for gathering and compression and $45 million for water infrastructure.

The 2018 capital investment plan for EQT Production is expected to be funded by cash generated from operations and ~~cash~~asset sales.

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

The Company plans to invest approximately $1.8 billion on ~~hand.~~midstream infrastructure through EQM ~~expects~~in 2018, including capital contributions to ~~fund~~the MVP Joint Venture of $0.9 billion, on gathering expansion projects, primarily driven by wellhead and header projects in Pennsylvania, West Virginia and Ohio. This also includes expansion and ongoing maintenance capital expenditures of RMP as a result of the completion of the Midstream Mergers on July 23, 2018 and approximately $150 million on commencing construction activities on the Hammerhead project. The Hammerhead project is a 1.2 Bcf per day gathering header pipeline connecting natural gas produced in Pennsylvania and West Virginia to the MVP primarily for EQT that is expected to cost a total of $555 million and be placed in service in the fourth quarter of 2019. EQM's future capital investments may vary significantly from period to period based on the available investment opportunities and the timing of construction for the MVP. Maintenance related capital expenditures ~~primarily through~~are also expected to vary quarter to quarter. EQM's available sources of liquidity include cash generated from operations, ~~availability~~borrowing under ~~its~~EQM's credit facilities, cash on hand, debt offerings and ~~issuances~~issuance of additional EQM partnership units. ~~RMP~~EQM is not forecasting any public equity issuance for the foreseeable future.

The Company has also announced that it expects ~~its future cash requirements relating~~the Equitrans Midstream board of directors will evaluate the possible simplification of the EQM structure by addressing the incentive distribution rights, although the ultimate decision of whether to ~~working capital, maintenance capital expenditures and quarterly cash distributions to its partners~~propose any such changes will be ~~funded from cash flows internally generated from its operations. RMP’s growth or expansion capital expenditures will be funded~~made by ~~borrowings under its revolving credit facility or from potential capital market transactions.~~the Equitrans Midstream board of directors following the Separation.

The Company’s revenues, earnings, liquidity and ability to grow are substantially dependent on the prices it receives for, and the Company’s ability to develop its reserves of, natural gas and NGLs. Due to the volatility of commodity prices, the Company is unable to predict future potential movements in the market prices for natural gas, including Appalachian and other market point basis, and NGLs and thus cannot predict the ultimate impact of prices on its operations.

Changes in natural gas, NGLs and oil prices could affect, among other things, the Company's development plans, which would increase or decrease the pace of the development and the level of the Company's reserves, as well as the Company's revenues, earnings or liquidity. Lower prices could also result in non-cash impairments in the book value of the Company’s oil and gas properties, goodwill or other long lived intangible assets or downward adjustments to the Company’s estimated proved reserves. Any such impairment and/or downward adjustment to the Company’s estimated reserves could potentially be material to the Company.

See "Impairment of Oil and Gas Properties and Goodwill" and “Critical Accounting Policies and Estimates” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of the Company’s accounting

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policies and significant assumptions related to accounting for oil and gas producing activities, and the Company's policies and processes with respect to impairment reviews for proved and unproved property and goodwill. As a result of its first quarter 2018 evaluations, the Company recognized an impairment charge of $2.3 billion associated with certain non-core production and related pipeline assets in the Huron and Permian Plays. The Company did not identify an impairment indicator related to goodwill during the ~~first~~third quarter of 2018.

CAPITAL RESOURCES AND LIQUIDITY

Operating Activities

Net cash flows provided by operating activities totaled ~~$904.4~~$2,445.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 compared to ~~$514.8~~$1,211.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2017. The ~~$389.6~~$1,234.0 million increase in cash flows provided by operating activities was primarily the result of ~~an 88% increase in production sales volume and~~ higher ~~pipeline, water and net marketing services revenue,~~operating revenues partially offset by ~~lower prices and higher~~increased cash operating expenses.

The Company's cash flows from operating activities will be impacted by future movements in the market price for commodities. The Company is unable to predict these future price movements outside of the current market view as reflected in forward strip pricing. Refer to "Natural gas, NGLs and oil price volatility, or a prolonged period of low natural gas, NGLs and oil prices, may have an adverse effect upon our revenue, profitability, future rate of growth, liquidity and financial position" under Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for further information.

Investing Activities

Net cash flows used in investing activities totaled ~~$849.4~~$2,719.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 compared to ~~$716.9~~$1,791.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2017. The ~~$132.6~~$928.0 million increase was primarily due to the Company's capital expenditures ~~primarily increased drilling and completions spending,~~ and higher contributions to the MVP JVJoint Venture during the ~~three~~nine months ended ~~March 31,~~September 30, 2018. These increases were partly offset by proceeds from the 2018 Divestitures and capital expenditures for acquisitions during the ~~three~~nine months ended ~~March 31,~~September 30, 2017. The Company spud 37125 gross wells in the first ~~three~~nine months of 2018, including 2489 horizontal Marcellus wells, ~~two~~five horizontal Upper Devonian wells and 1131 horizontal Utica wells. The Company spud 48149 gross wells in the first ~~three~~nine months of 2017, including 28100 horizontal Marcellus wells, 1948 horizontal Upper Devonian wells and one horizontal Utica well. The Company completed approximately ~~485,000~~1,744,000 feet of pay in the first ~~three~~nine months of 2018, approximately three times the ~~122,000~~646,000 feet of pay completed during the same period of 2017. Gathering capital expenditures increased primarily in support of gathering projects supporting EQT's production development in the Marcellus Shale.

Capital expenditures as reported on the Statements of Condensed Consolidated Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and 2017 excluded capitalized non-cash stock-based compensation expense and accruals. The impact of accrued capital

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

expenditures includes the reversal of the prior period accrual as well as the current period estimate, both of which are non-cash items. The net impact of these non-cash items was ~~$32.6~~$(45.2) million and ~~$21.0~~$102.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 and 2017, respectively. There were no non-cash capital expenditures excluded for acquisitions as reported on the Statements of Condensed Consolidated Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2018. The Company excluded non-cash capital expenditures as reported on the Statements of Condensed Consolidated Cash Flows of ~~$15.4~~$7.5 million related to the Company's acquisitions for the ~~three~~nine months ended ~~March 31,~~September 30, 2017.

Financing Activities

Net cash flows ~~used in~~provided by financing activities totaled ~~$8.1~~$131.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 compared to net cash flows used in financing activities of ~~$77.1~~$114.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2017. ~~During~~For the ~~three~~nine months ended ~~March 31,~~September 30, 2018, the primary source of financing cash flows was net proceeds from the EQM 2018 Senior Notes (as defined in Note Bto the Condensed Consolidated Financial Statements) offering net of offering costs, while the primary use of financing cash flows was a net decrease in EQT, EQM and RMP credit facility borrowings, repurchase and retirement of common stock, distributions to noncontrolling interests, EQM's acquisition of the 25% ownership interest in Strike Force Midstream, dividends paid and cash paid for taxes on share-based incentive awards. For the nine months ended September 30, 2017, the primary financing uses of cash were distributions to noncontrolling interests, cash paid for taxes on share-based incentive awards ~~repayments of Senior Notes~~ and dividends paid. The primary financing source of cash was a net increase in ~~EQT,~~ EQM ~~and RMP~~ credit facility ~~borrowings. During~~borrowings during the ~~three~~nine months ended March 31, 2017, the primary financing uses of cash were distributions to noncontrolling interests and payment of taxes related to the vesting or exercise of equity awards. There was no cash provided by financing activities during the period.September 30, 2017.

The Company may from time to time seek to repurchase its outstanding debt securities. Such repurchases, if any, will depend on prevailing market conditions, the Company's liquidity requirements, contractual and legal restrictions and other factors. In addition, following completion of the Distribution, the Company plans to dispose of its 19.9% retained shares of Equitrans Midstream’s common stock, which may include dispositions through one or more exchanges for debt or a sale of the retained shares for cash. The Company expects to use the proceeds from the sale of its retained Equitrans Midstream common stock to reduce the Company’s post-Separation debt, which was initially funded by borrowings on the Company's credit facility and cash on hand. The Company has $700 million of debt that matures in 2019; these maturities may be funded by sales of, or exchanges for, the retained interest in Equitrans Midstream common stock, borrowings on the Company's credit facility, cash from operations or a combination thereof.

Refer to Part II, Item 2, "Unregistered Sales of Equity Securities and Use of Proceeds" for discussion of the Company's $500 million share repurchase program.

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EQT Corporation and Subsidiaries

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

Security Ratings and Financing Triggers

The table below reflects the credit ratings for debt instruments of the Company at ~~March 31,~~September 30, 2018. Changes in credit ratings may affect the interest rates on the Company’s short-term and floating rate long-term debt and the fees it pays under its lines of credit. These ratings may also affect collateral requirements on derivative instruments, pipeline capacity contracts, joint venture arrangements and subsidiary construction contracts, as well as the rates available on new long-term debt and access to the credit markets.



Rating Service	Senior Notes	Outlook
Moody's ~~Investors Service (Moody's)~~	Baa3	Stable
~~Standard & Poor's Rating Service (S&P)~~S&P	BBB	Negative
Fitch Ratings Service (Fitch)	BBB-	Stable

The table below reflects the credit ratings for debt instruments of EQM at ~~March 31,~~September 30, 2018. Changes in credit ratings may affect EQM’s cost of short-term debt through interest rates and fees under its lines of credit. These ratings may also affect collateral requirements under joint venture arrangements and subsidiary construction contracts, as well as the rates available on new long-term debt and access to the credit markets.



Rating Service	Senior Notes	Outlook
Moody’s	Ba1	Stable
S&P	BBB-	Stable
Fitch	BBB-	Stable

EQGP ~~and RMP have~~has no long-term debt and ~~are~~is not currently rated by Moody’s, S&P or Fitch.

The Company’s and EQM’s credit ratings are subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. The Company and EQM cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by a credit rating agency if, in its judgment, circumstances so warrant. If any credit rating agency downgrades the ratings, particularly below investment grade, the Company’s or EQM’s access to the capital markets may be limited, borrowing costs and margin deposits on the Company’s derivative contracts would increase, counterparties may request additional assurances, including collateral, and the potential pool of investors and funding sources may decrease. The required margin on the Company’s derivative instruments is also subject to significant change as a result of factors other than credit rating, such as gas prices and credit thresholds set forth in agreements between the hedging counterparties and the Company. See Note J to the Condensed Consolidated Financial Statements for further discussion on what is deemed investment ~~grade.~~grade and a discussion of other factors affecting margin deposit requirements.

The Company’s debt agreements and other financial obligations contain various provisions that could result in termination of the agreements, require early payment of amounts outstanding or similar actions in the event of noncompliance. The most significant covenants and events of default under the debt agreements relate to maintenance of a debt-to-total capitalization ratio, limitations on transactions with affiliates, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of other financial obligations and change of control provisions. The Company’s credit facility contains financial covenants that require a total debt-to-total capitalization ratio of no greater than 65%. The calculation of this ratio excludes the effects of accumulated other comprehensive income (OCI). As of ~~March 31,~~September 30, 2018, the Company was in compliance with all debt provisions and covenants.

EQM’s debt agreements and other financial obligations contain various provisions that could result in termination of the agreements, require early payment of amounts outstanding or similar actions in the event of noncompliance. The most significant covenants and events of default under the debt agreements relate to maintenance of a permitted leverage ratio, limitations on transactions with affiliates, limitations on restricted payments, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of and certain other defaults under other financial obligations and change of control provisions. Under EQM’s $1 billion credit facility, EQM is required to maintain a consolidated leverage ratio of not more than 5.00 to 1.00 (or not more than 5.50 to 1.00 for certain measurement periods following the consummation of certain acquisitions). As of ~~March 31,~~September 30, 2018, EQM was in compliance with all debt provisions and covenants.

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~~EQT Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

EQM has a $500 million, 364-day, uncommitted revolving loan agreement with EQT (the 364-Day Facility) that matures on October 24, 2018 and will automatically renew for successive 364-day periods unless EQT delivers a non-renewal notice at least 60 days priorSee Note M to the ~~then current maturity date. Interest accrues~~Condensed Consolidated Financial Statements for a discussion of the borrowings on ~~any outstanding borrowings at an interest rate equal to~~ the ~~rate then applicable to similar loans under EQM's $1 billion credit facility, or a successor~~ revolving credit facility, less the sum of (i) the then applicable commitment fee under EQM's $1 billion credit facility and (ii) 10 basis points. EQM had no borrowings outstanding on the 364-Day Facility as of March 31, 2018 and December 31, 2017. There were no borrowings outstanding at any time during the three months ended March 31, 2018. During the three months ended March 31, 2017, the maximum amount of EQM's outstanding borrowings under the credit facility at any time was $50 million and the average daily balance was approximately $26 million. EQM incurred interest at a weighted average annual interest rate of approximately 2.0% for the three months ended March 31, 2017.

The RMP credit facility contains various provisions that, if not complied with, could result in termination of the agreement, require early payment of amounts outstanding or similar actions. The most significant covenants and events of default under the RMP credit facility relate to maintenance of certain financial ratios, as described below, limitations on certain investments and acquisitions, limitations on transactions with affiliates, limitations on restricted payments, limitations on the incurrence of additional indebtedness, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of and certain other defaults under other financial obligations and change of control provisions. The RMP credit facility requires RMP to maintain the following financial ratios:

~~an interest coverage ratio of at least 2.50 to 1.0;~~

a consolidated total leverage ratio of not more than 4.75 to 1.0, and after electing to issue senior unsecured notes, a consolidated total leverage ratio of not more than 5.25 to 1.0 (with certain increases for measurement periods following the completion of certain acquisitions); and

~~if RMP elects to issue senior unsecured notes, a consolidated senior secured leverage ratio of not more than 3.50 to 1.0.~~

~~As of March 31, 2018, RMP and Rice Midstream OpCo LLC were in compliance with all credit facility provisions and covenants.~~

~~EQM ATM Program~~

During 2015, EQM entered into an equity distribution agreement that established an “At the Market” (ATM) common unit offering program, pursuant to which a group of managers acting as EQM’s sales agents may sell EQM common units having an aggregate offering price of up to $750 million. EQM had approximately $443 million in remaining capacity under the program as of April 26, 2018.

~~RMP ATM Program~~

During 2016, RMP entered into an equity distribution agreement that established an ATM common unit offering program, pursuant to which a group of managers acting as RMP's sales agents may sell RMP common units having an aggregate offering price of up to $100 million. RMP had approximately $83.7 million in remaining capacity under the program as of April 26, 2018.

facilities.

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

Commodity Risk Management

The substantial majority of the Company’s commodity risk management program is related to hedging sales of the Company’s produced natural gas. The Company’s overall objective in this hedging program is to protect cash flow from undue exposure to the risk of changing commodity prices. The derivative commodity instruments currently utilized by the Company are primarily NYMEX swaps, collars and options.

As of ~~April 24,~~October 23, 2018, the approximate volumes and prices of the Company’s derivative commodity instruments hedging sales of produced gas for 2018 through 2020 were:


NYMEX Swaps	2018 (a)(b)(c)		2019 (b)(c)		2020 (b)		2018 (a)(b)(c)		2019 (b)(c)		2020 (b)
Total Volume (Bcf)	496		445		313		186		600		393
Average Price per Mcf (NYMEX) (d)	$	3.08	$	2.99	$	3.01	$	3.10	$	2.99	$	2.98
Collars
Total Volume (Bcf)	85		74		—		31		73		—
Average Floor Price per Mcf (NYMEX) (d)	$	3.28	$	3.12	$	—	$	3.28	$	3.12	$	—
Average Cap Price per Mcf (NYMEX) (d)	$	3.79	$	3.60	$	—	$	3.79	$	3.60	$	—
Puts (Long)
Total Volume (Bcf)	5		3		—		1		3		—
Average Floor Price per Mcf (NYMEX)	$	2.98	$	3.15	$	—	$	3.02	$	3.15	$	—

(a) ~~April~~October through December 31.

(b) The Company also sold calendar year 2018, 2019 and 2020 calls for approximately 7628 Bcf, 97145 Bcf and ~~103~~127 Bcf, respectively, at strike prices of ~~$3.47~~$3.45 per Mcf, ~~$3.55~~$3.41 per Mcf and ~~$3.47~~$3.46 per Mcf, respectively. The Company also purchased calendar year 2018, 2019 and 2020 calls for approximately 2616 Bcf, 4256 Bcf, and 35 Bcf at strike prices of $3.34 per Mcf, ~~$3.36~~$3.38 per Mcf, and $3.36 per Mcf, respectively.


(c)	The Company sold calendar year 2018 and 2019 puts for approximately 38 and 27 Bcf at strike prices of ~~$2.66~~$2.99 and ~~$3.15~~$2.88 per Mcf, respectively.

(d) The average price is based on a conversion rate of 1.05 MMBtu/Mcf.

The Company also enters into fixed price natural gas sales agreements that can be physically or financially settled. The difference between these sales prices and NYMEX are included in average differential on the Company's price reconciliation under "Consolidated Operational Data". The Company has fixed price natural gas sales agreements for the remainder of 2018, 2019 and ~~2019~~2020 of 8750 Bcf, 116 Bcf and 429 Bcf, respectively, at average NYMEX prices of ~~$2.95~~$3.03 per Mcf, $2.99 per Mcf and ~~$2.99,~~$2.93 per Mcf, respectively. For 2018, the Company has a natural gas sales agreement for approximately 35 Bcf that includes a NYMEX ceiling price of $4.88 per Mcf. For the remainder of 2018, 2019 and 2020, the Company also has a natural gas sales agreement for approximately 52 Bcf, 7 Bcf and 6 Bcf, respectively, that includes a NYMEX floor price of $2.16 per Mcf and a NYMEX ceiling price of $4.47 per Mcf. Currently, the Company has also entered into derivative instruments to hedge basis and a limited number of contracts to hedge its NGLs exposure. The Company may also use other contractual agreements in implementing its commodity hedging strategy.

See Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” and Note J to the Company’s Condensed Consolidated Financial Statements for further discussion of the Company’s hedging program.

Commitments and Contingencies

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company. While the amounts claimed may be substantial, the Company is unable to predict with certainty the ultimate outcome of such claims and proceedings. The Company accrues legal and other direct costs related to loss contingencies when actually incurred. The Company has established reserves it believes to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, the Company believes that the ultimate outcome of any matter currently pending against the Company will not materially affect the Company’s financial position, results of operations or liquidity.

Kay Company, LLC, et al. v. EQT Production Company, et al., United States District Court for the Northern District of West Virginia

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

Production Company and a number of related companies, including the Company, EQT Energy, LLC, Equitrans Gathering Holdings, LLC (formerly known as EQT Gathering Holdings, LLC), EQT Investments Holdings, LLC and EQM, have failed to pay royalties on the fair value of the gas produced from the leases and have taken improper post-production deductions from the royalties paid. The plaintiffs seek more than $100,000,000 (according to recently disclosed expert reports) in compensatory damages, punitive damages, and other relief. The Company denies that it underpaid royalties or that it took improper deductions. The Company further refutes that the amount of damages sought is supported by the facts and law and is vigorously defending the case. EQT has reserved approximately $1.5 million related to this case.

On May 31, 2013, the EQT defendants removed the lawsuit to federal court. On September 6, 2017, the district court granted the plaintiffs’ motion to certify the class and granted plaintiffs’ motion for summary judgment, finding that EQT Production Company and its marketing affiliate EQT Energy, LLC are alter egos of one another. The EQT defendants sought immediate appeal of the class certification. On November 30, 2017, the court of appeals declined the request for an immediate review. Trial is scheduled for November 27, 2018. In the event of an adverse judgment, the EQT defendants intend to appeal the class certification, alter ego ruling, and any assessment of liability.

Off-Balance Sheet Arrangements

See Note G to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further discussion of the ~~Mountain Valley Pipeline, LLC (MVP~~MVP Joint ~~Venture)~~Venture guarantee.

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~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Dividend

On ~~April 18,~~October 10, 2018, the Board of Directors of the Company declared a regular quarterly cash dividend of three cents per share, payable ~~June~~December 1, 2018, to the Company’s shareholders of record at the close of business on ~~May 11,~~November 9, 2018.

See Notes C, D and E to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for discussion of partnership distributions.

Critical Accounting Policies

The Company’s significant accounting policies are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in the notes to the Company’s Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. The application of the Company’s critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Condensed Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk and Derivative Instruments

The Company’s primary market risk exposure is the volatility of future prices for natural gas and NGLs. The market price for natural gas in the Appalachian Basin continues to be lower relative to NYMEX Henry Hub as a result of the significant increases in the supply of natural gas in the Northeast region in recent years. Due to the volatility of commodity prices, the Company is unable to predict future potential movements in the market prices for natural gas, including Appalachian and other market point basis, and NGLs and thus cannot predict the ultimate impact of prices on its operations. Prolonged low, and/or significant or extended declines in, natural gas and NGLs prices could adversely affect, among other things, the Company’s development plans, which would decrease the pace of development and the level of the Company’s proved reserves. Such changes or similar impacts on third-party shippers on the Company's midstream assets could also impact the Company’s revenues, earnings or liquidity and could result in material non-cash impairments to the recorded value of the Company’s property, plant and equipment.

The Company uses derivatives to reduce the effect of commodity price volatility. The Company’s use of derivatives is further described in Note J to the Condensed Consolidated Financial Statements and under the caption “Commodity Risk Management” in the “Capital Resources and Liquidity” section of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. The Company uses derivative commodity instruments that are placed primarily with financial institutions and the creditworthiness of these institutions is regularly monitored. The Company primarily enters into derivative instruments to hedge forecasted sales of production. The Company also enters into derivative instruments to hedge basis and exposure to fluctuations in interest rates. The Company’s use of derivative instruments is implemented under a set of policies approved by the Company’s Hedge and Financial Risk Committee and reviewed by the Audit Committee of the Company’s Board of Directors.

For the derivative commodity instruments used to hedge the Company’s forecasted sales of production, most of which are hedged at NYMEX natural gas prices, the Company sets policy limits relative to the expected production and sales levels which are exposed to price risk. The Company has an insignificant amount of financial natural gas derivative commodity instruments for trading purposes.

The derivative commodity instruments currently utilized by the Company are primarily fixed price swap agreements, collar agreements and option agreements which may require payments to or receipt of payments from counterparties based on the differential between two prices for the commodity. The Company may also use other contractual agreements in implementing its commodity hedging strategy.

The Company monitors price and production levels on a continuous basis and makes adjustments to quantities hedged as warranted. The Company’s overall objective in its hedging program is to protect a portion of cash flows from undue exposure to the risk of changing commodity prices.

For information on the quantity of derivative commodity instruments held by the Company, see Note J to the Condensed Consolidated Financial Statements and the “Commodity Risk Management” section in the “Capital Resources and Liquidity” section of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q for further discussion.

A hypothetical decrease of 10% in the market price of natural gas from the ~~March 31,~~September 30, 2018 and December 31, 2017 levels would have increased the fair value of these natural gas derivative instruments by approximately ~~$370.6~~$413.0 million and $386.2 million, respectively. A hypothetical increase of 10% in the market price of natural gas from the ~~March 31,~~September 30, 2018 and December 31, 2017 levels would have decreased the fair value of these natural gas derivative instruments by approximately ~~$370.1~~$418.4 million and $384.9 million, respectively. The Company determined the change in the fair value of the derivative commodity instruments using a method similar to its normal determination of fair value as described in Note K to the Condensed Consolidated Financial Statements. The Company assumed a 10% change in the price of natural gas from its levels at ~~March 31,~~September 30, 2018 and December 31, 2017. The price change was then applied to these natural gas derivative commodity instruments recorded on the Company’s Consolidated Balance Sheets, resulting in the hypothetical change in fair value.

The above analysis of the derivative commodity instruments held by the Company does not include the offsetting impact that the same hypothetical price movement may have on the Company’s physical sales of natural gas. The portfolio of derivative commodity instruments held to hedge the Company’s forecasted produced gas approximates a portion of the Company’s expected physical sales of natural gas. Therefore, an adverse impact to the fair value of the portfolio of derivative commodity instruments held to hedge the Company’s forecasted production associated with the hypothetical changes in commodity prices referenced above should be offset by a favorable impact on the Company’s physical sales of natural gas, assuming the derivative commodity instruments

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are not closed out in advance of their expected term, and the derivative commodity instruments continue to function effectively as hedges of the underlying risk.

If the underlying physical transactions or positions are liquidated prior to the maturity of the derivative commodity instruments, a loss on the financial instruments may occur or the derivative commodity instruments might be worthless as determined by the prevailing market value on their termination or maturity date, whichever comes first.

Interest Rate Risk

Changes in interest rates affect the amount of interest the Company, EQGP ~~EQM~~ and ~~RMP~~EQM earn on cash, cash equivalents and short-term investments and the interest rates the Company ~~EQM~~ and ~~RMP~~EQM pay on borrowings under their respective revolving credit facilities and the Company's floating rate notes. All of the Company’s and EQM’s Senior Notes, other than the floating rate notes, are fixed rate and thus do not expose the Company to fluctuations in its results of operations or liquidity from changes in market interest rates. Changes in interest rates do affect the fair value of the Company’s and EQM’s fixed rate debt. See Note M to the Condensed Consolidated Financial Statements for further discussion of the Company’s ~~EQM’s~~ and ~~RMP's~~EQM’s credit facility borrowings, as applicable, and Note K to the Condensed Consolidated Financial Statements for a discussion of fair value measurements, including the fair value of long-term debt.

Other Market Risks

The Company is exposed to credit loss in the event of nonperformance by counterparties to derivative contracts. This credit exposure is limited to derivative contracts with a positive fair value, which may change as market prices change. The Company’s over-the-counter (OTC) derivative instruments are primarily with financial institutions and, thus, are subject to events that would impact those companies individually as well as that industry as a whole. The Company utilizes various processes and analyses to monitor and evaluate its credit risk exposures. These include closely monitoring current market conditions, counterparty credit fundamentals and credit default swap rates. Credit exposure is controlled through credit approvals and limits based on counterparty credit fundamentals. To manage the level of credit risk, the Company enters into transactions with financial counterparties that are of investment grade, enters into netting agreements whenever possible and may obtain collateral or other security.

Approximately ~~82%~~63%, or ~~$262.3~~$315.6 million, of the Company’s OTC derivative contracts outstanding at ~~March 31,~~September 30, 2018 had a positive fair value. Approximately 63%, or $242.0 million, of the Company’s OTC derivative contracts outstanding at December 31, 2017 had a positive fair value.

As of ~~March 31,~~September 30, 2018, the Company was not in default under any derivative contracts and had no knowledge of default by any counterparty to its derivative contracts. The Company made no adjustments to the fair value of derivative contracts due to credit related concerns outside of the normal non-performance risk adjustment included in the Company’s established fair value procedure. The Company monitors market conditions that may impact the fair value of derivative contracts reported in the Condensed Consolidated Balance Sheets.

The Company is also exposed to the risk of nonperformance by credit customers on physical sales or transportation of natural gas. A significant amount of revenues and related accounts receivable are generated from the sale of produced natural gas and NGLs to certain marketers, utility and industrial customers located mainly in the Appalachian Basin and in markets available through the Company's current transportation portfolio, which includes markets in the Gulf Coast, Midwest and Northeast United States. The Company also contracts with certain processors to market a portion of NGLs on behalf of the Company. Similarly, revenues and related accounts receivable are generated from the gathering, transmission and storage of natural gas in the Appalachian Basin for independent producers, local distribution companies and marketers.

No one lender of the large group of financial institutions in the syndicates for the EQT and EQM ~~or RMP~~ credit facilities holds more than ~~15%~~10% of the respective facility. The large syndicate groups and relatively low percentage of participation by each lender are expected to limit the Company’s ~~EQM's~~ and ~~RMP's~~EQM's exposure to ~~problems~~disruption or consolidation in the banking industry.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer, an evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), was conducted as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

As noted under Item 9A, “Controls and Procedures,” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, management’s assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of the entities acquired in the Rice Merger on November 13, 2017. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting for a period of up to one year following an acquisition while integrating the acquired company. The Company is in the process of integrating Rice’s and the Company’s internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Except as noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the ~~first~~third quarter of 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal 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 accrues legal and other direct costs related to loss contingencies when actually incurred. The Company has established reserves it believes to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, the Company believes that the ultimate outcome of any matter currently pending against the Company will not materially affect the financial position, results of operations or liquidity of the Company.

Environmental Proceedings

Phoenix S Impoundment, Tioga County, Pennsylvania

In June and August 2012, the Company received three Notices of Violation (NOVs) from the Pennsylvania Department of Environmental Protection (the PADEP). The NOVs alleged violations of the Pennsylvania Oil and Gas Act and Clean Streams Law in connection with the unintentional release in May 2012, by a Company vendor, of water from an impaired water pit at a Company well location in Tioga County, Pennsylvania. Since confirming a release, the Company has cooperated with the PADEP in remediating the affected areas.

During the second quarter of 2014, the Company received a proposed consent assessment of civil penalty from the PADEP that proposed a civil penalty related to the NOVs. On September 19, 2014, the Company filed a declaratory judgment action in the Commonwealth Court of Pennsylvania against the PADEP seeking a court ruling on the PADEP’s legal interpretation of the penalty provisions of the Clean Streams Law, which interpretation the Company believed was legally flawed and unsupportable. On October 7, 2014, based on its interpretation of the penalty provisions, the PADEP filed a complaint against the Company before the Pennsylvania Environmental Hearing Board (the EHB) seeking $4.53 million in civil penalties. In January 2017, the Commonwealth Court ruled in favor of the Company, finding the PADEP’s interpretation of the penalty provisions of the Clean Streams Law erroneous. The PADEP appealed that decision to the Pennsylvania Supreme ~~Court.~~Court, and the parties made oral arguments in front of the Pennsylvania Supreme Court on November 28, 2017. Following a July 2016 hearing before the EHB, in May 2017, the EHB ruled that the Company should pay $1.1 million in civil penalties. In June 2017, both the Company and the PADEP appealed the EHB’s decision to the Commonwealth Court. In ~~March~~September 2018, the ~~Pennsylvania Supreme~~Commonwealth Court upheld the ~~Commonwealth Court’s decision that~~$1.1 million-dollar civil penalty, which the ~~PADEP’s interpretation~~Company will pay. The payment of the civil penalty ~~provisions~~will not have a material impact on the financial condition, results of operations or liquidity of the ~~Clean Streams Law is erroneous.~~Company.

Wilson Creek Water Withdrawals, Tioga County, Pennsylvania

On June 7, 2018, the Company received an NOV from the Susquehanna River Basin Commission (the SRBC). The NOV alleged violations of the Company’s Water Management Plan and its Wilson Creek Docket related to the withdrawal of water from Wilson Creek in Tioga County, Pennsylvania, between March 14, 2018 and April 3, 2018, when the stream flow was below the required flow protection threshold set forth in the Docket. The Company cooperated fully with the SRBC to address the matter. Civil penalty settlement discussions between the Company and the SRBC are ongoing. While the Company expects the ~~PADEP’s~~SRBC’s claims to result in penalties that exceed $100,000, the Company expects that the resolution of this matter will not have a material impact on the financial condition, results of operations or liquidity of the Company.

Erosion and Sedimentation Best Management Practice BMP Failures, Allegheny County, Pennsylvania

Between November 2017 and March 2018, the Company received multiple NOVs from the PADEP relating to four of the Company’s well pads in Allegheny County, Pennsylvania. During this time period, Pennsylvania experienced unprecedented amounts of rainfall. The NOVs alleged violations of the Oil and Gas Act, and Clean Stream Law in connection with the effects of this rainfall on erosion and sedimentation controls at the Prentice, Fetchen, Oliver East, and Oliver West well pads. The Company has cooperated fully with the PADEP to take appropriate actions to address the erosion and sedimentation control issues. The Company and the PADEP are currently negotiating a civil penalty settlement. While the Company expects the PADEP’s claims to result in penalties that exceed $100,000, the Company expects that the resolution of this matter will not have a material impact on the financial condition, results of operations or liquidity of the Company.

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Other

Kay Company, LLC, et al. v. EQT Production Company, et al., United States District Court for the Northern District of West Virginia

On January 16, 2013, several royalty owners who have entered into leases with EQT Production Company, a subsidiary of the Company, filed a gas royalty class action in the Circuit Court of Doddridge County, West Virginia. The suit alleges that EQT Production Company and a number of related companies, including the Company, EQT Energy, LLC, Equitrans Gathering Holdings, LLC (formerly known as EQT Gathering Holdings, LLC), EQT Investments Holdings, LLC and EQM, have failed to pay royalties on the fair value of the gas produced from the leases and have taken improper post-production deductions from the royalties paid. The plaintiffs seek more than $100,000,000 (according to recently disclosed expert reports) in compensatory damages, punitive damages, and other relief. The Company denies that it underpaid royalties or that it took improper deductions. The Company further refutes that the amount of damages sought is supported by the facts and law and is vigorously defending the case. EQT has reserved approximately $1.5 million related to this case.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, other than ~~the risks described below related to the pending Midstream Streamlining Transactions and the pending separation of the Company's upstream and midstream businesses.~~those listed in this section.

Our plan to separate into two independent publicly-traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.

On February 21, 2018, we announced plans to separate into two independent publicly-traded companies. ~~The Separation, which is expected to be completed by the end~~Completion of the ~~third quarter 2018, is subject to approval~~Separation was approved by our Board of Directors ~~of the final terms of~~on October 24, 2018; however, the Separation and Distribution remain subject to market, regulatory and certain other conditions. Unanticipated developments, including changes in the competitive conditions of our upstream and midstream businesses, possible delays in obtaining various tax opinions or rulings, regulatory approvals or clearances, the uncertainty of the financial markets and challenges in executing the Separation, could delay or prevent the completion of the proposed Separation, or cause the proposed Separation to occur on terms or conditions that are different or less favorable than expected.

We expect that the process of completing the proposed Separation will be time-consuming and involve significant costs and expenses, which may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the Separation is not completed. Executing the proposed Separation will require significant time and attention from our senior management and employees, which could adversely affect our business, financial results and results of operations. We may also

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experience increased difficulties in attracting, retaining and motivating employees during the pendency of the Separation and following its completion, which could harm our businesses.

The Separation may not achieve some or all of the anticipated benefits.

We may not realize some or all of the anticipated strategic, financial, operational or other benefits from the Separation. As independent publicly-traded companies, our upstream and midstream businesses will be smaller, less diversified companies with a narrower business focus and may be more vulnerable to changing market conditions, which could materially and adversely affect their respective business, financial condition and results of operations. Further, there can be no assurance that the combined value of the common stock of the two publicly-traded companies will be equal to or greater than what the value of our common stock would have been had the proposed Separation not occurred.

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The Separation and Distribution could result in substantial tax liability.

The Separation will be effected by a pro rata distribution to our shareholders of 80.1% of the outstanding stock of ~~a newly-formed corporation that conducts our midstream business and certain related transactions.~~Equitrans Midstream. We ~~intend to obtain~~have obtained (i) a private letter ruling from the U.S. Internal Revenue Service (the IRS) ~~and/or~~and intend to obtain (ii) one or more opinions of outside counsel regarding the qualification of the ~~distribution,~~Distribution, together with certain related transactions, as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the U.S. Internal Revenue Code (the Code) and certain other U.S. federal income tax matters relating to the ~~distribution~~Distribution and certain related transactions. The IRS private letter ruling ~~and/or~~and the opinion of counsel will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of us and ~~NewCo,~~Equitrans Midstream, including those relating to the past and future conduct of us and ~~NewCo.~~Equitrans Midstream. If any of these representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if we or ~~NewCo~~Equitrans Midstream breach any representations or covenants contained in any of the ~~separation-related~~Separation-related agreements and documents or in any documents relating to the IRS private letter ruling and/or the opinion of counsel, the IRS private letter ruling and/or the opinion of counsel may be invalid and the conclusions reached therein could be jeopardized.

Notwithstanding receipt of the IRS private letter ruling ~~and/or~~and the opinion of counsel, the IRS could determine that the ~~distribution~~Distribution and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings upon which the IRS private letter ruling or the opinion of counsel was based are false or have been violated. In addition, any opinion of counsel will represent the judgment of such counsel and is not binding on the IRS or any court and the IRS or a court may disagree with the conclusions in such opinion of counsel. Accordingly, notwithstanding receipt of the IRS private letter ruling ~~and/or any~~and the opinion of counsel, there can be no assurance that the IRS will not assert that the ~~distribution~~Distribution and/or certain related transactions do not qualify for the intended tax treatment or that a court would not sustain such a challenge. In the event the IRS were to prevail with such challenge, we, ~~NewCo~~Equitrans Midstream and our shareholders could be subject to material U.S. federal income tax liability.

Even if the ~~distribution~~Distribution otherwise qualifies as generally tax-free under Section 355 and Section 368(a)(1)(D) of the Code, it would result in a material U.S. federal income tax liability to us (but not to our shareholders) under Section 355(e) of the Code if one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by either vote or value) in our stock or in the stock of ~~NewCo~~Equitrans Midstream (excluding, for this purpose, the acquisition of stock of ~~NewCo~~Equitrans Midstream by holders of our stock in the ~~distribution)~~Distribution) as part of a plan or series of related transactions that includes the ~~distribution.~~Distribution. Any acquisition of our stock or stock of ~~NewCo~~Equitrans Midstream (or any predecessor or successor corporation) within two years before or after the ~~distribution~~Distribution generally would be presumed to be part of a plan that includes the ~~distribution,~~Distribution, although the parties may be able to rebut that presumption under certain circumstances. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual in nature and subject to a comprehensive analysis of the facts and circumstances of the particular case. Notwithstanding the IRS private letter ruling or any opinion of counsel described above, we or ~~NewCo~~Equitrans Midstream may cause or permit a change in ownership of our stock or stock of ~~NewCo~~Equitrans Midstream sufficient to result in a material tax liability to us.

In connection with the ~~distribution~~Distribution and to effect the ~~separation,~~Separation, we expect to effect certain restructuring transactions that are expected to be taxable to us (but not our shareholders) and to result in a material tax liability, which we expect to be offset in part by certain tax attributes.

We may determine to forgo certain transactions in order to avoid the risk of incurring material tax-related liabilities.

As a result of requirements of Section 355 of the Code and/or other applicable tax laws, we may determine to forgo certain transactions that would otherwise be advantageous. In particular, we may determine to continue to operate certain of our business operations for the foreseeable future even if a sale or discontinuance of such business would otherwise be advantageous. Moreover,

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in light of the requirements of Section 355(e) of the Code, we may determine to forgo certain transactions, including share repurchases, stock issuances, certain asset dispositions and other strategic transactions, for some period of time following the ~~separation.~~

The pending Midstream Streamlining Transactions are subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all. Failure to complete these transactions could have a material and adverse effect on us and, even if completed, these transactions may not achieve some or all of the anticipated benefits.

On April 26, 2018, we, together with EQM, EQGP and RMP, announced the Midstream Streamlining Transactions. Completion of the Midstream Streamlining Transactions is subject to a number of conditions set forth in the agreements governing these transactions, including, in the case of EQM’s acquisition of RMP, approval by a majority of RMP’s unitholders, which make the completion and timing of the transactions uncertain. If the Midstream Streamlining Transactions are not completed, our ongoing businesses may be adversely affected and, without realizing any of the benefits of having completed the transactions, we will be subject to a number of risks, including the following:

~~we will be required to pay our costs relating to the transactions, such as legal, accounting and financial advisory expenses, whether or not the transactions are completed;~~

~~time and resources committed by our management to matters relating to the transactions could otherwise have been devoted to pursuing other beneficial opportunities; and~~

~~the market price of our common stock could decline to the extent that the current market price reflects a market assumption that the transactions will be completed.~~

In addition, even if completed, there can be no assurance that the combination of EQM and RMP, the acquisition by EQM of the Rice retained midstream assets, or the sale of the RMP IDRs o EQGP, will deliver the strategic, financial and operational benefits anticipated by the parties.Separation.

The proposed ~~separation of our production and midstream businesses into two independent publicly-traded companies and/or the Midstream Streamlining Transactions~~Separation may result in disruptions to, and negatively impact our relationships with, our customers and other business partners.

Uncertainty related to the proposed ~~separation of our production and midstream businesses and/or the Midstream Streamlining Transactions~~Separation may lead customers and other parties with which we currently do business or may do business in the future to terminate or attempt to negotiate changes in existing business relationships, or consider entering into business relationships with parties other than us. These disruptions could have a material and adverse effect on our business,

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financial condition, results of operations and prospects. ~~The~~Further, the effect of such disruptions could be exacerbated by any delays in the completion of the ~~Separation and/or Midstream Streamlining Transactions.~~Separation.

The regulatory approval process for the construction of new midstream assets is challenging, and recent decisions by regulatory and judicial authorities in pending proceedings could impact EQM's or the MVP Joint Venture's ability to obtain all approvals and authorizations necessary to complete certain projects on the projected time frame or at all or its ability to achieve the expected investment return on the project.

Certain of EQM’s internal growth projects may require regulatory approval from federal, state and local authorities prior to construction, including any extensions from or additions to our transmission and storage system. The approval process for storage and transportation projects has become increasingly challenging, due in part to state and local concerns related to exploration and production and gathering activities in new production areas, including the Marcellus, Utica and Upper Devonian Shales, and negative public perception regarding the oil and gas industry. Such authorization may not be granted or, if granted, such authorization may include burdensome or expensive conditions.

In addition, any significant delays in the regulatory approval process for the MVP project could increase costs and negatively impact the scheduled in-service date of fourth quarter 2019, which in turn could adversely affect the ability for MVP and its owners, including EQM, to achieve the expected investment return. The MVP project is subject to several challenges that must be resolved before the MVP project can be completed. For example, on October 2, 2018, the Fourth Circuit Court of Appeals vacated the MVP project’s use of U.S. Army Corps of Engineers Nationwide Permit 12 in West Virginia. In related proceedings, the MVP project’s use of Nationwide Permit 12 has also been stayed on other segments of the project.

Although the MVP Joint Venture is actively defending the relevant agency actions and judicial challenges to the project, and is in active dialogue with all of the affected agencies to resolve these issues and restore the affected permits, there is no guarantee as to how long the agency proceedings and judicial challenges will take to resolve, or whether the MVP Joint Venture will ultimately succeed in restoring the permits in their present form or within the MVP Joint Venture's targeted time frame for placing the project in service. This and other similar litigation could adversely affect EQM's business, financial condition, results of operations, liquidity and ability to make quarterly cash distributions to its unitholders, including us and EQGP.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the Company’s repurchases of equity securities registered under Section 12 of the Exchange Act that have occurred during the three months ended ~~March 31,~~September 30, 2018:

Period
Total
number
of shares
purchased (a)

Average
price
paid per
share

Total number of
shares purchased
as part of publicly
announced plans
or programs

Maximum number
of shares that may
yet be purchased
under the plans or
programs (b)
January 2018 (January 1 – January 31) 96,446
$ 62.72
—
700,000
February 2018 (February 1 – February 28) 54,357
50.21
—
700,000
March 2018 (March 1 – March 31) 1,571
50.56
—
700,000
Total 152,374
$ 58.13
—



Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under plans or programs (b)
July 2018 (July 1 – July 31)	436,944	$	49.62	436,944	$	478,322,854
August 2018 (August 1 – August 31)	9,516,164	50.46		9,509,438	—
September 2018 (September 1 – September 30)	21,627	50.53		—	—
Total	9,974,735	$	50.39	9,946,382	—


(a)	Reflects the number of shares withheld by the Company to pay taxes upon vesting of restricted ~~stock.~~stock plus the number of shares purchased as part of publicly announced plans or programs.

(b)

~~During 2014,~~On July 11, 2018, the Company’s Board of Directors approved a share repurchase authorization ~~of up~~ to ~~1,000,000~~repurchase shares of the Company’s outstanding common ~~stock. The~~stock for an aggregate purchase price of not more than $500 million. Pursuant to the share repurchase authorization, the Company may repurchase shares from time to time in open market or in privately negotiated transactions. The share repurchase authorization does not obligate the Company to acquire any specific number of shares, has no pre-established end date and may be discontinued by the Company at any time. As of ~~March 31,~~September 30, 2018, the Company had ~~repurchased 300,000~~purchased shares for an aggregate purchase price of $500 million under this authorization, ~~since its inception.~~and therefore no additional shares may be purchased under this authorization.

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Item 6. Exhibits



Exhibit No.	Description	Method of Filing

~~2.01~~10.1	Agreement and ~~Plan of Merger,~~Release, dated as of ~~April 25,~~August 13, 2018, bybetween the Company and among EQT Midstream Partners, LP, EQT Midstream Services, LLC, EQM Acquisition Sub, LLC, EQM GP Acquisition Sub, LLC, Rice Midstream Partners LP, Rice Midstream Management LLC and, solely for the purposes of certain provisions therein, the Company. The Company will furnish supplementally a copy of any omitted schedule and similar attachment to the SEC upon request.Jeremiah J. Ashcroft III	~~Incorporated herein by reference to~~Filed herewith as Exhibit ~~2.1 to Form 8-K (#001-3551) filed on April 26, 2018.~~10.1

~~2.02~~10.2	~~Incentive Distribution Rights Purchase and Sale Agreement,~~Offer letter dated as of ~~April 25,~~August 9, 2018, bybetween the Company and ~~among EQT GP Holdings, LP, Rice Midstream GP Holdings LP and the Company.~~Thomas F. Karam	~~Incorporated by reference herein to~~Filed herewith as Exhibit ~~2.3 to Form 8-K (#001-3551) filed on April 26, 2018.~~10.2

~~2.03~~10.3	~~Contribution~~Confidentiality, Non-Solicitation and ~~Sale~~Non-Competition Agreement, dated as of ~~April 25,~~August 9, 2018, ~~by and among~~between the Company ~~Rice Midstream Holdings LLC, EQT Midstream Partners, LP~~ and ~~EQM Gathering Holdings, LLC. The Company will furnish supplementally a copy of any omitted schedule and similar attachment to the SEC upon request.~~Thomas F. Karam	~~Incorporated herein by reference~~Filed herewith as Exhibit 10.3

10.4	Amendment to 1999 Directors’ Deferred Compensation Plan (as amended October 2, 2018)	Filed herewith as Exhibit ~~2.2~~10.4

10.5	Amendment to ~~Form 8-K (#001-3551) filed on April 26, 2018.~~2005 Directors’ Deferred Compensation Plan (as amended October 2, 2018)	Filed herewith as Exhibit 10.5

31.01	Rule 13(a)-14(a) Certification of Principal Executive Officer	Filed herewith as Exhibit 31.01

31.02	Rule 13(a)-14(a) Certification of Principal Financial Officer	Filed herewith as Exhibit 31.02

32	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer	Furnished herewith as Exhibit 32

101	Interactive Data File	Filed herewith as Exhibit 101

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		EQT CORPORATION
		(Registrant)


	By:	/s/ Robert J. McNally
		Robert J. McNally
		Senior Vice President and Chief Financial Officer

Date: ~~April 26,~~October 25, 2018

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(in thousands)	Preliminary Purchase Price Allocation
Consideration given:
Equity consideration	$	5,943,289
Cash consideration	1,299,407
Buyout of preferred equity in Rice Midstream Holdings LLC	429,708
Buyout of Common Units in RMGP	125,828
Settlement of pre-existing relationships	(14,699		)
Total consideration	7,783,533

Fair value of liabilities assumed:
Current liabilities	566,774
Long-term debt	2,151,656
Deferred income taxes	1,106,000
Other long-term liabilities	67,533
Amount attributable to liabilities assumed	3,891,963

Fair value of assets acquired:
Cash	294,671
Accounts receivable	337,007
Current assets	109,465
Net property, plant and equipment	9,903,938
Intangible assets	747,300
Noncontrolling interests	(1,715,611		)
Amount attributable to assets acquired	9,676,770
Goodwill	$	1,998,726



	Three Months Ended March 31,
	2018		2017(a)		%
FINANCIAL DATA (in thousands)
Operating revenues:
Gathering revenues	$	52,730	$	—	100.0
Compression revenues	8,771		—		100.0
Total operating revenues	61,501		—		100.0

Operating expenses:
Operation and maintenance expense	3,189		—		100.0
General and administrative expense	6,093		—		100.0
Depreciation expense	8,124		—		100.0
Total operating expenses	17,406		—		100.0

Operating income (loss)	$	44,095	$	—	100.0

OPERATIONAL DATA
Gathered volumes (BBtu/d)	1,697		—		100.0
Compression volumes (BBtu/d)	1,248		—		100.0

Capital expenditures (in thousands)	$	20,940	$	—	100.0