eqt-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

☐

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, no par value

EQT

New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth 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 ☒

As of April 30, 2021, 279,098,036 shares of common stock, no par value, of the registrant were outstanding.

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TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Statements of Condensed Consolidated Operations	3
	Statements of Condensed Consolidated Comprehensive (Loss) Income	4
	Condensed Consolidated Balance Sheets	5
	Statements of Condensed Consolidated Cash Flows	6
	Statements of Condensed Consolidated Equity	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	30

Signature		31

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS (UNAUDITED)


	Three Months Ended March 31,
	2021		2020
	(Thousands, except per share amounts)
Operating revenues:
Sales of natural gas, natural gas liquids and oil	$	1,130,951	$	715,201
(Loss) gain on derivatives not designated as hedges	(188,813)		389,436
Net marketing services and other	7,785		2,420
Total operating revenues	949,923		1,107,057
Operating expenses:
Transportation and processing	445,784		439,834
Production	47,230		40,380
Exploration	949		923
Selling, general and administrative	45,006		34,938
Depreciation and depletion	377,116		357,526
Amortization of intangible assets	—		7,478
(Gain) loss on sale/exchange of long-lived assets	(1,207)		48,852
Impairment and expiration of leases	16,757		53,768
Other operating expenses	9,443		—
Total operating expenses	941,078		983,699
Operating income	8,845		123,358
Gain on Equitrans Share Exchange (see Note 8)	—		(187,223)
(Income) loss from investments	(11,848)		390,628
Dividend and other income	(3,304)		(24,714)
Loss on debt extinguishment	4,424		16,610
Interest expense	75,099		62,374
Loss before income taxes	(55,526)		(134,317)
Income tax (benefit) expense	(14,494)		32,822
Net loss	(41,032)		(167,139)
Less: Net loss attributable to noncontrolling interest	(514)		—
Net loss attributable to EQT Corporation	$	(40,518)	$	(167,139)

Loss per share of common stock attributable to EQT Corporation:
Basic:
Weighted average common stock outstanding	278,852		255,435
Net loss	$	(0.15)	$	(0.65)
Diluted:
Weighted average common stock outstanding	278,852		255,435
Net loss	$	(0.15)	$	(0.65)

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 COMPREHENSIVE (LOSS) INCOME (UNAUDITED)


	Three Months Ended March 31,
	2021		2020
	(Thousands)
Net loss	$	(41,032)	$	(167,139)
Other comprehensive income, net of tax:
Other post-retirement benefits liability adjustment, net of tax expense: $27 and $24	80		12
Comprehensive loss	(40,952)		(167,127)
Less: Comprehensive loss attributable to noncontrolling interests	(514)		—
Comprehensive loss attributable to EQT Corporation	$	(40,438)	$	(167,127)

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, 2021		December 31, 2020
	(Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	40,670	$	18,210
Accounts receivable (less provision for doubtful accounts: $7,049 and $6,239)	682,496		566,552
Derivative instruments, at fair value	431,949		527,073
Prepaid expenses and other	158,590		103,615
Total current assets	1,313,705		1,215,450

Property, plant and equipment	22,168,856		21,995,249
Less: Accumulated depreciation and depletion	6,270,840		5,940,984
Net property, plant and equipment	15,898,016		16,054,265

Contract asset	390,005		410,000

Other assets	437,678		433,754
Total assets	$	18,039,404	$	18,113,469

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt	$	29,291	$	154,161
Accounts payable	812,273		705,461
Derivative instruments, at fair value	651,058		600,877
Other current liabilities	257,405		301,911
Total current liabilities	1,750,027		1,762,410

Credit facility borrowings	300,000		300,000
Senior notes	4,378,270		4,371,467
Note payable to EQM Midstream Partners, LP	98,487		99,838
Deferred income taxes	1,358,489		1,371,967
Other liabilities and credits	923,765		945,057
Total liabilities	8,809,038		8,850,739

Equity:
Common stock, no par value, shares authorized: 640,000, shares issued: 280,003	8,238,643		8,241,684
Treasury stock, shares at cost: 1,222 and 1,658	(21,469)		(29,348)
Retained earnings	1,007,741		1,048,259
Accumulated other comprehensive loss	(5,275)		(5,355)
Total common shareholders' equity	9,219,640		9,255,240
Noncontrolling interests in consolidated subsidiaries	10,726		7,490
Total equity	9,230,366		9,262,730
Total liabilities and equity	$	18,039,404	$	18,113,469

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,
	2021		2020
	(Thousands)
Cash flows from operating activities:
Net loss	$	(41,032)	$	(167,139)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income tax (benefit) expense	(13,505)		127,860
Depreciation and depletion	377,116		357,526
Amortization of intangible assets	—		7,478
Loss on sale/exchange of long-lived assets and impairment and expiration of leases	15,550		102,620
Gain on Equitrans Share Exchange	—		(187,223)
(Income) loss from investments	(11,848)		390,628
Loss on debt extinguishment	4,424		16,610
Share-based compensation expense	6,239		4,684
Amortization, accretion and other	10,968		3,303
Loss (gain) on derivatives not designated as hedges	188,813		(389,436)
Cash settlements (paid) received on derivatives not designated as hedges	(38,140)		245,736
Net premiums (paid) on derivative instruments	(3,147)		—
Changes in other assets and liabilities:
Accounts receivable	(112,899)		149,057
Accounts payable	116,732		(85,840)
Income tax receivable and payable	(23,909)		(92,809)
Other items, net	(75,447)		17,207
Net cash provided by operating activities	399,915		500,262
Cash flows from investing activities:
Capital expenditures	(251,277)		(256,156)

Cash received for Equitrans Share Exchange	—		52,323
Other investing activities	3,367		140
Net cash used in investing activities	(247,910)		(203,693)
Cash flows from financing activities:
Proceeds from credit facility borrowings	1,581,000		206,000
Repayment of credit facility borrowings	(1,581,000)		(500,000)
Proceeds from issuance of debt	—		1,750,000
Debt issuance costs	—		(15,662)
Repayments and retirements of debt	(126,396)		(1,701,224)
Premiums paid on debt extinguishment	(4,267)		(13,660)
Contributions from noncontrolling interests	3,750		—
Dividends paid	—		(7,664)
Cash paid for taxes related to net settlement of share-based incentive awards	(2,632)		(304)
Net cash used in financing activities	(129,545)		(282,514)
Net change in cash and cash equivalents	22,460		14,055
Cash and cash equivalents at beginning of period	18,210		4,596
Cash and cash equivalents at end of period	$	40,670	$	18,651

Cash paid (received) during the period for:
Interest, net of amount capitalized	$	85,211	$	29,628
Income taxes, net	22,751		(1,950)
Non-cash activity during the period for:
Increase in right-of-use lease assets and liabilities	$	783	$	303
Increase in asset retirement costs and obligations	907		3,761
Capitalization of non-cash equity share-based compensation	1,228		—

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 Loss (a)		Noncontrolling Interests in Consolidated Subsidiaries
	Shares	No Par Value		Treasury Stock		Retained Earnings						Total Equity
	(Thousands, except per share amounts)
Balance at January 1, 2020	255,171	$	7,818,205	$	(32,507)	$	2,023,089	$	(5,199)	$	—	$	9,803,588
Comprehensive loss, net of tax:
Net loss						(167,139)						(167,139)
Other postretirement benefits liability adjustment, net of tax expense: $24								12				12
Dividends ($0.03 per share)						(7,664)						(7,664)
Share-based compensation plans	91	3,426		1,655								5,081

Balance at March 31, 2020	255,262	$	7,821,631	$	(30,852)	$	1,848,286	$	(5,187)	$	—	$	9,633,878

Balance at January 1, 2021	278,345	$	8,241,684	$	(29,348)	$	1,048,259	$	(5,355)	$	7,490	$	9,262,730
Comprehensive loss, net of tax:
Net loss						(40,518)				(514)		(41,032)
Other postretirement benefits liability adjustment, net of tax expense: $27								80				80
Share-based compensation plans	436	(3,041)		7,879								4,838
Contributions from noncontrolling interests										3,750		3,750
Balance at March 31, 2021	278,781	$	8,238,643	$	(21,469)	$	1,007,741	$	(5,275)	$	10,726	$	9,230,366

Common shares authorized: 320,000 and 640,000 at March 31, 2020 and 2021, respectively.

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

(a)Amounts included in accumulated other comprehensive loss are related to other postretirement benefits liability adjustments, net of tax. Losses (gains), net of tax, are attributable to net actuarial losses and net prior service costs.

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

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EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1. Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of March 31, 2021 and December 31, 2020, and the results of its operations, cash flows and equity for the three month periods ended March 31, 2021 and 2020. Certain previously reported amounts have been reclassified to conform to the current year presentation. In this Quarterly Report on Form 10-Q, references to "EQT," "EQT Corporation" and "the Company" refer collectively to EQT Corporation and its consolidated subsidiaries.

The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date. For further information, refer to the Consolidated Financial Statements and accompanying notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. This ASU simplifies accounting for income taxes by eliminating certain exceptions to ASC 740, Income Taxes, related to the general approach for intraperiod tax allocation, methodology for calculating income taxes in an interim period and recognition of deferred taxes when there are investment ownership changes. In addition, this ASU simplifies aspects of accounting for franchise taxes and interim period effects of enacted changes in tax laws or rates and provides clarification on accounting for transactions that result in a step up in the tax basis of goodwill and allocation of consolidated income tax expense to separate financial statements of entities not subject to income tax. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. The Company adopted this ASU in the first quarter of 2021 with no material impact on its financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging: Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This ASU simplifies accounting for convertible instruments by removing certain separation models for convertible instruments. For convertible instruments with conversion features that are not accounted for as derivatives under ASC 815 or do not result in substantial premiums accounted for as paid-in capital, the convertible instrument's embedded conversion features are no longer separated from the host contract. Consequently, and as long as no other feature requires bifurcation and recognition as a derivative, the convertible instrument is accounted for as a single liability measured at its amortized cost. This ASU also amends the impact of convertible instruments on the calculation of diluted earnings per share (EPS) and adds several new disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company plans to adopt this ASU on January 1, 2022 using the full retrospective method of adoption. The Company is evaluating the impact this standard will have on its financial statements and related disclosures.

2. Revenue from Contracts with Customers

Under the Company's natural gas, natural gas liquids (NGLs) and oil sales contracts, the Company generally considers the delivery of each unit (MMBtu or Bbl) to be a separate performance obligation that is satisfied upon delivery. These contracts typically require payment within 25 days of the end of the calendar month in which the commodity is delivered. A significant number of these contracts contain variable consideration because the payment terms refer to market prices at future delivery dates. In these situations, the Company has not identified a standalone selling price because the terms of the variable payments relate specifically to the Company's efforts to satisfy the performance obligations. Other contracts, such as fixed price contracts or contracts with a fixed differential to New York Mercantile Exchange (NYMEX) or index prices, contain fixed consideration. The fixed consideration is allocated to each performance obligation on a relative standalone selling price basis, which requires judgment from management. For these contracts, the Company generally concludes that the fixed price or fixed differentials in the contracts are representative of the standalone selling price.

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EQT CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Based on management's judgment, the performance obligations for the sale of natural gas, NGLs and oil are satisfied at a point in time because the customer obtains control and legal title of the asset when the natural gas, NGLs or oil is delivered to the designated sales point.

The sales of natural gas, NGLs and oil presented in the Statements of Condensed Consolidated Operations represent the Company's share of revenues net of royalties and exclude revenue interests owned by others. When selling natural gas, NGLs and oil on behalf of royalty or working interest owners, the Company acts as an agent and, thus, reports the revenue on a net basis.

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $467.8 million and $394.1 million in accounts receivable in the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.

The table below provides disaggregated information on the Company's revenues. Certain contracts that provide for the release of capacity that is not used to transport the Company's produced volumes are outside the scope of ASU 2014-09, Revenue from Contracts with Customers. The costs of, and recoveries on, such capacity are reported in net marketing services and other in the Statements of Condensed Consolidated Operations. Derivative contracts are also outside the scope of ASU 2014-09.


	Three Months Ended March 31,
	2021		2020
	(Thousands)
Revenues from contracts with customers:
Natural gas sales	$	1,013,080	$	673,230
NGLs sales	100,257		35,756
Oil sales	17,614		6,215
Total revenues from contracts with customers	$	1,130,951	$	715,201

Other sources of revenue:
(Loss) gain on derivatives not designated as hedges	(188,813)		389,436
Net marketing services and other	7,785		2,420
Total operating revenues	$	949,923	$	1,107,057

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of March 31, 2021. Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of March 31, 2021.


	2021 (a)		2022		2023		Total
	(Thousands)
Natural gas sales	$	133,576	$	8,158	$	6,794	$	148,528

(a)April 1 through December 31.

3. Derivative Instruments

The Company's primary market risk exposure is the volatility of future prices for natural gas and NGLs, which can affect the Company's operating results. The Company uses derivative commodity instruments to hedge its cash flows from sales of produced natural gas and NGLs. The overall objective of the Company's hedging program is to protect cash flows from undue exposure to the risk of changing commodity prices.

The derivative commodity instruments used by the Company are primarily swap, collar and option agreements. These agreements may require payments to, or receipt of payments from, counterparties based on the differential between two prices for the commodity. The Company uses these agreements to hedge its NYMEX and basis exposure. The Company may also use other contractual agreements when executing its commodity hedging strategy. The Company typically enters into over the counter

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EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(OTC) derivative commodity instruments with financial institutions, and the creditworthiness of all counterparties is regularly monitored.

The Company does not designate any of its derivative instruments as cash flow hedges; therefore, all changes in fair value of the Company's derivative instruments are recognized in operating revenues in the Statements of Condensed Consolidated Operations. The Company recognizes all derivative instruments as either assets or liabilities at fair value on a gross basis. These derivative instruments are reported as either current assets or current liabilities due to their highly liquid nature. The Company can net settle its derivative instruments at any time.

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

The Company's OTC derivative instruments generally require settlement in cash. The Company also enters into exchange traded derivative commodity instruments that are generally settled with offsetting positions. Settlements of derivative commodity instruments are reported as a component of cash flows from operating activities in the Statements of Condensed Consolidated Cash Flows.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of production and portions of its basis exposure covering approximately 1,954 Bcf of natural gas and 9,984 Mbbl of NGLs as of March 31, 2021 and 1,955 Bcf of natural gas and 3,462 Mbbl of NGLs as of December 31, 2020. The open positions at both March 31, 2021 and December 31, 2020 had maturities extending through December 2024.

Certain of the Company's OTC derivative instrument contracts provide that, if the Company's credit rating assigned by Moody's Investors Service, Inc. (Moody's) or S&P Global Ratings (S&P) is below the agreed-upon credit rating threshold (typically, below investment grade), and if the associated derivative liability exceeds the agreed-upon dollar threshold for such credit rating, the counterparty to such contract can require the Company to deposit collateral. Similarly, if such counterparty's credit rating assigned by Moody's or S&P is below the agreed-upon credit rating threshold, and if the associated derivative liability exceeds the agreed-upon dollar threshold for such credit rating, the Company can require the counterparty to deposit collateral with the Company. Such collateral can be up to 100% of the derivative liability. Investment grade refers to the quality of a company's credit as assessed by one or more credit rating agencies. To be considered investment grade, a company must be rated "Baa3" or higher by Moody's, "BBB–" or higher by S&P and "BBB–" or higher by Fitch Rating Service (Fitch). Anything below these ratings is considered non-investment grade. As of March 31, 2021, the Company's senior notes were rated "Ba2" by Moody's and "BB" by S&P.

When the net fair value of any of the Company's OTC derivative instrument contracts represents a liability to the Company that is in excess of the agreed-upon dollar threshold for the Company's then-applicable credit rating, the counterparty has the right to require the Company to remit funds as a margin deposit in an amount equal to the portion of the derivative liability that is in excess of the dollar threshold amount. The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $176.6 million and $137.7 million, respectively, for which the Company deposited and recorded current assets of zero and $21.1 million, respectively.

When the net fair value of any of the Company's OTC derivative instrument contracts represents an asset to the Company that is in excess of the agreed-upon dollar threshold for the counterparty's then-applicable credit rating, the Company has the right to require the counterparty to remit funds as a margin deposit in an amount equal to the portion of the derivative asset that is in excess of the dollar threshold amount. The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

When the Company enters into exchange traded natural gas contracts, exchanges may require the Company to remit funds to the corresponding broker as good-faith deposits to guard against the risks associated with changing market conditions. The Company is required to make such deposits based on an established initial margin requirement and the net liability position, if any, of the fair value of the associated contracts. The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets. When the fair value of such contracts is in a net asset position, the broker may remit funds to the Company. The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets. The initial margin

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EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

requirements are established by the exchanges based on the price, volatility and the time to expiration of the contract. The margin requirements are subject to change at the exchanges' discretion. As of March 31, 2021 and December 31, 2020, the Company recorded $111.7 million and $61.5 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

Refer to Note 8 for a discussion of the derivative liability recorded in connection with the Equitrans Share Exchange (defined in Note 8).

The Company has netting agreements with financial institutions and its brokers that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities. The table below summarizes the impact of netting agreements and margin deposits on gross derivative assets and liabilities.


	Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets		Derivative instruments subject to master netting agreements		Margin requirements with counterparties		Net derivative instruments
	(Thousands)
March 31, 2021
Asset derivative instruments, at fair value	$	431,949	$	(340,292)	$	—	$	91,657
Liability derivative instruments, at fair value	651,058		(340,292)		(111,737)		199,029

December 31, 2020
Asset derivative instruments, at fair value	$	527,073	$	(328,809)	$	—	$	198,264
Liability derivative instruments, at fair value	600,877		(328,809)		(82,552)		189,516

4. Fair Value Measurements

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

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

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

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EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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


	Gross derivative instruments recorded in the Condensed Consolidated Balance Sheets		Fair value measurements at reporting date using:
			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Thousands)
March 31, 2021
Asset derivative instruments, at fair value	$	431,949	$	65,167	$	366,782	$	—
Liability derivative instruments, at fair value	651,058		120,650		530,408		—

December 31, 2020
Asset derivative instruments, at fair value	$	527,073	$

SEC Form 10-Q filed by EQT Corporation