Financial Information by Business Segment

Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally and which are subject to evaluation by the Company’s chief operating decision maker in deciding how to allocate resources.

The Company reports its operations in three segments, which reflect its lines of business: EQT Production, EQT Gathering and EQT Transmission. The EQT Production segment includes the Company’s exploration for, and development and production of, natural gas, natural gas liquids (NGLs) and a limited amount of crude oil, primarily in the Appalachian Basin. The EQT Production segment also includes the marketing activities of the Company. The operations of EQT Gathering include the natural gas gathering activities of the Company, consisting solely of assets that are owned and operated by EQM. The operations of EQT Transmission include the natural gas transmission and storage activities of the Company, consisting solely of assets that are owned and operated by EQM.

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 an allocation of the headquarters’ annual operating budget. Differences between budget and actual headquarters’ expenses are not allocated to the operating segments.

Substantially all of the Company’s operating revenues, income from operations and assets are generated or located in the United States.



Three Months Ended September 30, 2017	EQT Production		EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	552,953	$	—	$	—	$	—		$	552,953
Pipeline and net marketing services	9,140		116,522		90,671		(144,598		)	71,735
Gain on derivatives not designated as hedges	35,625		—		—		—			35,625
Total operating revenues	$	597,718	$	116,522	$	90,671	$	(144,598	)	$	660,313



Three Months Ended September 30, 2016	EQT Production		EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	403,939	$	—	$	—	$	—		$	403,939
Pipeline and net marketing services	10,797		99,141		77,631		(128,138		)	59,431
Gain on derivatives not designated as hedges	93,356		—		—		—			93,356
Total operating revenues	$	508,092	$	99,141	$	77,631	$	(128,138	)	$	556,726



Nine Months Ended September 30, 2017	EQT Production		EQT Gathering		EQT 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		278,589		(418,337		)	222,904
Gain on derivatives not designated as hedges	222,693		—		—		—			222,693
Total operating revenues	$	2,057,481	$	330,996	$	278,589	$	(418,337	)	$	2,248,729



Nine Months Ended September 30, 2016	EQT Production			EQT Gathering		EQT Transmission		Intersegment Eliminations			EQT Corporation
Revenues:	(Thousands)
Sales of natural gas, oil and NGLs	$	1,072,898		$	—	$	—	$	—		$	1,072,898
Pipeline and net marketing services	28,196			297,305		243,295		(380,026		)	188,770
Loss on derivatives not designated as hedges	(32,342		)	—		—		—			(32,342		)
Total operating revenues	$	1,068,752		$	297,305	$	243,295	$	(380,026	)	$	1,229,326



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(Thousands)
Operating income (loss):
EQT Production	$	12,082		$	(15,465	)	$	322,277		$	(468,678	)
EQT Gathering	85,817			72,495			242,716			218,274
EQT Transmission	59,689			53,715			188,995			174,085
Unallocated expenses (a)	(19,894		)	(2,288		)	(35,856		)	(12,515		)
Total operating income (loss)	$	137,694		$	108,457		$	718,132		$	(88,834	)


(a)	Unallocated expenses consist primarily of compensation expense and administrative costs, including the Rice Merger (defined in Note N) acquisition-related expenses.

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



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
	(Thousands)
Total operating income (loss)	$	137,694		$	108,457	$	718,132	$	(88,834	)
Other income	6,859			10,715		16,878		23,199
Interest expense	50,377			35,984		137,110		108,469
Income tax (benefit) expense	(11,281		)	13,084		119,093		(151,826		)
Net income (loss)	$	105,457		$	70,104	$	478,807	$	(22,278	)



	As of September 30, 2017		As of December 31, 2016
	(Thousands)
Segment assets:
EQT Production	$	12,071,776	$	10,923,824
EQT Gathering	1,367,487		1,225,686
EQT Transmission	1,442,068		1,399,201
Total operating segments	14,881,331		13,548,711
Headquarters assets, including cash and short-term investments	1,103,317		1,924,211
Total assets	$	15,984,648	$	15,472,922



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(Thousands)
Depreciation, depletion and amortization:
EQT Production	$	224,103	$	220,768	$	654,411	$	635,253
EQT Gathering	9,983		7,663		28,398		22,520
EQT Transmission	12,261		6,976		35,793		20,657
Other	213		1,681		693		4,518
Total	$	246,560	$	237,088	$	719,295	$	682,948

Expenditures for segment assets (b):
EQT Production (c)	$	449,303	$	622,856	$	1,850,482	$	1,094,747
EQT Gathering	48,182		88,390		150,728		247,755
EQT Transmission	22,312		77,940		73,679		253,957
Other	2,502		4,693		7,097		10,395
Total	$	522,299	$	793,879	$	2,081,986	$	1,606,854


(b)	Includes the capitalized portion of non-cash stock-based compensation expense and the impact of capital accruals.

(c)

Expenditures for segment assets in the EQT Production segment included $52.1 million and $30.1 million for general leasing activity during the three months ended September 30, 2017 and 2016, respectively, and $147.0 million and $98.2 million for general leasing activity during the nine months ended September 30, 2017 and 2016, respectively. The three and nine months ended September 30, 2017 includes $7.8 million and $819.0 million of cash capital expenditures, respectively, for the acquisitions discussed in Note M. The three and nine months ended September 30, 2016 includes $412.3 million of cash capital expenditures for the acquisitions discussed in Note M. During the nine months ended September 30, 2017 and 2016, the Company also incurred $7.5 million and $6.2 million of non-cash capital expenditures for the acquisitions discussed in Note M.