Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Plans

Share-Based Compensation Plans

The following table summarizes the Company's share-based compensation expense.

	Years Ended December 31,
	2019			2018			2017
	(Thousands)
2015 Executive Performance Incentive Program	$	—		$	—		$	5,348
2016 Incentive Performance Share Unit Program	—			6,863			13,077
2017 Incentive Performance Share Unit Program	(681		)	2,467			5,038
2018 Incentive Performance Share Unit Program	(952		)	4,742			—
2019 Incentive Performance Share Unit Program	14,939			—			—
2016 EQT Value Driver Performance Share Unit Award Program	—			—			3,341
2017 EQT Value Driver Performance Share Unit Award Program	—			584			10,822
2018 EQT Value Driver Performance Share Unit Award Program	(248		)	8,224			—
2019 EQT Value Driver Performance Share Unit Award Program	3,624			—			—
Restricted stock awards	14,430			14,503			87,104
Non-qualified stock options	4,774			2,757			2,626
Other programs, including non-employee director awards	2,257			3,014			1,005
Less: Discontinued operations	—			(18,250		)	(15,595		)
Total share-based compensation expense (a)	$	38,143		$	24,904		$	112,766

(a) For the year ended December 31, 2019, share-based compensation expense of $28.6 million was included in proxy, transaction and reorganization expense.

In connection with the Separation in 2018, the Company transferred obligations related to then-outstanding share-based compensation awards to Equitrans Midstream. To preserve the aggregate fair value of awards held prior to the Separation, as measured immediately before and immediately after the Separation, each holder of share-based compensation awards generally received an adjusted award consisting of both a stock-based compensation award denominated in the Company equity and a stock-based compensation award denominated in Equitrans Midstream equity. These awards were adjusted in accordance with the basket method, which resulted in participants retaining one unit of the existing Company incentive award and receiving an additional 0.80 units of an Equitrans Midstream-based award.

The Company recognizes compensation cost related to unvested awards held by its employees, regardless of who settles the obligation. Upon vesting the Company is obligated to settle all outstanding share-based compensation awards denominated in the Company's equity, regardless of whether the holders are employees of the Company or Equitrans Midstream. Likewise, upon vesting, Equitrans Midstream is obligated to settle all of the outstanding share-based compensation awards denominated in its equity, regardless of whether the holders are employees of Equitrans Midstream or the Company. Changes in performance and number of outstanding awards can impact the ultimate amount of these obligations. Share counts for awards discussed herein represent outstanding shares to be remitted by the Company to its employees and employees of Equitrans Midstream. When an award has graduated vesting, the Company records expense equal to the vesting percentage on the vesting date.

The Company typically uses treasury stock to fund awards paid in stock, but the Company can elect to fund such awards by stock acquired by the Company in the open market or from any other person, issued directly by the Company or any combination of the foregoing. 

There was no cash received from exercises under all share-based payment arrangements for employees and directors for the year ended December 31, 2019. Cash received from exercises under all share-based payment arrangements for employees and directors for the years ended December 31, 2018 and 2017 was $1.9 million and $0.2 million, respectively. During the years ended December 31, 2019, 2018 and 2017, share-based payment arrangements paid in stock generated tax benefits of $4.9 million, $13.4 million and $58.9 million, respectively.

Executive Performance Incentive Programs – Equity & Liability

The Management Development and Compensation Committee of the Company's Board of Directors (the Compensation Committee) has adopted:

• the 2015 Executive Performance Incentive Plan (the 2015 Incentive PSU Program) under the 2014 Long-Term Incentive Plan (the 2014 LTIP);

• the 2016 Incentive Performance Share Unit Program (the 2016 Incentive PSU Program) under the 2014 LTIP;

• the 2017 Incentive Performance Share Unit Program (the 2017 Incentive PSU Program) under the 2014 LTIP;

• the 2018 Incentive Performance Share Unit Program (the 2018 Incentive PSU Program) under the 2014 LTIP; and

• the 2019 Incentive Performance Share Unit Program (the 2019 Incentive PSU Program) under the 2014 LTIP.

The 2015 Incentive PSU Program, 2016 Incentive PSU Program, 2017 Incentive PSU Program, 2018 Incentive PSU Program and 2019 Incentive PSU Program are collectively referred to as the Incentive PSU Programs. The 2015 Incentive PSU Program and 2016 Incentive PSU Program granted equity awards. The 2017 Incentive PSU Program, 2018 Incentive PSU Program and 2019 Incentive PSU Program granted both equity and liability awards.

The Incentive PSU Programs were established to provide long-term incentive opportunities to key employees to further align their interests with those of the Company's shareholders and with the strategic objectives of the Company. The performance period for each of the awards under the Incentive PSU Programs is 36 months, with vesting occurring upon payment following the expiration of the performance period.

Executive performance incentive program awards granted in years 2015, 2016 and 2017 were earned based on:

• the level of total shareholder return relative to a predefined peer group; and

• the cumulative total sales volume growth, in each case, over the performance period.

Beginning with the 2018 Incentive PSU Program, awards granted are earned based on:

• the level of total shareholder return relative to a predefined peer group;

• the level of operating and development cost improvement; and

• return on capital employed.

The payout factor varies between zero and 300% of the number of outstanding units contingent upon the performance metrics listed above. The Company recorded the 2015 Incentive PSU Program, the 2016 Incentive PSU Program and the portion of the 2017 Incentive PSU Program, 2018 Incentive PSU Program and 2019 Incentive PSU Program to be settled in stock as equity awards using a grant date fair value determined through a Monte Carlo simulation, which projected the share price for the Company and its peers at the end point of the performance period. The 2017 Incentive PSU Program, 2018 Incentive PSU Program and 2019 Incentive PSU Program also included awards to be settled in cash, which are recorded at fair value as of the measurement date determined through a Monte Carlo simulation, which projected the share price for the Company and its peers at the end point of the performance period. The expected share prices were generated using each company's annual volatility for the expected term and the commensurate three-year risk-free rate shown in the chart below for equity awards, one-year risk-free rate shown in the chart below for the 2018 Incentive PSU Program liability award and two-year risk-free rate shown in the chart below for the 2019 Incentive PSU Program liability award. As the Incentive PSU Programs include a performance condition that affects the number of shares that will ultimately vest, the Monte Carlo simulation computed either the grant date fair value for equity awards or the measurement date fair value for liability awards for each possible performance condition outcome on the grant date for equity awards or the measurement date for liability awards. The Company reevaluates the then-probable outcome at the end of each reporting period to record expense at the probable outcome grant date fair value or measurement date fair value, as applicable. Vesting of the units under each Incentive PSU Program occurs upon payment after the end of the performance period. More detailed information on each award is set forth in the table below.

Incentive PSU Program	Settled In	Accounting Treatment	Fair Value (a)		Risk-Free Rate	Vested/Payment Date	Awards Paid	Value (Millions)		Unvested/Expected Payment Date	Awards Outstanding as of December 31, 2019 (b)
2015	Stock	Equity	$	141.11	1.10%	February 2018	274,767	$	38.8	N/A	N/A
2016	Stock	Equity	$	109.30	1.31%	February 2019	384,101	$	34.8	N/A	N/A
2017 (c)	Stock	Equity	$	120.60	1.47%	N/A	N/A	N/A		First Quarter of 2020	44,573
2017 (d)	Cash	Liability	$	10.90	N/A	N/A	N/A	N/A		First Quarter of 2020	93,953
2018 (e)	Stock	Equity	$	76.53	1.97%	N/A	N/A	N/A		First Quarter of 2021	107,340
2018 (f)	Cash	Liability	$	11.81	1.58%	N/A	N/A	N/A		First Quarter of 2021	113,517
2019 (g)	Stock	Equity	$	29.45	2.44%	N/A	N/A	N/A		First Quarter of 2022	463,380
2019 (h)	Cash	Liability	$	14.21	1.57%	N/A	N/A	N/A		First Quarter of 2022	244,940

(a) Information for the valuation of the liability plans is shown as of December 31, 2019.

(b) Represents the number of outstanding units as of December 31, 2019 adjusted for forfeitures. The 2016 Incentive PSU Program settled in stock included 130,393 for Equitrans Midstream employees that was settled by the Company. The 2017 and 2018 Incentive PSU Programs to be settled in stock include 7,020 and 9,550 shares, respectively, for Equitrans Midstream employees that will be settled by the Company. The 2017 and 2018 Incentive PSU Programs to be settled in cash include 40,018 and 55,210 shares, respectively, for Equitrans Midstream employees that will be settled by the Company.

(c) As of January 1, 2019, 44,573 units were outstanding under the 2017 Incentive PSU Program – Equity. There were no forfeitures in 2019 and 44,573 outstanding units as of December 31, 2019.

(d) As of January 1, 2019, 105,018 units were outstanding under the 2017 Incentive PSU Program – Liability. Adjusting for 11,065 forfeitures, there were 93,953 outstanding units as of December 31, 2019.

(e) As of January 1, 2019, 107,340 units were outstanding under the 2018 Incentive PSU Program – Equity. There were no forfeitures in 2019 and 107,340 total outstanding units as of December 31, 2018.

(f) As of January 1, 2019, 124,820 units were outstanding under the 2018 Incentive PSU Program – Liability. Adjusting for 11,303 forfeitures, there were 113,517 outstanding units as of December 31, 2019.

(g) A total of 463,380 units were granted under the 2019 Incentive PSU Program – Equity in 2019, and no additional units may be granted. There were no forfeitures in 2019 and 463,380 total outstanding units as of December 31, 2019.

(h) A total of 255,920 units were granted under the 2019 Incentive PSU Program – Liability in 2019, and no additional units may be granted. Adjusting for 10,980 forfeitures, there were 244,940 outstanding units as of December 31, 2019.

The following table presents total capitalized compensation costs related to the Incentive PSU Programs.

	Years Ended December 31,
	2019			2018		2017
	(Millions)
2015 Incentive PSU Program	$	—		$	—	$	2.2
2016 Incentive PSU Program	—			2.1		4.4
2017 Incentive PSU Program (liability only)	(1.4		)	1.0		1.7
2018 Incentive PSU Program (liability only)	(0.3		)	0.6		—
2019 Incentive PSU Program (liability only)	0.9			—		—

As of December 31, 2019, $0.2 million, $0.1 million and $1.2 million of unrecognized compensation cost (assuming no changes to the performance condition achievement level) related to the 2018 Incentive PSU Program – Liability, 2019 Incentive PSU Program – Equity and 2019 Incentive PSU Program – Liability, respectively, was expected to be recognized over the remainder of the performance periods. Assuming no changes to the performance condition achievement level, there is no remaining unrecognized compensation cost related to the 2018 Incentive PSU Program – Equity.

Fair value is estimated using a Monte Carlo simulation valuation method with the following weighted average assumptions:

	Incentive PSU Programs Issued During the Years Ended December 31,
	2019	2019	2018	2018	2017	2017	2016	2015
Accounting Treatment	Liability (a)	Equity	Liability (a)	Equity	Liability (b)	Equity	Equity	Equity
Risk-free rate	1.57%	2.44%	1.58%	1.97%	N/A	1.47%	1.31%	1.10%
Dividend Yield (c)	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Volatility factor	59.90%	54.60%	52.10%	32.60%	N/A	32.30%	28.43%	27.45%
Expected term	2 years	3 years	1 year	3 years	N/A	3 years	3 years	3 years

(a) Information for the valuation of the liability plans is shown as of December 31, 2019.

(b) The 2017 Incentive PSU Program – Liability award fair value per unit is equal to EQT common stock price on the measurement date.

(c) Dividends paid from the beginning of the performance period will be cumulatively added as additional shares of common stock.

Value Driver Award Programs

The Compensation Committee has also adopted:

• the 2016 Value Driver Performance Share Unit Award Program (the 2016 EQT VDPSU Program) under the 2014 LTIP;

• the 2017 Value Driver Performance Share Unit Award Program (the 2017 EQT VDPSU Program) under the 2014 LTIP;

• the 2018 Value Driver Performance Share Unit Award Program (the 2018 EQT VDPSU Program) under the 2014 LTIP; and

• the 2019 Value Driver Performance Share Unit Award Program (the 2019 EQT VDPSU Program) under the 2014 LTIP.

The 2016 EQT VDPSU Program, 2017 EQT VDPSU Program, 2018 EQT VDPSU Program and 2019 EQT VDPSU Program are collectively referred to as the VDPSU Programs.

The VDPSU Programs were established to align the interests of key employees with the interests of shareholders and customers and the strategic objectives of the Company. Under each VDPSU Program, 50% of the confirmed awards vest upon payment following the first anniversary of the grant date; the remaining 50% of the confirmed awards vest upon payment following the second anniversary of the grant date, subject to continued service through such date. Due to the graded vesting of each award under the VDPSU Programs, the Company recognized compensation cost over the requisite service period for each separately vesting tranche of the award as though each award was, in substance, multiple awards. The payments are contingent upon adjusted earnings before interest, income taxes, depreciation and amortization performance as compared to the Company's annual business plan and individual, business unit and Company value driver performance over the respective one-year periods. The following table provides additional detailed information on each award.

EQT VDPSU Program	Settled In	Accounting Treatment	Fair Value per Unit (a)		Vested/Payment Date	Number of awards (including accrued dividends) or cash paid (Millions)		Unvested/Expected Payment Date	Awards Outstanding (including accrued dividends) as of December 31, 2019 (b)
2016 (c)	Cash	Liability	$	65.40	February 2017	$	21.3	N/A	N/A
			$	56.92	February 2018	$	16.8	N/A	N/A
2017	Cash	Liability	$	56.92	February 2018	$	14.0	N/A	N/A
			$	18.89	February 2019	$	4.0	N/A	N/A
2018	Cash	Liability	$	18.89	February 2019	$	4.9	N/A	N/A
			$	10.90	N/A	N/A		Second tranche first quarter of 2020	185,976
2019 (d)	Cash	Liability	$	10.90	N/A	N/A		First tranche first quarter of 2020	169,417
			N/A		N/A	N/A		Second tranche first quarter of 2021	170,180

(a) For liability awards, the fair value per unit is equal to EQT common stock price on the measurement date.

(b) The 2017 EQT VDPSU Program and 2018 EQT VDPSU Program include 95,452 and 130,355 awards, respectively, for Equitrans Midstream employees that will be settled by the Company.

(c) In addition to the $21.3 million in awards paid in February 2017, $0.2 million in awards were paid in 2017 in accordance with employee separation agreements.

(d) The total liability recorded for the 2019 EQT VDPSU Program was $2.8 million as of December 31, 2019.

The following table presents total capitalized compensation costs related to the VDPSU Programs.

	Years Ended December 31,
	2019		2018		2017
	(Millions)
2016 EQT VDPSU Program	$	—	$	—	$	7.0
2017 EQT VDPSU Program	—		0.1		10.3
2018 EQT VDPSU Program	0.1		3.3		—
2019 EQT VDPSU Program	2.4		—		—

Restricted Stock Awards – Equity

The Company granted 613,440, 145,540 and 85,350 restricted stock equity awards to key employees of the Company during the years ended December 31, 2019, 2018 and 2017, respectively. These restricted stock awards will be fully vested at the end of the three-year period commencing with the date of grant, assuming continued service through such date. For the years ended December 31, 2019, 2018 and 2017, the weighted average fair value of these restricted stock grants, based on the grant date fair value of EQT common stock, was approximately $17.42, $54.33 and $63.00, respectively. 

In conjunction with the closing of the Rice Merger, the Company converted Rice Energy restricted stock equity awards and performance share equity awards to 2,290,234 Company restricted stock equity awards. Employees who were terminated on the Rice Merger closing date became immediately vested in their Company awards and received merger consideration cash of $5.30 per Rice Energy share. Company awards of those employees who continued employment with the Company under a transition agreement vest upon the earlier of the end of the vesting period set forth in the original award agreement or the end of the employee's employment period set forth in his or her transition agreement, in both cases subject to continued service through such date. Company awards of those employees who continued employment with the Company on an at-will basis vest in accordance with the vesting period set forth in the original award agreement, assuming continued service through such date. The fair value of these restricted stock grants, based on the grant date fair value of EQT common stock, was approximately $65.18. See Note 8 for further discussion of the Rice Merger.

The total fair value of restricted stock awards vested during the years ended December 31, 2019, 2018 and 2017 was $11.9 million, $39.8 million and $123.0 million, respectively. The 2017 amount includes $13.0 million for the cash payment for the merger consideration of $5.30 per Rice Energy share.

As of December 31, 2019, $2.1 million of unrecognized compensation cost related to nonvested restricted stock equity awards was expected to be recognized over a remaining weighted average vesting term of approximately 2.1 years.

The following table summarizes restricted stock equity award activity as of December 31, 2019.

Restricted Stock	Nonvested Shares (a)		Weighted Average Fair Value		Aggregate Fair Value
Outstanding at January 1, 2019	192,782		$	59.79	$	11,525,593
Granted	613,440		17.42		10,685,274
Vested	(487,509	)	24.33		(11,862,608		)
Forfeited	(7,716	)	35.16		(271,295		)
Outstanding at December 31, 2019	310,997		$	32.40	$	10,076,964

(a) Nonvested shares outstanding at December 31, 2019 included 71,313 shares for Equitrans Midstream employees that will be settled by the Company.

Restricted Stock Unit Awards – Liability

During the years ended December 31, 2019, 2018, and 2017, the Company granted 686,350, 373,750, and 292,400 restricted stock unit liability awards, respectively, to key employees of the Company that will be paid in cash. Adjusting for forfeitures, there were 741,819 awards outstanding as of December 31, 2019. Because these awards are liability awards, the Company records compensation expense based on the fair value of the awards as remeasured at the end of each reporting period. The restricted units granted will be fully vested at the end of the three-year period commencing with the date of grant, assuming continued service through such date. The total liability recorded for these restricted units was $4.4 million, $6.9 million, and $8.8 million as of December 31, 2019, 2018, and 2017, respectively.

Non-Qualified Stock Options

The fair value of the Company's option grants was estimated at the dates of grant using a Black-Scholes option-pricing model with the assumptions indicated in the table below for the years ended December 31, 2019, 2018 and 2017. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the date of grant. The dividend yield is based on the dividend yield of EQT common stock at the time of grant. Expected volatilities are based on historical volatility of EQT common stock. The expected term represents the period of time that options granted are expected to be outstanding based on historical option exercise experience.

	Years Ended December 31,
	2019 (a)			2018			2017 (a)
Risk-free interest rate	2.48		%	2.25		%	1.95		%
Dividend yield	0.46		%	0.20		%	0.18		%
Volatility factor	27.97		%	26.46		%	27.45		%
Expected term	5 years			5 years			5 years
Number of Options Granted	779,300			287,800			153,700
Weighted Average Grant Date Fair Value	$	5.31		$	15.39		$	17.47
Total Intrinsic Value of Options Exercised (Millions)	$	—		$	—		$	1.7

(a) There were two grant dates for the 2019 and 2017 options. Amounts shown represent weighted average.

As of December 31, 2019, $0.1 million of unrecognized compensation cost related to outstanding nonvested stock options was expected to be recognized by December 31, 2020.

The following table summarizes option activity as of December 31, 2019.

Non-Qualified Stock Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	1,775,429	$	32.43
Granted	779,300	19.11
Outstanding at December 31, 2019	2,554,729	$	28.37	5.94 years	$	—
Exercisable at December 31, 2019	2,447,020	$	28.75	5.81 years	$	—

Non-employee Directors' Share-Based Awards

Prior to 2020, the Company historically granted to EQT non-employee directors share-based awards that vest upon grant. The share-based awards are paid in cash or EQT common stock following a directors' termination of service on the Company's Board of Directors. Beginning in 2020, the Company grants to EQT non-employee directors restricted stock unit awards that vest on the date of the Company's annual meeting of shareholders immediately following the grant of such awards. The restricted stock unit awards are settled in EQT common stock on the vesting date or, if elected by the director, following a director's termination of service on the Company's Board of Directors. Awards to be paid in cash are accounted for as liability awards and, as such, compensation expense is recorded based on the fair value of the awards as remeasured at the end of each reporting period. Awards to be settled in EQT common stock are accounted for as equity awards and, as such, compensation expense is recorded based on the fair value of the awards at the grant date fair value. A total of 259,443 non-employee director share-based awards, including

accrued dividends, were outstanding as of December 31, 2019. A total of 146,790, 50,979 and 26,090 share-based awards were granted to non-employee directors during the years ended December 31, 2019, 2018 and 2017, respectively. The weighted average fair value of these grants, based on the closing EQT common stock price on the business day prior to the grant date, was $18.11, $52.65 and $65.35 for the years ended December 31, 2019, 2018 and 2017, respectively.