Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

The table below summarizes the Company's outstanding debt.

	September 30, 2022				December 31, 2021
	Principal Value		Carrying Value (a)		Principal Value		Carrying Value (a)
	(Thousands)
Senior notes:
3.00% notes due October 1, 2022	$	—	$	—	$	568,823	$	567,909
7.42% series B notes due 2023	10,000		10,000		10,000		10,000
6.125% notes due February 1, 2025 (b)	915,594		911,883		1,000,000		994,643
1.75% convertible notes due May 1, 2026	414,846		406,232		499,991		487,543
3.125% notes due May 15, 2026	463,354		458,098		500,000		493,157
7.75% debentures due July 15, 2026	115,000		113,094		115,000		112,721
3.90% notes due October 1, 2027	1,234,433		1,228,714		1,250,000		1,243,340
5.00% notes due January 15, 2029	336,454		332,015		350,000		344,835
7.000% notes due February 1, 2030 (b)	730,000		725,071		750,000		744,417
3.625% notes due May 15, 2031	495,165		488,484		500,000		492,669
Note payable to EQM	95,728		95,728		99,838		99,838
Total debt	4,810,574		4,769,319		5,643,652		5,591,072
Less: Current portion of debt (c)	430,601		421,987		1,074,332		1,060,970
Long-term debt	$	4,379,973	$	4,347,332	$	4,569,320	$	4,530,102

(a)For the Company's credit facility and note payable to EQM, the principal value represents the carrying value. For all other debt, the principal value less the unamortized debt issuance costs and debt discounts represents the carrying value.

(b)Interest rates for this tranche of the Company's senior notes fluctuate based on changes to the credit ratings assigned to the Company's senior notes by Moody's, S&P and Fitch. Interest rates on the Company's other outstanding senior notes do not fluctuate based on changes to the credit ratings assigned to its senior notes by Moody's, S&P and Fitch.

(c)As of September 30, 2022, the current portion of debt includes the 7.42% series B notes, the 1.75% convertible notes and a portion of the note payable to EQM. As of December 31, 2021, the current portion of debt includes the 3.00% notes, the 1.75% convertible notes and a portion of the note payable to EQM.

Debt Repayments. The Company redeemed or repurchased the following debt during the nine months ended September 30, 2022.

Debt Tranche	Principal		Premiums/(Discounts)		Accrued but Unpaid Interest		Total Cost
	(Thousands)
3.00% notes due October 1, 2022	$	568,823	$	5,546	$	7,150	$	581,519
6.125% notes due February 1, 2025	84,406		3,046		2,621		90,073
1.75% convertible notes due May 1, 2026	85,096		127,906		250		213,252
3.125% notes due May 15, 2026	36,646		(2,050)		187		34,783
3.90% notes due October 1, 2027	15,567		(643)		188		15,112
5.00% notes due January 15, 2029	13,546		(445)		195		13,296
7.000% notes due February 1, 2030	20,000		1,428		640		22,068
3.625% notes due May 15, 2031	4,835		(601)		28		4,262

Credit Facility. The Company has a $2.5 billion credit facility. On June 28, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the Third Amendment) with the lenders party thereto and PNC Bank, National Association, as administrative agent, swing line lender and L/C issuer, amending and restating the Second Amended and Restated Credit Agreement, dated as of July 31, 2017 (the Credit Agreement). The Third Amendment, among other things, (i) extends the maturity date of the commitments and loans under the Credit Agreement to June 28, 2027 and provides, at the Company's option, two one-year extensions thereafter, subject to the approval of the lenders, (ii) allows for commitment increases of up to $500 million, subject to the agreement of the Company and new or existing lenders and (iii) allows for Base Rate Loans, Term SOFR Rate Loans and Swing Line Loans (each defined in the Third Amendment).

The Company had approximately $27 million and $440 million of letters of credit outstanding under its credit facility as of September 30, 2022 and December 31, 2021, respectively.

Under the Company's credit facility, for the three months ended September 30, 2022 and 2021, the maximum amount of outstanding borrowings was $1,216 million and $1,652 million, respectively, the average daily balances were approximately $717 million and $813 million, respectively, and interest was incurred at a weighted average annual interest rate of 3.8% and 1.9%, respectively. Under the Company's credit facility, for the nine months ended September 30, 2022 and 2021, the maximum amount of outstanding borrowings was $1,300 million and $1,652 million, respectively, the average daily balances were approximately $624 million and $525 million, respectively, and interest was incurred at a weighted average annual interest rate of 2.8% and 2.0%, respectively.

3.125% Senior Notes and 3.625% Senior Notes. On May 17, 2021, the Company issued $500 million aggregate principal amount of 3.125% senior notes due May 15, 2026 and $500 million aggregate principal amount of 3.625% senior notes due May 15, 2031. After deducting offering costs of $15.6 million, net proceeds from the sale of the notes of $984.4 million were used to partly fund the Alta Acquisition (defined in Note 9). The covenants of the 3.125% senior notes and 3.625% senior notes are consistent with the Company's existing senior unsecured notes; however, the 3.125% senior notes and 3.625% senior notes include an offer to repurchase provision applicable upon the occurrence of certain change of control events specified in the applicable indentures.

Convertible Notes. In April 2020, the Company issued $500 million aggregate principal amount of 1.75% convertible senior notes (the Convertible Notes) due May 1, 2026 unless earlier redeemed, repurchased or converted.

Holders of the Convertible Notes may convert their Convertible Notes at their option at any time prior to the close of business on January 30, 2026 under the following circumstances:

•during any quarter as long as the last reported price of EQT common stock for at least 20 trading days (consecutive or otherwise) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price on each such trading day (the Sale Price Condition);

•during the five-business-day period after any five-consecutive-trading-day period (the measurement period) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period is less than 98% of the product of the last reported price of EQT common stock and the conversion rate for the Convertible Notes on each such trading day;

•if the Company calls any or all of the Convertible Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding such redemption date; and

•upon the occurrence of certain corporate events set forth in the Convertible Notes indenture.

On or after February 1, 2026, holders of the Convertible Notes may convert their Convertible Notes at their option at any time until the close of business on the second scheduled trading date immediately preceding May 1, 2026.

The Company may not redeem the Convertible Notes prior to May 5, 2023. On or after May 5, 2023 and prior to February 1, 2026, the Company may redeem for cash all or any portion of the Convertible Notes at its option at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest up to the redemption date as long as the last reported price per share of EQT common stock has been at least 130% of the conversion price in effect for at least 20 trading days (consecutive or otherwise) during any 30-consecutive-trading-day period ending on the trading day immediately preceding the date on which the Company delivers notice of redemption. A sinking fund is not provided for the Convertible Notes.

The initial conversion rate for the Convertible Notes was 66.6667 shares of EQT common stock per $1,000 principal amount of the Convertible Notes, which was equivalent to an initial conversion price of $15.00 per share of EQT common stock. The initial conversion price represents a premium of 20% to the $12.50 per share closing price of EQT common stock on April 23, 2020. The conversion rate is subject to adjustment under certain circumstances. In addition, following certain corporate events that occur prior to May 1, 2026 or if the Company delivers notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or notice of redemption.

As a result of the cash dividend the Company paid on its common stock in the first quarter of 2022, effective February 11, 2022, the conversion rate for the Convertible Notes was adjusted to 67.0535 shares of EQT common stock per $1,000 principal amount of the Convertible Notes. As a result of the cash dividend the Company paid on its common stock in the second quarter of 2022, effective May 10, 2022, the conversion rate for the Convertible Notes was adjusted to 67.2836 shares of EQT common stock per $1,000 principal amount of the Convertible Notes. As a result of the cash dividend paid by the Company on its common stock in the third quarter of 2022, effective August 8, 2022, the conversion rate for the Convertible Notes was adjusted to 67.5232 shares of EQT common stock per $1,000 principal amount of the Convertible Notes. Future dividend payments by the Company will result in further adjustments to the conversion rate per share of EQT common stock.

The Sale Price Condition for conversion of the Convertible Notes was satisfied as of December 31, 2021 and September 30, 2022, and, accordingly, holders of the Convertible Notes are permitted to convert any of their Convertible Notes at their option at any time beginning on January 1, 2022 and continuing until December 31, 2022, subject to the terms and conditions set forth in the Convertible Notes indenture. Therefore, as of December 31, 2021 and September 30, 2022, the net carrying value of the Convertible Notes was included in current portion of debt on the Condensed Consolidated Balance Sheets.

The following table summarizes Convertible Notes conversion right exercises from issuance through October 21, 2022. The Company elected to settle all such conversions by issuing to the converting holders shares of EQT common stock.

Settlement Month	Principal Converted		Shares Issued	Average Conversion Price
	(Thousands)
September 2021	$	9	599	$	19.64
March 2022	8		536	33.65
April 2022	26		1,742	34.78
July 2022	5		335	36.91
October 2022	10		674	40.14

Upon conversion of the remaining outstanding Convertible Notes, the Company may satisfy its conversion obligation by paying and/or delivering at the Company's election, in the manner and subject to the terms and conditions provided in the Convertible Notes indenture, cash, shares of EQT common stock or a combination thereof. The Company intends to use a combined settlement approach to satisfy its obligation by paying or delivering to holders of the Convertible Notes cash equal to the principal amount of the obligation and EQT common stock for amounts that exceed the principal amount of the obligation.

In connection with the Convertible Notes offering, the Company entered into privately negotiated capped call transactions (the Capped Call Transactions), the purpose of which is to reduce the potential dilution to EQT common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such obligation, with such reduction and offset subject to a cap. The Capped Call Transactions have an initial strike price of $15.00 per share of EQT common stock and an initial capped price of $18.75 per share of EQT common stock, each of which are subject to certain customary adjustments, including adjustments as a result of the Company paying a dividend on its common stock.

The Capped Call Transactions are separate from the Convertible Notes. The Capped Call Transactions were recorded in shareholders' equity and were not accounted for as derivatives. The cost to purchase the Capped Call Transactions of $32.5 million was recorded as a reduction to equity and will not be remeasured.

Based on the closing stock price of EQT common stock of $40.75 on September 30, 2022 and excluding the impact of the Capped Call Transactions, the if-converted value of the Convertible Notes exceeded the principal amount by $727 million.

The table below summarizes the net carrying value and fair value of the Convertible Notes.

	September 30, 2022		December 31, 2021
	(Thousands)
Principal	$	414,846	$	499,991
Less: Unamortized debt issuance costs	8,614		12,448
Net carrying value of Convertible Notes	$	406,232	$	487,543
Fair value of Convertible Notes (a)	$	1,139,843	$	854,985

(a)The fair value is a Level 2 fair value measurement. See Note 4.

The table below summarizes the components of interest expense related to the Convertible Notes. The effective interest rate for the Convertible Notes is 2.4%.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(Thousands)
Contractual interest expense	$	1,821	$	2,188	$	6,191	$	6,563
Amortization of issuance costs	574		675		1,945		2,016
Total Convertible Notes interest expense	$	2,395	$	2,863	$	8,136	$	8,579

5.678% Senior Notes and 5.700% Senior Notes. On October 4, 2022, the Company issued $500 million aggregate principal amount of 5.678% senior notes due October 1, 2025 and $500 million aggregate principal amount of 5.700% senior notes due April 1, 2028. The Company intends to use the estimated net proceeds from the sale of the notes of $989.5 million (after deducting estimated offering costs of $10.5 million) to partly fund the Tug Hill and XcL Midstream Acquisition (defined in Note 9). The covenants of the 5.678% senior notes and 5.700% senior notes are consistent with the Company's existing senior unsecured notes. The 5.678% senior notes and 5.700% senior notes have a special mandatory redemption provision that provides that if the consummation of the Tug Hill and XcL Midstream Acquisition does not occur on or before June 30, 2023 or if the Company notifies the trustee of the notes that it will not pursue consummation of the Tug Hill and XcL Midstream Acquisition, the Company is required to redeem the notes of each series then outstanding at a price equal to 101% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Term Loan Facility and Bridge Loan Facility. In connection with the Tug Hill and XcL Midstream Purchase Agreement (defined in Note 9), on September 6, 2022, the Company entered into a debt commitment letter, which was amended and restated on September 20, 2022. Pursuant to such amended and restated debt commitment letter, Royal Bank of Canada, PNC Bank, National Association, Mizuho Bank, Ltd. and certain other financial institutions committed to provide the Company with an unsecured bridge loan facility in an aggregate principal amount of $1.25 billion (the Bridge Loan Facility) and an unsecured term loan facility in an aggregate principal amount of $1.25 billion (the Term Loan Facility), subject to satisfaction of standard conditions. In connection with the closing of the offering of the Company’s 5.678% senior notes and 5.700% senior notes on October 4, 2022, the commitments under the Bridge Loan Facility were automatically reduced by $989.5 million (the estimated net proceeds from the sale of the notes) in accordance with the terms of the Bridge Loan Facility. As of September 30, 2022, neither the Bridge Loan Facility nor the Term Loan Facility had closed, and, accordingly, commitments thereunder remained undrawn.