Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2011

Concentrations of Credit Risk

Concentrations of Credit Risk

17.Concentrations of Credit Risk

Revenues and related accounts receivable from the EQT Production segment’s operations are generated primarily from the sale of produced natural gas, NGLs and limited amounts of crude oil to marketers, utility and industrial customers located mainly in the Appalachian area and a gas processor in Kentucky.  No customer accounted for more than 10% of revenues in 2011, 2010 or 2009.

Approximately 66% of the Company’s accounts receivable balance as of December 31, 2011 and 2010, represent amounts due from marketers.  The Company manages the credit risk of sales to marketers by limiting its dealings to those marketers who meet the Company’s criteria for credit and liquidity strength and by regularly monitoring these accounts.  The Company may require letters of credit, guarantees, performance bonds or other credit enhancements from a marketer in order for that marketer to meet the Company’s credit criteria.  As a result, the Company did not experience any significant defaults on sales of natural gas to marketers during the years ended December 31, 2011, 2010 or 2009.

The transmission and storage operations of EQT Midstream include FERC regulated interstate pipeline transportation and storage service for the Distribution segment, as well as other utility and end user customers located in the northeastern United States.  EQT Midstream also provides commodity procurement and delivery, physical natural gas management operations and control and customer support services to energy consumers including large industrial, utility, commercial, institutional and certain marketers primarily in the Appalachian and mid-Atlantic regions.

Distribution’s operating revenues and related accounts receivable are generated primarily from state-regulated distribution natural gas sales and transportation to approximately 276,500 residential, commercial and industrial customers located in southwestern Pennsylvania, northern West Virginia and eastern Kentucky.  Distribution continues to monitor and analyze various customer-related metrics and their impact on accounts receivable.  The Company employs a firm collections strategy which is comprised of various collections tactics including outreach to low income customers to provide information regarding energy assistance programs and, if necessary, termination of service.  The outreach to low income customers includes enrolling customers into the Customer Assistance Program which is an affordable payment plan for low income customers based on a percentage of total household income.  This program is managed by the Company and recovered through rates charged to other residential customers.

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 believes that NYMEX-traded future contracts have limited credit risk because Commodity Futures Trading Commission regulations are in place to protect exchange participants, including the Company, from any potential financial instability of the exchange members.  The Company’s OTC swap, collar and option 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 analysis to monitor and evaluate its credit risk exposure to financial counter-parties.  This includes monitoring market conditions, counterparty credit spreads and credit default swap rates.  Credit exposure is controlled through credit approvals and limits.  To manage the level of credit risk, the Company deals with financial counterparties that are of investment grade or better, enters into netting agreements whenever possible and may obtain collateral or other security.

As of December 31, 2011, the Company is not in default under any derivative contracts and has no knowledge of default by any other counterparty to derivative contracts.  The Company monitors market conditions that may impact the fair value of derivative contracts reported in the Consolidated Balance Sheets.

As of December 31, 2011, approximately 11% of the Company’s workforce was subject to collective bargaining agreements.  The collective bargaining agreement which covers approximately 9% of the Company’s workforce expired on September 25, 2011.  The union agreed to continue working under the terms and conditions of the expired labor agreement while the parties continue negotiations for a new agreement.  The collective bargaining agreement which covers approximately 1% of the Company’s workforce will expire on May 21, 2012.