EQT Reports Fourth Quarter and Year-End 2017 Earnings

PITTSBURGH–(BUSINESS WIRE)–EQT Corporation (NYSE: EQT) today announced fourth quarter and full-year
2017 results.

2017 Highlights:

• Completed acquisition of Rice Energy
• Announced 59% increase in proved reserves
• Received FERC Certificate for Mountain Valley Pipeline
• Production sales volume was 17% higher than 2016
• Average realized price was 23% higher than 2016

As a result of the federal tax reform legislation, net income for the
three months and year-ended December 31, 2017, includes a tax benefit of
approximately $1.2 billion for the revaluation of existing net deferred
tax liabilities to the lower corporate tax rate. Adjusted earnings for
the year-ended December 31, 2017, were higher primarily due to increased
commodity prices and sales volume, partly offset by higher operating
expenses. Adjusted cash flow for year-ended December 31, 2017, includes
$183 million of transaction-related expenses.

Fourth quarter adjusted earnings were higher primarily due to higher
sales volume, partially offset by higher operating expenses.

The Non-GAAP Disclosures section of this news release provides
reconciliations of non-GAAP financial measures to the most comparable
GAAP financial measure, as well as important disclosures regarding
certain projected non-GAAP financial measures.

RESULTS BY BUSINESS

The increase in operating income for 2017 was primarily due to a gain on
derivatives not designated as hedges, a higher average realized price,
and increased sales volumes for produced natural gas and natural gas
liquids (NGLs), as a result of recent acquisitions and drilling
activity, partly offset by increased operating expenses.

The increase in the average realized price for the year was primarily
due to an increase in the average NYMEX natural gas price, including
cash settled derivatives, of $0.29 per Mcf; an increase in the average
natural gas differential of $0.19 per Mcf; and an increase in NGLs
pricing.

Operating expenses for 2017 were $401.8 million higher than last year.
Transmission expense increased $154.1 million, gathering expense
increased $66.4 million, and processing expense increased $54.7 million,
all consistent with higher volumes and improved access to premium
markets. Depreciation, depletion and amortization expense (DD&A)
increased $123.1 million as a result of higher sales volumes, partly
offset by a lower depletion rate year-over-year. Selling, general and
administrative expense (SG&A) was $14.6 million lower due to the absence
of one-time items from the prior year, including a charge for pension
settlement and legal reserves in 2016, partially offset by higher SG&A
associated with the Rice acquisition.

The increase in operating income for the quarter was primarily due to a
sales volume increase for both produced natural gas and NGLs related to
recent acquisitions, including Rice, and drilling activity and a gain on
derivatives not designated as hedges, partly offset by increased
operating expenses.

The increase in the average realized price for the quarter was primarily
due to an improvement in NGLs pricing.

Operating expenses for the quarter were $204.0 million higher than the
same period last year. DD&A increased $103.9 million, gathering expense
increased $39.2 million, transmission expense increased $34.7 million,
and processing expense increased $9.4 million, consistent with increased
volumes and improved access to premium markets.

EQT MIDSTREAM PARTNERS (EQM) GATHERING

Operating income increased 15% in 2017, and 28% in the fourth quarter,
primarily due to higher revenues driven by production development in the
Marcellus Shale. Revenue from firm reservation fees represented 90% of
total revenue during 2017 and 86% for the fourth quarter.

Operating expenses increased primarily as a result of higher
depreciation and amortization expense due to additional assets placed
in-service, including those associated with the Range Resources header
pipeline project and various affiliate wellhead gathering expansion
projects. Operating and maintenance expenses increased primarily as a
result of higher personnel costs and increased property taxes,
consistent with the Company’s growth.

EQM TRANSMISSION

The increase in operating income was primarily due to higher firm
reservation fee revenue on the Ohio Valley Connector (OVC). Revenue from
firm reservation fees represented 92% of total revenues during 2017.

Operating expenses were $1.3 million higher than last year, excluding a
$10.5 million non-cash charge to depreciation and amortization expense
in the fourth quarter of 2017. The non-cash charge related to a
revaluation of differences between regulatory and tax bases in property,
plant, and equipment.

OTHER BUSINESS
Acquisition
of Rice Energy
On November 13, 2017, EQT completed the
acquisition (Rice Merger) of Rice Energy Inc. (Rice). EQT acquired all
of the outstanding shares of Rice common stock in exchange for 0.37
shares of EQT stock and $5.30 in cash per share of Rice stock.

The foundation of the transaction with Rice was the ability to realize
significant synergies on SG&A expenses, as well as capture improved
capital returns resulting from the ability to drill longer laterals on
its much larger contiguous acreage position.

In 2018, SG&A savings from the acquisition are approximately
$110 million and capital efficiency savings are approximately $210
million. The forecasted average lateral length in southwestern
Pennsylvania is projected to be 13,600 feet.

As a result of replacing $1.3 billion of Rice senior notes with lower
coupon investment grade debt, EQT expects to realize $45 million in
annual interest savings.

Through the Rice Merger, EQT also acquired a controlling interest in
Rice Midstream Partners LP (RMP), for which EQT will now report
additional segments for RMP Gathering and RMP Water. A discussion of the
results of those segments has been omitted from this release as EQT only
reports the results of RMP from the acquisition date of November 13,
2017 and there is no comparable period.

2017 Reserves Report
In a separate news release issued
today, EQT reported total proved reserves at December 31, 2017, of 21.4
Tcfe, a 59% increase over 2016. Proved developed reserves increased 65%
over 2016 to 11.3 Tcfe.

Mountain Valley Pipeline
The Federal Energy Regulatory
Commission (FERC) issued a Certificate of Public Convenience and
Necessity for the Mountain Valley Pipeline project in October 2017. As
of December 2017, Mountain Valley Pipeline, LLC (MVP JV) had received
all of the necessary federal permits required for the project. In early
January 2018, the MVP JV began filing requests for partial Notices to
Proceed with the FERC, and subsequently has received permission to begin
construction activities in certain areas along the route. The 303-mile
pipeline is estimated to cost $3.5 billion, with EQM funding its
proportional share, or approximately $1.6 billion. The MVP JV has
secured a total of 2 Bcf per day of firm capacity commitments at 20-year
terms and continues to target a late 2018 in-service date.

Notes Issuance
On October 4, 2017, the Company completed the
public offering of Senior Notes and Floating Rate Notes totaling $3.0
billion. Net proceeds from the sale of the notes were primarily used to
fund a portion of the cash consideration for, to refinance assumed
indebtedness in, and to pay expenses related to the Rice Merger. Net
proceeds from the sale of the notes were also used to redeem Company
Senior Notes due in 2018.

Tax Reform Impact
On December 22, 2017, the Tax Cuts and
Jobs Act of 2017 was enacted, lowering the federal corporate tax rate to
21% from 35%. As a result, the Company recorded a deferred tax benefit
of $1.2 billion in the fourth quarter to revalue its existing net
deferred tax liabilities to the lower rate.

This legislation also repealed the alternative minimum tax (AMT) and
provides that existing AMT credit carryforwards can be utilized to
offset current federal taxes owed in tax years 2018 through 2020. In
addition, 50% of any unused AMT credit carryforwards can be refunded
during these years with any remaining AMT credit carryforward being
fully refunded in 2021. The Company expects a refund of $200 million
related to 2018. The Company had approximately $435 million of AMT
credit carryforwards as of December 31, 2017.

Lastly, this legislation preserved the deductibility of intangible
drilling costs for federal income tax purposes and provides bonus
depreciation which allows the Company to deduct 100% of its unregulated
tangible capital deployed between 2018 and 2020. After 2022, the bonus
percentage is reduced by 20% each year until it expires in 2027. None of
the other provisions are expected to have a material effect on the
Company's results of operations.

Marcellus Acreage Acquisitions
During 2017, the Company
acquired approximately 110,000 net Marcellus acres, with drilling rights
on approximately 55,000 net Utica acres, in the Company’s liquids-rich
West Virginia core development area. The Company paid net cash of $740.1
million during the year-ended December 31, 2017, for these acquisitions,
which exclude Rice.

EQT Midstream Partners, LP (NYSE: EQM) / EQT GP Holdings, LP (NYSE:
EQGP) / Rice Midstream Partners LP (NYSE: RMP)
On January 18,
2018, EQM announced a cash distribution to its unitholders of $1.025 per
unit for the fourth quarter. EQGP announced a cash distribution to its
unitholders of $0.244 per unit for the fourth quarter 2017. RMP also
announced a cash distribution to its unitholders of $0.2917 per unit for
the fourth quarter 2017.

The 2017 financial results for EQM and EQGP were released today and
provide operational results, as well as updates on significant midstream
projects under development by EQM. This news release is available at www.eqtmidstreampartners.com.

Calculation of Net Income Attributable to Noncontrolling Interest
(NCI)

The results of EQGP, EQM, RMP and Strike Force Midstream LLC (Strike
Force) are consolidated in EQT’s results. For the year ended December
31, 2017, EQT’s results reflected earnings of $349.6 million, or $1.86
per diluted share, attributable to the publicly held partnership
interests and the minority interest in Strike Force.

(a)Excludes incentive distribution rights

Hedging
As of January 31, 2018, the approximate volumes and
prices of the Company’s derivative commodity instruments hedging sales
of produced gas for 2018 through 2020 were:

(a)Full year 2018

• The Company also sold calendar year 2018 and 2019 calls for
  approximately 64 Bcf and 45 Bcf, respectively, at strike prices of
  $3.49 per Mcf and $3.69 per Mcf, respectively
• For 2018, the Company also sold puts for approximately 3 Bcf, at a
  strike price of $2.63 per Mcf
• The average price is based on a conversion rate of 1.05 MMBtu/Mcf

Operating Income (Loss)
The Company reports operating income
(loss) by segment in this news release. Interest, income taxes, and
unallocated expense are controlled on a consolidated, corporate-wide
basis and are not allocated to the segments.

The following table reconciles operating income (loss) by segment, as
reported in this news release, to the consolidated operating income
reported in the Company’s financial statements:

Unallocated expenses generally include incentive compensation costs and
administrative expenses. In addition, 2017 includes $237.3 million of
Rice Merger related expenses and 2016 includes a $59.7 million
impairment on gathering assets prior to the sale to EQM.

Wells Drilled (spud)

• 2017 average lateral lengths: Marcellus 8,900; Upper Devonian 9,800;
  Ohio Utica 10,500
• Q4 2017 average lateral lengths: Marcellus 9,800; Upper Devonian
  11,500; Ohio Utica 10,500
• 2018 forecasted average lateral lengths: Marcellus 12,600; Upper
  Devonian 15,800; Ohio Utica 11,000

Wells Turned-in-line (TIL)

• 2017 average lateral lengths: Marcellus 7,400; Upper Devonian 8,300;
  Ohio Utica 12,800
• Q4 2017 average lateral lengths: Marcellus 7,100; Upper Devonian
  7,000; Ohio Utica 12,700
• 2018 forecasted average lateral lengths: Marcellus 8,700; Upper
  Devonian 11,300; Ohio Utica 11,500

Marcellus Horizontal Well Status (cumulative since inception)

*Includes 77 wells acquired in 2016 and 570 wells acquired in 2017

NON-GAAP DISCLOSURES
Adjusted
Net Income (Loss) Attributable to EQT and Adjusted Earnings per Diluted
Share (Adjusted EPS)
Adjusted net income (loss) attributable to
EQT and adjusted EPS are non-GAAP supplemental financial measures that
are presented because they are important measures used by management to
evaluate period-to-period comparisons of earnings trends. Adjusted net
income (loss) attributable to EQT and adjusted EPS should not be
considered as alternatives to net income (loss) attributable to EQT or
earnings per diluted share (EPS) presented in accordance with GAAP.
Adjusted net income (loss) attributable to EQT as presented excludes the
revenue impact of changes in the fair value of derivative instruments
prior to settlement, Rice Merger-related expenses, and certain other
items that impact comparability between periods. Management utilizes
adjusted net income (loss) attributable to EQT to evaluate earnings
trends because the measure reflects only the impact of settled
derivative contracts; thus, the income from natural gas sales is not
impacted by the often-volatile fluctuations in the fair value of
derivatives prior to settlement. The measure also excludes other items
that affect the comparability of results. Management believes that
adjusted net income (loss) attributable to EQT as presented provides
useful information for investors for evaluating period-over-period
earnings.

The table below reconciles adjusted net income (loss) attributable to
EQT and adjusted EPS with net income (loss) attributable to EQT and EPS
as derived from the statements of consolidated operations to be included
in EQT’s report on Form 10-K for the year ended December 31, 2017.

Operating Cash Flow, Adjusted Operating Cash Flow Attributable to EQT
and Adjusted Operating Cash Flow Attributable to EQT Production
Operating
cash flow, adjusted operating cash flow attributable to EQT and adjusted
operating cash flow attributable to EQT Production are non-GAAP
supplemental financial measures that are presented as indicators of an
oil and gas exploration and production company’s ability to internally
fund exploration and development activities and to service or incur
additional debt. EQT includes this information because management
believes that changes in operating assets and liabilities relate to the
timing of cash receipts and disbursements and therefore may not relate
to the period in which the operating activities occurred. Adjusted
operating cash flow attributable to EQT is EQT’s net cash provided by
operating activities, less changes in other assets and liabilities,
adjusted to exclude EQM and RMP adjusted EBITDA, plus EQM and RMP
interest expense plus the EQGP and RMP cash distributions payable to
EQT. Prior to EQT’s 2018 operational forecast announcement in December
2017, the Company’s calculation of adjusted operating cash flow
attributable to EQT did not include the addition of EQM’s and RMP’s
interest expense. The Company believes it is preferable to present this
non-GAAP supplemental financial measure with this adjustment as it
better reflects EQT’s cash flows by excluding the cost of debt for EQM
and RMP. EQT has recast all periods presented to be consistent with this
change in the definition of adjusted operating cash flow attributable to
EQT. Management believes that removing the impact on operating cash
flows of the public unitholders of EQGP, EQM and RMP that is otherwise
required to be consolidated in EQT’s results provides useful information
to an EQT investor. As used in this news release, adjusted operating
cash flow attributable to EQT Production means the EQT Production
segment’s total operating revenues less the EQT Production segment’s
cash operating expense, less gains (losses) on derivatives not
designated as hedges, plus net cash settlements received (paid) on
derivatives not designated as hedges, plus premiums received (paid) for
derivatives that settled during the period, plus EQT Production asset
impairments (if applicable). Operating cash flow, adjusted operating
cash flow attributable to EQT and adjusted operating cash flow
attributable to EQT Production should not be considered as alternatives
to net cash provided by operating activities presented in accordance
with GAAP. The table below reconciles operating cash flow and adjusted
operating cash flow attributable to EQT with net cash provided by
operating activities, as derived from the statements of consolidated
cash flows to be included in EQT’s report on Form 10-K for the year
ended December 31, 2017.

Contacts

EQT analyst inquiries:
Patrick Kane – Chief Investor
Relations Officer, 412-553-7833
[email protected]
or
EQT
Midstream Partners / EQT GP Holdings / Rice Midstream Partners analyst
inquiries:
Nate Tetlow – Investor Relations Director,
412-553-5834
[email protected]
or
Media
inquiries:
Natalie Cox – Corporate Director, Communications,
412-395-3941
[email protected]

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