Item 8.01. Other Events.
Alta Acquisition
As previously reported, on July 21, 2021, EQT Corporation (EQT and, together
with its consolidated subsidiaries, the Company or we) consummated the
previously announced acquisition (the Alta Acquisition) of Alta Marcellus
Development, LLC (ARD Marcellus) and ARD Operating, LLC (ARD and, together with
ARD Marcellus, the Alta Target Entities). The following exhibits relating to the
Alta Acquisition or the Alta Target Entities are attached to this Current Report
on Form 8-K and incorporated herein by reference:
· Exhibit 99.1: Audited combined financial statements of the Alta Target Entities
as of June 30, 2021 and 2020, and for the years then ended, and the notes
related thereto;
· Exhibit 99.2: Unaudited pro forma condensed combined balance sheet of the
Company as of June 30, 2021 and unaudited pro forma condensed combined
statements of operations of the Company for the six months ended June 30, 2021
and the year ended December 31, 2020, and the notes related thereto; and
· Exhibit 99.3: Audit letter prepared by Netherland, Sewell & Associates, Inc.,
independent petroleum engineers, relating to ARD Marcellus's estimated
quantities of its proved natural gas and oil reserves as of June 30, 2021.
Update on Margin Posting Obligations, Hedge Positions and Liquidity
Natural gas is a commodity, and we typically receive market-based pricing for
the natural gas we produce. To protect our future cash flows from the risk of
unanticipated declines in commodity prices, we utilize exchange-traded and over
the counter (OTC) derivative contracts to hedge a portion of our forecasted
natural gas production. All of our exchange-traded derivative contracts require
us to post margin deposits based on an established initial margin requirement
and the net liability position, if any, of the fair value of the associated
contracts. Certain of our OTC derivative contracts provide that, if EQT's credit
rating assigned by Moody's Investors Service, Inc. (Moody's) or S&P Global
Ratings (S&P) is below an agreed-upon credit rating threshold, and if the
associated derivative liability exceeds the agreed-upon dollar threshold for
such credit rating, the counterparty to such contract can require us to deposit
collateral with such counterparty. Similarly, if such counterparty's credit
rating assigned by Moody's or S&P is below the agreed-upon credit rating
threshold, and if the associated derivative liability exceeds the agreed-upon
dollar threshold for such credit rating, we can require the counterparty to
deposit collateral with us. The cash collateral provided to our hedge
counterparties, which is interest-bearing, is returned to us in whole or in part
upon an increase in EQT's credit rating or a reduction in the derivative
liability, depending on the amount of such reduction, or in whole upon
settlement of the related derivative contract. The significant majority of our
OTC derivative contracts provide that, upon EQT obtaining an investment grade
rating ("Baa3" or higher by Moody's and "BBB-" or higher by S&P), we are not
required to post margin with the hedge counterparty. As of September 24, 2021,
EQT's senior notes were rated "Ba1" by Moody's and "BB+" by S&P.
During the third quarter of 2021, we amended our agreements with six of our
largest OTC hedge counterparties to permanently or temporarily reduce or
eliminate our margin posting obligations associated with our OTC derivative
contracts with these hedge counterparties, which serve to mitigate the amount of
cash collateral that we would otherwise have been required to post based on
current New York Mercantile Exchange (NYMEX) strip pricing. Additionally, during
the third quarter of 2021, we entered into certain swaps, swaptions and calls to
reposition our 2021 and 2022 hedge portfolio, opening up incremental upside
participation in the benefits of rising natural gas prices and further
mitigating potential incremental margin posting requirements. As of September
24, 2021, our margin balance on our existing hedge portfolio was approximately
$0.6 billion, as compared to approximately $0.5 billion as of June 30, 2021,
despite a significant increase in natural gas prices between June 30, 2021 and
September 24, 2021.
The following table summarizes the approximate volume and prices of our NYMEX
hedge positions through 2024 as of September 24, 2021:
2021(a) 2022 2023 2024
Swaps:
Volume (MMDth) 314 1,185 166 2
Average Price ($/Dth) $ 2.39 $ 2.69 $ 2.53 $ 2.67
Calls - Net Short:
Volume (MMDth) 43 343 77 15
Average Short Strike Price ($/Dth) $ 2.92 $ 2.98 $ 2.89 $ 3.11
Puts - Net Long:
Volume (MMDth)
53 183 69 15
Average Long Strike Price ($/Dth) $ 2.58 $ 2.68 $ 2.40 $ 2.45
Fixed Price Sales (b):
Volume (MMDth) 17 4 3 -
Average Price ($/Dth) $ 2.49 $ 2.38 $ 2.38 $ -
(a) October 1 through December 31.
(b) The fixed price natural gas sales agreements can be physically or
financially settled.
For 2021 (October 1 through December 31), 2022, 2023 and 2024, we have natural
gas sales agreements for approximately 5 million dekatherm (MMDth), 18 MMDth, 88
MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of
$3.17, $3.17, $2.84 and $3.21, respectively. We have also entered into
derivative instruments to hedge basis. During the third quarter, we purchased 37
MMDth total of 2022 swaptions with an average strike price of $3.75. We may use
other contractual agreements to implement our commodity hedging strategy from
time to time. For further discussion of our hedging program, see Item 3.,
"Quantitative and Qualitative Disclosures About Market Risk" and Note 3 to the
Condensed Consolidated Financial Statements in EQT's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2021.
As of August 31, 2021, we had $0.6 billion in credit facility borrowings and
$0.6 billion letters of credit outstanding under our $2.5 billion credit
facility.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
23.1 Consent of Moss Adams LLP.
23.2 Consent of Netherland, Sewell & Associates, Inc.
99.1 Audited combined financial statements of ARD Operating, LLC and Alta
Marcellus Development, LLC as of June 30, 2021 and 2020, and for the
years then ended, and the notes related thereto.
99.2 Unaudited pro forma condensed combined balance sheet of EQT
Corporation and its subsidiaries as of June 30, 2021 and unaudited pro
forma condensed combined statements of operations of EQT Corporation and
its subsidiaries for the six months ended June 30, 2021 and the year
ended December 31, 2020, and the notes related thereto.
99.3 Audit letter prepared by Netherland, Sewell & Associates, Inc., dated
August 5, 2021, with respect to estimates of reserves and future revenue
of Alta Marcellus Development, LLC as of June 30, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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