Item 8.01. Other Events.
EQT is also filing this Form 8-K to supplement
the risk factors described in Part 1, Item 1A of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 with
the following risk factor:
The outbreak of the novel coronavirus, or COVID-19, has
affected and may materially adversely affect, and any future outbreak of any other highly infectious or contagious diseases may
materially adversely affect, our operations, financial performance and condition, operating results and cash flows.
The recent outbreak of COVID-19 has affected, and may materially
adversely affect, our business and financial and operating results. The severity, magnitude and duration of the current COVID-19
outbreak is uncertain, rapidly changing and hard to predict. Thus far in 2020, the outbreak has significantly impacted economic
activity and markets around the world, and COVID-19 or another similar outbreak could negatively impact our business in numerous
ways, including, but not limited to, the following:
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our revenue may be reduced if the outbreak results in an economic downturn or recession, as many experts predict, to the extent it leads to a prolonged decrease in the demand for natural gas and, to a lesser extent, NGLs and oil;
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our operations may be disrupted or impaired, thus lowering our production level, if a significant portion of our employees or contractors are unable to work due to illness or if our field operations are suspended or temporarily shut-down or restricted due to control measures designed to contain the outbreak;
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the operations of our midstream service providers, on whom we rely for the transmission, gathering and processing of a significant portion of our produced natural gas, NGLs and oil, may be disrupted or suspended in response to containing the outbreak, and/or the difficult economic environment may lead to the bankruptcy or closing of the facilities and infrastructure of our midstream service providers, which may result in substantial discounts in the prices we receive for our produced natural gas, NGLs and oil or result in the shut-in of producing wells or the delay or discontinuance of development plans for our properties; and
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the disruption and instability in the financial markets and the uncertainty in the general business environment may affect our ability to find attractive asset monetization opportunities and successfully execute our plan to deleverage our business (the Deleveraging Plan) on the timeframe previously anticipated or at all; for example, the market value of the assets to be monetized may be reduced and the financial condition or prospects of prospective purchasers and other counterparties, and such parties’ access to financing on acceptable terms, may be adversely affected. If we are not able to successfully execute our Deleveraging Plan or otherwise reduce absolute debt to a level we believe appropriate, our credit ratings may be lowered, we may reduce or delay our planned capital expenditures or investments, and we may revise or delay our strategic plans.
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Prior to the declaration of COVID-19 as a global pandemic
by the World Health Organization on March 15, 2020, we established a COVID-19 Response Team (the Response Team) consisting of a
multi-disciplinary group of senior leaders. The primary functions of the COVID-19 Response Team were to analyze areas of risk,
scenario plan and assess business continuity matters. The Response Team generally meets twice weekly and has been in consistent
communication with our Board of Directors. We expect that the principal areas of operational risk for us are availability of service
providers and supply chain disruption. Active development operations, including drilling and fracking operations, represent the
greatest risk for transmission given that the number of personnel and contractors on site. While we believe that we are following
best practices under COVID-19 guidance, the potential for transmission still exists. In certain instances, it may be necessary
or determined advisable for us to delay development operations. To date, we have only experienced one instance of positive COVID-19
testing resulting in the delay of development operations. The Response Team continues to monitor potential areas of risk for us.
In addition, the COVID-19 pandemic has increased volatility
and caused negative pressure in the capital and credit markets. As a result, we may experience difficulty accessing the capital
or financing needed to fund our exploration and production operations, which have substantial capital requirements, or refinance
our upcoming maturities on satisfactory terms or at all. We typically fund our capital expenditures with existing cash and cash
generated by operations (which is subject to a number of variables, including many beyond our control) and, to the extent our capital
expenditures exceed our cash resources, from borrowings under our revolving credit facility and other external sources of capital.
If our cash flows from operations or the borrowing capacity under our revolving credit facility are insufficient to fund our capital
expenditures and we are unable to obtain the capital necessary for our planned capital budget or our operations, we could be required
to curtail our operations and the development of our properties, which in turn could lead to a decline in our reserves and production,
and could adversely affect our business, results of operations and financial position.
As of December 31, 2019, our outstanding senior notes were
rated “Baa3” with a “Negative” outlook by Moody’s Investors Services (Moody’s), “BBB–“
with a “Negative” outlook by Standard & Poor’s Ratings Service (S&P) and “BBB–“ with
a “Negative” outlook by Fitch Ratings Service (Fitch). In January 2020, Moody’s downgraded our senior notes rating
to “Ba1” with a “Negative” outlook. In February 2020, S&P downgraded our senior notes rating to “BB+”
with a “Negative” outlook, and Fitch downgraded our senior notes rating to “BB” with a “Negative”
outlook. In April 2020, S&P further downgraded our senior notes rating to “BB- ” with a “Negative”
outlook, and Moody’s downgraded our senior notes to “Ba3” with a “Negative” outlook. As a result,
the interest rate on our 6.125% senior notes due 2025 will increase to 7.875% and the interest rate on the 7.000% senior notes
due 2030 increased to 8.750% beginning with the next interest payment period on such notes starting on August 1, 2020. See Note
10 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the
Annual Report) for a further discussion of the effects of the downgrades on our financial statements subsequent to December 31,
2019. Although we are not aware of any current plans of Moody’s, S&P or Fitch to downgrade its rating of our senior notes,
we cannot be assured that one or more will not downgrade or withdraw entirely their rating of our senior notes. Further impacts
to our business as a result of the recent outbreak of COVID-19, including low prices for natural gas, NGLs and oil, or an increase
in the level of our indebtedness or a failure to significantly execute the Deleveraging Plan, may result in Moody’s, S&P
or Fitch downgrading its rating of our senior notes. If there are further downgrades to our credit rating, our access to the capital
markets may be impacted, the cost of short-term debt through interest rates and fees under our lines of credit may increase, the
interest rate on our Term Loan Facility and Adjustable Rate Notes (each defined in Note 10 to the Consolidated Financial Statements
in our Annual Report) will further increase, the rates available on new long-term debt may increase, our pool of investors and
funding sources may decrease, the borrowing costs and margin deposit requirements on our derivative instruments may increase and
we may be required to provide additional credit assurances, including collateral, in support of our midstream service contracts,
joint venture arrangements or construction contracts, which could adversely affect our business, results of operations and liquidity.
As of April 22, 2020, such credit assurances could be up to approximately $1.4 billion, inclusive of letters of credit, margin
deposits and other collateral posted of approximately $0.9 billion in the aggregate.
To the extent the COVID-19 pandemic adversely affects our
business and financial results, it may also have the effect of heightening many of the other risks set forth in Item 1A., “Risk
Factors” in our Annual Report, such as those relating to our financial performance and debt obligations. The rapid development
and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on our business, which will
depend on numerous evolving factors and future developments that we are not able to predict, including the length of time that
the pandemic continues, its effect on the demand for natural gas, NGLs and oil, the response of the overall economy and the financial
markets as well as the effect of governmental actions taken in response to the pandemic.