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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K/A

Amendment No. 1 to Form 10-K

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(Mark One)

x                                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

o                                   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

FOR THE TRANSITION PERIOD FROM: ______ TO: _______

COMMISSION FILE NUMBER 001-03551

EQT CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (412) 553-5700

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2018: $14.5 billion

The number of shares (in thousands) of common stock outstanding as of April 1, 2019: 255,284

DOCUMENTS INCORPORATED BY REFERENCE

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Explanatory Note

On February 14, 2019, EQT Corporation (EQT or the Company) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the Original Form 10-K). This Amendment No. 1 on Form 10-K (the Form 10-K/A) amends Part III, Items 10 through 14 of the Original Form 10-K to include information previously omitted from the Original Form 10-K in reliance on General Instruction G(3) to Form 10-K. EQT is filing this Form 10-K/A because it will not file its definitive proxy statement within 120 days after the end of its fiscal year ended December 31, 2018.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act), certifications by EQT’s principal executive officer and principal financial officer are filed as exhibits to this Form 10-K/A under Item 15 of Part IV hereof.

Except as described above, this Form 10-K/A does not modify or update disclosure in, or exhibits to, the Original Form 10-K. Furthermore, this Form 10-K/A does not change any previously reported financial results, nor does it reflect events occurring after the date of the Original Form 10-K. Information not affected by this Form 10-K/A remains unchanged and reflects the disclosures made at the time the Original Form 10-K was filed.

Cautionary Statements

Disclosures in this Form 10-K/A may contain certain forward-looking statements within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended.  Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “approximate,” “expect,” “intend,” “plan,” “believe” and other words of similar meaning in connection with any discussion of future operating or financial matters.  Without limiting the generality of the foregoing, forward-looking statements contained in this Form 10-K/A include the matters discussed regarding the expectation of performance under compensation plans, anticipated financial and operational performance of the Company and its subsidiaries and reserves estimates.  These statements involve risks and uncertainties that could cause actual results to differ materially from projected results.  Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company has based these forward-looking statements on current expectations and assumptions about future events.  While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and are beyond the Company’s control.  The risks and uncertainties that may affect the operations, performance and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth in the Company’s Original Form 10-K.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not intend to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

Website Information

This document includes several website references.  These website addresses are intended to provide inactive, textual references only.  The information on these websites is not part of this Form 10-K/A.

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EQT Corporation

Form 10-K/A

December 31, 2018

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PART III

Item 10.                 Directors, Executive Officers and Corporate Governance

Executive Officers

Executive Officers of the Registrant (as of April 29, 2019)

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All executive officers have executed agreements with the Company and serve at the pleasure of the Company’s Board of Directors.  Officers are elected annually to serve during the ensuing year or until their successors are elected and qualified, or until death, resignation or removal.

Directors

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Information about the Audit Committee

Our Audit Committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.  A copy of the charter of the Audit Committee is posted on the Company’s website www.eqt.com by clicking on the “Investors” link on the main page and then on the “Corporate Governance” link followed by the “Charters and Documents” link.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that the Company’s directors, executive officers and all persons who beneficially own more than 10% of the Company’s common stock file initial reports of ownership and reports of changes in ownership of the Company’s common stock with the SEC.  As a practical matter, the Company assists its directors and executive officers by monitoring transactions and completing and filing Section 16 reports on their behalf.  Based solely upon the Company’s review of copies of filings or written representations from the reporting persons, the Company believes that all reports that were required to be filed under Section 16(a) of the Exchange Act were filed on a timely basis during 2018, with the exception of the following.  Due to an administrative error by the Company, the Forms 3 filed for Messrs. Lushko, Mitchell and Smith inadvertently omitted one time-based restricted stock unit award granted to each of them in early 2018.

Code of Ethics and Governance Documents

EQT is committed to the highest standards of business integrity and corporate governance.  All of our directors, executives and employees must act ethically.  We maintain a Code of Business Conduct and Ethics (Code of Ethics) that provides the ethical guidelines and expectations for those conducting business on behalf of EQT and affiliates. The Code of Ethics applies to all directors, officers and employees of EQT.

The Code of Ethics, as well as our Corporate Governance Guidelines and the charters of our Audit, Management Development and Compensation, Corporate Governance, and Public Policy and Corporate Responsibility Committees can be accessed through our website at https://ir.eqt.com/charters-and-documents.  These documents are also available to any shareholder who requests them in writing addressed to EQT Corporation, EQT Plaza, Suite 1700, 625 Liberty Avenue, Pittsburgh, PA 15222-3111, Attention: Corporate Secretary.  We will disclose any future amendments to, or waivers from, provisions of our Code of Ethics for members of the Board and our officers

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on our website as promptly as practicable, as may be required under applicable SEC and NYSE rules.  The Corporate Governance Committee of the Board periodically reviews and reassesses the adequacy of our overall corporate governance, Corporate Governance Guidelines and Committee charters.

Item 11.                 Executive Compensation

The Compensation Discussion and Analysis (CD&A) and “Narrative Disclosure to Summary Compensation Table and 2018 Grants of Plan-Based Awards Table” below contain references to the Company’s adjusted EBITDA and adjusted EBITDAX, financial measures that have not been calculated in accordance with generally accepted accounting principles (GAAP), which are also referred to as non-GAAP supplemental financial measures.  Attached as Appendix A to this CD&A is a reconciliation of each of the Company’s adjusted 2018 EBITDA and adjusted 2018 EBITDAX to net income, the most directly comparable GAAP financial measure, as well as other important disclosures regarding non-GAAP financial measures.

As shareholders, you are invited to express your view of the compensation paid to the Company’s named executive officers for 2018, as discussed and analyzed below.

This Executive Compensation portion of this Form 10-K/A is organized into the following sections:

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Compensation Discussion and Analysis

Message from the Management Development and Compensation Committee

2018 was a pivotal year for our Company as we transformed into a financially strong, returns-focused Appalachia upstream company.

The Company that we are today is the result of significant work and many accomplishments over the past year.  These efforts included:

·                 the successful integration of the business and operations of the former Rice Energy;

·                 completion of the sum-of-the-parts discount analysis, which evaluated the shareholder value creation opportunity of splitting the production and midstream operations into two separate companies; and

·                 the successful spin-off to our shareholders of the Company’s midstream business into a stand-alone, publicly-traded company.

Successfully executing these complex, transformative transactions marked a major achievement in 2018 and served to position the Company as a focused, premier pure-play upstream company with a vastly simplified financial and operational structure.

The Company transitioned to a new Chief Executive Officer, Robert McNally, who has announced his vision for the Company — to unlock the tremendous value in EQT’s world-class asset base by operating more efficiently and cost effectively to maximize free cash flow generation while continuing to adhere to the highest standards in safety and environmental sustainability.  The Committee has confidence in Mr. McNally’s leadership and strategic focus on achieving this vision.

At the same time, we as a Committee were mindful of the Company’s disappointing third quarter 2018 capital expenditures and operational performance relative to business plan.  Consistent with our performance-based compensation philosophy, our 2018 compensation decisions, which are explained more fully in the rest of this Compensation Discussion and Analysis, were informed in part by these events.

We, the Management Development and Compensation Committee, are committed to ensuring that our compensation programs align incentives for executive performance with the Company’s strategic priorities to drive increased shareholder value.  To align our 2019 compensation programs to this strategy, total shareholder return, operating efficiency, development efficiency and return on capital employed are significant performance measures under our 2019 long-term incentive program.  The short-term incentive plan focuses our employees on financial measures as well as safety and environmental metrics.  The Committee also leveraged the expertise of the recently-formed Operating and Capital Efficiency Committee in setting appropriately robust performance metrics against which performance will be measured.

We remain committed to listening to shareholder feedback as we continue to evaluate and refine the Company’s compensation programs.

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Compensation Program Summary

Introduction

EQT’s core values include a commitment to operational excellence, integrity, and accountability, and its executive compensation program is intended to promote achievement consistent with these values.  The Company believes that its executive compensation program:

·                              is designed to attract and retain the highest quality named executive officers;

·                              aligns the interests of the Company’s named executive officers with the interests of its shareholders by directly linking executive pay to Company performance;

·                              directly supports the Company’s strategic plan by focusing employee performance on specific value drivers; and

·                              is market-based and premised upon informed industry benchmarking.

The Company’s compensation program is designed to reward the named executive officers when the Company achieves strong financial and operational results.  Executive compensation is structured to require a commitment to performance, as evidenced by the large percentage of executive compensation that is “at-risk.”

The charts below reflect the fixed versus at-risk performance components of 2018 compensation for Mr. McNally, who was serving as the Chief Executive Officer at the end of 2018, on the one hand, and the other named executive officers who were serving as such at the end of 2018, on the other.  The Company believes the 2018 compensation of its named executive officers is consistent with its commitment to link pay with performance.

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Named Executive Officers for 2018

This CD&A describes the Company’s compensation philosophy and the components of the Company’s compensation program for the following named executive officers in 2018.

(1)         Mr. McNally became the Company’s President and Chief Executive Officer in November 2018, effective as of the Spin-off date. Mr. McNally previously served as the Company’s Chief Financial Officer.

(2)         Ms. Smith assumed her role effective as of the Spin-off date. Ms. Smith previously served as the Company’s Chief Accounting Officer.

(3)         Ms. Centofanti assumed her role in October 2018. Ms. Centofanti previously served as the Senior Vice President of Asset Development for EQT Production.  Effective upon Gary E. Gould’s commencement of employment as the Company’s Executive Vice President and Chief Operating Officer on April 22, 2019, Ms. Centofanti ceased to serve in the role of Executive Vice President, Production and, on such date, Ms. Centofanti announced her intent to resign from the Company, effective as of May 3, 2019.

(4)         Mr. Jenkins assumed his role effective as of the Spin-off date. Mr. Jenkins previously served as the Company’s Chief Commercial Officer.

(5)         Mr. Lushko assumed his role in October 2018. Mr. Lushko previously served as Deputy General Counsel, Governance & Enterprise Risk.

(6)         Mr. Porges served as interim President and Chief Executive Officer of the Company from March 2018 until the Spin-off date.

(7)         Mr. Schlotterbeck served as the Company’s President and Chief Executive Officer and as a director of the Company until March 2018.

(8)         Mr. Schlosser served in his position until October 2018.

(9)         Mr. Ashcroft served in his position until October 2018.

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Significant Events and Performance Highlights for 2018

2018 was a transformative year for the Company.  After acquiring Rice Energy in November 2017, the Company successfully integrated the former Rice Energy business and operations.  At the same time, the Company and the Board conducted a comprehensive review process to assess the sum-of-the-parts discount, the undertaking of which was influenced to a significant degree by the Company’s robust dialogue with our shareholders.  This process culminated in the Board’s decision to separate the Company’s upstream and midstream businesses, which was announced in February 2018 and completed by November 2018.

In March 2018, David Porges was appointed as interim-President and Chief Executive Officer and served in that role until November 2018.

In April 2018, the Company announced a series of midstream streamlining transactions that included the acquisition by EQM of the Company’s retained midstream assets and Gulfport Energy’s 25% ownership in the Strike Force Gathering System for $1.69 billion, the merger of EQM and RMP and the purchase by EQGP of RMP’s Incentive Distribution Rights.  These midstream streamlining transactions were successfully completed in July 2018.

In August 2018, following a fulsome and rigorous CEO search process, the Board selected Robert J. McNally to serve as the Company’s President and Chief Executive Officer, effective upon the completion of the separation of the Company’s upstream and midstream businesses in November 2018.

In November 2018, the Company successfully completed the separation through the Spin-off to the Company’s shareholders of the midstream business.  Upon the closing of the Spin-off, Mr. McNally assumed the role of President and Chief Executive Officer of the Company.  Additionally, in November 2018, we began a refreshment of our Board by adding four new, independent directors to the Board.

Through the execution of the Spin-off, the Company transformed into a premier pure-play upstream company that is the largest natural gas producer in the United States and boasts a world-class asset base that is well positioned within the Marcellus and Utica basins.  At the same time, the Company provided significant value to its shareholders in the Spin-off through its distribution of 80.1% of the issued and outstanding equity of Equitrans Midstream Corporation (ETRN), a premier pure-play Appalachia midstream company that is the third-largest natural gas gatherer in the United States.  ETRN now trades on the New York Stock Exchange under the ticker symbol “ETRN.”

This transformative transaction, and the series of complex transactions required to facilitate its execution, positioned the Company as a financially strong, returns-focused Appalachia upstream company, with a simplified corporate structure.  These decisions were informed a great deal by the engaged dialogue we have developed, and are committed to continuing to foster, with our shareholders.

In December 2018, the Board established a new standing Board committee, the Operating and Capital Efficiency Committee.  The Operating and Capital Efficiency Committee consists of four independent directors with significant industry experience and was tasked with an ongoing review of the Company’s operations and capital deployment.  At this same time, the Company commenced a search process to identify and hire a Chief Operating Officer.  This comprehensive search process resulted in the hiring of Gary E. Gould, former Senior Vice President, Production and Resource Development at Continental Resources, Inc., as the Company’s Executive Vice President and Chief Operating Officer, effective April 2019.

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The following timeline illustrates these significant events:

At the same time, the Company achieved a number of other key financial and operational results in 2018, which are described in detail in the Original Form 10-K for the year ended December 31, 2018, including the following:

2018 Operational Highlights

·                  Achieved a record year for the Company, with annual sales volumes of 1,488 Bcfe(1) and average daily sales volumes of 4,076 MMcfe(2) per day.

·                  Completed sales of 2.5 million non-core, net acres in the Huron Play located in Southern Appalachia for net proceeds of approximately $523.6 million and certain non-core Permian Basin assets located in Texas for net proceeds of approximately $56.9 million (the Huron and Permian Divestitures).  The successful completion of these divestitures better-positioned the Company to focus on core operations.

·                  Proved reserves increased 2% in 2018, or 11% when adjusted for the impact of the Huron and Permian Divestitures.

Looking forward, and consistent with its effort to drive an industry leading cost structure, the Company has forecast a 2019 production sales volume of 1,480 to 1,520 Bcfe and anticipates that the 2019 drilling program will support a 5% increase in sales volume in 2020 over the Company’s 2019 expected volumes.

(1)             Bcfe  =  billion cubic feet of natural gas equivalents, with one barrel of natural gas liquids (NGLs) and crude oil being equivalent to 6,000 cubic feet of natural gas.

(2)             MMcfe  =  million cubic feet of natural gas equivalents, with one barrel of NGLs and crude oil being equivalent to 6,000 cubic feet of natural gas.

Environmental, Safety and Community

In 2018, the Company also continued our focus on fulfilling our corporate social responsibility commitments to operate as a safe, responsible and accountable corporate citizen.

The Company launched numerous initiatives during 2018 focusing on safety, including our “Zero is Possible – Today” safety program, which focuses all employees and our contractors on eliminating workplace accidents and injuries each day.  By enhancing our safety-focused culture, the Company achieved an approximately 39% drop in

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our 2018 Occupational Safety and Health Administration (OSHA) recordable incident rate (a measure of the relative number of employees involved in a recordable injury or illness) as compared to 2017.

Consistent with our commitment to environmental stewardship, the Company is a founding partner of the Center for Responsible Shale Development and, in 2018, joined the ONE Future Coalition, a group of natural gas companies working together to use a science-based approach to reduce methane emissions across the industry’s supply chain.  The Company also published a robust 2018 Corporate Social Responsibility Report in accordance with Global Reporting Initiative 4.0 standards, which you can view on our website by visiting csr.eqt.com.

The Company also built upon our continuing efforts to support local communities through local giving, sponsorship and philanthropic efforts.

Pay for Performance Results

The Management Development and Compensation Committee (for purposes of this Executive Compensation disclosure, the Committee) aims to align the named executive officers’ compensation with the performance of the Company.  In 2018, the Committee’s independent compensation consultant, Pay Governance, assessed the alignment of the aggregate realizable compensation awarded to the Company’s Chief Executive Officer for the five-year period ending December 31, 2017 (the last year for which this information was publicly available at the time) with the performance of the Company on a relative basis, during the same five-year period, to the aggregate realizable compensation of chief executive officers of the 2018 peer group discussed below, which was calculated on the basis of peer group company summary compensation table disclosures and, in the case of estimated award payouts for unvested awards, peer group company outstanding equity awards table disclosures.  The analysis behind the selection of the 2018 peer group is described below under “Benchmarking.”

The chart below shows the results of this assessment and compares:

·                              the Company’s performance relative to the performance of the 2018 peer group over the five-year period ending December 31, 2017 based on total shareholder return (TSR), which the Company believes is an appropriate performance measure in evaluating shareholder value; and

·                              the total realizable compensation of the Company’s Chief Executive Officer relative to the total realizable compensation of the chief executive officers of the 2018 peer group companies over the same period.  Realizable compensation is defined as the sum of: (i) base salary earned during the five-year period, (ii) actual non-equity incentive compensation earned during the five-year period, (iii) aggregate current value of restricted share grants received during the five-year period, (iv) aggregate in-the-money value of stock option grants received during the five-year period, and (v) for performance-based compensation the actual payouts for awards beginning and ending during the five-year period and an estimated payout (based on values disclosed in outstanding equity awards tables) for unvested awards received but not paid during the five-year period.

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Pay-for-Performance Alignment

Source: Pay Governance LLC

As reflected in the chart above, the realizable compensation of the Company’s Chief Executive Officer positioned the Company at the 53rd percentile of the 2018 peer group, which is aligned with the Company’s composite performance over the same period at the 53rd percentile, showing the close link between the Chief Executive Officer’s compensation and Company performance.

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Management Development and Compensation Committee Highlights

The Committee evaluates and, when appropriate or desirable, takes action with respect to various aspects of the Company’s compensation programs.  The following highlights the Committee’s key actions in 2018:

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Shareholder Outreach and Consideration of 2018 Say-on-Pay Vote and Feedback from Shareholder Engagement

In establishing and recommending the 2019 compensation program for the Company’s continuing named executive officers (Messrs. McNally, Jenkins and Lushko and Mses. Smith and Centofanti), the Committee carefully considered the shareholder feedback received in connection with the Company’s annual shareholder outreach program.  It also noted that approximately 96% of the votes cast at the 2018 annual meeting approved the compensation of the Company’s named executive officers for 2017.

Additionally, in 2018, the Company continued its practice of engaging with its shareholders to solicit feedback and input regarding its executive compensation program, reaching out to, and offering to meet with, each of the Company’s 15 largest institutional shareholders and ten largest index fund shareholders.  The Company engaged in a dialogue with those shareholders that elected to meet with the Company in 2018, which included discussion of the Company’s proposed 2019 executive compensation plan design and proposed performance measures for its 2019 executive compensation program.  Additionally, the Company agreed to meet with, and received feedback from, various smaller shareholders who requested meetings in 2018.

Based on the results of the 2018 say-on-pay vote and feedback received through the Company’s shareholder outreach efforts, the Committee concluded that the compensation paid to the named executive officers and the Company’s overall pay practices have strong shareholder support.  Nonetheless, the Committee undertook a thorough analysis of its compensation programs, especially in light of the Spin-off, and made certain modifications for 2019 as described above and below.

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The Committee recognizes that both executive pay practices and the Company’s strategy continue to evolve.  Consequently, the Committee intends to continue to (i) pay close attention to the advice and counsel of its independent compensation advisors and (ii) engage in meaningful shareholder outreach.  The Committee also invites our shareholders to communicate any concerns or opinions on executive pay directly to it or the Board.  See the caption “Contacting the Board” under “Corporate Governance and Board Matters” above for information about communicating with the Committee and the Board.

The advisory vote on executive compensation will occur every year until the next vote on the frequency of shareholder votes on executive compensation, which will occur at the Company’s 2023 annual meeting.

Compensation Philosophy

Our executive compensation program supports EQT’s core values of operational excellence, integrity, and accountability, as evidenced by the key aspects of the Committee’s compensation philosophy:

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Compensation Decisions for 2018

Making Executive Compensation Decisions

Key Elements of 2018 Compensation Program

Base salaries and annual and long-term incentive awards comprise total target direct compensation for our named executive officers.  When appropriate, the Committee also provides certain limited perquisites and makes other awards.

*May be paid in equity in limited circumstances.

Determining Target Total Direct Compensation

When establishing target total direct compensation for each named executive officer, the Committee considers:

·                  The Committee’s overall compensation philosophy;

·                  The market median of target total direct compensation as reviewed with the Committee’s independent compensation consultant;

·                  The scope of the executive’s responsibility, internal pay equity, succession planning, and industry-specific technical skills and abilities that may be difficult to replace; and

·                  The Chief Executive Officer’s compensation recommendations for each named executive officer (other than himself).

The Committee also periodically seeks input from, or the approval of, the other independent directors of the Board as it deems appropriate.  For example, in deciding upon appropriate performance metrics for the operating efficiency

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and development efficiency performance measures under the 2019 Incentive PSU Program (which program is described below), the proposed performance metrics were formally reviewed with the Operating and Capital Efficiency Committee of the Board prior to the Committee approving the performance metrics.

In considering the amount and type of each component of compensation, the Committee evaluates the effect of each element on all other elements, as well as the allocation of target total direct compensation between (i) cash and equity and (ii) long- and short-term compensation. The Committee is committed to providing a significant portion of each named executive officer’s compensation in the form of performance-based awards.

Benchmarking

Each year, the Committee reviews executive compensation peer groups with its independent compensation consultant for continued appropriateness. Accordingly, these peer groups have changed over time, consistent with the evolution of both the Company and its industry.

This peer group review typically occurs in the Fall prior to the relevant year and includes an analysis of the then-current peer group and other potential peers, including peers identified by the larger proxy advisory services.  The Committee considers industry, strategic focus, talent competitiveness, whether an entity is a peer of peers, geographic location, ownership structure, current and historical financial and stock performance, and scope.

·                  Financial performance metrics considered include net income, market capitalization, and revenue.

·                  Market performance over one-, three-, and five-year periods is typically considered.

·                  Based on information available at the time the Committee selects the peer group, the Company’s financial metrics generally approximate, on balance, the financial metrics of the median of the peer group.

The Committee also reviews the number of peer group companies, as consolidation and other changes in the industry over a three-year performance period could result in too small of a peer group. Peers are most frequently removed from the peer group when they or the Company complete a large acquisition or disposition, they are acquired, or they or the Company shift industry emphasis or they enter bankruptcy.  Peers are most frequently added as they become appropriately sized.

·                  Impact of Rice Transaction and Spin-off.  In assessing the market median for named executive officer compensation, the Committee noted that changes to the Company’s peer group for 2018, as a result of the closing of the Rice Transaction in late 2017, signaled a need for increases to each element of target total direct compensation for each named executive officer in order to keep compensation market competitive.  In setting 2018 target total direct compensation opportunities, however, the Committee also desired to demonstrate its commitment to achieving Rice Transaction synergies.  Moreover, the Committee was cognizant that the conclusions reached in the review of the “sum-of-the-parts discount” in anticipation of the Spin-off could result in a significantly different company, with a different peer group, moving forward.

In considering the Company’s peer group for 2019, the Committee, based upon recommendations and advice from Pay Governance, also took into consideration the profile of the Company following the completion of the Spin-off in November 2018.  Specifically, in consultation with Pay Governance, the Committee refined the 2019 peer group to include only companies having greater than 30% of their production volume coming from natural gas in light of the Company’s transformation into a pure-play upstream company.  Finally, the Committee took into consideration the reduction in the Company’s market capitalization that resulted from the Spin-off, ultimately deciding to exclude from the 2019 peer group those companies that fell outside of a relative range of market capitalization size, when compared to the Company on a post-Spin-off basis.

See Appendix B to this CD&A for the 2017, 2018 and 2019 peer groups and a comparison of their financial metrics.

Tally Sheets

Annually, the Committee is provided with a tally sheet for each named executive officer, which is designed to provide the Committee with a full picture of both the executive’s compensation history and all compensation

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payable upon the executive’s termination of employment and in connection with a change of control.  Each tally sheet generally sets forth the following elements of compensation history:

·                              a history of five years of base salary, annual incentive targets and awards, and perquisites; and

·                              a history of five years of long-term incentive awards, including realized gains as well as potential gains on unexercised or unvested awards.

The tally sheets also reflect the value of compensation due to each named executive officer under certain termination scenarios, including:

·                              termination of the executive by the Company with and without cause, as defined in any applicable agreement or policy;

·                              termination by the executive for good reason, as defined in the applicable agreement;

·                              termination by the executive other than for good reason, including retirement;

·                              termination of the executive in connection with or following a change of control; and

·                              disability or death.

With regard to each scenario, the tally sheets include:

·                              the cash amounts payable to the executive, including outplacement and other payments;

·                              the cost of benefits continuation;

·                              the value of all equity awards, including the acceleration of unvested equity awards and the value of forfeited awards; and

·                              any other compensation payable to the executive upon termination.

The tally sheets are provided to Committee members in an electronic resource book for easy reference.  This resource book also contains base salary, annual and long-term incentive targets, all incentive plan documentation, and all employment-related agreements for each of the named executive officers.

Role of the Independent Compensation Consultant

The Committee has the sole authority to hire, terminate, and approve fees for compensation consultants, outside legal counsel, and other advisors as it deems to be necessary to assist in the fulfillment of its responsibilities.  During 2018, the Committee utilized Pay Governance as its independent compensation consultant, and Pay Governance reported directly to the Committee.  Representatives of Pay Governance provided the Committee with market data and counsel regarding executive officer compensation programs and practices, including specifically:

·                              competitive benchmarking;

·                              peer group identification and assessment;

·                              advice and market insight as to the form of and performance measures for annual and long-term incentives;

·                              marketplace compensation trends in the Company’s industry and generally; and

·                              advice regarding the performance of the Company’s annual review of compensation risk.

Representatives of Pay Governance do not make recommendations on, or approve, the amount of compensation for any executive officer.  The Committee may request information or advice directly from representatives of Pay Governance and may direct the Company to provide information to representatives of Pay Governance.  Representatives of Pay Governance regularly interact with members of the Committee (including at each Committee meeting), as well as with representatives of the Company’s human resources department and, periodically, with the Chief Executive Officer and representatives of the Company’s legal department.

Setting Target Total Direct Compensation

Based on the several factors described above, and after receiving the input of Pay Governance, in early 2018, the Committee set the 2018 target total direct compensation opportunity for each named executive officer who was an

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executive officer of the Company at such time, other than Mr. Schlotterbeck, at 90% of the market median with respect to the 2018 peer group target total direct compensation opportunity.  This was accomplished by providing each such named executive officer with:

·                  a 5% base salary increase;

·                  a market median annual incentive target award; and

·                  a long-term incentive target award that, when coupled with the executive’s 2018 base salary and annual incentive target, aggregated to 90% of the value of the market median total direct compensation.

Mr. Schlotterbeck’s 2018 target total direct compensation was set at 82% of the market median with respect to the 2018 peer group target total direct compensation, which the Committee believed was appropriate in light of Mr. Schlotterbeck having only recently assumed the role of chief executive officer at the time 2018 target total direct compensation decisions were determined.

In addition, the 2018 long-term incentive target awards granted to these named executive officers were subject to a 13.5% reduction in the event that the targeted Rice Transaction first-year operating or development synergies were not achieved. The Committee believed that this approach, which favored at-risk compensation that depended upon achieving results and was structured to avoid a “windfall” to executives solely by virtue of growth of the Company due to the Rice Transaction, would properly motivate these executives to meet their commitments, while providing appropriate incentives to them for their management of a larger Company, assuming the achievement of the performance metrics.

For 2019, the Committee established the total target direct compensation opportunity for its named executive officers, as a percentage of the market median for each executive’s comparable position among the Company’s 2019 peer group, at 90% of the market median for Mr. McNally and Ms. Centofanti, 95% of the market median for Mr. Jenkins, and 89% of the market median for Ms. Smith and Mr. Lushko.

2018 Compensation Decisions

Overview of Compensation Components

The following elements comprised the Company’s 2018 executive compensation arrangements:  base salaries, annual incentives, long-term incentives, one-time strategic incentive awards, health and welfare benefits, retirement programs, perquisites, and non-compete agreements.

Base Salary

The base salary for each named executive officer was established taking into account the factors discussed under “Determining Target Total Direct Compensation” above.  Base salaries are ordinarily considered by the Committee and, where appropriate, adjusted towards the beginning of each calendar year.  For 2018, the Committee also reviewed and adjusted base salaries for promoted named executive officers to reflect their increased levels of executive responsibilities.  The following adjustments were made in 2018 to the base salary of each of our currently-serving named executive officers:

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(1)         The “market median for peer group” is the median base salary paid by companies within the Company’s 2018 peer group to their executive officers holding comparable positions to the position held by the named executive officer at the time of his or her most recent base pay increase.  For Mr. Lushko, the market median was determined by reference to broader industry data due to unavailability of comparable peer group data.

(2)         Represents base salary amount effective February 2018 for position held prior to promotion.

(3)         Represents base salary amount effective following promotion in November 2018.

(4)         Represents base salary amount effective following promotion in October 2018.

Consistent with the discussion above under “Setting Target Total Direct Compensation,” each of Messrs. Schlotterbeck, Schlosser and Ashcroft received a 5% base salary increase in February 2018.

Annual Incentives

Overview

Annual cash incentive awards are designed to drive and reward performance and are based on financial objectives and individual functional or business group objectives established by the Committee.  For 2018, annual incentives for our named executive officers were determined under (i) the Executive Short-Term Incentive Plan (Executive STIP) – under which plan named executive officers typically earn their annual incentives – and (ii) the Company’s Short-Term Incentive Plan (Regular STIP) – under which plan certain promoted named executive officers earned their annual incentives in 2018 as participants in such plan prior to promotion.

·                  The Executive STIP is the annual bonus plan under which the named executive officers typically earn their annual incentives.  Messrs. McNally and Jenkins and Ms. Smith, who were executive officers in early 2018 when the Committee approved target annual incentive awards for 2018, each participated in the Executive STIP for 2018.  Although these executives were promoted during 2018, the Committee did not make a corresponding increase to their target annual incentive opportunities to the 2018 market median annual incentive target opportunities for their promoted positions.  The Committee also did not apply their target percentages to their base salaries as increased at the time of promotion.

·                  Ms. Centofanti and Mr. Lushko, who became executive officers in October 2018, each participated in the Regular STIP for 2018.  Although these executives were promoted during 2018, the Committee did not make a corresponding increase to their target annual incentive opportunities to the 2018 market median annual incentive target opportunities for the promoted positions.  The Committee also did not apply their target percentages to their base salaries as increased at the time of promotion.

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Determination of 2018 Target Annual Incentive Awards

Typically, before or at the start of each year, the Committee approves the target annual incentive award for each named executive officer taking into account the factors discussed under “Determining Target Total Direct Compensation” above.

The target 2018 annual incentive award approved by the Committee for each of our currently-serving named executive officers was established based upon the position held by the executive prior to his or her promotion in 2018.  For Mr. McNally, his target 2018 annual incentive award was set at an amount equal to the market median (based on the Company’s 2018 peer group) for his prior position as the Company’s Chief Financial Officer.  For each of our other named executive officers (none of whom were executive officers in early 2018), their target 2018 annual incentive award was established at a level equal to the median for their comparable position, based upon general industry compensation data provided by Pay Governance.  Consistent with the Company’s policy of not adjusting annual incentive targets for promotions occurring after October 1, the target 2018 annual incentive awards for the Company’s named executive officers were not adjusted as a result of their promotions, which led to lower target annual incentive amounts as compared to the market median for comparable positions to those held by the named executive officers at the end of 2018.

For illustrative purposes, the table below compares the target 2018 annual incentive award for each of the Company’s currently-serving named executive officers to the median annual incentive target set by companies within the Company’s 2019 peer group for their executive officers holding positions comparable to those held by our named executive officers at the end of 2018:

(1)         The peer group market median is the median annual incentive target set by companies within the Company’s 2019 peer group for their executive officers holding positions comparable to those of our named executive officers as of the end of 2018.  For Mr. Lushko, the market median was determined by reference to broader industry data due to unavailability of comparable peer group data.

2018 Annual Incentives – Executive STIP

The Committee established as the 2018 performance metric “adjusted 2018 EBITDA” compared to the Company’s 2018 business plan, which the Company has used as its annual performance metric since the 2009 plan year, as an objectively determinable performance measure for the 2018 plan year at the beginning of 2018 due to the following:

·                  Performance against this measure results in an objectively determinable bonus pool amount.

·                  The Committee believes this measure drives the named executive officers to implement and exceed the Company’s business plan, which embodies the strategic goals of the Company, and which the Committee believes ultimately will create long-term value for shareholders.

·                  Cash flow measures such as EBITDA are often utilized by capital intensive companies and their investors as an indicator of such companies’ performance, including their ability to fund their activities and service their debt.

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Adjusted 2018 EBITDA (see Appendix A to this CD&A for the definition of, and additional information about, this non-GAAP measure) was calculated consistent with GAAP line items but used constant commodity prices and excluded certain charges.  Commodity prices are held constant to avoid the undue positive or negative effect of prices that are beyond the control of plan participants and may be volatile.  In order to hold commodity prices constant, the Committee adjusts actual results for, among other things, derivatives, basis and fixed price sales.   Under the plan, the Committee is required to adjust for certain extraordinary items, typically those that are unusual or strategic in nature (e.g., certain large acquisitions and dispositions, debt repurchases and certain impairments), to encourage the executives to make the best decision or recommendation for the Company without regard to the executive’s compensation when considering these types of extraordinary items.  In consideration of the Spin-off, which closed in November 2018, in measuring adjusted 2018 EBITDA for purposes of both the Executive STIP and the headquarters portion of the Regular STIP (and adjusted 2018 EBITDAX for purposes of the production business unit portion of the Regular STIP, as discussed below), the Committee determined to measure actual financial results of the Company through October 31, 2018, plus two months (November and December 2018) of forecasted financial results to afford a meaningful comparison to the Company’s 2018 business plan.  The Committee also has the discretion, but not the obligation, to adjust for items not contemplated in the original business plan, to avoid undue negative effects on possible bonus amounts.  The Committee did not exercise the discretion to make these adjustments, in light of the Company’s third quarter 2018 capital expenditures and operational performance relative to business plan.

2018 Funding under the Executive STIP

Under the Executive STIP, a pool to pay bonuses to the Company’s eligible officers was funded based upon adjusted 2018 EBITDA relative to business plan, as follows:

The Company’s adjusted 2018 EBITDA of $3,527.9 million was 98.9% of its 2018 business plan EBITDA of $3,566.0 million, which resulted in the total 2018 pool for all participants under the Executive STIP being capped at 1.5% of adjusted 2018 EBITDA.

After determining the pool available for distribution, the Committee determined the value of the award to each eligible named executive officer based upon consideration of the individual’s 2018 target annual incentive award and 2018 performance with respect to Company, business unit, and individual value drivers which are discussed below.

Generally, the Committee aims to award between zero and three times the value of a named executive officer’s target award, but may award up to $5 million to each named executive officer, subject to the overall cap (which maximum amount the Committee has never awarded).  The Committee believes that this structure provides flexibility to reward superior individual performance in years of superior company performance and appropriately recognize exceptional efforts in the face of goals established at a challenging threshold.  Further, the Committee historically has not had, and for the 2018 plan year did not have, discretion to pay a higher amount under the Executive STIP than specified by the objective formula under the Executive STIP.

The Committee is permitted to exercise, and historically has exercised, downward discretion in determining the actual payout under Executive STIP.  The Committee exercised this discretion again in respect of the payouts that could otherwise have been made in respect of the 2018 plan year, distributing less than $1.3 million, in the aggregate, to the three named executive officers (Messrs. McNally and Jenkins and Ms. Smith) who participated in the Executive STIP for 2018, although the Executive STIP pool funded at $52.9 million.

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The Committee also considered, but elected not to grant, “true up” grants that would otherwise have raised their target opportunities commensurate with their increased levels of executive responsibilities upon their promotions to their senior executive leadership positions.  See the Summary Compensation Table below for the amount awarded to each eligible named executive officer for 2018.

2018 Annual Incentives – Regular STIP

Ms. Centofanti and Mr. Lushko, who were not executive officers at the beginning of 2018, participated in the production business unit portion and the headquarters portion, respectively, of the Regular STIP in 2018.

2018 Funding under the Regular STIP

Under the production business unit portion of the Regular STIP (i.e., the portion in which Ms. Centofanti participated in 2018), the incentive pool was established by adjusting the target incentive pool that was approved by the Committee for the production business unit by a formula based on the production business unit’s adjusted 2018 business unit EBITDAX (a non-GAAP measure, calculated as set forth in Appendix A to this CD&A), compared to the Company’s business plan, as follows:

* Payout multiples are interpolated between levels depending upon performance.

The above result then is adjusted based on business unit value drivers (operational, strategic and financial goals), by adding to it the sum of the amounts, if greater than zero, determined by multiplying the applicable payout multiple for each value driver by the original target incentive pool amount, as follows:

* Individual business unit value drivers are weighted by the Committee based on their relative importance to achieving the Company’s operational, strategic and financial goals.

Under the headquarters portion of the Regular STIP (i.e., the portion in which Mr. Lushko participated in 2018), a formula based on the Company’s adjusted 2018 EBITDA compared to the Company’s business plan establishes 60% of the incentive pool, as follows:

* Payout multiples are interpolated between levels depending upon performance.

Business unit value drivers (operational, strategic and financial goals) establish the remaining 40% of the headquarters portion of the Regular STIP incentive pool available for payouts, as follows:

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The Regular STIP provides that the annual awards are paid in cash, subject to the Committee’s discretion to pay in equity.  Additionally, the Company’s Chairman of the Board may elect to settle awards in equity rather than cash if a participant has not satisfied his or her applicable equity ownership guidelines.

2018 funding of the production business unit and headquarters pools under the Regular STIP was determined based on the following:

·                  The Company’s production business unit’s adjusted 2018 business unit EBITDAX of $2,402.6 million represented 99.7% of the Company’s 2018 production business plan EBITDAX of $2,411.1 million.

·                  The Company’s adjusted 2018 EBITDA of $3,527.9 represented 98.9% of the Company’s 2018 business plan EBITDA of $3,566.0.

2018 Annual Incentive Payouts under the Executive STIP and Regular STIP

Under the Executive STIP and Regular STIP, the Company also considers each executive officer’s achievement of individual value driver performance goals that are established at the beginning of each year.  The Committee reviewed the individual performance of each named executive officer who was serving at the end of 2018 based on the following:

·                  a review of Mr. McNally’s performance conducted by the Corporate Governance Committee and the Chair of the Committee and reviewed with the other directors (to support this review, Mr. McNally provides a self-assessment to the Corporate Governance Committee and the Chair of the Committee, and input is requested from the independent Chairman and other directors); and

·                  a report by Mr. McNally regarding the performance of each other named executive officer.

In assessing the value driver performance of each eligible named executive officer, the Committee considered, among other matters, the efforts on a number of important transactions, including the Spin-off, and performance against key operational and strategic goals, as described below.

The following are the highlights of 2018 performance for each named executive officer (executive officers who were no longer employed at year-end, and consequently did not receive a bonus for 2018, are not included in the table):

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(1)             Tcfe  =  trillion cubic feet of natural gas equivalents, with one barrel of NGLs and crude oil being equivalent to 6,000 cubic feet of natural gas.

(2)             PV10 = the present value of estimated future oil and gas revenues net of estimated direct expenses and discounted at an annual discount rate of 10%.

Following its review of overall Company financial performance, the Committee exercised downward discretion in determining the actual award payable to each eligible named executive officer for 2018, taking into consideration the named executive officer’s performance with respect to Company, business unit, and individual value drivers.  Although the Executive STIP pool funded at $52.9 million, the Committee distributed less than $1.3 million, in the aggregate, to Messrs. McNally and Jenkins and Ms. Smith, the three named executive officers who participated in the Executive STIP for 2018.

The Senior Vice President, HR, in consultation with the Company’s Chief Executive Officer, determined the annual incentive awards under the Regular STIP for Ms. Centofanti and Mr. Lushko, which, in the aggregate, totaled less than $0.5 million.

Finally, as described in the “Management Development and Compensation Committee Highlights” section above, the Committee determined to not pay any 2018 annual incentive awards to the named executive officers who departed during 2018.

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Strategic Incentive Awards

In recognition of the management team’s efforts through March 2018, and to incentivize management’s effort and focus on execution of the complex Spin-off transaction during 2018, the Committee awarded one-time “Strategic Implementation Awards” to various senior executives, including Messrs. McNally, Lushko, Schlosser and Ashcroft and Ms. Smith, in March 2018.  These awards included both a cash and equity component.  The cash component is reflected in the Bonus column of the Summary Compensation Table below.  See the “Long-Term Incentives – Strategic Incentive Awards” section below for further discussion of both the cash and equity component of these awards.

2019 Target Annual Incentive Awards

2019 annual incentives will be funded, structured and determined similarly to the 2018 annual incentives.  After consideration of the factors used to establish prior annual incentive programs, in December 2018, the Committee selected adjusted 2019 EBITDA relative to the Company’s business plan as the applicable performance measure for purposes of the 2019 plan year of the Executive STIP.  Consistent with the 2018 annual incentive program, adjusted 2019 EBITDA (see Appendix A to this CD&A for the definition of, and additional information about, this non-GAAP measure) will be calculated consistent with GAAP line items but will use constant commodity prices and exclude certain items (e.g. large acquisitions and dispositions, debt repurchases and impairments). Under the Executive STIP, the pool available for all executive officer incentive awards will be funded based upon adjusted 2019 EBITDA relative to the 2019 business plan consistent with the funding schedule for the 2018 plan year.  Also consistent with 2018 and prior years, after determining the pool available for distribution for 2019, the Committee will determine the value of the award to each named executive officer who remains with the Company at such time based upon consideration of the individual’s 2019 target award and 2019 performance on Company, business unit, and individual value drivers, and subject to the Committee’s ability to exercise downward discretion to reduce actual payouts.

Long-Term Incentives

Overview of 2018 Long-Term Incentive Awards

The Committee aims for a balanced set of awards that motivate operational achievement, risk management, and a commitment to excellence, all of which the Committee believes ultimately contribute to long-term value creation for shareholders.

The 2018 long-term incentive compensation structure for the named executive officers was more complex than in prior years due to the senior executive leadership changes that occurred during 2018, coupled with the Company’s ordinary timing for deciding and awarding long-term incentives.  Specifically, the Committee typically completes the long-term incentive program design in late Fall of the preceding year, approving target long-term incentive awards in December with a January 1 grant date.

As a result, in January 2018, Messrs. McNally, Jenkins, Schlotterbeck, Schlosser and Ashcroft and Ms. Smith received the long-term incentive awards designed for our most senior executive officers, while Mr. Lushko and Ms. Centofanti received the long-term incentive awards designed for senior leaders in the executive level immediately below most executive officers (next tier senior leadership).

In connection with the promotions of Mr. Lushko and Mses. Smith and Centofanti to senior executive leadership positions in late 2018, the Committee considered, but elected not to grant, “true up” grants that would otherwise have raised their target opportunities commensurate with their increased levels of executive responsibilities.

In developing the 2018 long-term incentive program, the Committee designed a program that the Committee believed would align the interests of the named executive officers with the interests of shareholders, drive appropriate performance, be market competitive, be effective for retention purposes, be tax efficient, minimize earnings volatility, and result in a portfolio approach to performance metrics.  The Committee’s considerations also included:

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·                              market data regarding the long-term incentive design at the 2017 peer group;

·                              the appropriate way to incentivize executives toward the success of the Company and, prior to the Spin-off, EQGP and EQM;

·                              the portfolio of existing long-term incentive programs and their combined influence on focusing executive behavior on critical activities;

·                              feedback received from shareholders during the Company’s annual outreach program and in conjunction with the announcement of the Rice Transaction;

·                              the availability of EQT shares under the Company’s 2014 Long-Term Incentive Plan (2014 LTIP); and

·                              the views of the larger proxy advisory services.

The process involved consideration of the pros and cons of multiple variations of long-term incentive programs.

2018 Long-Term Incentive Award Mix

As a result of its analysis, with input from Pay Governance, the 2018 long-term incentive compensation program designed by the Committee for most executive officers and for next tier senior leadership was as follows:

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The award mix for the 2018 long-term incentive program for its senior executive officers at the beginning of the year, composed of stock options, time-based restricted shares and other performance-based awards, reaffirms the Committee’s desire to incorporate time-based restricted shares on a limited basis while continuing the Committee’s historic emphasis on performance-based incentive compensation.  Similarly, the allocation of the 2018 long-term incentive program for its next tier senior leadership at the beginning of the year among time-based restricted share units and performance-based awards reflects the Committee’s commitment to performance-based, at-risk compensation, coupled with its focus on market data for comparably situated executives.

The Committee believes that the overall mix of award types for both groups of executives provides a balanced set of incentives that motivate operational achievement, risk management, and a commitment to excellence, all of which the Committee believes ultimately contribute to long-term value creation for shareholders.

2018 Long-Term Incentive Award Performance Measures

In developing the performance measures for the 2018 long-term incentive program, the Committee worked to identify performance metrics designed to focus employees on the efficient development of the Company’s vast resources that would replace absolute natural gas sales volume growth in the Company’s long-term incentive programs.

Further, following the announcement of the Rice Transaction, some shareholders raised concerns about the Company’s prior focus on volumes and expressed a desire for the Company to include a return metric within the long-term programs.  This shareholder input was considered by the Committee and reflected in the design of the 2018 program.

2018 Incentive PSU Program

The Committee strongly supported management’s vision to shift employee focus to maintaining an industry leading cost structure, as evidenced by its discussion of the specific metrics and appropriate performance targets and weighting over multiple meetings.  The resulting performance measures and their weighting under the 2018 Incentive PSU Program, based on the Company’s performance over the period January 1, 2018 through December 31, 2020, consist of the following:

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In establishing the payout matrices for the 2018 Incentive PSU Program, the Committee considered their alignment with the Company’s historical and projected growth and synergy targets related to the Rice Transaction.  The analysis behind the selection of the 2018 peer group is described above under “Benchmarking.”  Following discussion with its independent compensation consultant, the Committee concluded that the payout matrices (which are disclosed as set forth in Appendix C to this CD&A) would provide rewards appropriate to performance and were appropriately rigorous.

2018 Value Driver PSU Program

The performance measure for the 2018 Value Driver PSU Program (in which only Ms. Centofanti and Mr. Lushko participated, in light of their participation prior to being promoted in 2018) was the Company’s adjusted 2018 EBITDA compared to the 2018 business plan.  The payout opportunity under the 2018 Value Driver Program was:

·                  no payout if the adjusted 2018 EBITDA was less than the Company’s business plan; or

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·                  three times the number of target awards granted if the adjusted 2018 EBITDA equaled or exceeded business plan, subject to the Committee’s discretion to determine that a lower performance multiple applied.  In exercising its discretion, the Committee was to consider and be guided by performance on Company, business unit, and individual value drivers.

In connection with the Spin-off, the Committee deemed the adjusted 2018 EBITDA performance measure to be satisfied for purposes of the 2018 Value Driver PSU Program, as reflected in the terms of the Employee Matters Agreement, dated November 12, 2018, between the Company and ETRN.  However, as described above, the Committee exercised downward discretion to confirm for each of Ms. Centofanti and Mr. Lushko a below-maximum award based upon the individual’s 2018 target award and 2018 performance on Company, business unit, and individual value drivers (which included, in the case of Ms. Centofanti, taking into account the Company’s third quarter 2018 capital expenditures and operational performance relative to business plan).

2018 Stock Options and Restricted Shares

The stock options granted in January 2018 have a term of ten years and were granted with an exercise price of $56.92 per share (which was adjusted to $29.30 per share pursuant to the Spin-off – see “Stock Options” under “Treatment of Equity-Based Compensation in the Spin-off” below).  These options will vest on January 1, 2021, contingent upon continued service with the Company through such date.

The restricted shares granted in January 2018 will vest on January 1, 2021, contingent upon continued service with the Company through such date.

2018 Target Long-Term Incentive Awards

The Committee’s considerations in determining the appropriate targets for each named executive officer for the 2018 long-term incentive awards are described above under the caption “Making Executive Compensation Decisions – Determining Target Total Direct Compensation.”  The resulting long-term incentive award to Mr. Schlotterbeck was at 80% of the market median (based on the 2018 peer group) for his position as President and Chief Executive Officer.  For 2018, long-term incentive awards to the other named executive officers at such time averaged 87% of the market median (based on the 2018 peer group).

The number of stock options, restricted shares and target units under the 2018 Incentive PSU Program awarded to the named executive officers were as follows:

As described above under the caption “Making Executive Compensation Decisions – Determining Target Total Direct Compensation,” the Committee determined in early 2018 that the target 2018 long-term incentive awards for each named executive officer serving as an executive officer at such time would be subject to a 13.5% reduction in the event the anticipated Rice Transaction first year operating or development synergies are not achieved.  The entirety of any reduction would be taken from the 2018 Incentive PSU Program awards to avoid the accounting costs associated with turning the options or restricted shares into performance-based awards. As a result, the 2018

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Incentive PSU Program awards identified above are subject to a potential 27% reduction in the event such first year synergies are not achieved.

Messrs. Schlosser and Ashcroft vested in their outstanding long-term equity awards in connection with his termination of employment and will receive the benefit, if any, of the 2018 Incentive PSUs to the extent and at the same time as other holders thereof.  Mr. Schlotterbeck forfeited the long-term incentive awards that were granted to him in 2018 upon his resignation in March 2018.

Strategic Incentive Awards

The separation of EQT’s upstream and midstream businesses through the Spin-off was an extraordinarily complex transaction, which EQT successfully executed on an expedited timeframe.  This complexity was compounded by EQT’s work to successfully create long-term value for EQT’s shareholders through the integration of its business with the business of Rice Energy.

In determining compensation for 2018, the Committee believed that it was important to have a stable, focused and experienced leadership team throughout this process.  Accordingly, in recognition of the management team’s efforts through March 2018, and to incentivize future efforts, the Committee approved Strategic Implementation Awards for Messrs. McNally, Jenkins, Lushko, Schlosser and Ashcroft and Ms. Smith in March 2018.

With a focus on retaining this team and on incenting future performance, the Strategic Implementation Awards for the named executive officers mentioned above (other than Mr. Lushko, who was not an executive officer at the time of grant) were paid one-third in cash, with the remaining two-thirds granted in the form of additional performance share units (PSUs), which would vest (a) 50% on the later of the first anniversary of the grant date and the date of the Spin-off and (b) 50% on the second anniversary of the grant date, subject to the earlier completion of the Spin-off.  On February 12, 2019, the Committee certified that the performance condition (i.e., successful closing of the Spin-off) had been satisfied.  The PSUs would have been forfeited in their entirety if the Spin-off had not occurred by the second anniversary of the grant date.  The Strategic Implementation Award for Mr. Lushko was similarly paid one-third in cash; however, consistent with the awards to the next tier senior leadership, Mr. Lushko received the remaining two-thirds of his award in the form of Restricted Stock Units, which vest 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date.  In total, the named executive officers in 2018 received the following amounts under the Strategic Implementation Award Program:

Certification of Performance Under Previously Awarded Long-Term Incentive Programs

In early 2018, the Committee certified the relevant performance and authorized payout for the 2015 Executive Performance Incentive Program (the 2015 Incentive PSU Program) (after excluding production from Rice Energy wells producing as of the transaction closing date) and the 2017 Value Driver PSU Program (which by its terms excluded the impact of acquisitions of greater than $100 million).  In early 2019, the Committee certified the relevant performance and authorized payout for the 2016 Incentive PSU Program and the 2018 Value Driver PSU Program.

December 31, 2018 was the natural end of the performance period under the 2016 Incentive PSU Program.  The payout for the 2016 Incentive PSU Program was calculated using a payout multiple of 1.85X based on the Company’s actual TSR ranking and the Company’s compound annual production sales volume growth during the performance period.

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2019 Long-Term Incentive Awards

In developing the 2019 long-term incentive program, the Committee designed a program that would align the interests of the Company’s named executive officers with the interests of shareholders, would drive appropriate performance, be market competitive, be effective for retention purposes, be tax efficient, minimize earnings volatility, and result in a portfolio approach to performance metrics.  The Committee’s considerations also included:

·                              market data regarding the long-term incentive design at the 2018 peer group;

·                              the appropriate way to incentivize executives toward the success of the Company;

·                              the portfolio of existing long-term incentive programs and their combined influence on focusing executive behavior on critical activities;

·                              feedback received from shareholders during the Company’s annual outreach program and in conjunction with the announcement of the Rice Transaction;

·                              the availability of EQT shares under appropriately approved plans; and

·                              the views of the larger proxy advisory services.

The process involved consideration of the pros and cons of multiple variations of long-term incentive programs.  As a result of its analysis, and with input from Pay Governance, the 2019 long-term incentive compensation program designed by the Committee for the named executive officers consisted of stock options (25%), restricted share awards (25%), and 2019 Incentive Performance Share Unit Program performance units (50%).

The allocation of the 2019 long-term incentive program among stock options, time-based restricted shares and other performance-based awards reaffirms the Committee’s desire to incorporate time-based restricted shares on a limited basis while continuing the Committee’s historic emphasis on performance-based incentive compensation.   As noted, the Committee aims for a balanced set of awards that motivate operational achievement, risk management, and a commitment to excellence, all of which the Committee believes ultimately contribute to long-term value creation for shareholders.

Management and the Committee again worked to identify performance metrics designed to focus employees on the efficient development of the Company’s vast resources, as a pure-play natural gas production company.  The Committee continued to strongly support management’s vision to focus employees on achieving operating and capital efficiencies, discussing the specific metrics and appropriate performance targets and weighting over multiple meetings, and obtaining feedback from the Operating and Capital Efficiency Committee of the Board regarding the appropriate performance measures and metrics.  The resulting performance measures and their weighting under the 2019 Incentive PSU Program are the Company’s performance over the period January 1, 2019 through December 31, 2021 on Relative TSR (weighting of 50%), Operating Efficiency (weighting of 25%), Development Efficiency (weighting of 25%) and a Return on Capital Employed modifier, which modifies the performance on all other metrics by up to 10% based upon performance (see Appendix C to this CD&A for the performance and payout matrices under the 2019 Incentive PSU Program).

The stock options granted in January 2019 have a term of ten years and an exercise price of $18.89 per share.  The stock options will vest on January 1, 2022, contingent upon continued service with the Company through such date.

The restricted shares granted in January 2019 will vest on January 1, 2022, contingent upon continued service with the Company through such date.

Consistent with 2018, the 2019 long-term incentive programs for its named executive officers contemplate payment in EQT equity, which the Committee believes further aligns the interests of the named executive officers with those of shareholders and allows favorable, non-variable accounting treatment.

In January 2019, each of the Company’s named executive officers who remained employed by the Company received the long-term incentives designed for senior executive officers described above.

The Committee’s considerations in determining the appropriate targets for the 2019 long-term incentive awards are described above under the caption “Making Executive Compensation Decisions – Determining Target Total Direct

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Compensation.”  The resulting target long-term incentive award to Mr. McNally was at 89% of the market median (i.e., the Company’s 2019 peer group) for his position as President and Chief Executive Officer.   The long-term incentive awards to the other named executive officers who remained with the Company at such time averaged 85% of the market median (i.e., the Company’s 2019 peer group) for each of their comparable positions.   The number of options, restricted shares and target units under the 2019 Incentive PSU Program awarded to the named executive officers at such time were as follows:

Treatment of Equity-Based Compensation in the Spin-off

In connection with the Spin-off, and consistent with the Committee’s desire to align the interests of all employees with the interests of the Company’s stockholders – who also became stockholders of ETRN by virtue of the Spin-off – the Company’s outstanding equity-based compensation awards were converted into equity-based awards in respect of each of the Company and ETRN, as described below.

Stock Options

Upon the closing of the Spin-off, each outstanding option to purchase shares of the Company’s common stock (other than those held by former employees) was converted into an award of options to purchase both shares of the Company’s common stock and shares of ETRN’s common stock.  Each outstanding option to purchase shares of the Company’s common stock held by a former employee remained an award of options solely to purchase shares of the Company’s common stock. The number of shares and exercise prices of each option award was adjusted in a manner intended to preserve the aggregate intrinsic value of the original stock option as measured immediately before and immediately after the Spin-off, subject to rounding.  The adjusted stock options are subject to substantially the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original stock options immediately before the Spin-off.

Restricted Stock, Restricted Stock Units and Deferred Stock Awards

Upon the closing of the Spin-off, each outstanding award of Company restricted stock, restricted stock units (including all Strategic Implementation Awards denominated in shares of the Company’s common stock), and deferred stock units (including awards granted pursuant to the 2017 Value Driver PSU Program), other than certain performance-based awards described below, was converted into an award in respect of both shares of the Company’s common stock and shares of ETRN’s common stock.  The number of shares of the Company’s common stock subject to each award is the same as the number subject to the award prior to the Spin-off, while the number of shares of ETRN’s common stock subject to the award was determined based on the number of ETRN shares distributed per share of the Company’s common stock in the Spin-off.  The adjusted awards are subject to substantially the same terms, vesting conditions and other restrictions that applied to the original awards immediately before the Spin-off.

Performance-Based Awards

Upon the closing of the Spin-off, each outstanding award of Company restricted stock units granted pursuant to the Incentive PSU Programs for 2016, 2017 and 2018 or pursuant to the 2018 Value Driver PSU Program was converted into an award in respect of both shares of the Company’s common stock and shares of ETRN’s common stock.  The number of shares of the Company’s common stock subject to each award is the same as the number subject to the award prior to the Spin-off, while the number of shares of ETRN’s common stock subject to the award was determined based on the number of shares of ETRN’s common stock distributed per share of the Company’s

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common stock in the Spin-off.  The adjusted awards are subject to substantially the same terms, vesting conditions and other restrictions that applied to the original awards immediately before the Spin-off, except that:

·                  For awards granted pursuant to the 2018 Incentive PSU Program, one-third of the total number of shares subject to the awards will be earned based on actual performance as of December 31, 2018, after which date such portion of the awards will be subject to solely time-based vesting, and two-thirds of the total number of shares subject to the awards will be earned based on the same performance goals established by the Committee for the 2019 Incentive PSU Program; and

·                  For awards granted pursuant to the 2018 Value Driver PSU Program, (a) the EBITDA-based performance goal was deemed satisfied as of the Spin-off, and the satisfaction of the business unit value drivers and any other applicable performance goals were determined based actual performance as of December 31, 2018 or the last date performance can be determined (in the case of awards denominated in respect of the Company’s common stock) or September 30, 2018 (in the case of awards denominated in respect of ETRN common stock), and (b) one-half of the award vested on December 31, 2018 and one-half of the award will vest on December 31, 2019.

Other Compensation Components

The Company provides modest, customary additional benefits to our named executive officers to enable them to focus on our business and enhance their commitment to us.

Health and Welfare Benefits

The named executive officers participate in the same health and welfare benefit plans offered to other EQT employees, including medical, prescription drug, dental, vision, short- and long-term disability, wellness and employee assistance programs.  The same contribution amounts, deductibles and plan design provisions are generally applicable to all employees.

Retirement Programs

The named executive officers participate in the same defined contribution 401(k) plan as other EQT employees.  The Company has historically contributed an amount equal to 6% of each participant’s base salary to an individual investment account for the employee, subject to applicable tax regulations.  In addition, the Company matches a participant’s elective contribution by contributing to the participant’s individual investment account an amount equal to 50% of each dollar contributed by the employee, subject to a maximum Company contribution of 3% of the employee’s base salary and applicable tax regulations.

Once Company contributions for named executive officers reach the maximum level permitted under the 401(k) plan, Company contributions are continued on an after-tax basis through a retirement annuity product offered by Fidelity Investments Life Insurance Co.  The Company contributions are made in December of each year and the named executive officer must be employed at the time the contribution is made to be eligible.  Under this program, in 2018 the Company contributed to the annuity an amount equal to 11% of each of Mr. McNally’s and Mr. Jenkins’ annual incentive award (the other named executive officers were not eligible due to either the timing of their promotions or due to their not being employed on the contribution date).  The after-tax annuity program contains no vesting requirements.

The Company has no defined benefit retirement plan, supplemental executive retirement plan (SERP) or deferred compensation obligations to any employee.

Perquisites

Consistent with its philosophy of pay for performance, the Company generally aims to provide modest perquisites to its named executive officers that, in number and value, are below median competitive levels for the industry.

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Perquisites offered to each named executive officer include the following:  a car allowance, a country club and a dining club membership, executive physical and healthcare services (for the executive and his/her spouse), financial planning, life insurance and accidental death and disability insurance (both of which exceed the level of insurance provided to other employees), and, except for Messrs. McNally and Lushko, a reduced monthly lease rate for parking.  The named executive officers may use two tickets purchased by EQT to attend up to four sporting or other events when such tickets are not otherwise being used for business purposes.  The costs of such tickets used for personal purposes are considered de minimis by EQT and are not included as perquisites in the Summary Compensation Table because there are no incremental costs to EQT associated with such use.  Beginning in 2019, Mr. McNally is a beneficiary of, and during 2018 Messrs. Schlotterbeck, Schlosser and Ashcroft were beneficiaries of, a travel security insurance policy.

In connection with Mr. Porges assuming the role of interim President and Chief Executive Officer upon the unanticipated, voluntary departure of Mr. Schlotterbeck in March 2018, the Committee determined to permit Mr. Porges to utilize corporate-chartered aircraft to facilitate travel between the Company’s headquarters and Mr. Porges’ home in Florida.  The Committee believed that making this perquisite available to Mr. Porges was appropriate to secure his experience and engaged leadership in the role of interim President and Chief Executive Officer through the critical period of completion of the Spin-off.  For his services as interim President and Chief Executive Officer, Mr. Porges remained an employee of the Company eligible for continued participation and vesting in its benefit plans and long-term incentive plans and for named executive officer perquisites, plus a base salary.  Mr. Porges did not receive any special cash bonus or equity award, did not receive an annual incentive award payout under the Executive STIP, and did not receive any equity awards under the Long-Term Incentive Plan for 2018.

See footnote (6) to the Summary Compensation Table below for a discussion of the perquisites provided to the named executive officers in 2018.

Agreements with the Named Executive Officers

The Committee believes that severance protections play a valuable role in attracting, motivating and retaining highly talented executives.  Accordingly, the Company provides such protections for the named executive officers under their Confidentiality, Non-Solicitation and Non-Competition Agreements, which are described in detail under the caption “Potential Payments Upon Termination or Change of Control” below.

Importantly, these executive agreements include covenants not to compete with, or solicit employees, customers, potential customers, vendors or independent contractors from, the Company for a specified period of time and to maintain the confidentiality of the Company’s information.  The Committee believes that these covenants are extremely valuable to the Company.

In connection with their promotion or hiring, the Committee:

·                  made no changes to the Confidentiality, Non-Solicitation and Non-Competition Agreements for Messrs. McNally and Jenkins; and

·                  approved the standard executive officer Confidentiality, Non-Solicitation and Non-Competition Agreements for Mses. Smith and Centofanti and Mr. Lushko.

In March 2018, Mr. Schlotterbeck resigned as President and Chief Executive Officer of the Company and Mr. Porges became interim President and Chief Executive Officer, in addition to his role as Chairman of the Board.  Before he resigned, the Committee offered Mr. Schlotterbeck a compensation package consisting of a $900,000 salary, $1,008,000 annual short-term incentive target award and $7,400,000 long-term incentive award.  Mr. Schlotterbeck declined this offer and voluntarily resigned his employment with the Company and his position on the Board.  Because Mr. Schlotterbeck’s resignation was voluntary, he was not entitled to severance or other termination-related benefits under his Confidentiality, Non-Solicitation and Non-Competition Agreement or any other agreement with the Company (other than payment for unused vacation); however, he remains subject to the restrictive covenants set forth in his Confidentiality, Non-Solicitation and Non-Competition Agreement.

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While serving as Executive Chairman, commencing March 1, 2017, Mr. Porges received a base salary of $850,000 per year.  During this period, he also continued to vest in the long-term incentive awards that he held as of March 1, 2017, but he did not receive any special cash bonus or special equity award, or new short- or long-term incentive opportunity in respect of his service as Executive Chairman.  Effective upon the closing of the Spin-off, Mr. Porges commenced executive alternative work arrangement status.  As discussed above, Mr. Porges was not paid an annual bonus for 2018.

Effective with their departures from full time employment with the Company, Mr. Ashcroft commenced executive alternative work arrangement status on August 8, 2018 and Mr. Schlosser commenced executive alternative work arrangement status on October 24, 2018.  See “Executive Alternative Work Arrangement” under the caption “Payments to be made Pursuant to Written Agreements with the Named Executive Officers” for a discussion of the benefits to which each of Messrs. Porges, Schlosser and Ashcroft is entitled, and the obligations to which each is subject, while in executive alternative work arrangement status.

The Committee also approved an agreement and release with each of Messrs. Schlosser and Ashcroft in connection with the termination of their employment and their transition to executive alternative work arrangement status pursuant to the terms of their Confidentiality, Non-Solicitation and Non-Competition Agreements.  For each of Messrs. Schlosser and Ashcroft, the agreement and release established their last day of service to EQT, provided for a general release of all claims against the Company and confirmed the benefits to which each was entitled, and the continuing obligations to which each was subject, under the terms of his Confidentiality, Non-Solicitation and Non-Competition Agreement and the Company’s severance pay plan.

See “Potential Payments Upon Termination or Change of Control” below for more detail regarding the Company’s agreement with each named executive officer, including the value of the benefits provided under such agreements.

Excise Tax Provisions

If any compensation to a named executive officer is accelerated or becomes vested, that executive could, in some cases, be considered to have received “parachute payments” within the meaning of Code Sections 280G and 4999.  Pursuant to these tax laws, the executive could be subject to a 20% excise tax on parachute payments that exceed a certain amount, in which case the Company would be denied a tax deduction for such excess parachute payments.  The agreement with each executive officer contains a “best net” provision, pursuant to which any “parachute payments” will be reduced to the extent necessary to avoid triggering the excise tax, unless the executive would have a more favorable after-tax result by receiving the unreduced payments and paying the excise tax himself, without a gross-up from the Company.  Due to the structure of the excise tax, it is not possible to determine in advance which calculation would produce the more tax-efficient result.  If the excise tax is triggered, the Company would not enjoy a tax deduction on the amount of the “excess parachute payments” but in no event would the Company be obligated to pay any portion of the excise tax.

Equity Ownership Guidelines

As of December 31, 2018, for those named executive officers who remained with the Company, the named executive officers’ holdings relative to their equity ownership guidelines were as set forth below:

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Qualifying holdings include EQT Corporation (EQT) and Equitrans Midstream Corporation (ETRN) stock and EQM Midstream Partners, LP (EQM) units owned directly, EQT and ETRN shares held in the Company’s 401(k) plan, time-based restricted shares and units for EQT and ETRN, and EQT and ETRN performance-based awards for which only a service condition remains, but do not include other performance-based awards or options.  Although mandatory, there is no deadline for achieving the ownership guidelines and executives are not required to purchase EQT or ETRN stock or EQM units.  The net shares or units acquired through incentive compensation plans (through the exercise of options, the vesting of restricted shares or similar) must be retained if an executive has not satisfied the executive’s ownership target.  An executive’s failure to meet the equity ownership guidelines may influence an executive’s mix of cash and non-cash compensation.

Tax Matters

For federal income tax purposes, Code Section 162(m) prohibits publicly-held companies from deducting compensation, including that which is “performance-based,” paid to certain executive officers to the extent it exceeds $1 million per individual.  While the Committee considers the after-tax cost to the Company in establishing executive compensation programs, both individually and in the aggregate, the Committee also considers the other goals of our executive compensation program in making its compensation decisions and when determining what is in the best long-term interests of the Company, even though compensation in excess of $1 million per person may not be deductible under Code Section 162(m).

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APPENDIX A TO CD&A

NON-GAAP FINANCIAL INFORMATION

The Executive STIP and the headquarters portion of the Regular STIP for the 2018 plan year utilized, and the Executive STIP and the Regular STIP for the 2019 plan year utilize, adjusted EBITDA compared to the Company’s business plan as a performance measure and the Production business unit portion of the Regular STIP for the 2018 plan year utilized adjusted business unit EBITDAX compared to EQT’s business plan as a performance measure.

For the 2018 plan year, adjusted EBITDA is defined as the Company’s income from continuing operations (which shall include income attributable to non-controlling interests) before interest, income taxes, depreciation, depletion, amortization and cumulative effect of accounting change for the fiscal year ending December 31, 2018, (i) calculated using the fixed commodity prices set forth in the Company’s 2018 business plan (the 2018 Plan) and adjusted for all cash settled derivatives and all basis and fixed price sales set forth in the 2018 Plan, (ii) excluding the effects of non-cash derivative gains (losses) not included in the 2018 Plan, (iii) excluding gains / losses on derivatives not designated as hedges, (iv) excluding the effects of non-cash impairments,  (v) excluding all direct and indirect impacts of acquisitions and/or dispositions during the year in which the total consideration paid, received or assumed is in excess of $100 million to the extent not contemplated by the 2018 Plan, (vi) excluding any charge and benefit associated with the repurchase of debt by the Company, and (vii) to the extent not contemplated by the 2018 Plan, excluding the costs associated with the Company’s analyses of (A) the Company’s “sum-of-the-parts discount” and (B) the structure of the Company’s master limited partnerships, and the implementation of any changes recommended as a result of either of the foregoing.

For the 2019 plan year, adjusted EBITDA is defined as the Company’s income from continuing operations (which shall include income attributable to non-controlling interests) before interest, income taxes, depreciation, depletion, amortization and cumulative effect of accounting change for the fiscal year ending December 31, 2019, (i) calculated using the fixed commodity prices set forth in the Company’s 2019 business plan (the 2019 Plan) and adjusted for all cash settled derivatives and all basis and fixed price sales set forth in the 2019 Plan, (ii) excluding the effects of non-cash derivative gains (losses) not included in the 2019 Plan, (iii) excluding gains / losses on derivatives not designated as hedges, (iv) excluding the effects of non-cash impairments, (v) excluding all direct and indirect impacts of acquisitions and/or dispositions during the year in which the total consideration paid, received or assumed is in excess of $100 million to the extent not contemplated by the 2019 Plan, (vi) excluding any charge and benefit associated with the repurchase of debt by the Company, (vii) to the extent not contemplated by the 2019 Plan, excluding the costs associated with the Company’s analyses of (A) the Company’s “sum-of-the-parts discount” and (B) the structure of the Company’s master limited partnerships, and the implementation of any changes recommended as a result of either of the foregoing, and (viii) excluding realized and unrealized gains and losses on Equitrans Midstream Corporation securities.

For the 2018 plan year, adjusted business unit EBITDAX is defined as total revenues of the applicable business unit, minus total expenses of the applicable business unit, excluding in each case (i) interest, income taxes, depreciation, depletion, amortization and exploration expenses, (ii) non-cash gains/losses on derivatives not designated as hedges and (iii) to the extent charged to the business unit and not contemplated by the business unit’s 2018 business plan, (A) the cumulative effect of accounting change and (B) the 2018 Review Costs, in each case including the components thereof attributable to noncontrolling interests.

Adjusted EBITDA and adjusted business unit EBITDAX are non-GAAP supplemental financial measures that the Company’s management uses to assess:  (i) the Company’s performance versus prior periods; (ii) the Company’s operating performance as compared to other companies in its industry; (iii) the ability of the Company’s assets to generate sufficient cash flow to make distributions to its investors; (iv) the Company’s ability to incur and service debt and fund capital expenditures; and (v) the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.  Additionally, management uses adjusted business unit EBITDAX as a measure to assess the Company’s and the applicable business unit’s performance versus prior periods without the impact of production and exploration costs associated with innovative drilling and exploratory wells, which vary from period-to-period.  Adjusted EBITDA and Adjusted EBITDAX contain certain adjustments that are not included in the Company’s calculation of EBITDA, a separate non-GAAP supplemental financial

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measure used by external users of the Company’s financial statements, such as industry analysts, investors, lenders and ratings agencies.

Adjusted EBITDA and adjusted business unit EBITDAX should not be considered as an alternative to net income, operating income, or any other measure of financial performance or liquidity presented in accordance with GAAP.  Adjusted EBITDA and adjusted business unit EBITDAX have important limitations as analytical tools because they exclude some, but not all, items that affect net income.  Additionally, because adjusted EBITDA and adjusted business unit EBITDAX may be defined differently by other companies in its industry, the Company’s definition of adjusted EBITDA and adjusted business unit EBITDAX may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Adjusted EBITDA was selected as a performance measure under the Executive STIP and the headquarters portion of the Regular STIP for the 2018 and 2019 plan years because adjusted EBITDA growth drives behavior consistent with the shareholders’ interests, and the Company’s business plan embodies the goals and priorities of the Company.  Similarly, adjusted business unit EBITDAX was selected as a performance measure under the business unit portion of the 2018 Regular STIP because adjusted business unit EBITDAX growth drives behavior within the applicable business unit consistent with the shareholders’ interests, and EQT’s business plan embodies the goals and priorities of EQT.

The table below reconciles the Company’s adjusted EBITDA as shown in this Form 10-K/A with the Company’s net income, the most comparable financial measure calculated in accordance with GAAP, for the applicable year as set forth in the Company’s 2018 annual report on Form 10-K.

The table below reconciles the Company’s production business unit’s adjusted business unit EBITDAX for 2018 with the Company’s net income, the most comparable financial measure calculated in accordance with GAAP, for the applicable year as set forth in the Company’s 2018 annual report on Form 10-K.

1  In light of the Spin-off, which closed in November 2018, in measuring adjusted 2018 EBITDA for purposes of the Executive STIP and the headquarters portion of the Regular STIP and adjusted 2018 EBITDAX for purposes of the production portion of the Regular STIP, the Committee determined to measure actual financial results of the Company through October 31, 2018, plus two months (November and December, 2018) of forecasted financial results to afford a meaningful comparison to the Company’s 2018 business plan.

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1  In light of the Spin-off, which closed in November 2018, in measuring adjusted 2018 EBITDA for purposes of the Executive STIP and the headquarters portion of the Regular STIP and adjusted 2018 EBITDAX for purposes of the production portion of the Regular STIP, the Committee determined to measure actual financial results of the Company through October 31, 2018, plus two months (November and December, 2018) of forecasted financial results to afford a meaningful comparison to the Company’s 2018 business plan.

The 2019 Regular STIP also utilizes free cash flow as a performance measure.  For the 2019 plan year, free cash flow is defined as the Company’s net cash provided by operating activities, excluding from such amount the effects of changes in other assets and liabilities, minus accrual-based capital expenditures (excluding any cash payments or capital expenditures for acquisitions), plus dividends received from Equitrans Midstream Corporation.

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APPENDIX B TO CD&A

2017 PEER GROUP –

FINANCIAL METRICS

Source:  Pay Governance

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2018 PEER GROUP –

FINANCIAL METRICS

Source:  Pay Governance

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2019 PEER GROUP –

FINANCIAL METRICS

Source: Pay Governance

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APPENDIX C TO CD&A

INCENTIVE PERFORMANCE SHARE UNIT PROGRAM PAYOUT MATRIX

2018 Program

Relative TSR Ranking (50% Weight)

Operating Efficiency (25% Weight)

Development Efficiency (25% Weight)

Return on Capital Employed* Modifier

After determining the preliminary payout factor as set forth above, the preliminary payout factor is modified based on achievement of return on capital employed over the performance period, by multiplying the preliminary payout factor by a percentage, as set forth in the table below, to determine the final payout factor for the performance share units.  In no event shall the payout factor exceed 300%.

*Return on Capital Employed is defined in Exhibit 10.02(t) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

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INCENTIVE PERFORMANCE SHARE UNIT PROGRAM PAYOUT MATRIX

2019 Program

Relative TSR Ranking (50% Weight)