Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENTS

Disclosures in this Quarterly Report on Form 10-Q contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, 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," "will," "may," "forecasts," "approximate," "expect," "project," "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 report include the matters discussed in the sections captioned "Outlook" in Management's Discussion and Analysis of Financial Condition and Results of Operations, and the expectations of plans, strategies, objectives, and growth and anticipated financial and operational performance of the Company and its subsidiaries, including guidance regarding the Company's drilling and infrastructure programs, production and sales volumes, reserves, capital expenditures, financing requirements, hedging strategy and tax position. 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, most of which are difficult to predict and many of which 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 under Item 1A, "Risk Factors" of the Company's Form 10-K for the year ended December 31, 2008.

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.

In reviewing any agreements incorporated by reference in this Form 10-Q, please remember they are included to provide you with information regarding the terms of such agreement and are not intended to provide any other factual or disclosure information about the Company. The agreements may contain representations and warranties by the Company, which should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties should those statements prove to be inaccurate. The representations and warranties were made only as of the date of the relevant agreement or such other date or dates as may be specified in such agreement and are subject to more recent developments. Accordingly, these representations and warranties alone may not describe the actual state of affairs as of the date they were made or at any other time.

CORPORATE OVERVIEW

Three Months Ended June 30, 2009

vs. Three Months Ended June 30, 2008

EQT Corporation's consolidated net income for the three months ended June 30, 2009 totaled $26.6 million, or $0.20 per diluted share, compared to $55.4 million, or $0.44 per diluted share, reported for the same period a year ago. Several factors contributed to the decrease in net income between periods. The Company was negatively impacted by unfavorable commodity prices through reduced average well-head and NGL sales prices together totaling $62 million pre-tax. The impact of the unfavorable commodity prices was partially offset by increases in production gas sales volumes resulting from increased production from the Company's drilling program, increases in processing, gathering, transmission and commercial activity and the Distribution segment's increase in base rates. The Company's continued investment in its oil and gas producing properties and midstream infrastructure resulted in higher DD&A and interest charges and the midstream infrastructure investments required additional operation and maintenance expenses for electricity, property taxes and labor. The effective tax rate for the three months ended June 30, 2009 was 38.6% which is consistent with the 38.5% effective tax rate for the three months ended June 30, 2008.

Six Months Ended June 30, 2009

vs. Six Months Ended June 30, 2008

EQT Corporation's consolidated net income for the six months ended June 30, 2009 totaled $98.6 million, or $0.75 per diluted share, compared to $125.9 million, or $1.00 per diluted share, reported for the same period a year ago. Several factors contributed to the decrease in net income between periods. The Company was negatively impacted by unfavorable commodity prices through reduced average well-head sales prices, NGL sales prices and commodity storage price spreads together totaling $110 million pre-tax. The impact of the unfavorable commodity prices was partially offset by increases in production gas sales volumes resulting from increased production from the Company's drilling program, increases in commercial, transmission, processing and gathering activity, and increased base rates in the Company's Distribution segment. Decreased SG&A expenses resulted primarily from the absence of incentive compensation expense relating to the Company's 2005 Executive Performance Incentive Program while the Company's increased investment in its oil and gas producing properties and midstream infrastructure resulted in increased DD&A and interest charges. The midstream infrastructure investments also resulted in increased operation and maintenance costs for electricity, labor and property taxes to operate the facilities. The effective tax rate for the six months ended June 30, 2009 was 39.1% compared to 37.3% for the six months ended June 30, 2008. The higher effective tax rate in 2009 is primarily the result of a West Virginia law change that created a discrete benefit in the first quarter of 2008.

The current economic downturn is affecting EQT primarily through reduced natural gas prices and disruption to the global financial markets. The Company has not yet experienced other material changes to its financial position, results of operations or liquidity as a result of any changes in the economy; however, if the economic downturn continues for an extended period, EQT may be negatively impacted in various ways which the Company cannot reasonably predict at this time. For more information regarding risks associated with natural gas price volatility and the global financial challenges see Item 1A "Risk Factors" of the Company's Form 10-K for the year ended December 31, 2008.

The Company has reported the components of each segment's operating income and various operational measures in the sections below and, where appropriate, has provided information describing how a measure was derived. EQT's management believes that presentation of this information provides useful information to management and investors regarding the financial condition, operations and trends of each of EQT's segments without being obscured by the financial condition, operations and trends for the other segments or by the effects of corporate allocations of interest and income taxes. In addition, management uses these measures for budget planning purposes.

EQT PRODUCTION

OVERVIEW

EQT Production continued to focus on organic growth through its drilling program. The Company drilled 304 gross (221 net) wells in the first six months of 2009, including 11 horizontal Marcellus wells, 4 vertical Marcellus wells, 126 horizontal Huron shale wells, 9 horizontal Berea wells, and 1 horizontal Big Lime well, compared to 324 gross (252 net) wells in the first six months of 2008 which included 161 horizontal Huron shale wells and 7 horizontal Berea wells. See "Capital Resources and Liquidity" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q for further details of the Company's capital expenditures for drilling and development.

EQT Production's operating revenues for the second quarter decreased 28% from 2009 to 2008 as lower commodity prices more than offset significantly increased production. The average well-head sales price decreased 42% due to a 68% decrease in the average NYMEX price and a higher percentage of unhedged gas sales partially offset by a higher realized hedge price compared to 2008. Gas sales volumes increased 22% from 2008 to 2009. The increase was primarily the result of increased production from the 2008 and 2009 drilling programs partially offset by the normal production decline in the Company's existing wells.

Second quarter operating expenses at EQT Production included increases in the Company's depletion and exploration expense. The increase in DD&A resulted from the combination of higher rates, due to the significant on-going drilling and development program, and increased units-of-production. The increase in exploration expense was the result of an increased level of seismic analysis and supporting personnel costs compared to the prior year. Excluding DD&A and exploration expenses, operating expenses decreased both in total and on a per unit basis.

RESULTS OF OPERATIONS



EQT PRODUCTION



                                        Three Months Ended                Six Months Ended
                                             June 30,                         June 30,
                                    2009        2008        %        2009        2008        %
       OPERATIONAL DATA

Natural gas and oil production
(MMcfe)                              25,505      21,543     18.4      49,983      42,564     17.4
Company usage, line loss
(MMcfe)                              (1,139 )    (1,587 )  (28.2 )    (2,641 )    (2,893 )   (8.7 )
Total sales volumes (MMcfe)          24,366      19,956     22.1      47,342      39,671     19.3

Average (well-head) sales price
($/Mcfe)*                         $    3.59   $    6.14    (41.5 ) $    3.87   $    5.67    (31.7 )

Lease operating expenses (LOE),
excluding production taxes
($/Mcfe)                          $    0.28   $    0.33    (15.2 ) $    0.26   $    0.31    (16.1 )
Production taxes ($/Mcfe)         $    0.29   $    0.61    (52.5 ) $    0.32   $    0.55    (41.8 )
Production depletion ($/Mcfe)     $    1.03   $    0.81     27.2   $    1.03   $    0.81     27.2

Production depletion              $  26,226   $  17,502     49.8   $  51,431   $  34,593     48.7
Other depreciation, depletion
and amortization (DD&A)               1,209       1,119      8.0       2,437       2,149     13.4
Total DD&A                        $  27,435   $  18,621     47.3   $  53,868   $  36,742     46.6

Capital expenditures
(thousands)                       $ 164,880   $ 146,413     12.6   $ 302,316   $ 242,876     24.5

  FINANCIAL DATA (Thousands)

Total operating revenues          $  89,885   $ 124,949    (28.1 ) $ 187,648   $ 230,026    (18.4 )

Operating expenses:
LOE, excluding production taxes       7,170       7,054      1.6      13,212      13,016      1.5
Production taxes                      7,326      13,114    (44.1 )    16,150      23,337    (30.8 )
Exploration expense                   4,414         838    426.7       7,725       1,393    454.6
Selling, general and
administrative (SG&A)                 9,892      11,145    (11.2 )    18,628      21,029    (11.4 )
DD&A                                 27,435      18,621     47.3      53,868      36,742     46.6
Total operating expenses             56,237      50,772     10.8     109,583      95,517     14.7
Operating income                  $  33,648   $  74,177    (54.6 ) $  78,065   $ 134,509    (42.0 )

Three Months Ended June 30, 2009

vs. Three Months Ended June 30, 2008

EQT Production's operating income totaled $33.6 million for the three months ended June 30, 2009 compared to $74.2 million for the three months ended June 30, 2008. The $40.6 million decrease in operating income was primarily the result of a decrease in the average well-head sales price ($62.0 million) offset by an increase in sales volumes ($27.1 million).

Total operating revenues were $89.9 million for the three months ended June 30, 2009 compared to $124.9 million for the three months ended June 30, 2008. The $35.0 million decrease in total operating revenues was primarily due to a 42% decrease in the average well-head sales price, partially offset by an increase in production gas sales volumes. The $2.55 per Mcfe decrease in the average well-head sales price was primarily due to a $7.43 per Dth decrease in the average NYMEX price and a higher percentage of unhedged gas sales, partially offset by a higher

realized hedge price. The increase in production gas sales volumes was the result of increased production from the 2008 and 2009 drilling programs, partially offset by the normal production decline in the Company's wells.

Operating expenses totaled $56.2 million for the three months ended June 30, 2009 compared to $50.8 million for the three months ended June 30, 2008. DD&A increased $8.8 million primarily as a result of an increase in the depletion unit rate ($5.6 million) and higher volumes ($3.1 million). The $0.22 increase in the depletion rate was primarily attributable to the increased investment in the Company's oil and gas producing properties. The increase in exploration expense was due to an increased level of seismic analysis and supporting personnel costs compared to prior year. These increases were offset by a decrease in production taxes primarily due to decreased severance taxes (a production tax directly imposed on the value of the gas extracted) as a result of lower gas commodity prices and lower SG&A primarily related to lower commodity price based reserve for uncollectible accounts.

During the first quarter of 2008, the Company drilled its first exploratory vertical Utica well. During the three months ended June 30, 2009, the Company capitalized $0.2 million of Utica well costs bringing the total capitalized exploratory well costs that are pending the determination of proved reserves to $7.6 million. As of June 30, 2009, this well has not been turned in line. The Company expects to drill a second Utica well in 2010 and to complete the two wells at the same time.

Six Months Ended June 30, 2009

vs. Six Months Ended June 30, 2008

EQT Production's operating income totaled $78.1 million for the six months ended June 30, 2009 compared to $134.5 million for the six months ended June 30, 2008. The $56.4 million decrease in operating income was primarily the result of a decrease in the average well-head sales price ($85.6 million) offset by an increase in sales volumes ($43.5 million), higher DD&A and an increase in exploration expense.

Total operating revenues were $187.6 million for the six months ended June 30, 2009 compared to $230.0 million for the six months ended June 30, 2008. The $42.4 million decrease in total operating revenues was primarily due to a 32% decrease in the average well-head sales price, partially offset by an increase in production gas sales volumes. The $1.80 per Mcfe decrease in the average well-head sales price was primarily due to a $5.29 per Dth decrease in the average NYMEX price and a higher percentage of unhedged gas sales, partially offset by a higher realized hedge price. Gas sales volumes increased 19% from 2008 to 2009. The increase in production gas sales volumes was the result of increased production from the 2008 and 2009 drilling programs, partially offset by the normal production decline in the Company's wells.

Operating expenses totaled $109.6 million for the six months ended June 30, 2009 compared to $95.5 million for the six months ended June 30, 2008. The increase in operating expenses was primarily the result of increased DD&A from increases in the depletion unit rate ($11.0 million) and volume ($5.7 million). The $0.22 increase in the depletion rate was primarily attributable to the increased investment in the Company's oil and gas producing properties. The increase in exploration expense was due to an increased level of seismic analysis and supporting personnel costs compared to prior year. These increases were partially offset by decreases in production taxes and SG&A. The decrease in production taxes was due to decreased severance taxes partially offset by an increase in property taxes. The decrease in severance taxes (a production tax directly imposed on the value of the gas extracted) was primarily due to lower gas commodity prices. The increase in property taxes was a direct result of higher prices in prior years, as property taxes in several of the taxing jurisdictions where the Company's wells are located are calculated based on historical gas commodity prices and gas sales volumes. The decrease in SG&A was primarily due to adjustments to the reserve for uncollectible accounts resulting from the decrease in the commodity prices.

OUTLOOK

EQT Production's business strategy is focused on organic growth of the Company's natural gas reserves. Key elements of EQT Production's strategy include:

† Expanding reserves and production through horizontal drilling in Kentucky, West Virginia and Pennsylvania. Through the capital program, the Company is seeking to maximize the value of its existing asset base by developing its large acreage position, which the Company believes holds significant production and reserve growth potential. A substantial portion of the Company's 2009 drilling efforts is focused on drilling horizontal wells in Lower Huron shale formations in Kentucky and West Virginia and in the Marcellus shale formation in Pennsylvania and West Virginia.

† Exploiting additional reserve potential through key emerging development plays. In 2009, the Company is examining the potential for exploitation of gas reserves in new geological formations and through different technologies. Plans include high pressure Marcellus shale wells, re-entry wells in the Devonian shale and testing the Devonian shale in Virginia. In addition, the Company will complete its evaluation of proprietary seismic data in order to evaluate deep drilling opportunities for 2010.

EQT MIDSTREAM

OVERVIEW

EQT Midstream's 2009 second quarter net operating revenues increased by 34% from 2008 to 2009. Increases in net operating revenues were partially offset by increased operating expenses. Gathering net operating revenues increased primarily due to an increase in gathered volumes. The increase in processing net operating revenues was driven by higher volumes offset by a lower average NGL sales price. Transmission net operating revenues increased primarily due to Big Sandy pipeline activity in 2009, as it became operational in the middle of the second quarter of 2008. Storage and marketing net operating revenues increased as a result of third party marketing utilizing Big Sandy pipeline capacity not currently being used to transport Company production. Operating and maintenance expense and DD&A increased due to the completion in 2008 of significant midstream infrastructure projects

In 2008, EQT Energy, the Company's gas marketing affiliate, executed a binding precedent agreement with Tennessee Gas Pipeline Company (TGP), a wholly owned subsidiary of El Paso Corporation, for a 15-year term that awarded the Company 300,000 Dth per day of capacity in TGP's 300-Line expansion project. In July 2009, the parties amended the binding precedent agreement and EQT Energy's capacity in the project was increased to 350,000 Dth per day beginning in November 2011. When completed, the 300-Line expansion project will consist of approximately 128 miles of 30-inch pipe loop and approximately 52,000 horsepower of additional compression facilities to be constructed in TGP's existing pipeline corridor in Pennsylvania and New Jersey. The awarded capacity will provide EQT access to consumer markets from the Gulf Coast to the Mid-Atlantic and the Northeast and will also provide back-haul capacity to the Gulf Coast.

RESULTS OF OPERATIONS



EQT MIDSTREAM



                                        Three Months Ended                Six Months Ended
                                             June 30,                         June 30,
                                    2009        2008        %        2009        2008        %
       OPERATIONAL DATA

Gathering and processing:
Gathered volumes (BBtu)              39,590      33,444     18.4      78,069      67,281     16.0
Average gathering fee ($/MMBtu)   $    1.04   $    1.00      4.0   $    1.04   $    0.99      5.1
Gathering and compression
expense (MMBtu)                   $    0.42   $    0.38     10.5   $    0.41   $    0.36     13.9
NGLs sold (Mgal) (a)                 32,514      17,181     89.2      59,888      35,574     68.3
Average NGL sales price ($/gal)   $    0.63   $    1.57    (59.9 ) $    0.65   $    1.47    (55.8 )
Transmission pipeline
throughput (BBtu)                    22,313      16,379     36.2      39,531      31,139     27.0

Net operating revenues
(thousands):
Gathering                         $  40,775   $  33,293     22.5   $  79,454   $  66,728     19.1
Processing                           10,127       9,105     11.2      16,747      20,452    (18.1 )
Transmission                         17,735      10,665     66.3      37,545      21,955     71.0
Storage, marketing and other         12,574       7,503     67.6      40,021      44,884    (10.8 )
Total net operating revenues      $  81,211   $  60,566     34.1   $ 173,767   $ 154,019     12.8

Capital expenditures
(thousands)                       $  53,344   $ 152,099    (64.9 ) $ 115,517   $ 247,664    (53.4 )

  FINANCIAL DATA (Thousands)

Total operating revenues          $ 119,500   $ 153,777    (22.3 ) $ 242,874   $ 375,102    (35.3 )
Purchased gas costs                  38,289      93,211    (58.9 )    69,107     221,083    (68.7 )
Total net operating revenues         81,211      60,566     34.1     173,767     154,019     12.8

Operating expenses:
Operating and maintenance (O&M)      24,440      17,678     38.3      45,641      32,943     38.5
SG&A                                 11,182      11,417     (2.1 )    21,319      21,533     (1.0 )
DD&A                                 12,787       7,843     63.0      25,025      15,061     66.2
Total operating expenses             48,409      36,938     31.1      91,985      69,537     32.3
Operating income                  $  32,802   $  23,628     38.8   $  81,782   $  84,482     (3.2 )

Other income                      $     355   $   1,464    (75.8 ) $     905   $   4,847    (81.3 )
Equity in earnings of
nonconsolidated investments       $   1,595   $   1,471      8.4   $   2,662   $   2,626      1.4

Three Months Ended June 30, 2009

vs. Three Months Ended June 30, 2008

EQT Midstream's operating income totaled $32.8 million for the three months ended June 30, 2009 compared to $23.6 million for the three months ended June 30, 2008. The $9.2 million increase in operating income was primarily the result of increased gathered and processed volumes and transportation and marketing activity from the Big Sandy Pipeline commissioned in the second quarter of 2008, partially offset by increases in O&M and DD&A expenses.

Total net operating revenues were $81.2 million for the three months ended June 30, 2009 compared to $60.6 million for the three months ended June 30, 2008. Both total operating revenues and purchased gas costs decreased compared to the prior year due to a decrease in commodity prices.

Gathering net operating revenues increased due to an 18% increase in gathered volumes. This increase was driven by more volumes gathered for EQT Production, as well as increased third party customer volume due to increased available capacity. Processing net revenues increased $1.0 million in the second quarter 2009 compared to the second quarter of 2008 primarily due to an 89% increase in NGL equivalents sold, offset by a 60% lower sales price for NGL products. Commodity market prices for propane and other NGLs were significantly lower in the second quarter of 2009 compared to the same period of 2008, partially offset by a decrease in the cost of natural gas processed. The increase in NGL equivalents sold resulted from increased production volumes from both EQT Production and third party customers and the expansion of the Kentucky hydrocarbon processing plant and gas compression facilities in the second half of 2008.

Transmission net revenues in the second quarter of 2009 increased from the prior year primarily due to activity from the Big Sandy pipeline. The increase in storage and marketing net revenues was primarily due to increased third party marketing utilizing Big Sandy pipeline capacity not currently being used to transport Company production.

Operating expenses totaled $48.4 million for the three months ended June 30, 2009 compared to $36.9 million for the three months ended June 30, 2008. The $11.5 million increase in operating expenses was primarily due to increases of $6.7 million in O&M and $5.0 million in DD&A partially offset by a $0.2 million decrease in SG&A. The increase in O&M was primarily due to higher operational costs associated with the growth in the Midstream business including electricity, labor and property taxes. The infrastructure investments made in 2008, such as the Big Sandy pipeline, the expansion of the Kentucky Hydrocarbon processing facility and the Ranger liquids line, required increased electric costs, property taxes, and labor to operate the additional infrastructure. The increase in DD&A was primarily due to the increased investment in gathering, . . .