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(1)	Presented net of income tax expense of $0.1 million for the three months ended March 31, 2019 .

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(1)	Refer to Cash, Cash Equivalents and Restricted Cash in Note 1 – Basis of Presentation .

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Nature of Business

QEP Resources, Inc. (QEP or the Company) is an independent crude oil and natural gas exploration and production company with operations in two regions of the United States: the Southern Region (primarily in Texas) and the Northern Region (primarily in North Dakota). Unless otherwise specified or the context otherwise requires, all references to "QEP" or the "Company" are to QEP Resources, Inc. and its subsidiaries on a consolidated basis. QEP's corporate headquarters are located in Denver, Colorado and shares of QEP's common stock trade on the New York Stock Exchange (NYSE) under the ticker symbol "QEP".

Basis of Presentation

The interim Condensed Consolidated Financial Statements (financial statements) contain the accounts of QEP and its majority-owned or controlled subsidiaries. The financial statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States and with the instructions for Quarterly Reports on Form 10-Q and Regulation S-X. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Consolidated Financial Statements reflect all normal recurring adjustments and accruals that are, in the opinion of management, necessary for a fair statement of financial position and results of operations for the interim periods presented. Interim financial statements do not include all of the information and notes required by GAAP for annual consolidated financial statements. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 .

The preparation of the financial statements and Notes in conformity with GAAP requires that management make estimates and assumptions that affect revenues, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. Actual results could differ from estimates. Further, these estimates and other factors, including those outside the Company's control, such as the impact of sustained lower commodity prices, could have a significant adverse impact to the Company's financial condition, results of operations and cash flows. The results of operations for the three months ended March 31, 2020 , are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 .

Certain prior period balances on the Condensed Consolidated Balance Sheets (balance sheets) and Condensed Consolidated Statements of Cash Flows (statements of cash flows) have been reclassified to conform to the current year presentation. Such reclassifications had no effect on the Company's net income (loss), earnings (loss) per share or retained earnings previously reported.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents primarily consist of highly liquid investments in securities with original maturities of three months or less made through commercial bank accounts that result in available funds the next business day. Restricted cash are funds that are legally or contractually reserved for a specific purpose and therefore not available for immediate or general business use.

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets to the amounts shown in the statements of cash flows:

	March 31,
	2020				2019
	(in millions)
Cash and cash equivalents	$	70.3			$	89.9
Restricted cash (1)	30.6				28.6
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	100.9			$	118.5

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⁽¹⁾ As of March 31, 2020 and 2019 , the restricted cash balance is cash held in an escrow account related to a title dispute between outside parties in the Williston Basin. The restricted cash balance is recorded within "Other noncurrent assets" on the balance sheets.

Income Tax

The tax legislation enacted in December 2017 reduced our federal corporate tax rate from 35 % to 21 % . In addition, the tax legislation eliminated the corporate Alternative Minimum Tax (AMT), allowing the Company to claim AMT refunds for AMT credits carried forward from prior tax years. The Company received $ 73.9 million of AMT credit refunds in 2019. The Coronavirus Aid Relief, and Economic Security Act (CARES Act) enacted in March 2020 permitted the Company to carry back its net operating loss (NOL) generated in 2018, creating additional AMT credits, and accelerate all of its AMT refunds into 2020. The Company now anticipates it will receive $ 165.6 million of AMT credit refunds, after carrybacks, in the next 12 months. The AMT credit refunds are included in "Income tax receivable" on the balance sheets as of March 31, 2020 .

QEP’s effective federal and state income tax rate was 15.3 % during the first quarter of 2020 compared to a rate of 49.0 % during the first quarter of 2019 . The decrease in the federal and state income tax rate was primarily driven by the impact of discrete items (unusual or infrequent items impacting the tax provision) recognized during the first quarter of 2019 and 2020 . The primary discrete item recognized during the first quarter of 2020 relates to the remeasurement of deferred taxes related to a NOL carryback under the CARES Act to a year with a higher federal tax rate. The primary discrete item recognized during the first quarter of 2019 related to the remeasurement of deferred taxes associated with the Haynesville Divestiture.

Impairment of Long-Lived Assets

During the three months ended March 31, 2020 , there were no impairment charges. During the three months ended March 31, 2019 , QEP recorded impairment charges of $ 5.0 million related to an office building lease.

Employee Benefits

QEP provides pension and other postretirement benefits to certain employees through three retiree benefit plans: the QEP Resources, Inc. Retirement Plan (the Pension Plan), the Supplemental Executive Retirement Plan (the SERP), and a postretirement medical plan (the Medical Plan). The Pension Plan is a closed, qualified, defined-benefit pension plan that is funded and provides pension benefits to certain QEP employees. The SERP is a nonqualified retirement plan that is unfunded and provides postretirement benefits to certain QEP employees. The Medical Plan is a self-insured plan. It is unfunded and provides other postretirement benefits including certain health care and life insurance benefits for certain retired QEP employees.

During the three months ended March 31, 2020 , the Company made contributions of $ 9.0 million to its retiree benefit plans (including $ 2.0 million to the Pension Plan and $ 7.0 million to the SERP) and expects to contribute an additional $ 3.7 million during the remainder of 2020 (including $ 2.0 million to the Pension Plan, $ 1.5 million to the SERP and $ 0.2 million to the Medical Plan). Contributions to the Pension Plan increase plan assets whereas contributions to the SERP and Medical Plan are used to fund current benefit payments.

The Company recognizes service costs related to SERP and Medical Plan benefits on the Condensed Consolidated Statements of Operations (statements of operations) within "General and administrative" expense. All other expenses related to the Pension Plan, SERP and Medical Plan are recognized on the statements of operations within "Interest and other income (expense)".

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QEP also offers a nonqualified, unfunded deferred compensation plan (Wrap Plan) to certain individuals. The Wrap Plan provides participants with certain tax planning benefits as well as supplemental funds for retirement and allows participants to defer the receipt of various types of compensation. Participants are able to select from a variety of investment options, including mutual funds and phantom QEP shares. As of March 31, 2020 and December 31, 2019 , the Wrap Plan obligations for participants' future benefits were $ 21.0 million and $ 26.8 million , respectively, and are included in "Other long-term liabilities" on the balance sheets. The Company established a trust (Rabbi Trust) to hold the investments associated with the Wrap Plan (other than phantom QEP shares) and to pay Wrap Plan obligations as they arise. As of March 31, 2020 and December 31, 2019 , the marketable securities held in the Rabbi Trust were $ 20.6 million and $ 23.1 million , respectively, and are included in "Other noncurrent assets" on the balance sheets. Refer to Note 6 – Fair Value Measurements for information on the fair value measurement of the marketable securities held in the Rabbi Trust and the Wrap Plan obligations.

Recent Accounting Developments

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of credit losses on financial instruments , which requires a company immediately recognize management's current estimated credit losses ("CECL") for all financial instruments that are not accounted for at fair value through net income. Previously, credit losses on financial assets were only required to be recognized when they were incurred. The Company adopted ASU 2016-13 on January 1, 2020. The guidance did not have a significant impact on the financial statements or notes accompanying the financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair value measurement (Topic 820) - Disclosure framework - Changes to the disclosure requirements for fair value measurement , which modifies the disclosure requirements on fair value measurements in Topic 820. The Company adopted ASU 2018-13 on January 1, 2020. The guidance did not have a significant impact on the financial statements or notes accompanying the financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform , which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (LIBOR). The amendment provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This amendment is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company's financial statements.

Revenue Recognition

QEP recognizes revenue from the sale of oil and condensate, gas and NGL in the period that the performance obligations are satisfied. QEP's performance obligations are satisfied when the customer obtains control of product, when QEP has no further obligations to perform related to the sale, when the transaction price has been determined and when collectability is probable. The sale of oil and condensate, gas and NGL are made under contracts with customers, which typically include consideration that is based on pricing tied to local indices and volumes delivered in the current month. Reported revenues include estimates for the two most recent months using published commodity price indices and volumes supplied by field operators. Performance obligations under our contracts with customers are typically satisfied at a point in time through monthly delivery of oil and condensate, gas and/or NGL. Our contracts with customers typically require payment for oil and condensate, gas and NGL sales within 30 days following the calendar month of delivery.

QEP's oil and condensate is typically sold at specific delivery points under contract terms that are common in the industry. QEP's gas and NGL are also sold under contract types that are common in the industry; however, under these contracts, the gas and its components, including NGL, may be sold to a single purchaser or the residue gas and NGL may be sold to separate purchasers. Regardless of the contract type, the terms of these contracts compensate QEP for the value of the residue gas and NGL constituent components at market prices for each product. QEP also purchases and resells oil and gas primarily to mitigate credit risk related to third party purchasers, to fulfill volume commitments when production does not fulfill contractual commitments and to capture additional margin from subsequent sales of third party purchases. QEP recognizes revenue from these resale activities in the period that the performance obligations are satisfied.

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The following tables present QEP's revenues that are disaggregated by revenue source and by geographic area. Transportation and processing costs in the following table are not all of the transportation and processing costs that QEP incurs, only the expenses that are netted against revenues pursuant to ASC Topic 606, Revenue Recognition .

	Oil and condensate sales				Gas sales				NGL sales				Transportation and processing costs included in revenue				Oil and condensate, gas and NGL sales, as reported
	(in millions)
	Three Months Ended March 31, 2020
Northern Region
Williston Basin	$	79.2			$	4.6			$	3.5			$	( 9.3	)		$	78.0
Other Northern	0.1				0.1				—				—				0.2
Southern Region
Permian Basin	140.7				1.8				6.1				( 5.0		)		143.6
Other Southern	—				—				—				—				—
Total oil and condensate, gas and NGL sales	$	220.0			$	6.5			$	9.6			$	( 14.3	)		$	221.8
	Three Months Ended March 31, 2019
Northern Region
Williston Basin	$	109.9			$	12.5			$	7.4			$	( 10.1	)		$	119.7
Other Northern	0.4				0.2				—				—				0.6
Southern Region
Permian Basin	139.2				4.6				9.5				( 3.7		)		149.6
Other Southern	—				5.7				—				—				5.7
Total oil and condensate, gas and NGL sales	$	249.5			$	23.0			$	16.9			$	( 13.8	)		$	275.6

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Acquisitions

During the three months ended March 31, 2020 and 2019 , QEP acquired various oil and gas properties, which primarily included proved leasehold acreage in the Permian Basin for an aggregate purchase price of $ 3.0 million and $ 0.6 million , respectively, subject to post-closing purchase price adjustments.

Divestitures

During the three months ended March 31, 2020 , QEP received proceeds of $ 12.6 million and recorded a pre-tax gain on sale of $ 3.7 million , primarily related to the divestiture of certain properties outside its main operating areas. Gains and losses are reported on the statements of operations within "Net gain (loss) from asset sales, inclusive of restructuring costs".

Haynesville/Cotton Valley Divestiture

In January 2019, QEP sold its Haynesville/Cotton Valley assets (Haynesville Divestiture) and during the year ended December 31, 2019 , reached final settlement on asserted environmental and title defects and received aggregate net cash proceeds of $ 633.9 million . QEP recorded a net pre-tax loss, including restructuring costs, of $ 4.0 million , of which $ 15.0 million of the pre-tax loss was recognized during the three months ended March 31, 2019 , and was recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the statements of operations.

During the three months ended March 31, 2019 , QEP accounted for revenues and expenses related to Haynesville/Cotton Valley, including the pre-tax loss on sale of $ 15.0 million , as income from continuing operations on the statements of operations because the Haynesville Divestiture did not cause a strategic shift for the Company and therefore did not qualify as discontinued operations. During the three months ended March 31, 2019 , QEP recorded a net loss before income taxes related to the divested Haynesville/Cotton Valley properties of $ 11.1 million , which includes the pre-tax loss on sale of $ 15.0 million .

Other Divestitures

In addition to the Haynesville Divestiture, during the three months ended March 31, 2019 , QEP received net cash proceeds of $ 2.1 million and recorded a pre-tax loss on sale of $ 0.4 million , primarily related to the divestiture of properties outside its main operating areas.

These gains and losses were recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the statements of operations.

Basic earnings (loss) per share (EPS) are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted EPS includes the potential increase in the number of outstanding shares that could result from the exercise of in-the-money stock options. QEP's unvested restricted share awards are included in weighted-average basic common shares outstanding because, once the shares are granted, the restricted share awards are considered issued and outstanding, the historical forfeiture rate is minimal and the restricted share awards are eligible to receive dividends.

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings (loss) per share pursuant to the two-class method. The Company's unvested restricted share awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. However, the Company's unvested restricted share awards do not have a contractual obligation to share in losses of the Company. The Company's unexercised stock options do not contain rights to dividends. Under the two-class method, the earnings used to determine basic earnings (loss) per common share are reduced by an amount allocated to participating securities. When the Company records a net loss, none of the loss is allocated to the participating securities since the securities are not obligated to share in Company losses. Use of the two-class method has an insignificant impact on the calculation of basic and diluted earnings (loss) per common share. The Company was in a net loss position for the three months ended March 31, 2019 ; therefore, all potentially dilutive securities were anti-dilutive.

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The following is a reconciliation of the components of basic and diluted shares used in the EPS calculation:

	Three Months Ended
	March 31,
	2020			2019
	(in millions)
Weighted-average basic common shares outstanding	239.1			237.1
Potential number of shares issuable upon exercise of in-the-money stock options under the Long-Term Stock Incentive Plan	—			—
Average diluted common shares outstanding	239.1			237.1

QEP records asset retirement obligations (ARO) associated with the retirement of tangible, long-lived assets. The Company's ARO liability applies primarily to abandonment costs associated with oil and gas wells and certain other properties. The fair values of such costs are estimated by Company personnel based on abandonment costs of similar assets and depreciated over the life of the related assets. Revisions to the ARO estimates result from changes in expected cash flows or material changes in estimated asset retirement costs or estimated lives. The ARO liability is adjusted to present value each period through an accretion calculation using a credit-adjusted risk-free interest rate.

The balance sheet line items of QEP's ARO liability are presented in the table below:

	Asset Retirement Obligations
	March 31,				December 31,
	2020				2019
Balance Sheet line item	(in millions)
Current:
Asset retirement obligations, current liability	$	6.5			$	6.0
Long-term:
Asset retirement obligations	93.7				94.9
Total ARO Liability	$	100.2			$	100.9

The following is a reconciliation of the changes in the Company's ARO for the period specified below:

	Asset Retirement Obligations
	(in millions)
ARO liability at January 1, 2020	$	100.9
Accretion	0.9
Additions	0.6
Revisions	( 0.5		)
Liabilities related to assets sold	( 1.3		)
Liabilities settled	( 0.4		)
ARO liability at March 31, 2020	$	100.2

QEP measures and discloses fair values in accordance with the provisions of ASC 820, Fair Value Measurements and Disclosures . This guidance defines fair value in applying GAAP, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 also establishes a fair value hierarchy. Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

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QEP has determined that its commodity derivative instruments are Level 2. The Level 2 fair value of commodity derivative contracts (refer to Note 7 – Derivative Contracts for more information) is based on market prices posted on the respective commodity exchange on the last trading day of the reporting period and industry standard discounted cash flow models. QEP primarily applies the market approach for recurring fair value measurements and maximizes its use of observable inputs and minimizes its use of unobservable inputs. QEP considers bid and ask prices for valuing the majority of its assets and liabilities measured and reported at fair value. In addition to using market data, QEP makes assumptions in valuing its assets and liabilities, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The Company's policy is to recognize significant transfers between levels at the end of the reporting period.

Certain of the Company's commodity derivative instruments are valued using industry standard models that consider various inputs, including quoted forward prices for commodities, time value, volatility, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable prices at which transactions are executed in the marketplace. The determination of fair value for derivative assets and liabilities also incorporates nonperformance risk for counterparties and for QEP. Derivative contract fair values are reported on a net basis to the extent a legal right of offset with the counterparty exists.

QEP has determined that the marketable securities held in the Rabbi Trust and the Wrap Plan obligations are Level 1. The fair value of the marketable securities in the Rabbi Trust is based on actively traded mutual funds. The Wrap Plan obligations, which represent the underlying liabilities to the participants in the Wrap Plan, are recorded at amounts due to participants, based on the fair value of participants' selected investments, including both actively traded mutual funds and phantom QEP shares.

 

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The fair value of financial assets and liabilities at March 31, 2020 and December 31, 2019 , is shown in the table below:

	Fair Value Measurements
	Gross Amounts of Assets and Liabilities												Netting Adjustments (1)				Net Amounts Presented on the Condensed Consolidated Balance Sheets
	Level 1				Level 2				Level 3
	(in millions)
Financial Assets	March 31, 2020
Fair value of derivative contracts – short-term	$	—			$	375.4			$	—			$	( 4.8	)		$	370.6
Fair value of derivative contracts – long-term	—				21.2				—				( 2.1		)		19.1
Fair value of marketable securities	20.6				—				—				—				20.6
Total financial assets	$	20.6			$	396.6			$	—			$	( 6.9	)		$	410.3
Financial Liabilities
Fair value of derivative contracts – short-term	$	—			$	4.8			$	—			$	( 4.8	)		$	—
Fair value of derivative contracts – long-term	—				2.1				—				( 2.1		)		—
Fair value of Wrap Plan obligations	21.0				—				—				—				21.0
Total financial liabilities	$	21.0			$	6.9			$	—			$	( 6.9	)		$	21.0
	December 31, 2019
Financial Assets
Fair value of derivative contracts – short-term	$	—			$	1.5			$	—			$	—			$	1.5
Fair value of derivative contracts – long-term	—				0.2				—				—				0.2
Fair value of marketable securities	23.1				—				—				—				23.1
Total financial assets	$	23.1			$	1.7			$	—			$	—			$	24.8
Financial Liabilities
Fair value of derivative contracts – short-term	$	—			$	18.7			$	—			$	—			$	18.7
Fair value of derivative contracts – long-term	—				0.5				—				—				0.5
Fair value of Wrap Plan obligations	26.8				—				—				—				26.8
Total financial liabilities	$	26.8			$	19.2			$	—			$	—			$	46.0

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(1)	The Company nets its derivative contract assets and liabilities outstanding with the same counterparty on the balance sheets for the contracts that contain netting provisions. Refer to Note 7 – Derivative Contracts for additional information regarding the Company's derivative contracts.

The following table discloses the fair value and related carrying amount of certain financial instruments not disclosed in other notes to the financial statements:

	Carrying Amount				Level 1 Fair Value				Carrying Amount				Level 1 Fair Value
	March 31, 2020								December 31, 2019
Financial Liabilities	(in millions)
Total debt outstanding	$	1,919.0			$	806.2			$	2,015.6			$	2,029.4

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and checks outstanding in excess of cash balances approximate fair value. The fair value of fixed-rate long-term debt is based on the trading levels and dollar prices for the Company's debt at the end of the quarter. At times when the Company has outstanding debt under the credit

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facility, the carrying amount of variable-rate long-term debt approximates fair value because the floating interest rate paid on such debt is set for periods of one month or less.

The initial measurement of ARO at fair value is calculated using discounted cash flow techniques and is based on internal estimates of future retirement costs associated with property, plant and equipment. Significant Level 3 inputs used in the calculation of ARO includes plugging costs and reserve lives. A reconciliation of the Company's ARO is presented in Note 5 – Asset Retirement Obligations .

Nonrecurring Fair Value Measurements

The provisions of the fair value measurement standard are also applied to the Company's nonrecurring measurements. The Company reviews its proved oil and gas properties and operating lease right-of-use assets for potential impairment at least annually and when events and changes in circumstances indicate that the carrying amount of such property may not be recoverable. If impairment is indicated, the fair value of property is measured utilizing the income approach and utilizing inputs that are primarily based upon internally developed cash flow models discounted at an appropriate weighted average cost of capital. In addition, the signing of a purchase and sale agreement could also trigger an impairment of proved properties. For assets subject to a purchase and sale agreement, the terms of the purchase and sale agreement are used as an indicator of fair value. If a range is estimated for the amount of future cash flows, the fair value of property is measured utilizing a probability-weighted approach in which the likelihood of possible outcomes is taken into consideration. Given the unobservable nature of the inputs, fair value calculations associated with long-term operating lease right-of-use assets and proved oil and gas property impairments are considered Level 3 within the fair value hierarchy. During the three months ended March 31, 2020 , the Company did not have an impairment charge. During the three months ended March 31, 2019 , the Company recorded impairment charges of $ 5.0 million related to an office building lease.

Acquisitions of proved and unproved properties are also measured at fair value on a nonrecurring basis. The Company utilizes a discounted cash flow model to estimate the fair value of acquired property as of the acquisition date, which utilizes the following inputs to estimate future net cash flows: (i) estimated quantities of oil and condensate, gas and NGL reserves; (ii) estimates of future commodity prices; and (iii) estimated production rates, and future operating and development costs, which are based on the Company's historic experience with similar properties. In some instances, market comparable information of recent transactions is used to estimate fair value of unproved acreage. Due to the unobservable characteristics of the inputs, the fair value of the acquired properties is considered Level 3 within the fair value hierarchy. Refer to Note 3 – Acquisitions and Divestitures for more information on the fair value of acquired properties.

QEP has established policies and procedures for managing commodity price volatility through the use of derivative instruments. In the normal course of business, QEP uses commodity price derivative instruments to reduce the impact of potential downward movements in commodity prices on cash flow, returns on capital investment, and other financial results. However, these instruments typically limit gains from favorable price movements. The volume of production subject to commodity derivative instruments and the mix of the instruments are frequently evaluated and adjusted by management in response to changing market conditions. QEP may enter into commodity derivative contracts for up to 100 % of forecasted production, but generally, QEP enters into commodity derivative contracts for approximately 50 % to 75 % of its forecasted annual production by the end of the first quarter of each fiscal year. QEP does not enter into commodity derivative contracts for speculative purposes.

QEP uses commodity derivative instruments known as fixed-price swaps, basis swaps or costless collars to realize a known price or price range for a specific volume of production delivered into a regional sales point. QEP's commodity derivative instruments do not require the physical delivery of oil or gas between the parties at settlement. All transactions are settled in cash with one party paying the other for the net difference in prices, multiplied by the contract volume, for the settlement period. Oil price derivative instruments are typically structured as NYMEX fixed-price swaps based at Cushing, Oklahoma. QEP has also entered into oil price derivative swaps that use Intercontinental Exchange, Inc. (ICE) Brent or regional price indices as the reference price. Gas price derivative instruments are typically structured as fixed-price swaps or collars at NYMEX Henry Hub or regional price indices. QEP also enters into oil basis swaps to achieve a fixed-price swap for a portion of its oil sales at prices that reference specific regional index prices.

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QEP does not currently have any commodity derivative instruments that have margin requirements or collateral provisions that would require payments prior to the scheduled settlement dates. QEP's commodity derivative contract counterparties are typically financial institutions and energy trading firms with investment-grade credit ratings. QEP routinely monitors and manages its exposure to counterparty risk by requiring specific minimum credit standards for all counterparties, actively monitoring counterparties' public credit ratings and avoiding the concentration of credit exposure by transacting with multiple counterparties. The Company has master-netting agreements with some counterparties that allow the offsetting of receivables and payables in a default situation.

Derivative Contracts – Production

The following table presents QEP's volumes and average prices for its commodity derivative swap contracts as of March 31, 2020 :

Year		Index		Total Volumes			Average Swap Price per Unit
				(in millions)
Oil sales				(bbls)			($/bbl)
2020		NYMEX WTI		11.0			$	57.75
2020		Argus WTI Midland		1.1			$	57.30
2020		Argus WTI Houston		0.5			$	60.06
2021		NYMEX WTI		1.6			$	55.04
Gas sales				(MMbtu)			($/MMbtu)
2020		IF Waha (1)		8.3			$	0.63
2020		NYMEX HH		5.5			$	2.11
2021		IF Waha (1)		7.3			$	1.47
2021		NYMEX HH		7.3			$	2.38

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(1)	IF Waha Index pricing reported in Platts' Inside FERC's Gas Market Report, reflecting the weighted average price of Natural Gas transactions at the Waha Hub in west Texas on the first day of the month.

QEP uses oil basis swaps, combined with NYMEX WTI fixed-price swaps, to achieve fixed price swaps for the location at which it physically sells its production. The following table presents details of QEP's oil basis swaps as of March 31, 2020 :

Year		Index		Basis		Total Volumes			Weighted-Average Differential
						(in millions)
Oil sales						(bbls)			($/bbl)
2020		NYMEX WTI		Argus WTI Midland		5.2			$	0.20
2020		NYMEX WTI		Argus WTI Houston		0.2			$	3.75
2021		NYMEX WTI		Argus WTI Midland		4.4			$	0.99

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The effects of the change in fair value and settlement of QEP's derivative contracts recorded in "Realized and unrealized gains (losses) on derivative contracts" on the statements of operations are summarized in the following table:

	Three Months Ended
Derivative contracts	March 31,
	2020				2019
Realized gains (losses) on commodity derivative contracts	(in millions)
Production
Oil derivative contracts	$	42.6			$	( 3.0	)
Gas derivative contracts	—				( 2.9		)
Realized gains (losses) on commodity derivative contracts	42.6				( 5.9		)
Unrealized gains (losses) on commodity derivative contracts
Production
Oil derivative contracts	413.9				( 177.3		)
Gas derivative contracts	( 6.6		)		( 0.3		)
Unrealized gains (losses) on commodity derivative contracts	407.3				( 177.6		)
Total realized and unrealized gains (losses) on commodity derivative contracts related to production	$	449.9			$	( 183.5	)
Derivatives associated with Haynesville Divestiture
Unrealized gains (losses) on commodity derivative contracts
Production
Gas derivative contracts	—				1.8
Unrealized gains (losses) on commodity derivative contracts related to divestitures (1)	$	—			$	1.8
Total realized and unrealized gains (losses) on commodity derivative contracts	$	449.9			$	( 181.7	)

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(1)

During the three months ended March 31, 2019 , the unrealized gains (losses) on commodity derivative contracts related to the Haynesville Divestiture were comprised of derivatives included as part of the Haynesville/Cotton Valley purchase and sale agreement, which were subsequently novated to the buyer upon the closing of the sale in January 2019. Refer to Note 3 – Acquisitions and Divestitures for more information. The unrealized gains (losses) on commodity derivatives associated with the Haynesville Divestiture are offset by an equal amount recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the statements of operations.

QEP enters into contractual lease arrangements to rent office space, compressors, generators, drilling rigs and other equipment from third-party lessors. QEP records a net operating lease right-of-use (ROU) asset and operating lease liability on the balance sheets for all operating leases with a contract term in excess of 12 months. ROU assets represent QEP’s right to use an underlying asset for the lease term and lease liabilities represent QEP’s obligation to make future lease payments arising from the lease. Operating lease ROU assets and liabilities are recorded at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. With the exception of generators, QEP does not account for lease components separately from the non-lease components. The contractual consideration provided under QEP's leased generators is allocated between lease components, such as equipment, and non-lease components, such as maintenance service fees, based on estimated costs from the vendor. QEP uses its incremental borrowing rate at commencement date of the contract in calculating the present value of future lease payments. The incremental borrowing rate is calculated using a risk-free interest rate adjusted for QEP's risk. The operating lease ROU asset also includes any lease incentives received in the recognition of the present value of future lease payments. Certain of QEP's leases may also include escalation clauses or options to extend or terminate the lease. These options are included in the present value recorded for the leases when it is reasonably certain that QEP will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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QEP determines if an arrangement is a lease at inception of the contract and records the resulting operating lease asset on the balance sheets as “Operating lease right-of-use assets, net” with offsetting liabilities recorded as “Current operating lease liabilities” and “Operating lease liabilities.” QEP recognizes a lease in the financial statements when the arrangement either explicitly or implicitly involves property, plant, or equipment (PP&E), the contract terms are dependent on the use of the PP&E, and QEP has the ability or right to operate the PP&E or to direct others to operate the PP&E and receive the majority of the economic benefits of the assets. As of March 31, 2020 , QEP does not have any financing leases.

Lease costs represent the straight-line lease expense of ROU assets and short-term leases. The components of lease cost are classified as follows:

	Three Months Ended				Three Months Ended
	March 31, 2020				March 31, 2019
Lease Cost included in the Condensed Consolidated Balance Sheets	(in millions)
Property, Plant and Equipment acquisitions (1)	$	4.4			$	4.7
	Three Months Ended				Three Months Ended
	March 31, 2020				March 31, 2019
Lease Cost included in the Condensed Consolidated Statement of Operations	(in millions)
Lease operating expense	$	2.5			$	3.1
Gathering and other expense	1.9				1.5
General and administrative	1.5				1.6
Total lease cost	$	10.3			$	10.9

  ____________________________

(1)	Represents short-term lease capital expenditures related to drilling rigs for the three months ended March 31, 2020 and 2019 . These costs are capitalized as a part of "Proved properties" on the balance sheets.

Lease term and discount rate related to the Company's leases are as follows:

	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Weighted-average remaining lease term (years)	4.3			3.8
Weighted-average discount rate	7.5	%		8.1	%

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As of March 31, 2020 and December 31, 2019 , the maturity analysis for long-term operating leases under the scope of ASC 842 are as follows:

	March 31, 2020				December 31, 2019
Year	(in millions)
2020	$	17.0			$	22.3
2021	21.1				20.4
2022	16.3				15.9
2023	11.0				10.6
2024	1.7				1.4
After 2024	2.5				2.4
Less: Interest (1)	( 8.8		)		( 10.2		)
Present value of lease liabilities (2)	$	60.8			$	62.8

 ____________________________

(1)	Calculated using the estimated interest rate for each lease.

(2)	As of March 31, 2020 and December 31, 2019 , of the total present value of lease liabilities, $ 18.5 million and $ 18.0 million , was recorded in "Current operating lease liabilities", respectively, and $ 42.3 million and $ 44.8 million was recorded in "Operating lease liabilities", respectively, on the balance sheets.

In February 2018, QEP's Board of Directors approved certain strategic and financial initiatives. In February 2019, QEP's Board of Directors commenced a comprehensive review of strategic alternatives to maximize shareholder value. In connection with these activities, QEP has incurred various restructuring costs associated with contractual termination benefits including severance, accelerated vesting of share-based compensation and other expenses. The termination benefits are accounted for under ASC 712, Compensation – Nonretirement Postemployment Benefits and ASC 718, Compensation – Stock Compensation .

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Restructuring costs recognized are summarized below:

	Total recognized				Recognized in "General and administrative"				Recognized in "Net (gain) loss from asset sales, inclusive of restructuring costs"				Recognized in "Interest and other (income) expense"
	Three Months Ended March 31, 2020
	(in millions)
Termination benefits	$	1.0			$	1.0			$	—			$	—
Accelerated share-based compensation (1)	0.2				0.2				—				—
Retention expense (including share-based compensation)	0.2				0.2				—				—
Total restructuring costs	$	1.4			$	1.4			$	—			$	—
	Three Months Ended March 31, 2019
Termination benefits	$	6.8			$	6.7			$	0.1			—
Office lease termination costs	0.6				0.6				—				—
Accelerated share-based compensation (1)	8.4				6.9				1.5				—
Retention expense (including share-based compensation)	6.1				6.1				—				—
Pension and Medical Plan curtailment	( 0.5		)		—				( 0.2		)		( 0.3		)
Total restructuring costs	$	21.4			$	20.3			$	1.4			$	( 0.3	)

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(1)

Accelerated share-based compensation represents the additional expense or loss recognized in the statement of operations for the three months ended March 31, 2020 and 2019 . Total accelerated share-based compensation was $ 0.6 million and $ 8.8 million as of March 31, 2020 and 2019 , respectively, and was determined based on the contractual vesting date, with $ 0.2 million and $ 8.4 million recognized during the three months ended March 31, 2020 and 2019 , respectively, as shown above, and the remaining amount recognized in prior periods.

	Costs recognized from inception through March 31, 2020 (1)				Total remaining costs expected to be incurred
	(in millions)
Termination benefits	$	45.6			$	—
Office lease termination costs	1.6				—
Accelerated share-based compensation	23.8				—			(2)
Retention expense (including share-based compensation)	38.5				0.2
Pension and Medical Plan curtailment	1.3				—
Total restructuring costs	$	110.8			$	0.2

  ____________________________

(1)	Represents costs incurred since February 2018 when QEP's Board of Directors approved certain strategic and financial initiatives.

(2)	Due to the nature of the accelerated share-based compensation, as of March 31, 2020 , the Company is not able to reasonably estimate the total cost to be incurred in connection with these restructurings.

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The following table is a reconciliation of QEP's restructuring liability, which is included within "Accounts payable and accrued expenses" on the balance sheets.

	Restructuring liability
	Termination benefits				Office lease termination costs				Accelerated share-based compensation				Retention expense				Pension curtailment				Total
	(in millions)
Balance at December 31, 2019	$	1.2			$	—			$	—			$	6.5			$	—			$	7.7
Costs incurred and charged to expense	1.0				—				0.2				0.2				—				1.4
Costs paid or otherwise settled	( 1.0		)		—				( 0.2		)		( 6.5		)		—				( 7.7		)
Balance at March 31, 2020	$	1.2			$	—			$	—			$	0.2			$	—			$	1.4

As of the indicated dates, the principal amount of QEP's debt consisted of the following:

	March 31, 2020				December 31, 2019
	(in millions)
Revolving Credit Facility due 2022	$	—			$	—
6.875% Senior Notes due 2021	332.3				382.4
5.375% Senior Notes due 2022	465.1				500.0
5.25% Senior Notes due 2023	636.8				650.0
5.625% Senior Notes due 2026	500.0				500.0
Less: unamortized discount and unamortized debt issuance costs	( 15.2		)		( 16.8		)
Total principal amount of debt (including current portion)	1,919.0				2,015.6
Less: current portion of long-term debt	( 331.6		)		—
Total long-term debt outstanding	$	1,587.4			$	2,015.6

Of the total debt outstanding on March 31, 2020 , the 6.875 % Senior Notes due March 1, 2021 , the 5.375 % Senior Notes due October 1, 2022 and the 5.25 % Senior Notes due May 1, 2023 , will mature within the next five years . In addition, the revolving credit facility matures on September 1, 2022 .

Credit Facility

QEP's unsecured revolving credit facility, which matures in September 2022, provides for loan commitments of $ 1.25 billion . The credit facility provides for borrowings at short-term interest rates and contains customary covenants and restrictions. The credit agreement contains financial covenants (that are defined in the credit agreement) that limit the amount of debt the Company can incur and may limit the amount available to be drawn under the credit facility including: (i) a net funded debt to capitalization ratio that may not exceed 60%, (ii) a leverage ratio under which net funded debt may not exceed 3.75 times consolidated EBITDA (as defined in the credit agreement), and (iii) a present value coverage ratio under which the present value of the Company's proved reserves must exceed net funded debt by 1.50 times at any time on or after January 1, 2020. At March 31, 2020 and December 31, 2019 , QEP was in compliance with the covenants under its credit agreement.

As of March 31, 2020 , and December 31, 2019 , respectively, QEP had no borrowings outstanding and $ 2.9 million in letters of credit outstanding under the credit facility.

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Senior Notes

At March 31, 2020 , the Company had $ 1,934.2 million in principal amount of senior notes outstanding with maturities ranging from March 1, 2021 to March 1, 2026 , and coupons ranging from 5.25 % to 6.875 % . The senior notes pay interest semi-annually, are unsecured senior obligations and rank equally with all of QEP's other existing and future unsecured and senior obligations. QEP may redeem some or all of its senior notes at any time before their maturity at a redemption price based on a make-whole amount plus accrued and unpaid interest to the date of redemption. The indentures governing QEP's senior notes contain customary events of default and covenants that may limit QEP's ability to, among other things, place liens on its property or assets. During the period ended March 31, 2020 , QEP repurchased principal amounts of $ 50.1 million of its 6.875 % Senior Notes due March 2021, $ 34.9 million of its 5.375 % Senior Notes due October 1, 2022 and $ 13.2 million of its 5.25 % Senior Notes due May 1, 2023. The Company recorded $ 25.2 million in "Gain from early extinguishment of debt" on the statements of operations associated with the repurchase of Senior Notes during the period ended March 31, 2020 .

The Company is involved in various commercial and regulatory claims, litigation and other legal proceedings that arise in the ordinary course of its business. In each reporting period, the Company assesses these claims in an effort to determine the degree of probability and range of possible loss for potential accrual in its financial statements. In accordance with ASC 450,  Contingencies , an accrual is recorded for a material loss contingency when its occurrence is probable and damages are reasonably estimable based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes.

Legal proceedings are inherently unpredictable and unfavorable resolutions can occur. Assessing contingencies is highly subjective and requires judgment about uncertain future events. When evaluating contingencies related to legal proceedings, the Company may be unable to estimate losses due to a number of factors, including potential defenses, the procedural status of the matter in question, the presence of complex legal and/or factual issues and the ongoing discovery and/or development of information important to the matter.

Mabee Ranch Royalty Partnership Litigation – In October 2017, the owners of certain surface and mineral interests in Martin and Andrews County, Texas, filed suit against QEP, alleging QEP improperly used the surface of the properties and failed to correctly pay royalties, and seeking monetary damages and a declaratory judgment that portions of the oil and gas leases covering the properties are no longer in effect. The parties have reached a settlement involving no cash consideration and have jointly moved to dismiss the litigation.

Mandan, Hidatsa and Arikara Nation ("MHA Nation") Title Dispute – In June 2018, the MHA Nation notified QEP of its position that QEP has no valid lease covering certain minerals underlying the Missouri and Little Missouri Riverbeds on the Fort Berthold Reservation in North Dakota. The MHA Nation also passed a resolution purporting to rescind those portions of QEP's IMDA lease covering the disputed minerals underlying the Missouri River.

 

Overriding Royalty Interest Litigation – In July 2019, owners of small overriding royalty interests in certain wells in the South Antelope oil and gas field in North Dakota filed suit against QEP, alleging QEP has improperly taken deductions for post-production expenses.

In 2018, QEP's Board of Directors and QEP's shareholders approved the QEP Resources, Inc. 2018 Long-Term Incentive Plan (LTIP), which replaced the 2010 Long-Term Stock Incentive Plan (LTSIP) and provides for the issuance of up to 10.0 million shares such that the Board of Directors may grant long-term incentive compensation. QEP issues restricted share awards, restricted cash awards and restricted share units under its LTSIP or LTIP and awards performance share units under its Cash Incentive Plan (CIP) to certain officers, employees and non-employee directors. Grants issued prior to May 15, 2018 were under the LTSIP and grants issued on or after May 15, 2018 are under the LTIP. QEP recognizes the expense over the vesting periods for stock options, restricted share awards, restricted cash awards, restricted share units and performance share units. There were 3.7 million shares available for future grants under the LTIP at March 31, 2020 .

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Share-based compensation expense is generally recognized within "General and administrative" expense on the statements of operations and is summarized in the table below.

	Three Months Ended
	March 31,
	2020 (1)				2019 (2)
	(in millions)
Stock options	$	—			$	0.3
Restricted share awards	3.3				6.1
Restricted cash awards	0.2				—
Performance share units	0.4				5.2
Restricted share units	—				0.1
Total share-based compensation expense	$	3.9			$	11.7

 ________________________

(1)	During the three months ended March 31, 2020 , the Company recorded an additional $ 0.2 million of share-based compensation expense related to the acceleration of vesting that occurred as part of the restructuring program. Refer to Note 9 – Restructuring for additional information.

(2)

During the three months ended March 31, 2019 , the Company recorded $ 8.4 million of share-based compensation expense related to the acceleration of vesting that occurred as part of the restructuring program, of which $ 1.5 million was recorded in "Net gain (loss) from asset sales, inclusive of restructuring costs" on the statement of operations during the three months ended March 31, 2019 and the remaining $ 6.9 million is included in the table above. Refer to Note 9 – Restructuring for additional information.

Stock Options

During the three months ended March 31, 2020 , QEP did not issue stock options to its employees. In periods when QEP granted stock options, the Company historically used the Black-Scholes-Merton mathematical model to estimate the fair value of stock option awards at the date of grant. Fair value calculations rely upon subjective assumptions used in the mathematical model and may not be representative of future results. The Black-Scholes-Merton model is intended for calculating the value of options not traded on an exchange. The Company utilized the "simplified" method to estimate the expected term of the stock options granted as there was limited historical exercise data available in estimating the expected term of the stock options. QEP used a historical volatility method to estimate the fair value of stock option awards, and the risk-free interest rate was based on the yield on U.S. Treasury strips with maturities similar to those of the expected term of the stock options. The stock options typically vest in equal installments over three years from the grant date and are exercisable immediately upon vesting through the seventh anniversary of the grant date. To fulfill options exercised, QEP either reissues treasury stock or issues new shares. The Company recognizes forfeitures of stock options as they occur.

Stock option transactions under the terms of the LTSIP are summarized below:

	Options Outstanding			Weighted-Average Exercise Price				Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
				(per share)				(in years)		(in millions)
Outstanding at December 31, 2019	1,802,387			$	20.87
Cancelled	( 305,163	)		30.12
Outstanding at March 31, 2020	1,497,224			$	18.98			2.51		$	—
Options Exercisable at March 31, 2020	1,494,157			$	19.00			2.51		$	—
Unvested Options at March 31, 2020	3,067			$	7.52			4.42		$	—

During the three months ended March 31, 2020 there were no exercises of stock options. The Company recognized $ 1.0 million of income tax expense for the cancellation of options for the three months ended March 31, 2020 , and no income tax expense related to stock options for the three months ended March 31, 2019 . As of March 31, 2020 , there was no unrecognized compensation expense related to stock options granted under the LTSIP. Refer to Note 9 – Restructuring for additional information.

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Restricted Share Awards

Restricted share award grants typically vest in equal installments over three years from the grant date. The grant date fair value is determined based on the closing bid price of the Company's common stock on the grant date. The Company recognizes restricted share forfeitures as they occur. The total fair value of restricted share awards that vested during the three months ended March 31, 2020 and 2019 was $ 10.5 million and $ 22.8 million , respectively. The Company recognized $ 1.9 million of income tax expense for shares that were either vested or forfeited during the three months ended March 31, 2020 , and no income tax expense related to restricted shares for the three months ended March 31, 2019 . The weighted-average grant date fair value of restricted share awards was $ 2.18 per share and $ 7.98 per share for the three months ended March 31, 2020 and 2019 , respectively. As of March 31, 2020 , $ 16.4 million of unrecognized compensation expense related to restricted share awards granted under the LTSIP and LTIP is expected to be recognized over a weighted-average vesting period of 2.51 years.

Transactions involving restricted share awards under the terms of the LTSIP and LTIP are summarized below:

	Restricted Share Awards Outstanding			Weighted-Average Grant Date Fair Value
				(per share)
Unvested balance at December 31, 2019	2,845,033			$	8.67
Granted	4,860,052			2.18
Vested	( 1,073,255	)		9.76
Forfeited	( 12,583	)		8.61
Unvested balance at March 31, 2020	6,619,247			$	3.73

Restricted Cash Awards

Beginning in March 2020, QEP issued restricted cash awards under its LTIP to certain employees. Restricted cash award grants vest in equal installments over three years from the grant date. The Company recognizes restricted cash forfeitures as they occur. There were no restricted cash awards granted or outstanding during the three months ended March 31, 2019 . As of March 31, 2020 , $ 3.1 million of unrecognized compensation expense related to restricted cash awards granted under the LTIP is expected to be recognized over a weighted-average vesting period of 3.0 years.

Transactions involving restricted cash awards under the terms of the LTIP are summarized below:

	Restricted Cash Awards Outstanding
Unvested balance at December 31, 2019	$	—
Granted	3,216,675
Vested	—
Forfeited	—
Unvested balance at March 31, 2020	$	3,216,675

Performance Share Units

The payouts associated with performance share units under the CIP are dependent upon the Company's total shareholder return compared to a group of its peers over three years . The awards are denominated in share units and have historically been paid in cash. The Company has the option to settle earned awards in cash or shares of common stock under the Company's LTIP; however, as of March 31, 2020 , the Company expects to settle all awards under the CIP in cash. These awards are classified as liabilities and are included within "Other long-term liabilities" on the balance sheets. Because these awards are dependent upon the Company's total shareholder return and stock price, they are remeasured at fair value at the end of each reporting period. The Company paid $ 10.9 million for vested performance share units during the three months ended March 31, 2019 . The weighted-average grant date fair value of the performance share units granted during the three months ended March 31, 2020 and 2019 was $ 2.17 and $ 7.93 per share, respectively. As of March 31, 2020 , $ 4.9 million of unrecognized compensation cost, which represents the unvested portion of the fair market value of performance shares granted, is expected to be recognized over a weighted-average vesting period of 2.53 years. Refer to Note 9 – Restructuring for additional information.

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Transactions involving performance share units under the terms of the CIP are summarized below:

	Performance Share Units Outstanding			Weighted-Average Grant Date Fair Value
				(per share)
Unvested balance at December 31, 2019	625,922			$	9.04
Granted	1,926,026			2.17
Vested and paid	( 55,186	)		16.37
Unvested balance at March 31, 2020	2,496,762			$	3.65

Restricted Share Units

Employees may elect to defer their grants of restricted share awards and these deferred awards are designated as restricted share units. Restricted share units vest over three years and are deferred into the Company's nonqualified, unfunded deferred compensation plan at the time of grant. These awards are ultimately paid in cash when distributed from the deferred compensation plan. They are classified as liabilities in "Other long-term liabilities" on the balance sheets and are measured at fair value at the end of each reporting period. The weighted-average grant date fair value of the restricted share units was $ 2.08 and $ 7.93 per share for the three months ended March 31, 2020 and 2019 , respectively. The Company recognized $ 0.2 million of income tax expense related to restricted share units for the three months ended March 31, 2020 , and no income tax expense related to restricted share units for the three months ended March 31, 2019 . As of March 31, 2020 , there was less than $ 0.1 million of unrecognized compensation cost, which represents the unvested portion of the fair market value of restricted share units granted. Refer to Note 9 – Restructuring for additional information.

Transactions involving restricted share units under the terms of the LTSIP and LTIP are summarized below:

	Restricted Share Units Outstanding			Weighted-Average Grant Date Fair Value
				(per share)
Unvested balance at December 31, 2019	34,393			$	8.16
Granted	76,083			2.08
Vested and paid	( 26,770	)		8.20
Unvested balance at March 31, 2020	83,706			$	2.62

On January 30, 2020, the World Health Organization (WHO) announced a global health emergency due to the risks imposed to the international community by a new strain of coronavirus known as COVID-19. In March 2020, the WHO classified the COVID-19 outbreak as a global pandemic. During this time, the crude oil market began to experience a decline in oil prices in response to concerns about oil demand due to the global economic impacts of COVID-19. In addition, policy disputes in the first quarter of 2020 between OPEC and Russia resulted in Saudi Arabia significantly discounting the price of its crude oil, as well as Saudi Arabia and Russia significantly increasing their oil supply. These actions have led to significant weakness in oil prices that have continued to decline subsequent to March 31, 2020 and caused concern for the outlook on crude oil prices for 2020 and beyond.

The Company is not able to reasonably estimate the future costs, total magnitude and duration of potential social, economic and labor instability as a direct result of COVID-19 at this time. Should any of these potential impacts continue for an extended period of time, it will have a negative impact on the demand for our oil and natural gas products and an adverse effect on our financial position and results of operations. In addition, a decline in oil and gas prices and additional volatility in future pricing could negatively impact our ability to execute our operating and development plans and our ability to generate operating cash flows. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks, such as those relating to our indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

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•	Generated net income of $367.4 million , or $1.54 per diluted share;

•	Reported Adjusted EBITDA (a non-GAAP financial measure defined and reconciled below) of $173.9 million ;

•	Reported cash provided by operating activities of $151.9 million ;

•	Reported Free Cash Flow (a non-GAAP measure defined and reconciled below) outspend of $31.6 million ;

•	Lowered lease operating expense by 22% compared to the first quarter of 2019 ;

•	Reduced general and administrative expenses by 75% compared to the first quarter 2019 ;

•	Recognized an additional $128.1 million in accelerated alternative minimum tax (AMT) credit refunds from the CARES Act, resulting in an aggregate income tax receivable of $165.6 million as of March 31, 2020 ;

•	Repurchased a principal amount of $98.2 million of senior notes, which were due in 2021, 2022 and 2023, and recorded a $25.2 million gain on early extinguishment of debt; and

•	Reported oil and condensate production of 3.3 MMbbls in the Permian Basin, an increase of 14% compared to the first quarter 2019 ;

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(1)	Five of the six gross operated wells in the Williston Basin represent wells for which surface casing had been set as of March 31, 2020 .

(2)	One of the three rigs in the Permian Basin was an intermediate drilling rig, and fifteen of the 18 gross operated wells in the Permian Basin represent wells for which intermediate casing had been set as of March 31, 2020 . Subsequent to March 31, 2020 , due to the current market conditions, the Company released two of the three rigs.

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(1)	Depending on the terms of the contract, a portion of the total transportation and processing costs incurred by the Company are deducted from revenue. Refer to the Operating Expenses section below for a reconciliation of total transportation and processing costs.

(2)

Oil and condensate, gas and NGL sales (the most comparable GAAP measure) as presented on the statements of operations is reconciled to oil and condensate, gas and NGL sales, as adjusted (a non-GAAP measure). Management excludes costs deducted from revenue to reflect total revenue associated with its production prior to deducting any expenses. Management believes that this non-GAAP measure is useful supplemental information for investors as it is reflective of the total revenue generated from its wells for the period. This non-GAAP measure should be considered by the reader in addition to, but not instead of, the financial measure prepared in accordance with GAAP. Refer to Note 2 – Revenue in Part 1, Item I of this Quarterly Report on Form 10-Q.

(1)	The revenue variance attributed to the change in volume is calculated by multiplying the change in volume from the three months ended March 31, 2020 , as compared to the three months ended March 31, 2019 , by the average field-level price for the three months ended March 31, 2019 .

(2)

The revenue variance attributed to the change in price is calculated by multiplying the change in average field-level price from the three months ended March 31, 2020 , as compared to the three months ended March 31, 2019 , by the respective volumes for the three months ended March 31, 2020 . Pricing changes are driven by changes in commodity average field-level prices, excluding the impact from commodity derivatives.

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(1)

Below are reconciliations of transportation and processing costs (the most comparable GAAP measure) as presented on the statements of operations and on a unit of production basis to adjusted transportation and processing costs. Adjusted transportation and processing costs includes transportation and processing costs that are reflected as part of "Oil and condensate, gas and NGL sales" on the statements of operations. Management adds these costs together to reflect the total operating costs associated with its production. Management believes that this non-GAAP measure is useful supplemental information for investors as it is reflective of the total production costs required to operate the wells for the period. This non-GAAP measure should be considered by the reader in addition to, but not instead of, the financial measure prepared in accordance with GAAP. Refer to Note 2 – Revenue in Part 1, Item I of this Quarterly Report on Form 10-Q.

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•	$332.3 million 6.875% Senior Notes due March 2021;

•	$465.1 million 5.375% Senior Notes due October 2022;

•	$636.8 million 5.25% Senior Notes due May 2023; and

•	$500.0 million 5.625% Senior Notes due March 2026.

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•	our strategic objectives;

•	plans to reduce general and administrative expenses significantly;

•	restructuring costs associated with contractual termination benefits, including accelerated vestings of share-based compensation;

•	expectation to generate free cash flow and focus on capital efficiency;

•	effect of the COVID-19 pandemic on our business results;

•	expectation of proved undeveloped (PUD) reserve conversion rate and total PUD reserves;

•	the coverage and amounts of insurance are consistent with industry practice;

•	drilling and completion plans and strategies;

•	adding additional acreage in our operating areas;

•	adequacy of procedures implemented to protect against credit-related losses;

•	expectations and assumptions regarding oil, gas and NGL prices;

•	our ability to meet delivery and sales commitments;

•	volatility of oil, gas and NGL prices and factors impacting such prices;

•	beliefs about the reduction of global spending on new oil and gas projects and a corresponding reduction in the global oil supply;

•	the effects of oil, gas and NGL prices on our business;

•	factors impacting our ability to transport oil and condensate and gas;

•	credit agreement limitations that could prevent QEP from incurring certain indebtedness, which could limit QEP's ability to engage in acquisitions;

•	the conditions impacting the timing and amount of share repurchases under our share repurchase program;

•	incurring penalties related to air emission noncompliance and capital expenditures to maintain or obtain operating permits and approvals;

•	the underfunded status of our pension plan;

•	the adjustments made to GAAP Measures to arrive at non-GAAP measures and the usefulness of non-GAAP financial measures;

•	our inventory of drilling locations and the ability of that inventory to provide a solid base for generating free cash flow and capital efficiency;

•	evaluation of potential acquisitions, divestitures and joint venture opportunities;

•	our balance sheet and sufficient liquidity providing for the ability to meet future financial obligations, ensure financial flexibility, withstand commodity price volatility and fund its development projects, operations and capital expenditures and return capital to shareholders;

•	our ability to fund maturities of senior notes;

•	future availability under our revolving credit facility or continued compliance with restrictive financial covenants;

•	adjustments to our capital investment program based on a variety of factors, including an evaluation of drilling and completion activities and drilling results;

•	focus and reduction on operating costs and per well drilling costs;

•	amount and allocation of forecasted capital expenditures (excluding property acquisitions) and, plans and sources for funding operations and capital investments;

•	impact of lower or higher commodity prices and interest rates;

•	potential for asset impairments and factors impacting impairment amounts;

•	fair value estimates and related assumptions and assessment of the sensitivity of changes in assumptions, and critical accounting estimates, including estimated asset retirement obligations;

•	impact of global geopolitical and macroeconomic events and the monitoring of such events;

•	plans regarding derivative contracts, including the volumes utilized, and the anticipated benefits derived there from;

•	outcome and impact of various claims;

•	expected cost savings and other efficiencies from multi-well pad drilling, including "tank-style" development;

•	delays in completion of wells, well shut-ins and volatility to operating results caused by multi-well pad drilling;

•	value of pension plan assets and our plans regarding additional contributions to our Pension Plan, nonqualified retirement plan (SERP), Medical Plan;

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•	estimates of the amount of additional indebtedness we may incur under our revolving credit facility;

•	off-balance sheet arrangements;

•	redemption of senior notes;

•	factors impacting our ability to borrow and the interest rates offered;

•	unrecognized tax benefits and the realization of those benefits;

•	assumptions regarding share-based compensation;

•	settlement of performance share units and restricted share units in cash; and

•	alternative minimum tax credit refund amounts and timing.

•	the risk factors discussed in Item 1A of Part I of the 2019 Form 10-K and Item 1A of Part II of this Quarterly Report on Form 10-Q;

•	changes in oil, gas and NGL prices;

•	global geopolitical and macroeconomic factors;

•	general economic conditions, including the performance of financial markets and interest rates;

•

the length and severity of a pandemic or other health crisis, such as the recent outbreak of COVID-19 and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the factors herein, reduce the demand for oil, gas and NGLs and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period;

•	the risks and liabilities associated with acquired assets;

•	asset impairments;

•	liquidity constraints, including those resulting from the cost and availability of debt and equity financing;

•	drilling and completion strategies, methods and results;

•	assumptions around well density/spacing and recoverable reserves per well prove to be inaccurate;

•	changes in estimated reserve quantities;

•	changes in management's assessments as to where QEP's capital can be most profitably deployed;

•	shortages and costs of oilfield equipment, services and personnel;

•	changes in development plans;

•	lack of available pipeline, processing and refining capacity;

•	processing volumes and pipeline throughput;

•	risks associated with hydraulic fracturing;

•	the outcome of contingencies such as legal proceedings;

•	delays in obtaining permits and governmental approvals;

•	operating risks such as unexpected drilling conditions and risks inherent in the production of oil and gas;

•	weather conditions;

•

changes in, adoption of and compliance with laws and regulations, including decisions and policies concerning: the environment, climate change, greenhouse gas or other emissions, renewable energy mandates, natural resources, fish and wildlife, hydraulic fracturing, water use and drilling and completion techniques, as well as the risk of legal proceedings arising from such matters, whether involving public or private claimants or regulatory investigative or enforcement measures;

•	derivative activities;

•	potential losses or earnings reductions from our commodity price risk management programs;

•	volatility in the commodity-futures market;

•	failure of internal controls and procedures;

•	failure of our information technology infrastructure or applications to prevent a cyberattack;

•	elimination of federal income tax deductions for oil and gas exploration and development costs;

•	production, severance and property taxation rates;

•	discount rates;

•	regulatory approvals and compliance with contractual obligations;

•	actions of, or inaction by federal, state, local or tribal governments, foreign countries and the Organization of Petroleum Exporting Countries;

•	lack of, or disruptions in, adequate and reliable transportation for our production;

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•	competitive conditions;

•	production and sales volumes;

•	actions of operators on properties in which we own an interest but do not operate;

•	estimates of oil and gas reserve quantities;

•	reservoir performance;

•	operating costs;

•	inflation;

•	capital costs;

•	creditworthiness and performance of the Company's counterparties, including financial institutions, operating partners and other parties;

•	volatility in the securities, capital and credit markets;

•	actions by credit rating agencies and their impact on the Company;

•	changes in guidance issued related to tax reform legislation; and

•	other factors, most of which are beyond the Company's control.

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•	changes in local, regional, domestic and foreign supply of and demand for oil, gas and NGL;

•	the impact of an abundance of oil, gas and NGL from unconventional sources on the global and local energy supply;

•	the level of imports and/or exports of, and the price of, foreign oil, gas and NGL;

•	localized supply and demand fundamentals, including the proximity, cost and availability of pipelines and other transportation facilities, and other factors that result in differentials to benchmark prices from time to time;

•	the availability of refining and storage capacity;

•	domestic and global economic and political conditions;

•	changes in government energy policies, including imposed price controls or product subsidies or both;

•	speculative trading in crude oil and natural gas derivative contracts;

•	the continued threat of terrorism and the impact of military and other action;

•	the activities of the Organization of Petroleum Exporting Countries (OPEC) and other oil producing countries such as Russia and Saudi Arabia, including the ability of members of OPEC and Russia to maintain oil price and production controls;

•	including events in the Middle East, Africa, South America and Russia;

•	the strength of the U.S. dollar relative to other currencies;

•	weather conditions, natural disasters and epidemic or pandemic disasters such as the recent outbreak of COVID-19;

•	domestic and international laws, regulations and taxes, including regulations, legislation or executive orders relating to climate change, induced seismicity or oil and gas exploration and production activities, including, but not limited to hydraulic fracturing;

•	technological advances affecting energy consumption and energy supply;

•	conservation efforts;

•	the price, availability and acceptance of alternative energy sources, including coal, nuclear energy, renewables and biofuels;

•	demand for electricity and natural gas used as fuel for electricity generation;

•	pandemic and health events that could reduce demand of petroleum products;

•	pandemic events that could impair our employees and contractors abilities to drill and produce oil and gas;

•	the level of global oil, gas and NGL inventories and exploration and production activity; and

•	the quality of oil and gas produced.

•	adversely affect QEP's financial condition and liquidity and QEP's ability to finance planned capital expenditures, borrow money, repay debt and raise additional capital;

•	reduce the amount of oil, gas and NGL that QEP can produce economically;

•	limit QEP's ability to generate Free Cash Flow;

•	cause QEP to delay, postpone or cancel some of its capital projects;

•	cause QEP to divest properties to generate funds to meet cash flow or liquidity requirements;

•	reduce QEP's revenues, operating income or cash flows;

•	reduce the amounts of QEP's estimated proved oil, gas and NGL reserves;

•	reduce the carrying value of QEP's oil and gas properties due to recognizing additional impairments of proved and unproved properties;

•	limit QEP's access to, or increasing the cost of, sources of capital such as equity and long-term debt;

•	cause additional counterparty credit risk;

•	decrease the value of QEP's common stock; and

•	increase shareholder activism.

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•	pandemic health events, injuries and/or deaths of employees, supplier personnel, or other individuals;

•	fires, explosions and blowouts;

•	earthquakes and other natural disasters;

•	aging infrastructure and mechanical problems;

•	unexpected drilling conditions, including abnormally pressured formations or loss of drilling fluid circulation;

•	pipe, cement or casing failures;

•	equipment malfunctions, mechanical failures or accidents;

•	theft or vandalism of oilfield equipment and supplies, especially in areas of increased activity;

•	adverse weather conditions;

•	plant, pipeline, railway and other facility accidents and failures;

•	truck and rail loading and unloading problems;

•	delays imposed by or resulting from compliance with regulatory requirements;

•	delays in or limits on the issuance of drilling permits on our federal leases, including as a result of government shutdowns;

•	delays imposed by or resulting from legal proceedings;

•	environmental accidents such as oil spills, natural gas leaks, pipeline or tank ruptures, or discharges of air pollutants, brine water or well fluids into the environment;

•	security breaches, cyberattacks, piracy, or terrorist acts;

•	flaring of natural gas, including, where required, accurate and timely payment of royalty on flared gas;

•	pipeline takeaway and refining and processing capacity issues; and

•	title problems.

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*	Filed herewith.

**	Furnished herewith.

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