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Rice brothers take over EQT board
APPALACHIAN BASIN
ACTIVIST investor brothers Derek and Toby Rice have won control of gas producer EQT’s board a er a nine-month proxy contest. Share- holders at the EQT annual meeting on July 10 elected all seven Rice-nominated directors and ve nominees that were supported by both the company and the Rice group of shareholders. All 12 elected directors won over 80% of the votes cast.
is comes a er the brothers sold their com- pany, Rice Energy, to EQT in 2017. EQT, which focuses on the proli c Appalachian Basin, says on its website that it is now the largest natural gas producer in the US. However, the Rice brothers have argued that EQT has been underperform- ing since the acquisition.
EQT shares had fallen from around $35 at the time of the acquisition to about $15 currently, with the company also cutting its production targets over this period. Under former CEO Robert McNally, EQT was implementing a plan to turn its performance around, but this does not appear to have gone far enough to win over shareholders.
In seeking to overhaul the board, the Rice brothers won the support of T Rowe Price Group, EQT’s largest shareholder. They also managed to win backing from several other investors, including DE Shaw & Co., Kensico Capital Management and Elliott Management.
Following the annual meeting, Toby Rice was named EQT’s CEO.
e “board only valued nancial expertise and that led to the dramatically poor operational performance of EQT”, said former EQT CEO Steve Schlotterbeck. “Toby can x that”. Schlot- terbeck oversaw the Rice Energy takeover dur- ing his tenure as CEO and remains a shareholder,
having resigned in March 2018 following disa- greements with the board over his pay.
Changes planned by the Rice brothers include cutting costs and bringing in new executives for major parts of the business. is comes a er EQT let most of Rice Energy’s sen- ior management go in the wake of the merger. Not all of EQT’s top executives will be ousted, but Toby Rice said a er the shareholder meeting that they would replace the general counsel and add a chief information o cer and chief human resources o cer.
e Rice brothers are also touting drilling e ciencies that can be achieved by EQT through the more intensive use of technology. e focus will remain on the Appalachian Basin’s Marcel- lus shale play – the most productive gas play in the US.
One of the main drivers behind EQT’s acquisition of Rice Energy was the opportunity to drill supersized wells on the two companies’ contiguous acreage in the Marcellus. But EQT quickly fell behind with its plans, and said at the end of 2018 that it would spend $300mn more than planned over the course of the year, while producing about 3% less gas than projected.
e Rice brothers said previously that EQT’s goals were too modest. e pressure will now be on them to turn the company’s performance around as the entire shale industry struggles to balance the need for growth with a demand to focus more on shareholder returns. Success could prove that there are still ways of boost- ing leading shale drillers’ performances even in the current operating environment. Failure could lead to growing scepticism about the shale industry’s longer-term potential.™
Following the annual meeting, Toby Rice was named EQT’s CEO.
The Rice brothers have argued that EQT has been underperforming since the acquisition.
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w w w . N E W S B A S E . c o m Week 28 18•July•2019