EQT Announces Good 1Q19, Drills Longest Marcellus Well Ever!
Two days ago EQT issued its first quarter 2019 update. Yesterday they held a conference call to discuss the company’s performance. EQT performed better in 1Q19 both financially and operationally than it did in 1Q18. What most caught our interest were CEO Rob McNally’s remarks, both his prepared remarks at the beginning of the conference call, and his unscripted remarks during the Q&A. We gained some important insights on where and how much EQT plans to drill for the balance of 2019.
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In addition to EQT’s 1Q19 update yesterday, Toby and Derek Rice filed a lawsuit against EQT, alleging the company is trying to confuse shareholders by requiring some of board candidates the Rice boys are proposing get commingled with EQT’s own slate of candidates. The Rice boys say the lawsuit is aimed at “preventing EQT from manipulating shareholder election.” The Rices want to elect their own board, tossing out the existing board and following that, tossing out EQT’s current senior management.
On Monday, Toby and Derek Rice filed a proxy statement with the Securities and Exchange Commission and sent EQT shareholders a package and special proxy card (for voting) in an effort to elicit votes for their slate of nine board members at the upcoming July annual meeting–so they can take control of the company. Normally proxy statements are pretty dry affairs. Not this one! There are bombshell accusations in the proxy statement made by the Rice boys against EQT’s current management.
It’s no secret that upstream companies (drillers) like EQT are trimming head count and reducing annual spending. So it probably won’t come as a surprise that EQT has put 46,000 square feet (out of 250,000 sq. ft.) in its palatial headquarters in downtown Pittsburgh up for sublease. Meanwhile, in a contrasting bit of news, midstream (pipeline) company Williams has just renewed the lease for its big regional Pittsburgh headquarters at Park Place Corporate Center–a 112,481 sq. ft. building.
We read on a regular basis in mainstream media that shale companies spend more money than they bring in, and that investors are growing tired of pumping money into companies without a return on their investment. We’ve recently noticed a renewed commitment on the part of major drillers to get their financial houses in order–spend less and drill less in order to make more money. We spotted an article by Reuters on the “shale drillers aren’t profitable/healthy” meme which got us investigating the financial health (or lack thereof) for Marcellus/Utica drillers. What we found may interest you.
The proxy war between Toby and Derek Rice and current management at EQT continues. It’s now turned into a press release war. Every few days one or the other (or both) sides issue press releases to try and convince shareholders *their* side is the winning/righteous/justified side in this war. Yesterday EQT fired off another round by issuing a press release to announce the release of a new PowerPoint slide deck.
We’re not quite sure what to make of this. In February, EQT filed lawsuits in both Pennsylvania and federal courts against two former employees it had fired, claiming the employees, before they were fired, had systematically copied confidential information from company computers and took it with them when they left (see 
A West Virginia Circuit Court case in September 2017, Crowder and Wentz v EQT, found in favor of surface landowners ruling that EQT did not have the right to extend underground shale wells to adjacent properties where EQT also owned the mineral rights (see 
EQT yesterday announced they’ve hired a new Chief Operating Officer–Gary E. Gould, hired away from Harold Hamm at Continental Resources where he oversaw production and resource development (essentially the same position). Gould is being paid $550,000 a year with a $500,000 signing bonus ($1.1 million total), for his first year. His salary goes up from there. Gould’s charter from EQT CEO Rob McNally? Cut costs. Which made us giggle.
EQT is not holding their annual meeting in April this year, the month they’ve traditionally held the annual meeting until last year, when it was held in June due to an impending split of the company into upstream and midstream. Instead, the current board is using a legal loophole to delay this year’s annual meeting to July–as a way of obstructing the efforts of Toby and Derek Rice and their proxy war to take over the company.
On Tuesday EQT filed lawsuits in both Pennsylvania and federal courts against two former employees it had fired, claiming the employees, before they were fired (sensing it was coming) had systematically copied confidential information from company computers and took it with them when they left.
EQT released its fourth quarter and full year 2018 update yesterday. The numbers show the company lost, on paper, $2.2 billion–but the loss was from “impairments,” writing off the value of old assets they had sold. Not an actual $2.2B out-of-pocket loss. The company, which is the largest natural gas producer in the U.S., produced 1.49 trillion cubic feet equivalent of gas in 2018, up an incredible 68% from the 888 billion cubic feet produced in 2017.