EQT Urges Shareholders to Skip White Proxy Card, Wait for Gold Card
The battle to control EQT continues. Yesterday we brought you the news that Toby and Derek Rice–the Rice brothers, formerly owners of Rice Energy that sold itself to EQT in 2017–sent an open letter to EQT shareholders asking them to vote on the white proxy card that will soon be issued (see Rice Brothers Drop 2 Proposed Board Members from Rice Proxy Card). Today we have EQT’s response, which is a letter to shareholders asking them to “ignore any solicitation materials and discard any white proxy cards you may receive” and instead wait for EQT’s soon-to-be-issued gold proxy card.
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A few new developments to report in the war to control EQT. Late last week brothers Toby and Derek Rice, formerly of Rice Energy, announced they are trimming their slate of proposed EQT board members by two (from nine to seven). There was no explanation for why the two were dropped from consideration, other than the Rice boys said they had reviewed EQT’s proposal to add three new board members (replacing three existing board members), and that two of the three, in the Rices’ opinion, “appear qualified” to serve on the board and “as a result” Rice dropped two of its proposed slate of board members.
In the fight to control EQT, it appears like the momentum has just shifted in favor of EQT’s existing management. No more defense, EQT’s management team and board are now on offense. Yesterday the board and CEO Rob McNally released their list of proposed nominees to be voted on at the annual meeting in July. Three longtime members of the existing board including (surprisingly) board chairman Jim Rohr, will be out. Three new members have been named to replace them. Most important, in a bold move, EQT is adopting a “universal proxy card”–something advocated by Toby and Derek Rice in their attempt to replace the board. We explain this important development below…
The Pennsylvania Dept. of Environmental Protection (DEP) has just fined EQT $330,775 for erosion and sedimentation violations at two well sites in Forward Township, Allegheny County, PA. Water with sediment in it leaked from the well sites in early 2018, which sometimes happens. The reason for the stiff fine is that EQT failed to notify the DEP when it happened. If the DEP finds out via its own inspections first, the cost goes way up.
Fair or not, anything and everything that happens at EQT right now, which is under extreme pressure by the Rice brothers and several other large shareholders (see 
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.
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.