Former Rice Energy Leadership Team Sends Letter to Board of EQT and Releases Presentation on Path Forward for the Company
Believes EQT Can Significantly Enhance Shareholder Value with
Improved Operational Performance and that Individuals with Proven
Operational Experience Must Be Added to the Board and Management Team
Rice Team is Ready, Willing and Able to Oversee the Operational
Transformation Needed to Maximize Value for All Shareholders
Presentation Highlights Tremendous Potential of EQT’s Assets and
Detailed Business Plan to Generate Incremental $400-600 Million of Free
Cash Flow above EQT’s Current Plans – Equaling Greater than $1.0 Billion
of Free Cash Flow per Year
Rice Team Has Identified Director Candidates and Will
Nominate Them for Election at 2019 Annual Meeting If Necessary
Toby Z. Rice and Derek A. Rice, who collectively own 7 million shares of
EQT Corporation (the “Company” or “EQT”) (NYSE: EQT), today sent a
letter to the Board of Directors (the “Board”) of EQT and released a
presentation outlining the path forward for an operational
transformation at the Company to maximize value for all shareholders.
Both the presentation and the letter can be viewed at www.EQTPathForward.com.
The full text of the letter follows:
December 10, 2018
Board of Directors
EQT Corporation
EQT Plaza
625 Liberty
Avenue, Suite 1700
Pittsburgh, PA 15222
Dear Members of the Board:
The completion of the merger in November 2017 between EQT Corporation
(NYSE: EQT) (“EQT”) and the company we founded, Rice Energy Inc.
(“RICE”), created a world-class asset in the core of the Appalachian
Basin, setting the table for peer-leading capital efficiency and
returns. Our belief in the tremendous potential of EQT’s assets was
underscored by the fact that we took approximately 80% of the merger
consideration in EQT stock. As of today, the Rice family owns over 7
million shares of EQT.
The Rice Team continues to believe strongly in the potential of EQT’s
assets, but unfortunately the Company’s operational performance has
translated into a severely depressed stock price that is not reflective
of the underlying value of the assets. EQT trades at or below PDP value,
with no value ascribed to EQT’s core undeveloped acreage. EQT’s
valuation metrics of ~3.4x 2019E EBITDA and ~$2,000/mcfepd represent a
significant discount to Appalachian peers, notwithstanding the fact that
EQT has the deepest inventory of high-quality natural gas assets in the
basin.
EQT has the potential to unlock significant value for all its
shareholders, but, to deliver the results this asset base deserves, a
course correction is needed. EQT must add proven operational experience
to the Board and senior management team – in particular, individuals
with experience in large-scale operational planning.
The Rice team has a demonstrated track record of delivering
basin-leading results on the exact same assets that EQT is operating
today. With the proper authority and Board support, our team is willing
to oversee the transformation needed to achieve these results. We have
executed on it before, and we are ready, willing and able to execute on
it again.
The Rice team is fully aligned with all EQT shareholders and committed
to improving EQT’s operations and delivering value for all EQT
shareholders and employees. We have a proven, detailed business plan to
generate an incremental $400-$600 million of pre-tax free cash flow
per year above EQT’s current plans, equaling greater than $1.0 billion
of free cash flow per year. This plan would match EQT’s current
five-year production goals but generate twice the cash flow for
shareholders. A detailed presentation outlining this plan can be found
at www.eqtpathforward.com.
Over the past few weeks, in response to repeated outreach by a range of
EQT investors asking for our assistance, we engaged in private dialogue
with Chairman Jim Rohr and CEO Rob McNally to express our concerns and
propose solutions, which included, among other things, inserting Toby
Rice into the organization with proper authority and support to oversee
operations. Unfortunately, given the lack of reciprocal engagement – and
EQT pushing forward with establishing its 2019 operational plan and
budget – it has become apparent that they are unwilling to make the
changes needed.
We are focused on results and willing to work constructively with the
current Board to reach a solution for the benefit of all shareholders.
However, if we do not arrive at a mutually agreeable outcome that
materially benefits all long-term shareholders, we have identified
director candidates and will nominate them for election to the EQT Board
at the 2019 Annual Meeting.
Respectfully,
Toby Z. Rice
Derek A. Rice
IMPORTANT INFORMATION
Toby Z. Rice and Derek A. Rice, as well as certain of their affiliates,
may file a proxy statement with the U.S. Securities and Exchange
Commission (“SEC”) to solicit proxies from stockholders of EQT for use
at EQT’s 2019 annual meeting of stockholders. TOBY Z. RICE AND DEREK A.
RICE STRONGLY ADVISE ALL SECURITY HOLDERS OF EQT TO READ ANY SUCH PROXY
STATEMENT IF AND WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Any such proxy statement, if and when filed, and
any other relevant documents will be available at no charge on the SEC’s
website at http://www.sec.gov/.
PARTICIPANT INFORMATION
In accordance with Rule 14a-12(a)(1)(i) under the Securities Exchange
Act of 1934, as amended, the following persons are, or may be deemed to
be, participants in the potential proxy solicitation: Toby Z. Rice and
Derek A. Rice. Toby Z. Rice holds a total of 400,000 shares of common
stock, both directly and indirectly, in EQT, and Derek A. Rice holds a
total of 272,651 shares of common stock, both directly and indirectly,
in EQT. In addition, Toby Z. Rice and Derek A. Rice are potential
beneficiaries of the Rice Energy 2016 Irrevocable Trust, which holds a
total of 5,676,000 shares of EQT’s common stock.
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