Urges Shareholders to Keep EQT on the Best Path Forward by Voting “FOR” the Company’s Nominees on the GOLD Universal Proxy Card
PITTSBURGH–(BUSINESS WIRE)–EQT Corporation (NYSE: EQT) today mailed a letter to shareholders highlighting the continued strength of EQT’s operating results and detailing why Toby Rice is not qualified or fit to lead EQT or serve on its Board of Directors (the “Board”).
The letter, available at VoteGoldForEQT.com, urges shareholders to support the Company’s nominees, who are dedicated to creating long-term value, instead of the family-and-friends group beholden to Toby Rice and his brother Derek Rice (the “Toby Rice Group”).
Shareholders should discard any white proxy cards they may receive from the Toby Rice Group and vote on the GOLD universal proxy card “FOR” each of EQT’s 12 highly qualified director nominees.
The full text of the letter follows:
Dear Fellow EQT Shareholder:
THE EQT BOARD AND MANAGEMENT TEAM ARE SUCCESSFULLY TRANSFORMING EQT INTO A FREE CASH FLOW MACHINE
EQT’s refreshed Board and management team have successfully shifted the Company’s culture to one that emphasizes accountability, collaboration and transparency. Today, there is a relentless focus throughout the organization on enhancing capital efficiency and transforming EQT into a free cash flow machine. You can see this in our results.
In the fourth quarter of 2018 and first quarter of 2019, the new EQT successfully executed our plan and met or exceeded our targets. We delivered more than $300 million of adjusted free cash flow1 and reduced debt by $500 million while increasing production volumes through substantial drilling and operating efficiencies. We’re committed to continuing to reduce annual costs, and we have already identified $175 million in annual cost savings since the new management team assumed control in November 2018.
Earlier this week, we announced strong preliminary second quarter 2019 results, which demonstrate continued progress in driving operating efficiencies. EQT expects to deliver second quarter 2019 sales volumes at the high-end of our guidance and capital expenditures in line with expectations, resulting in stronger than expected free cash flow.
We are on track to generate approximately $300 to $400 million of adjusted free cash flow1 in 2019 and – with the recently identified incremental savings – at least $3 billion of adjusted free cash flow1 through 2023, with additional upside expected through our Target 10% Initiative.
INDUSTRY EXPERTS RECOGNIZE THAT THE TRANSFORMATION IS TAKING HOLD AT EQT2
- “EQT is making a strong case for business continuity…The current management team has delivered strong execution, despite high pressure, for the short <6-month tenure since they took over control of the company. We walked away more appreciative of the organizational & cultural changes underpinning the improvement in YTD execution. We are also more positive on the potential for additional cost savings, likely resulting in less capex for the same production in 2020+.” – Credit Suisse, May 1, 2019
- “Our investor meetings with EQT’s management team on the West Coast earlier this week left us more positively inclined on the ability of this team to deliver on and possibly beat its five year plan. Two quarters of successful results that coincide with the tenure of this team clearly have given them incremental confidence that they can correct the discounted value in the stock without activist intervention.” – Wells Fargo, May 9, 2019
- “This is an incrementally positive update because, similar to 1Q19, operational performance continues to exceed expectations and there are new long-term savings captured from the company’s efforts to improve capital efficiency.” – RBC Capital Markets, June 17, 2019
- “This marks the third consecutive quarter with volumes expected at or above the high end of guidance…Since announcing its target 10% initiative in January, EQT has achieved ~$75 mm of annualized savings, pushing its 5 year free cash flow outlook to $3.0bn vs. $2.7bn originally, and nearly halfway toward its goal of $700 mm of cumulative improvements.” – Wells Fargo, June 17, 2019
- “Yesterday’s press release highlights Q2 production is expected to be at the high end of 355-375bcfe guidance for in line capex, marking three consecutive quarters of solid operational results. In addition, management continues to make progress on cost reduction initiatives with another $25MM in savings captured under the Target 10% Initiative, bringing total savings announced since Nov’18 to $175MM. The company continues to capture operational efficiencies with drilling days per 1,000′ down -8%, frac stages per crew up +20%, and frac plugs drilled per day up +14% compared to Q1’19.” – Tudor, Pickering, Holt & Co., June 18, 2019
TOBY RICE HAS A TRACK RECORD OF MISMANAGEMENT
The EQT Board believes that retaining the right leadership to effect the transformation is among its primary responsibilities. In that regard, EQT evaluated Toby Rice’s qualifications to serve as a director and/or member of senior management at the Company. In addition to reviewing Toby’s qualifications, professional experience and operational track record, EQT examined its internal records obtained through EQT’s acquisition of Rice Energy. Following this comprehensive review, EQT determined that Toby Rice is not qualified to serve in a leadership position or on the Board of a large and established organization. In fact, these internal documents clearly evidence significant issues with Toby Rice’s ability to manage.
Specifically, the evidence examined by EQT revealed that, among other things:
- Toby Rice’s brother Daniel, who was CEO of Rice Energy, expressed concerns regarding managing Toby and Toby’s behavior and, on a number of occasions, had to involve his father, who was a Rice Energy director at the time, and Rice Energy’s independent chairman of the board in an attempt to get Toby to modify his behavior.
- Toby’s brother Daniel noted that Toby’s behavior threatened Rice Energy’s ability to retain key talent.
- Toby’s father stated that the rollout of an important new technology had to be halted at Rice Energy because Toby lacked necessary training to effectively manage its adoption. He noted that the situation was beyond what the Rice Energy board would tolerate. In addition, Toby’s brother Daniel informed the independent chairman of the Rice Energy board that Toby was “sinking deeper in the abyss” with his technology “shenanigans”, “which were causing a lot of strife throughout the organization”.
- A senior executive at Rice Energy noted that 25 written complaints were made against Toby in a span of two weeks in 2015. A different senior executive thought this was alarming because employees submitted complaints to the human resources department even though Toby was both a family member and C-suite executive.
- Toby’s brother Daniel shared with the independent chairman of the Rice Energy board his frustration regarding Daniel’s inability to address the serious concerns and complaints involving Toby. Daniel indicated that he would have had a list of solutions, if Toby were not his brother.
- Rice Energy’s independent board chairman stated that, while Toby’s drive and energy were useful in Rice Energy’s formative stage, by 2015 Rice Energy was in a “different phase” and Toby lacked the management skills required by a growing but stable company.
Do not allow Toby Rice to take control of EQT’s Board and derail EQT’s successful path. The facts are clear – Toby is not qualified to serve in a leadership position in management or on the Board, and family dynamics impeded effective management at Rice Energy. Toby’s actions while at Rice Energy directly contradict his claimed strengths as a leader and culture agent. EQT shareholders and employees deserve real leadership and the positive culture already arising from its newly refreshed Board and management team.
Toby’s concerning behavior has continued in his current role heading the Rice Investment Group (“RIG”). Toby lobbied EQT executives to do business with a company in which RIG had an interest, and did not disclose RIG’s connection to that company. Given that a Rice family member with an interest in RIG serves on the EQT Board, and RIG invests in companies that sell or would be positioned to sell products and services to EQT, we question Toby’s judgment and candor with this behavior. We also believe that having a director or CEO with a portfolio of active multi-million-dollar investments in the same industry as EQT presents the potential for numerous conflicts.
We believe that EQT shareholders should reject the Toby Rice Group’s efforts to replace a majority of the Board and install Toby as CEO of EQT.
VOTE TODAY “FOR” EQT’S 12 HIGHLY QUALIFIED DIRECTOR NOMINEES ON THE GOLD UNIVERSAL PROXY CARD
EQT’s nominees are aligned with the interests of EQT shareholders and we believe they are best suited to continue to oversee EQT’s successful transformation. Unlike the Toby Rice Group slate, we have shown diligence and care in selecting our independent directors for election. The EQT director nominees are independent, highly qualified, experienced and complement one another with diverse and valuable perspectives.
You have an opportunity to keep EQT on the best path forward by supporting EQT’s Board and management team: we urge you to vote today by telephone, internet or by signing, dating and returning the enclosed GOLD universal proxy card in the postage-paid envelope provided.
Thank you for your continued support of EQT as we work to execute our strategy and drive value and significant cash flow for all shareholders.
The Independent Members of the EQT Board of Directors
If you have any questions, or need assistance in voting
your shares on the GOLD universal proxy card,
please call EQT’s proxy solicitor:
INNISFREE M&A INCORPORATED
TOLL-FREE at 1-877-687-1866 (from the U.S. or Canada)
Or at (412) 232-3651 (From Other Locations)
Please discard and do NOT vote using any white proxy cards you may receive from the Toby Rice Group