EQT Corp. is not a Mom-and-Pop natural gas producer – and can’t be run like one – the board’s independent members said, in effect, to dissident shareholders looking to insert their board nominees into the operations of the U.S.’s largest gas producer.
“The Board should not be a friends-and-family club, and it is not in the best interests of all EQT shareholders for the company to become a family business,” the current independent directors said in a letter to dissident Toby Rice Wednesday.
“Particularly given your family’s 3.1% ownership interest in EQT, and your brother’s position as a director on the EQT board standing for reelection, we do not believe the addition of other Rice family members or their designees is appropriate or consistent with best-in-class governance practices.”
Stick & carrot
While using a big stick on Toby and Derek Rice et al., EQT also put forth a proverbial carrot, announcing three of its long-time directors, including board chairman and 23-year board member Jim Rohr, are not standing for re-election at the July 10 annual meeting. The other two directors stepping down are Lee Todd and Brad Carey, Kallanish Energy reports.
EQT nominees for the trio of board seats are: Valerie Mitchell, founding member and CEO of Corterra Energy; James McManus, chairman, president and CEO of Energen Corp. from 2008 until its sale to Diamondback Energy in 2018; and Janet Carrig, senior vice president, general counsel and corporate secretary of ConocoPhillips from 2007 through 2018.
With this trio, EQT is attempting to counter the Rice team’s complaint the current board and management team are basically screwing up what had been a good thing at Rice before the bigger company took it over.
The dissidents, including the Rices, a number of former Rice Energy executives, and at least two hedge funds that support their efforts, allege EQT’s board doesn’t have enough directors with oil and gas industry experience and too many directors with long tenures.
“As we and other shareholders have been saying for many months, the problem at EQT is that the leadership team lacks the vision, ambition and execution capability to deliver on the promise of EQT’s outstanding assets,” the dissidents said in response to the EQT letter.
“Modest board changes without a leadership team change will not, in our view, put EQT on a path to unlock the true potential of its asset base. The reality is that even if EQT achieves management’s stated 2019 targets, it would remain the highest-cost operator in the Appalachian Basin.”
No additional Rices needed
With Danny Rice, former CEO of Rice Energy, already on the EQT board, the letter said, “We fail to see why the company needs two brothers with similar backgrounds and experience when we could benefit, by contrast, from directors with a variety of direct, large-company experience, as offered by the EQT nominees.”
The letter intimated the Rice team nominees as unqualified and conflicted. It also accused the Rice brothers, who own the Rice Investment Group, of trying to secure business contracts with EQT for their portfolio companies, which the current board said would complicate their independence.
The letter noted Toby Rice was not made CEO of Rice Energy before that company went public in 2014 — he became, instead, its president and chief operating officer.
“We are not aware of anything that would cause us to reach a different conclusion than your own family members,” the board members wrote.
While EQT welcomed “constructive disruption,” the plan outlined by the Rice team would instead slow the progress that the company has made over the past two quarters and destabilize the business, the letter said.
“In short, we believe that the skill set, experience and independence of the EQT nominees make them better suited to continue to implement EQT’s turnaround while avoiding the conflicts of friends-and-family relationships,” the letter states.
This post appeared first on Kallanish Energy News.