Shale Directories Conferences
7th Annual Utica Summit
October 10, 2019
North Canton, OH
7th Annual Midstream PA 2019
November 12, 2019
Penn Stater Conference Center
State College, PA
Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, and Bakken Shale Plays
Latest Information on Rice Brothers – EQT Battle. At T minus 5 days and counting until what could be one of the most contentious annual meetings in some time, the battle between current EQT Corp. management and board and former management and allies of the company EQT bought to become the U.S.’s largest natural gas producer, has taken another turn on a twisty road.
The dissidents, led by the Brothers Rice, previously of Rice Energy, won support from EQT’s largest shareholder, T. Rowe Price Group, which holds 10.15% of EQT, Kallanish Energy reports.
Earlier this week, T.Rowe said it will vote to elect the seven-person slate of director-nominees put forward by the Rice Group, along with the five management-sponsored nominees the Rices also back.
That support was announced just days after Kensico Capital Management, another large shareholder with more than 3.60% of EQT’s common shares outstanding, said it’s backing the dissidents.
The Rices and their allies have called for drastic changes at the Pittsburgh-based independent producer, contending EQT has underperformed peers since buying Rice Energy in late 2017, the company the Rice family founded.
The brothers want Toby Rice to take over as CEO. EQT says most of the Rice’s demands are too radical and the company is already undergoing significant changes and on track.
“We have long been admirers of the founders and leaders of Rice Energy,” David J. Wallack, portfolio manager for the T. Rowe Price Mid-Cap Value Fund, said, in a statement. “This magnitude of change for the EQT board is appropriate and necessary.”
The Rices have at least 20% of shareholder support in the EQT proxy battle, according to Bloomberg research.
- Rowe Price and Kensico follow Elliott Management Corp. and the D.E. Shaw Group, which earlier threw their support behind the brothers.
“EQT believes shareholders should question the merit of a 3% shareholder seeking to be CEO and replace management and a majority of the board,” the company said in separate statement, referring to the Rice’s holdings.
Shareholder advisory firms Institutional Shareholder Services and Glass Lewis one week ago took opposite sides in the running dispute Iss urged EQT shareholders to support the Rices, while Glass Lewis said the company is headed in the right direction after changes to management and the board in recent months.
Proxy Advisor Supports Rice Brothers vs. EQT. Well-known proxy advisory firm Institutional Shareholder Services (Iss) has issued a report recommending EQT Corp. shareholders elect all seven dissident nominees backed by the dissidents, Kallanish Energy reports.
Iss wrote in its opinion, the Rice Team “has made a compelling case that substantial change at the board level is required.”
“Although there is an elevated bar for supporting a majority slate under ISS’ contest framework, this contest amounts to a referendum as to which management team is better suited to run EQT. Given the (Rice Team)’s track record (with various connections to oil and gas, including Rice Energy executives and board members), strongly-aligned incentives, and thorough business plan … it appears that there would be minimal downside risk under the (Rice Team) relative to both EQT’s current positioning and its future prospects under the incumbents, with significant upside potential,” according to Iss.
“The Rice Team is pleased ISS has recommended shareholders vote for all of the Rice Team nominees. This clearly affirms that the Rice Team’s plan is the only viable path towards transforming EQT into a modern, low-cost gas operator and realizing the potential of the merger with Rice Energy, and that a majority board change is necessary to ensure this plan is implemented,” said Toby Z. Rice.
Iss concluded the Rice Team “has not only articulated a compelling case for majority change, but it has appropriately measured its request for board representation by seeking to elect a simple majority and to retain the most qualified and independent members of the management slate. As such, support for all seven (Rice Team) nominees and all five unopposed management nominees in warranted on the (Rice Team) WHITE card.”
Minimal downside risk
In reaching this conclusion, ISS also stated:
* “Given the (Rice Team’s) track record, strongly-aligned incentives, and thorough business plan … it appears that there would be minimal downside risk under the (Rice Team) relative to both EQT’s current positioning and its future prospects under the incumbents, with significant upside potential.”
* “By contrast, the incumbent management team has failed to advance turnaround efforts at a satisfactory pace for shareholders, has identified target initiatives that are vague and unambitious (particularly when considered in the context of EQT’s deterioration since the Rice merger), and has failed to communicate with shareholders in an effective manner.”
* “The (Rice Team) raises several other valid points, including that EQT has failed to fully achieve the RICE transaction synergies communicated to the market prior to the deal, that management’s guidance relies on unsupported future gas price assumptions that are more bullish than futures contract prices, that the CEO was promoted from the CFO role despite overseeing a disastrous $500 million share repurchase program during the disappointing Q3 2018, and that EQT’s cost cutting initiatives are simultaneously vague and unambitious. …
EQT blasts the Iss conclusions
EQT soon after Rice began touting the Iss results, issued a statement strong disagreeing with the advisory firm’s conclusions.
“EQT strongly disagrees with ISS’s recommendation to vote for the Toby Rice Group nominees. As compared to EQT’s purpose-built Board, the Toby Rice Group nominees are significantly less qualified, less experienced and highly conflicted. Like Toby Rice’s “friends and family slate,” it seems that ISS decided to support Toby Rice based on false information published by the Toby Rice Group and without thoughtfully evaluating the detrimental impact the election of the dissident nominees would have on the Company’s operations.”
EQT Gets Shareholder Support. Just as EQT Corp. is at odds with remnants of Rice Energy, which it acquired in 2017 and became the U.S.’s largest natural gas producer, independent proxy advisory services firms have now come out on opposite sides of the ongoing proxy battle.
Glass Lewis & Co. said in a report Friday EQT, under its current management and after board changes, was headed in the right direction, Kallanish Energy reports.
Change unwarranted now
It recommended shareholders not support an effort to replace the majority of the board by shareholders Toby and Derek Rice.
“We do not believe further change is warranted at this time given the significant board and management turnover that has already occurred at the Company in the last year, including a new CEO, CFO and COO and eight new directors, representing 75% of the board as proposed on the management slate,” Glass Lewis said, in its report.
“We see no cause for concern with the qualifications or experience of the Management Nominees and find that management and the board are taking appropriate steps to improve operating efficiency at the Company, including identifying material cost savings and delivering favorable performance in the first two quarters with Robert McNally at the helm as CEO.
Unconvinced Rice plan a ‘credible path’
“… We are not convinced the Rice Group plan offers a credible path to achieving material incremental savings above what EQT is already targeting.”
The report is at odds with another proxy advisory firm, Institutional Shareholder Services, which last week recommended investors support all seven Rice nominees. (See story elsewhere in this issue.)
The Rice brothers also have the support of EQT’s fourth and sixth largest shareholders, DE Shaw Group and Kensico Capital Management Corp.
The Rice brothers have been pushing to revamp the board and management, arguing the company has underperformed and is in need of an overhaul.
Back to the future
EQT has argued the Rice brothers want to take the gas producer back to the future by appointing 15 former employees of Rice Energy to management roles. The company has argued their plans would destabilize the business and are unmanageable.
EQT also has said its taken steps to refresh its board, replacing nine of its 12 directors since 2017, including three long-tenured ones last month, among them chairman Jim Rohr.
“The recommendation reaffirms that EQT has the right Board, management team and strategy to continue its successful transformation and create significant long-term shareholder value,” the company said, in a statement.
The Rice Team wasn’t immediately available for comment.
More time needed
Glass Lewis said in its report the current leadership should be given more time for its turnaround.
“Ultimately, we believe this contest has placed additional pressure on EQT leadership to deliver operational efficiencies and we believe it would be reasonable for shareholders to provide management and the board with additional time to achieve target savings before seeking further change,” Glass Lewis said, in its report.
Nexus Lawsuit Preserved. A panel of appellate court judges last night preserved a lawsuit over a natural gas project through Ohio and Michigan. The U.S. Court of Appeals for the District of Columbia Circuit denied a motion to dismiss a challenge over the Federal Energy Regulatory Commission’s approval of the Nexus pipeline. Argued in the spring, the case highlights controversies over the seizure of private land for gas transport projects that may serve foreign markets.
Record PA natural gas impact fee distribution over $251 million. Impact fees collected from natural gas producers hit a record-breaking $251,830,900 for the 2018 reporting year, the Public Utility Commission announced Thursday. The increase in revenue primarily was driven by a 10% increase in the number of wells subject to paying the fee. That number increased from 8,518 last year to 9,560 this year, the PUC said. Impact fees are collected annually based on the age of the well and the price of natural gas, according to the trade group Marcellus Shale Coalition. “The price of natural gas has remained relatively constant over the past year and did not impact the well fee calculations,” the PUC said in a statement. More wells paid impact fees this year due in part to a December 2018 Pennsylvania Supreme Court decision on the definition of “stripper wells.”
Fossil Fuels Still Account for 80% of Energy Consumption. Fossil fuels, including petroleum, natural gas, and coal, have accounted for at least 80% of energy consumption in the U.S. for well over a century, according to the Energy Information Administration.
Overall energy consumption in the U.S. reached a record high in 2018 of 101 quadrillion British thermal units (Btu), of which more than 81 quadrillion Btu were from fossil fuels, Kallanish Energy reports.
Despite the increase, the fossil fuel share of total U.S. energy consumption in 2018 increased only slightly from 2017 and was the second-lowest share since 1902.
The increase in fossil fuel consumption in 2018 was driven by increases in petroleum and natural gas consumption. Coal consumption fell by 4.3% in 2018, the fifth consecutive annual decline, EIA reported.
U.S. consumption of coal peaked in 2005, and has declined nearly 42% since then. U.S. coal consumption fell to 687 million short tons in 2018, the lowest level of coal consumption in the U.S. since the 1970s.
Natural gas consumption increased in 2018, reaching a new record consumption level of 82.1 billion cubic feet per day (Bcf/d). Natural gas consumption has increased in eight of the past 10 years, according to EIA.
Growth in natural gas consumption has largely been driven by increased consumption in the electric power sector. Overall, U.S. consumption of natural gas has increased by 37% since 2005.
Petroleum consumption also increased in 2018, as petroleum product supplied reached the equivalent of 20.5 million barrels per day (Mmbpd).
Despite the increase in 2018, U.S. petroleum consumption remains lower than its peak consumption level set in 2005. Petroleum has been the largest source of energy consumption in the U.S. since surpassing coal in 1950.
The renewable share of energy consumption in 2018, which includes hydroelectricity, biomass, and other renewables such as wind and solar, was 11.4%, slightly less than its 2017 share. The largest growth in renewables over the past decade has been in solar and wind electricity generation.
12 Million Barrels Per Day in April! Two recent reports confirmed the preeminence of the United States in its production of crude oil and its related derivative, natural gas. Earlier this month British Petroleum (BP) released its “Statistical Review of World Energy” for 2019 in which it reported that the United States extended its lead as the world’s top oil producer to a record 15.3 million bpd (barrels per day): 11 million bpd of crude and 4.3 million bpd of natural gas liquids (NGL) in April. BP added that the United States led all global oil producers by increasing its production by more than two million bpd in 2018, 98 percent of the total new global production.
Saudis Dig In for Shale Fight as OPEC+ Extends Cuts to 2020. Saudi Arabia, OPEC’s dominant producer, will keep doing the heavy lifting as the cartel and its allies were all but forced to extend their effort to counter the U.S. shale boom into a fourth year. In a meeting on Tuesday, the Organization of Petroleum Exporting Countries and 10 non-members including Russia rubber stamped the cartel’s earlier decision to continue production limits for another nine months. They also adopted a charter putting the OPEC+ coalition on a more solid footing.
Weatherford Declares Bankruptcy. It took seven weeks to finally put the parts in place, but oilfield services firm Weatherford International Plc, a few years ago valued at more than $50 billion, on Monday filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Weatherford has received commitments from lenders for $1.75 billion of debtor-in-possession financing, with proceeds available to fund the company’s working capital needs throughout the bankruptcy process, Kallanish Energy reports
PA Permits June 27, to July 4, 2019
County Township E&P Companies
- Bradford Franklin Chief
- Greene Perry Exco
- Washington Amwell Range
OH Permits for June 22, 2019
County Township E&P Companies
- Guernsey Oxford Eclipse Resources
- Guernsey Oxford Eclipse Resources
- Monroe Jackson Triad Hunter
- Monroe Jackson Triad Hunter
Joe Barone moc.s1569132426eirot1569132426cerid1569132426elahs1569132426@enor1569132426abj1569132426 610.764.1232