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Moody's shifts EQT outlook to negative after activists win proxy battle

Moody's on July 11 lowered Appalachian shale gas driller EQT Corp.'s rating outlook to negative from stable after a group of activist investors led by Toby and Derek Rice won control of the company's board.

At the same time, the rating agency affirmed EQT's senior unsecured regular bond/debenture rating at Baa3 and its senior unsecured medium-term note program and senior unsecured shelf ratings at (P)Baa3.

The revised outlook reflects uncertainty from the recent board and management changes at EQT and the company's already weakening cash flow metrics in an environment of low natural gas prices, Moody's said in a research note. "A lack of clarity around the company's future strategy vis-a-vis capital preservation as well as its ability to successfully execute on its debt reduction plan create additional risk that is reflected in the negative outlook," senior analyst Sreedhar Kona wrote.

The rating agency may change the outlook to stable if EQT's new management devises a "conservative operating and financial strategy" and cuts debt to withstand weak natural gas fundamentals.

EQT on July 10 appointed Toby Rice president and CEO, succeeding Robert McNally, whose employment was terminated. The country's largest gas producer also named John McCartney chairman of the recomposed board, which includes seven members nominated by the Rice team.