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Investment fund wants new board for Appalachian driller Range Resources

A growth and value fund with no record of shareholder activism said it will vote against Appalachian shale gas driller Range Resources Corp.'s entire slate of directors and against the company's 2018 executive pay plan at Range's May 16 annual meeting in hopes of shaking up a company whose stock has been in decline for years.

"We are voting against all current directors at this year's annual meeting because we believe the board as a group is representing its own and management's interests instead of the interests of shareholders," Stelliam Investment Management LP Portfolio Manager Ross Margolies wrote in a May 10 letter to Range's leading independent director. "We believe that the actions of Range's management, with the oversight of the board, have destroyed substantial value at Range."

A Range spokesman had no comment on Stelliam's letter.

Stelliam, which owns 3.6% of Range's common stock, said the 2018 performance metrics for executive pay were undemanding. The letter said executives could reap maximum rewards even if Range missed its guidance to analysts and investors. "Management's annual compensation has remained generous over the past four years while the stock has declined approximately 80%."

Stelliam identified retiring CFO Roger Manny as an example of rewarding failure at Range, whose share values have plummeted 83% in the past four years, according to S&P Global Market Intelligence data.

"The board has rewarded failure by approving the payment of enormous 'retirement' benefits to executives, including Roger Manny, who as CFO oversaw the disastrous Memorial Resources acquisition," Stelliam said.

Range's $4.2 billion purchase of Memorial Resources' operations in the Terryville play of northwestern Louisiana in 2016 as a way to escape the gas pipeline bottlenecks of Appalachia has proven to be a disappointment. "We thought diversifying away from a congested basin into a premium market at a reasonable cost would have worked better," Guggenheim Securities LLC analyst Subash Chandra said while previewing Range's first-quarter results April 19. "The challenge has been in achieving decent results or efficiencies in the new basin."

Manny, who is scheduled to retire after this year's annual meeting, will collect $493,000 per year in retirement pay, according to Range's proxy statement. His total compensation for 2017 was $4.3 million, the proxy said.

"The very officers and directors who have been the primary drivers of Range's poor stock performance have profited at shareholder expense," Stelliam said. "We believe compensation should be tied to performance, not who sits in a particular seat."

Stelliam is not the first investment fund to take Range's management to task. Two years ago, activist fund Sailing Stone Capital, now Range's largest shareholder, with a 17% stake, threatened a proxy fight unless Range appointed a Sailing Stone nominee to its board. Steffen Palko, the co-founder of shale gas giant XTO Energy Inc., now a unit of Exxon Mobil Corp., took the new board seat.