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Letter questions current management's operational strategy

Recent company layoffs cited

Houston — D.E. Shaw, which owns 4.5% of EQT, the biggest US gas producer, on Friday expressed support for a proposal by the former leaders of Rice Energy calling for a management shake-up and change in the company's strategic direction.

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In an open letter to the company's board of directors, the investment firm called on the EQT board to reach a resolution in a dispute with brothers Toby and Derek Rice, two of the founders of Rice Energy, who last month launched a challenge to the current board's leadership. Saying that if such a solution could not be reached soon, D.E. Shaw said the future of the company should be put up for a vote by shareholders.

"We have been disappointed in the current management's poor execution and are excited about the prospect of Toby Rice and the Rice Team returning to lead the company," the letter to the board states. EQT acquired Rice in November 2017.

In an email statement following the release of the D.E. Shaw letter Friday, EQT spokeswoman Linda Robertson said EQT board has invited Toby and Derek Rice to make a presentation to the board later this month.

D.E. Shaw also panned a letter to the board sent by CEO, Robert McNally earlier this month, which outlined the company's strategy to streamline its operations and deliver modest growth, but which also included the announcement of the layoff of approximately 100 managers and workers.

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"Unfortunately, management's January 7th letter announcing a "New EQT" is little more than an announcement of layoffs," according to the investment firm.

"No matter how well-intentioned, current management has not only failed to deliver on the potential of EQT's asset base, but also lacks the relevant operational experience to deliver going forward," the investment firm's letter states.


D.E. Shaw recounts what it perceives as multiple failures by the current EQT leadership, including spending $1.85 billion on acreage that appears to be unlikely to be drilled in the foreseeable future and failure to deliver on promised synergies from the Rice merger. These missteps have resulted in a depressed stock price, the letter states.

EQT should schedule a shareholder meeting in April, its traditionally scheduled time, to allow shareholders a chance to vote on the outstanding issues as soon as possible, D.E. Shaw said. Last year, the meeting was held in June, to give shareholders time to learn about the proposed spinoff of EQT's liquids business, which was completed last November.

"We have and will continue to engage with shareholders to hear their insights and perspectives on our strategy and the company," Robertson said in her statement.

"In the near future, we will be announcing our 2019 plan to unlock the potential of EQT's assets. We intend to achieve mid-single digit year-over-year growth combined with meaningful free cash flow, and when we announce our 2019 capital program, we will provide additional operational and financial projections."

The company "will also provide clear and measurable action items so that shareholders can assess our progress," according to the statement.

-- Jim Magill,

-- Edited by Richard Rubin,