EQT Files Definitive Proxy and Mails Letter to ShareholdersSource: Business Wire
- Highlights Success of New EQT Board, Leadership Team and Ambitious, Realistic Strategic Plan Already Delivering Clear Results
- Urges Support for the EQT Team, Which Is Creating Significant and Sustainable Long-Term Value for Shareholders
- Recommends Shareholders Vote “FOR” All 12 of EQT’s Highly Experienced Director Nominees on the GOLD Universal Proxy Card TODAY
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EQT HAS OUTPERFORMED PEERS (1) BY 61% AND THE XOP BY 29% SINCE THE SPIN-OFF OF THE MIDSTREAM BUSINESS (Peer median includes AR, CNX, COG, RRC and SWN.) (Graphic: EQT)
The EQT Board of Directors (the “Board”) recommends that shareholders support the EQT team and strategy that is delivering results by voting on the GOLD universal proxy card “FOR” EQT’s 12 highly qualified director nominees.
In connection with the filing of the definitive proxy statement, the independent directors of EQT mailed a letter to shareholders. Highlights of the letter include:
- EQT has transformed into a focused pure play upstream industry leader with a simplified corporate structure and a refreshed Board and leadership team.
The new EQT team is successfully executing an ambitious, realistic
strategic plan to drive substantial and sustainable free cash flow
growth and value creation.
EQT generated more than
$300 millionof adjusted free cash flow2 in the last two quarters; and
The Company is on track to achieve approximately
$300 to $400 millionof adjusted free cash flow2 in 2019, and at least $2.9 billionof adjusted free cash flow2 through 2023.
- EQT generated more than
- EQT’s independent, diverse Board slate has the right skills and experience to oversee EQT’s progress.
- The Board values feedback from shareholders and is committed to continually enhancing governance as demonstrated by the Company’s three new independent director nominees and use of a universal proxy card.
- The Board has carefully considered the Toby Rice slate and determined the EQT nominees are better suited to continue to oversee EQT’s successful transformation.
- The Board believes that the Rices’ campaign is designed to install Toby as CEO and his family and friends on the Board and management team. The Board should not be a friends-and-family club.
- The Board believes that the Toby Rice plan is fundamentally flawed and unrealistic, would be destabilizing and value destructive and is solely designed to advance the interests of the Rice family and their friends, not EQT.
The full text of the letter to shareholders follows below:
Support the EQT Team Successfully Creating Significant and Sustainable Long-Term Value for Shareholders
Vote the Enclosed GOLD Universal Proxy Card Today “FOR” All 12 of EQT’s Highly Experienced Director Nominees
Dear Fellow EQT Shareholder:
Over the last year,
Before EQT’s Annual Meeting of Shareholders on
At this year’s meeting, a group led by
We encourage you to support the EQT team and the effective strategy that is delivering results and vote today on the GOLD universal proxy card “FOR” EQT’s 12 nominees:
We believe the choice is clear:
Support the EQT team that is driving substantial and sustainable free cash flow and shareholder value or
Cede control of EQT to the Toby Rice slate, a team of family and friends that is deeply conflicted and NEVER generated positive free cash flow at Rice Energy.
THE NEW EQT BOARD AND LEADERSHIP TEAM ARE OPERATING FROM A POSITION OF STRENGTH AND SUCCESSFULLY EXECUTING AN AMBITIOUS, REALISTIC STRATEGIC PLAN
Today, EQT is the largest independent natural gas producer in
As part of EQT’s transformation into a focused upstream industry leader,
the Company refreshed its Board and management team.
EQT Is Outperforming Appalachian Peers
As market sentiment shifted to focus on capital efficiencies over volume growth, so have EQT’s operations. We anticipated this shift and took aggressive, meaningful and decisive steps to reduce costs and drive efficiencies to generate substantial and sustainable free cash flow growth.
We have increased production volumes, delivered substantial operational
improvements and reduced annual costs by
Operating plan focused on enhancing operations, increasing efficiency and accelerating free cash flow growth
Working to address legacy issues, EQT’s new management team acted
swiftly and developed a rigorous, bottom-up operating plan that was
Decisive actions taken to optimize operational results
In December, the Board formed an Operating and Capital Efficiency Committee. This committee is made up of independent directors who collectively have more than 125 years of E&P operating experience. The committee has undertaken an ongoing review of the Company’s operations and capital deployment, reviewed detailed operational benchmarking analyses and remained fully engaged in our efforts to drive further efficiency gains and cost reductions.
In March, our deep bench of talent was strengthened with the appointment
EQT DELIVERED MORE THAN
As we have implemented comprehensive cultural changes, EQT has generated
The Rice Team has never generated positive free cash flow
On the other hand, Rice Energy never produced positive annual free cash
flow while operating as a public company. In fact, it burned through
EQT’s operational focus is driving further cost savings
With the support and oversight of
EQT is one of the industry’s lowest cost operators
Contrary to the Rices’ repeated claims, EQT already stands as one of the lowest cost operators in its peer group, as noted in the chart.
EQT WELCOMES DIVERSE PERSPECTIVES IN THE BOARDROOM AND IS COMMITTED TO CONTINUALLY ENHANCING GOVERNANCE
EQT has demonstrated that we value the feedback we have received through
extensive shareholder engagement. Board refreshment is a priority for
the new EQT, and we are pleased to nominate
The Rice family already has proportionate representation on EQT’s Board
Given the Rice family’s 3.1% ownership interest in EQT, and Daniel Rice’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. The Board believes Daniel brings relevant experience with regard to Rice Energy’s legacy assets as well as a former public company CEO’s perspective to the EQT boardroom.
Best-in-industry Board composition
The composition of our 2019 director slate reflects our focus on closely aligning the skill sets, experience and perspectives of the Company’s directors with the dynamic needs of EQT. We are confident that our new nominees and the incumbent directors seeking reelection are best qualified to help ensure EQT continues to successfully generate substantial and sustainable free cash flow growth.
Enfranchising EQT shareholders with the universal proxy card
EQT’s commitment to outstanding governance extends beyond refreshment actions. For the upcoming Annual Meeting, EQT is implementing one of today’s most forward-thinking governance constructs – the universal proxy card.
EQT IS OPEN-MINDED AND VALUES FEEDBACK FROM SHAREHOLDERS
BUT THE RICES’ DEMANDS ARE UNREASONABLE, SELF-SERVING AND WOULD BE HIGHLY DESTABILIZING IF IMPLEMENTED
EQT has responsibly, but meaningfully, disrupted the status quo. As reflected in the actions taken over the last year, we embrace disruption when we believe changes will yield improved and meaningful results without introducing material risk to ongoing operations.
EQT’s director nominees are more qualified
EQT met with the Rices, thoroughly evaluated their claims and determined that their operational ideas are flawed and based on assumptions that overlook key business fundamentals. After careful consideration, the Board determined that the EQT nominees are better suited to continue to oversee EQT’s successful transformation. Toby Rice’s proposal for wholesale change would be counterproductive and destabilizing, especially amid a successful transformation.
Toby Rice intends to replace EQT’s department heads with Rice friends and family
Despite the successful turnaround at EQT that your refreshed Board and management team have overseen, Toby Rice is seeking to replace the majority of the Board and install himself as CEO. Toby Rice has also clearly articulated his intention to appoint former Rice Energy employees – a group that includes his wife and his college baseball coach – to replace up to 15 of the Company’s department heads. We believe the turmoil that would result from the wholesale replacement of the Board and management team would disrupt the Company’s progress, impact financial and operational results, create uncertainty and fear with employees and impair EQT’s valuation.
Toby Rice was replaced as CEO of his own company
The Board carefully considered these factors, noting that Toby Rice was replaced as CEO by his brother Daniel prior to Rice Energy’s IPO and that several of the Rice Group’s nominees oversaw poor governance practices as Rice Energy directors. The Board also has serious concerns about potential conflicts of interest of the Rice Group’s nominees because a number of them have a long history of friendship and service to the Rice family, and at least one has a relative who was employed by Rice Energy.
EQT should not be a family business
The replacement of management with Toby Rice’s friends and family would be irresponsible and a significant step backward for EQT from a governance perspective. We do not believe that turning EQT into a family-and-friends club is in the best interests of the Company or all shareholders. Moreover, we do not believe that Toby Rice is fit to serve as a director or officer of EQT.
SUPPORT THE NOMINEES WHO ARE ALIGNED WITH YOUR INTERESTS –
VOTE TODAY “FOR” EQT’S 12 HIGHLY QUALIFIED DIRECTOR NOMINEES ON THE GOLD UNIVERSAL PROXY CARD
Support the nominees who are independent, not conflicted and successfully overseeing the execution of a proven plan that has already created value for shareholders and will continue to do so in the short and long term. We believe the Rices are using irrelevant information and outdated statistics from the old EQT in an effort to mislead shareholders and advance their campaign to take control of EQT and turn it into a family business. A vote for EQT’s 12 nominees is a vote to reject the Rices’ fundamentally conflicted and self-serving agenda and to continue the successful execution of EQT’s proven cash flow plan.
Your vote is extremely important. It does not matter how many or how few shares you have. It does not matter whether or not you plan to attend the Annual Meeting. You have an opportunity to keep EQT on the best path forward and support EQT’s Board and management team by voting the GOLD universal proxy card. Please note, if you mark “FOR” for more than 12 individuals for the election of directors, all of your votes for the election of directors will be deemed invalid.
We urge you to vote today by telephone, internet or by signing,
dating and returning the enclosed GOLD
universal proxy card in the postage-paid envelope provided. Please
discard and do NOT vote using any white proxy cards you may receive from
Thank you for your continued support of EQT as we work to execute our strategy and drive value and significant cash flow for shareholders. We are building on our momentum and look forward to continuing to engage with all shareholders regarding the positive change underway and our progress in driving accelerated free cash flow growth.
The Independent Members of the EQT Board of Directors
EQT shareholders with questions about how to vote their shares or would
like additional information may call
If you have any questions, or need assistance in voting your shares on the GOLD universal proxy card, please call EQT’s proxy solicitor:
INNISFREE M&A INCORPORATED
TOLL-FREE at 1-877-687-1866 (from the U.S. or
Or at (412) 232-3651 (From Other Locations)
EQT Management speaks to investors from time to time and the analyst presentation for these discussions, which is updated periodically, is available via the Company’s investor relationship website at ir.eqt.com.
This news release contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended.
Statements that do not relate strictly to historical or current facts
are forward-looking. Without limiting the generality of the foregoing,
forward-looking statements contained in this news release specifically
include the expectations of plans, strategies, objectives and growth and
anticipated financial and operational performance of the Company and its
subsidiaries, including guidance regarding projected adjusted free cash
flow. These forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from projected
results. Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. The
Company has based these forward-looking statements on current
expectations and assumptions about future events, taking into account
all information currently available to the Company. While the Company
considers these expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic, competitive,
regulatory and other risks and uncertainties, many of which are
difficult to predict and beyond the Company’s control. The risks and
uncertainties that may affect the operations, performance and results of
the Company’s business and forward-looking statements include, but are
not limited to, those set forth under Item 1A, “Risk Factors,” of the
Company’s Form 10-K for the year ended
Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Adjusted Free Cash Flow
Adjusted free cash flow is defined as the Company’s net cash provided by operating activities less changes in other assets and liabilities, less EBITDA attributable to discontinued operations (a non-GAAP supplemental financial measure defined below), plus interest expense attributable to discontinued operations and cash distributions from discontinued operations, less accrual-based capital expenditures attributable to continuing operations. Adjusted free cash flow is a non-GAAP supplemental financial measure that the Company's management and external users of its consolidated financial statements, such as industry analysts, lenders and ratings agencies use to assess the Company’s liquidity. The Company believes that adjusted free cash flow provides useful information to management and investors in assessing the impact of the Company’s ability to generate cash flow in excess of capital requirements and return cash to shareholders. Adjusted free cash flow should not be considered as an alternative to net cash provided by operating activities or any other measure of liquidity presented in accordance with GAAP.
The table below reconciles adjusted free cash flow with net cash
provided by operating activities, the most comparable financial measure
calculated in accordance with GAAP, as derived from the Statements of
Condensed Consolidated Cash Flows included in the Company's report on
Form 10-Q for the quarter ended
|Three Months Ended||Three Months Ended|
|March 31, 2019||December 31, 2018||Total|
|Net cash provided by operating activities||$||871,287||$||530,866||$||1,402,153|
|(Deduct) / add back changes in other assets and liabilities||(223,934||)||261,216||37,282|
|Operating cash flow||$||647,353||$||792,082||$||1,439,435|
|(Deduct) / add back:|
|EBITDA attributable to discontinued operations (a)||—||(118,934||)||(118,934||)|
|Interest expense attributable to discontinued operations||—||19,452||19,452|
|Adjusted operating cash flow||$||647,353||$||692,600||$||1,339,953|
|Capital expenditures attributable to continuing operations||(476,022||)||(558,351||)||(1,034,373||)|
|Adjusted free cash flow||$||171,331||$||134,249||$||305,580|
|(a)||As a result of the separation of the Company's midstream business from its upstream business and subsequent spin-off of Equitrans Midstream Corporation in November 2018, the results of operations of Equitrans Midstream Corporation are presented as discontinued operations in the Company's Statements of Condensed Consolidated Operations. EBITDA attributable to discontinued operations is a non-GAAP supplemental financial measure reconciled in the section below.|
The Company has not provided projected net cash provided by operating
activities or a reconciliation of projected adjusted free cash flow to
projected net cash provided by operating activities, the most comparable
financial measure calculated in accordance with GAAP. The Company is
unable to project net cash provided by operating activities for any
future period because this metric includes the impact of changes in
operating assets and liabilities related to the timing of cash receipts
and disbursements that may not relate to the period in which the
operating activities occurred. The Company is unable to project these
timing differences with any reasonable degree of accuracy without
unreasonable efforts such as predicting the timing of its and customers’
payments, with accuracy to a specific day, months in advance.
Furthermore, the Company does not provide guidance with respect to its
average realized price, among other items, that impact reconciling items
between net cash provided by operating activities and adjusted operating
cash flow and adjusted free cash flow, as applicable. Natural gas prices
are volatile and out of the Company’s control, and the timing of
transactions and the income tax effects of future transactions and other
items are difficult to accurately predict. Therefore, the Company is
unable to provide projected net cash provided by operating activities,
or the related reconciliation of projected adjusted free cash flow to
projected net cash provided by operating activities, without
unreasonable effort. Projected 2019 adjusted free cash flow is based on
average NYMEX natural gas price (April to December) of
EBITDA Attributable to Discontinued Operations
EBITDA attributable to discontinued operations is a non-GAAP
supplemental financial measure defined as income from discontinued
operations, net of tax plus interest expense, income tax expense,
depreciation and amortization of intangible assets attributable to
discontinued operations for the three months ended
The table below reconciles EBITDA attributable to discontinued
operations with income from discontinued operations, net of tax, the
most comparable financial measure calculated in accordance with GAAP, as
reported in the Statements of Condensed Consolidated Operations included
in the Company’s report on Form 10-K for the year ended
|Three Months Ended|
|December 31, 2018|
|Income (loss) from discontinued operations, net of tax||$||(163,911)|
|Add back / (deduct):|
|Income tax benefit||(31,575)|
|Amortization of intangible assets||4,847|
|Impairment of goodwill||267,878|
|EBITDA attributable to discontinued operations||$||118,934|
Adjusted SG&A per Unit
Adjusted SG&A per unit is a non-GAAP supplemental financial measure that is presented because it is an important measure used by EQT’s management to evaluate period-to-period comparisons of earnings trends. Adjusted SG&A per unit is defined as SG&A less an increase in litigation reserves which was recorded in the fourth quarter of 2018 and indirect costs previously associated with the midstream business prior to the separation that are not permitted to be allocated to discontinued operations under the accounting rules. The measure excludes items that affect the comparability of results or that are not indicative of trends in the ongoing business. Management believes that adjusted SG&A per unit as presented provides useful information for investors for evaluating period-over-period earnings.
The table below reconciles adjusted SG&A per unit with SG&A, the most
comparable financial measure as calculated in accordance with GAAP, as
reported in the Statements of Condensed Consolidated Operations be
included in the Company’s report on Form 10-Q for the quarter ended
|Twelve Months Ended|
|March 31, 2019|
|($ in thousands, unless noted)|
|Selling, general and administrative (SG&A)||$||293,383|
|Add back / (deduct):|
|Increase in litigation reserves||(59,677)|
|Indirect costs previously allocated to the midstream business prior to the separation||(33,758)|
|Total sales volume (MMcfe)||1,514,154|
|Adjusted SG&A per unit||$||0.13|
Participants in the Solicitation
The Company, its directors and nominees and certain of its executive
officers are participants in the solicitation of proxies from
shareholders in respect of the 2019 Annual Meeting. Information
regarding the names of the Company’s directors and nominees and
executive officers and their respective interests in the Company by
security holdings or otherwise is set forth in the Company’s definitive
proxy statement for the 2019 Annual Meeting, filed with the
Blake McLean – Senior Vice President, Investor Relations and Strategy
Michael Laffin – Vice President, Communications