From The Pittsburgh Post-Gazette
Toby Rice is set to take control of EQT Corp., nine months after launching a fast-moving campaign to replace the oil and gas company’s leadership and less than two years after selling his company Rice Energy Corp. to EQT.
In a highly anticipated vote to tallied at EQT’s annual meeting on Wednesday, the Downtown company’s shareholders overwhelmingly voted to turn over control of the company to seven candidates nominated by brothers Toby and Derek Rice, and five others nominated by EQT including a third Rice brother, former Rice Energy CEO Danny Rice. An official vote count will be available later .
This arrangement gives the edge to directors that have vowed to replace current EQT CEO Rob McNally with Toby Rice. That transition of power will take place sometime on Wednesday. Mr. Rice said after the annual meeting that in addition to replacing Mr. McNally, he will also replace EQT’s general counsel. Then he’ll evaluate other executives.
Mr. Rice has previously said he has 15 former Rice Energy executives on standby to take over the top functions of the company. But on Wednesday, he suggested they may not be replacing as much as augmenting the current management structure.
Mr. Rice and his brothers started Rice Energy Inc. in 2008 and grew it into a public company with nearly 600 employees by the time they sold it to EQT in 2017 for $6.7 billion.
EQT faced some shareholder opposition to that acquisition, including from hedge fund D.E. Shaw, which was the first to come out in favor of Team Rice in the current proxy battle.
The dissident campaign went public after EQT announced disastrous results for the third quarter of 2018, telling investors it blew its capital budget by $300 million in a rush to drill very long horizontal wells enabled by combining EQT’s land holdings with Rice’s.
The public challenge followed a brief behind the scenes period where Mr. Rice reached out to EQT’s board of directors and offered himself as a turnaround agent. Within weeks, however, Team Rice told shareholders that it would nominate its own candidates for the board of directors and, if successful, those candidates would install Mr. Rice as CEO.
Mr. McNally has been under constant pressure to prove himself since November. Even as the company highlighted improved results during the first quarter this year, the Rice effort appeared to gain momentum with three of the top shareholders publicly pledging their support for the Rice team and influential proxy advisory firm Institutional Shareholder Services coming out in its favor.
EQT’s management won approval from the other major proxy consultant, Glass Lewis, but no shareholders announced their support before the meeting.
Even before Wednesday’s vote, the dissident effort succeeded in nudging the retirement of EQT’s three longest serving directors, including its chairman, Jim Rohr.
EQT has warned that the kind of leadership change promised by the Rice team would be disastrously disruptive for the company, the nation’s largest oil and gas producer with about 850 employees and thousands of shale wells across three states. After all, the company has been through three CEOs in as many years, and had recently corrected course, EQT’s management told investors during the proxy campaign.
In an interview with the Post-Gazette last month, John McCartney, a newly elected EQT director nominated by the Rice brothers, said too much has been made of the potential disruption.
“There will be transformation at EQT which I believe will be extremely positive,” he said. “Fifteen people is not an awful lot. And a number of these people will help build and fulfill roles that aren’t present at EQT, especially at IT and operations planning.”
Mr. McCartney said the key will be to bring to EQT the culture of Rice Energy, where he sat on the board of directors from 2015.
“The Rice team is not proposing to do anything more than what they’ve achieved at Rice,” Mr. McCartney said. “That’s what this campaign is basically all about: a proven set of operators against a team that has not been able to do anything with the best assets in the basin.”
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Mr. Rice has promised to bring a “shalennial” mindset to EQT. He came up with the term while at Rice Energy and though the definition has varied — in fact, each floor at Rice’s headquarters had a white board where employees were encouraged to write their own definitions — it connotes a young, tech-minded approach to oil and gas.
His first-day speech has already been ready for weeks, Mr. Rice said earlier this month.
The Rice family owns more than 3% of EQT stock. Mr. Rice said last week that Danny Rice, who has been on EQT’s board since the 2017 acquisition, will remain in that role.
“I think Danny’s content as a board member,” Mr. Rice said.
Danny Rice agreed on Wednesday. “This is Toby’s show,” he said.
Derek Rice, a petroleum geologist, will be part of the a team helping to “stand up” the new development plan. Once that’s completed, Mr. Rice said, he envisions his brother assuming the role of an ideas man — surveying the oil and gas horizon, pulling out best practices and coming up with new ones for EQT.
The change in control will put the Rice brothers back in charge of hundreds of their former employees, their old wells and the landowners they signed leases with.
Toby Rice plans to get to know the rest of EQT’s employees quickly and personally.
