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Toby Rice, former COO of Rice Energy, during an interview at the Post-Gazette office on the North Shore Wednesday, Jun 12, 2019 in Pittsburgh.
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A second opinion on the EQT/Rice proxy battle veers toward EQT

Pam Panchak/Post-Gazette

A second opinion on the EQT/Rice proxy battle veers toward EQT

If ever there was hope for good news in a second opinion, EQT Corp. harvested it Saturday when proxy advisory firm Glass Lewis & Co. recommended that shareholders reject the dissident campaign launched by Toby and Derek Rice and stick with EQT’s chosen team.

Just one day before Glass Lewis released its recommendations, the other major proxy advisory firm, Institutional Shareholder Services Inc., sided with the Rice brothers, telling shareholders to replace a majority of EQT’s board of directors with Rice nominees who would oust current CEO Rob McNally and swap out his executive team with former Rice leaders.

Glass Lewis, on the other hand, projected confidence in Mr. McNally, who became CEO in late 2018.

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“We find that management and the board are taking appropriate steps to improve operating efficiency at the company, including identifying material cost savings and delivering favorable performance in the first two quarters with Robert McNally at the helm as CEO,” the proxy firm said.

Toby Rice, former COO of Rice Energy, during an interview at the Post-Gazette office on the North Shore in June.
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Unlike ISS, which drew a direct line between the company’s past performance and current management and board, Glass Lewis said such a link is unfair and unfounded.

Just because Mr. McNally was the CFO at EQT since 2016 doesn’t mean he set the direction or strategy of the company, the analysis concluded.

As analysts and reporters have grappled to make sense of the voluminous and contradicting claims made by both sides about who drilled cheaper and better wells — EQT or Rice Energy Inc., the company started by the dissident Rice brothers and a third brother, Danny Rice, and which was acquired by EQT in 2017 for $6.7 billion — Glass Lewis all but suggested that the pundits stop trying.

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The differences in how each side calculates its own well costs and how the Rice team is projecting its own historical results on what is possible at EQT “make it difficult for shareholders to draw a clear conclusion,” Glass Lewis concluded.

Besides, Glass Lewis reasoned, if there are strategies that were deployed at Rice that would be useful at EQT, the company already has access to them in the data that came along with the acquisition and “from the perspective and experience” of Danny Rice. Mr. Rice is the former CEO of Rice Energy who has been on EQT’s board since the merger and has been nominated for re-election by both the Rice team and EQT.

The proxy advisory firm said EQT has sowed enough doubt in Rice’s analysis that “we are not convinced the Rice Group plan offers a credible path to achieving material incremental savings above what EQT is already targeting.”

“We believe it would be reasonable for shareholders to provide management and the board with additional time to achieve target savings before seeking further change,” Glass Lewis wrote.

Blue Jenkins, left, talks with Rob McNally, CEO of EQT, right, during their fundamentals update meeting in  Mr. McNally's conference room.
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The Rice team did not address the Glass Lewis recommendation in a statement and instead praised the analysis of ISS, thanked two major EQT shareholders who said they were voting in favor of Rice’s slate of board nominees and attributed the 10 percent jump in EQT’s stock on Friday to those two developments.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455.

First Published: June 30, 2019, 12:00 p.m.
Updated: June 30, 2019, 1:48 p.m.

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