Another hedge fund pressures EQT to split drilling and pipeline assets

Another group of EQT Corp. shareholders has drafted a sharply-worded letter to the oil and gas company over its handling of a proposed $6.7 billion acquisition of Rice Energy Inc.

D.E. Shaw Group, a New York hedge fund that represents 4 percent of EQT’s stock, sent a letter to the Pittsburgh-based company Thursday morning outlining its plan to “unlock $8 billion in value for shareholders.” In order words, to drive up the company’s stock price by 50 percent by the middle of next year.

“Shareholders are frustrated and question the strategic direction of EQT,” D.E. Shaw wrote in a presentation released Thursday.

So far, the most vocally frustrated shareholder has been another New York-based hedge fund Jana Parnters. Jana began stockpiling EQT stock early this year in order to pressure the company to spin out all of its pipeline assets into a separate publicly-traded company. Jana was caught off guard by the Rice acquisition announcement and mounted an aggressive campaign to stop the deal, which it thinks will delay EQT’s ability to split off its midstream division.

D.E. isn’t looking to scuttle the Rice Energy deal, which is projected to close by the end of the year. The plan it proposed involves consummating the deal, then immediately separating EQT’s oil and gas exploration business from its midstream business, merging those midstream assets with Rice’s, and appointing new members to EQT’s board.

“Announce a plan today,” the group urged EQT, which raced against D.E. Shaw’s announcement on Thursday by releasing its own statement just before midnight on Wednesday. In it, EQT committed to forming a committee just after the Rice deal closes to “evaluate options” and vowed to unveil a decision by the end of the first quarter next year.

In a separate answer to Jana’s earlier criticism against EQT’s motives for the Rice deal — Jana suggested that because executives get rewarded for growth in oil and gas production, they are incentivized to make deals that boost that production by any means even if those deals put shareholders at a disadvantage — EQT said that Rice’s gas production won’t be counted toward the metric in determining executive pay after the deal.

“Furthermore, production volume will no longer be a performance metric for EQT’s long-term compensation programs,” the company said. Instead, executives will be judged on efficiency improvements rather than how much more gas came out of the ground this year versus last.

Anya Litvak: or 412-263-1455.

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