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The D. E. Shaw Group Outlines Detailed Plan for Value Creation at EQT Corporation

D. E. Shaw & Co., L.P., on behalf of certain investment funds advised by it that in the aggregate own an approximately 4.0% interest in the common stock and equivalents of EQT Corporation (the “Company” or “EQT”) (NYSE: EQT), today sent a letter to the Board of Directors of EQT outlining a plan that could unlock $8 billion of value for the Company’s shareholders—representing a 50% upside to the current stock price—and that could be completed during the first half of 2018.

The letter was accompanied by a detailed presentation. Both the presentation and the letter can be downloaded at www.deshawmaterials.com.

The full text of the letter follows:

September 14, 2017

Board of Directors
EQT Corporation
625 Liberty Avenue
Pittsburgh, PA 15222
Attn: David Porges, Chairman
Attn: Steven Schlotterbeck, CEO

Dear Dave, Steve, and other Members of the Board:

I am writing to you on behalf of certain investment funds advised by D. E. Shaw & Co., L.P. that in the aggregate own an approximately 4.0% interest in the common stock and equivalents of EQT Corporation (the “Company” or “EQT”). Having conducted extensive analysis, which we detail in the accompanying presentation,1 we believe that EQT is substantially undervalued. Further, we believe that EQT’s Board can remedy this undervaluation by announcing a plan today that, pro forma for the acquisition of Rice Energy Inc., can unlock $8 billion of value for shareholders (representing a 50% increase to EQT’s stock price) and that can be completed during the first half of 2018.

We have been shareholders of EQT for nearly two years and appreciate the dialogue we have had with Dave and Steve. We also understand why investors are frustrated with the Company and its current strategy. In our view, these frustrations are justified in light of (i) the Company’s poor equity performance, particularly given its low leverage and mix of premier midstream and production assets, (ii) the Company’s outlay of $1.85 billion (approximately 17% of its current market capitalization) to acquire additional acreage, despite the Company’s own share price consistently reflecting negative value for undeveloped acreage, and (iii) the uncertain benefits the Company stands to achieve through the acquisition of Rice given the lack of a clear plan to unlock value following the transaction.

To date, EQT’s commitments around the Rice transaction and responses to public shareholder frustration have been inadequate. Despite asking shareholders to approve a substantial acquisition that would result in 35% dilution, EQT has said that it will take eighteen months to develop a “path” toward addressing its persistent sum-of-the-parts discount and likely another twelve months to carry out whatever that path may be. In its response to public criticism of the Rice transaction, EQT has missed an opportunity to provide a clear value creation plan to its shareholders. Instead, EQT management has described the potential for an additional $7.5 billion in synergies without providing a commitment to achieve any portion of them—the kind of communication that puts valuable credibility at risk.

EQT’s Board and Management Can Do More for Shareholders

We believe that EQT should lay out a clear path forward that shows how the Rice acquisition will unlock value for shareholders. In furtherance of this goal, we have carried out extensive research, including working with leading reserve engineers, consulting with former C-level midstream and E&P executives, and retaining tax and corporate counsel to evaluate various transaction structures. In the accompanying presentation, we set forth a plan that allows EQT to acquire Rice and to deliver substantial value to shareholders. We believe the plan is readily executable, can be completed during the first half of 2018, and can result in 50% share price appreciation. The plan consists of the following three actions:

1. Carry Out a Separation of Production and Midstream Businesses.

Following the consummation of the Rice acquisition, EQT Corporation should separate into EQT Production and EQT Midstream. As we detail in the accompanying presentation, we believe that separation is the best path forward and will leave both entities stronger and better able to pursue their respective strategic goals. Additionally, we believe that any tax drag from such a separation following immediately after the Rice acquisition would be immaterial (approximately $1 per share) compared to the opportunity to unlock value of approximately $30 per share or more.

2. Restructure Midstream Businesses Through a Merger of EQM and RMP.

EQT Midstream should simplify its structure by merging EQM and RMP. As we detail in the presentation, this combination would allow the businesses to achieve considerable operational and capital synergies while substantially increasing the incentive distribution rights collected by EQGP, thereby benefitting all parties (EQT, EQM, RMP, and EQGP). Despite RMP’s relatively weak negotiating position given EQT’s ability to control the pace and location of development, we believe that a straightforward no-premium merger is in the best interest of all parties.

3. Appoint Experienced Midstream Executives to the Board of EQT.

Although EQT Midstream represents approximately 40% of EQT Corporation’s equity value and $8 billion in potential value to be unlocked, EQT’s Board lacks any independent directors with executive midstream experience or public company restructuring experience.

We have advised you of the availability of specific candidates with directly relevant experience as former C-level executives of large-capitalization, public, midstream companies. We are encouraged that the Board seems to recognize that these individuals would be valuable additions, and we encourage you to add them to the Board immediately. The addition of the highly accomplished candidates that we have suggested or others with comparable experience would be a tremendous asset to EQT’s Board and in turn to EQT shareholders.

We Look Forward to Working Constructively Together

For years, we, and other EQT shareholders, have taken comfort in management’s acknowledgement of the Company’s sum-of-the-parts discount and the need to address it eventually. Now, on the eve of a significant transaction that will result in substantial equity dilution for EQT shareholders, the time has come for EQT’s Board and management to unlock value for EQT shareholders—not by invoking vague and uncertain potential synergies, but by proposing a clearly articulated plan that can be executed promptly. We look forward to working constructively together for the benefit of all EQT shareholders.


Quentin Koffey
Portfolio Manager
D. E. Shaw & Co., L.P.

About the D. E. Shaw Group

Founded in 1988, the D. E. Shaw group is a global investment and technology development firm with over $40 billion in assets under management, predominantly from institutional investors. We have a significant presence in the world’s capital markets, investing in a wide range of companies and financial instruments in both developed and developing economies. The firm has extensive experience investing in the energy sector in both public markets and private equity. Funds managed by the D. E. Shaw group have been shareholders of EQT for nearly two years, and we have a long-term view on its value creation potential and best path forward.


This letter (the “Letter”) represents the opinions of D. E. Shaw & Co., L.P. (“DESCO LP”) on behalf of certain investment funds managed or advised by it (“the Funds”) that currently beneficially own, or otherwise have an economic interest in, shares of EQT Corporation (the “Company”). The Letter is for informational purposes only and does not take into account the specific investment objectives, financial situation, suitability, or particular need of any person who may receive the Letter. Nothing in the Letter constitutes investment, financial, legal, or tax advice, and the Letter should not be relied on as such.

The views expressed in the Letter are based on publicly available information and DESCO LP’s analyses. The Letter contains statements reflecting DESCO LP’s opinions and beliefs with respect to the Company and its business based on DESCO LP’s research, analysis, and experience. All such statements are based on DESCO LP’s opinion and belief, whether or not those statements are expressly so qualified. DESCO LP acknowledges that the Company may possess confidential information that could lead the Company to disagree with DESCO LP’s views and/or analyses. Certain financial information and data used in the Letter have been derived or obtained from filings made with the U.S. Securities and Exchange Commission by the Company or by other companies that DESCO LP considers comparable. DESCO LP has not sought or obtained consent from any third party to use any statements or information indicated in the Letter, and no such statements or information should be viewed as indicating the support of any third party for the views expressed in the Letter.

Information contained in the Letter has not been independently verified by DESCO LP, and neither DESCO LP nor any of its affiliates makes any representation or warranty, whether express or implied, as to the accuracy, fairness, or completeness of the information contained herein. By receiving and retaining the Presentation, each recipient agrees and acknowledges that it will not rely on any such information. None of the companies in the D. E. Shaw group; nor any of their respective affiliates,; nor any, shareholders, partners, members, managers, directors, principals, personnel, trustees, or agents of any of the foregoing shall be liable for any errors or omissions (as a result of negligence or otherwise, to the fullest extent permitted by law in the absence of fraud) in the production or contents of the Presentation, or for the consequences of relying on such contents.

All of the information in the Presentation is presented as of the date of the Letter (except as otherwise indicated), is subject to change without notice, and may have changed (possibly materially) between the date as of which such information is presented and the date the Letter was received. No member of the D. E. Shaw group has any obligation to update the information in the Letter to account for changes subsequent to any date as of which such information is given or to provide any additional materials.

The Funds currently beneficially own, and/or have an economic interest in, shares of the Company. The Funds are in the business of trading (i.e., buying and selling) securities, and it is expected that the Funds will from time to time engage in transactions that result in changes to their beneficial and/or economic interest in the Company. To the fullest extent permitted by law, DESCO LP may cause the Funds to buy or sell shares in the Company, or otherwise to change the form or substance of any of their investments in the Company, without notice to or the consent of the Company or any other recipient of the Letter.

The Letter may contain certain information that constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology (or the negatives thereof). Actual events, results, and/or performance may differ materially from what is contemplated in such forward-looking statements. Any such forward-looking statements have been prepared based on, among other things, DESCO LP’s current view of economic conditions, which view it believes to be reasonable in light of information that is presently available but which may prove to be incorrect. This information is subject to uncertainties, changes, and other risks beyond DESCO LP’s control, including without limitation broad trends in business, finance, and the economy (including, for example, monetary policy, interest rates, inflation, and currency values), legislation and regulation, the availability and cost of short-term and/or long-term funding and capital, and the conditions prevailing in the securities and/or other markets. Industry experts may disagree with DESCO LP’s views. No assurance, representation, or warranty is made by any person that any of DESCO LP’s aims, assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in the Letter may be relied upon as a guarantee, promise, assurance, or representation as to the future.

The Letter does not convey an offer of any type. It is not intended to be, and should not be construed as, an offer to sell, or the solicitation of an offer to buy, any security, including without limitation an interest in any Fund.

1 This letter and the accompanying presentation are available at www.deshawmaterials.com.

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