Toby Rice, the co-founder of Rice Energy which was acquired by EQT Corp in 2017, will drop his lawsuit against EQT after the U.S. oil and gas producer said it was not seeking to manipulate the outcome of his board challenge, a Rice spokesman said May 5.

RELATED: Rice Energy Founder Launches Lawsuit Against EQT

Rice and his brother Derek have put forward a slate of nominees to challenge EQT's board in a shareholder vote in July, arguing EQT has mismanaged the $6.7 billion acquisition of their company to the detriment of EQT investors.

In a lawsuit last month, Rice also accused EQT of seeking to mislead its shareholders by portraying his board nominees as endorsing EQT's existing board, and presenting their election as triggering covenants that would require EQT to repay early or refinance its debt.

In a letter on Sunday to its management, EQT said the lawsuit was a distraction without merit. It said the Rice team had misinterpreted a "standard form director and officer questionnaire" and that it would not seek to conflate its board directors with the Rice nominees. It added it had no intention of triggering change of control provisions that would have required a debt refinancing or early repayment.

In response, the Rice team told Reuters in its statement it was pleased "EQT has conceded that it must withdraw its unreasonable requirements" and that it was "deeply disappointed" that a lawsuit was needed to address the issue. The Rice team is continuing with its effort to overthrow EQT's board.

Pittsburgh-based EQT became one of the largest gas-focused U.S. producers when it completed its tie-up with Rice Energy. Despite its new scale, EQT’s share price has lagged since the merger, spurring the Rice brothers to call for changes.

How the company develops its assets is at the heart of the dispute. The Rice brothers insist the current management has not fulfilled EQT's potential, while the company insists the siblings’ projections are inflated and based on outdated market conditions.

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