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The new CEO of EQT, the largest gas producer in Pennsylvania, recently went on the road to assure landowners that his takeover of the company will pay dividends.
Toby Rice is already well-known in Southwestern Pennsylvania and Ohio as the former president of Rice Energy, a company which had many leases and wells in Western Pennsylvania and Ohio and was ultimately acquired in 2017 by EQT. He recently went on a two-week outreach campaign to connect with landowners in Southwestern Pennsylvania, West Virginia, and Ohio. This campaign consisted of holding well-attended events for landowners and community members at which he spoke about his background and business philosophy, which revolves around technology, planning, and relationships. He calls it the “shalennial approach” to gas development.
EQT’s acquisition of Rice Energy was not a smooth transition for many of Rice Energy’s management team, executives, and other employees. Toby Rice, his brothers Daniel IV and Derek, and a number of Rice executives and workers were not retained by EQT. The Rices, though not employed by EQT, did hold about 3 percent of EQT stock after the sale, and Daniel was added to the board of directors.
But Toby Rice quickly became critical of the company’s performance and management, and in the third quarter of 2018 EQT announced it had gone $300 million over its capital budget for drilling.
The combination of the companies’ land holdings, Rice said at the first of the four meetings in Greene County, where Rice was one of the first companies leasing land, created “a world-class asset base, but despite that EQT failed to produce results.”
So, he and brother Derek launched a proxy battle for control of EQT’s board of directors. In July, all seven Rice nominees were elected, and the new board named Toby Rice as president and chief executive, replacing Robert McNally.
Toby Rice quickly replaced others on the EQT management team with former Rice executives and developed a 100-day plan to get the company back on track.
The key to Rice’s plan is what he calls “combo drilling,” or drilling wells on multiple pads in the same area with long lateral lines that gather the gas in sequence, in order to maximize gas production, drilling efficiency, and to “condense the amount of activity so we can minimize the amount of disruption” to the affected communities, he said. That strategy should also allow owners to collect more in royalties.
He stressed that the complex planning must be done in advance and that the new management team is now putting together a development plan for its assets. EQT owns two-thirds of the gas leases in Greene County.
Rice also noted that the company will have to “evolve the way we develop the resources” given that natural gas has been selling at an all-time low due to an oversupply.
The audience packing the EQT Recreation Center near Waynesburg seemed encouraged that the Rice team is back in charge. Rice, who mingled with the crowd before and after speaking, also stressed that landowner relations are important and his team is committed to resolving landowner issues that EQT had.
In Bridgeport, W.Va., much of the town hall focused on landowner issues with EQT. During the question-and-answer session, multiple landowners signaled that EQT representatives stopped returning their calls. Rice assured the audience that they will be pursuing technological innovations to make all facets of EQT’s operations more efficient, including customer service. He highlighted a new phone system that logs all landowner calls and allows for multiple members of EQT’s team to answer calls, shortening the communication pipeline.