We’re not small potatoes, Rice team tells EQT

If EQT’s strategy for fending off a leadership takeover by the Rice team is to condescend about the quaint little startup these kids built, Toby and Derek Rice’s answer is to bathe flamboyantly in the language of youthful vigor.

Sure, EQT Corp. has a rich history, the brothers said Tuesday during a conference call with analysts.

“However, with history comes some baggage,” Toby Rice said.

The Rice team — as the brothers refer to themselves and the 15 unnamed, mostly former Rice Energy Inc. executives who stand ready and eager to take the reins at EQT — will bring “new blood and new technology to revive this business.”

EQT acquired Canonsburgbased Rice Energy Inc. for $6.7 billion in 2017.

The brothers first tried to intervene in the affairs of Downtown-based EQT in November 2018, they said, after a growing disappointment that the oil and gas company wasn’t following the blueprint that Rice had laid out during the company “integration period.”

The tone was different then, Toby Rice said in an interview Tuesday with the Post-Gazette after the conference call.

“It was, ‘Listen, you guys have a problem. I’d love to help fix it. In any capacity.’

“I did not go to them and say I needed to be CEO,” he said. “There was no ego. This was, ‘I just want to help.’ But management’s response was ignoring that.”

The board of directors ignored them as well, the Rice team said.

Backed by certain shareholders, they are demanding that EQT schedule its annual shareholder meeting for April and let the shareholders — “the real owners” of the company — decide whether to replace the board with Rice-approved picks and put Toby Rice in charge as CEO.

It wasn’t personal, Toby Rice said, when he concluded that EQT’s current management team simply can’t squeeze all the juice from the company’s assets.

The Rice team’s strategy, he said, involves bringing in the right people and digitizing everything.

Imagine, they said, that Rice’s cutting-edge technology platform — they called it the “shalennial operating system,” because they’re millennials and shale millionaires — is sitting dormant at EQT.

Their argument isn’t just that Grandpa doesn’t know how to program the VCR. It’s that he has a supercomputer and doesn’t even know it.

The Rice app that tracked more than 400 tasks needed to run the company — from leasing land to scheduling water trucks at the well site to selling the produced gas — would be

the backbone of the Rice team’s efficiency machine, they said.

The Rice team said they agreed with EQT’s current management on how much gas the company should be producing, which acreage it should be developing and how it should be using its cash (buying back shares to help drive up the stock price for existing shareholders, of course).

They just disagree on how to do all that. Namely, they think they can shave $500 million off the cost of delivering this plan beyond what EQT has promised.

They’re simply better at planning their operations, the brothers said, and testing their innovations with data. The things that EQT thinks are cool and innovative — like jamming more sand into fractures to keep them open so the gas can escape into the wellbore — the Rices have already tried and settled on the optimal formula. “We’ve moved on,” Derek Rice said.

Tuesday’s call was a response to criticism leveled at the Rice plan by EQT CEO Rob McNally during the company’s earnings call last month.

At that time, Mr. McNally said EQT was too big and too complex a company for the Rice boys to handle. He also challenged the Rices’ well costs, calculations and assumptions, which the Rice team moved to rebut in a recent slide presentation.

After the Rice conference call on Tuesday, EQT reacted with some polite generics: “We disagree with the analysis put forward by the Rices and look forward to continuing our discussions directly with shareholders,” the company said. “EQT remains focused on reducing costs and generating substantial free cash flow to create further value for EQT shareholders.”

Toby Rice declined to say who the 15 changemakers in waiting are, or who the team plans to nominate to replace the board of directors, except that the candidates will have “relevant shale experience.”

As an aside, he marveled that his brother Danny Rice, former CEO of Rice Energy who now sits on EQT’s board, was not included in the newly formed committee to oversee operations.

“The one person who is most qualified to sit on the operating committee ...” he said.