February 5, 2019 / 5:15 PM / 10 months ago

Rice founders rebuke gas producer EQT, pressing case for new board, CEO

HOUSTON, Feb 5 (Reuters) - The founders of Rice Energy on Tuesday outlined a plan to turn around EQT Corporation, rebuking its performance a year and a half after the two companies merged and proposing it replace its chief executive officer and board.

Appalachian-focused EQT acquired rival Rice Energy for $6.7 billion in mid-2017, making it the largest natural gas producer in the United States. However, its share price has tumbled since the merger, drawing criticism from Rice Energy founders, Toby and Derek Rice, who have pegged its weak share performance to operational and management issues within EQT.

On Tuesday, in a presentation to shareholders, they proposed appointing Toby Rice, former chief operating officer for Rice Energy, as EQT's new chief executive, and revamping its board.

EQT in January released its 2019 guidance, drawing criticism from the Rice brothers who said they would challenge the board in a shareholder ballot.

The brothers said they could improve EQT's free cash flow by $500 million per year. They proposed streamlining aspects of the organization, digitizing workflows, and improving planning to reduce well cost.

A representative for EQT did not immediately respond to a request for comment.

Shares of EQT were down 1.4 percent to $19.49 in mid-morning trading on Tuesday and are off 28 percent in the past 52 weeks.

EQT's average Marcellus well cost for a 12,000-foot lateral was $1,250 per foot in 2018, while Rice, before its merger with EQT, averaged $790 per foot for wells with laterals reaching 8,800 in the same region, according to the Rice presentation. The brothers also said EQT has historically "erroneously adjusted downwards" its well costs.

Rice, pointing to its previous strategies, said operations could be improved by altering well designs to include more sand, water and stages per foot.

Rice said it had initiated a dialogue with EQT to improve its business, but claimed those suggestions have been ignored, prompting it to bring their concerns to shareholders.

"After an operational miss, we went to management explained and offered our help and we were ignored," Toby Rice said during a conference call on Tuesday.

He said they received a similar response from the board.

Rice owns 7.5 million shares in EQT, worth more than $145 million. (Reporting by Liz Hampton Editing by Bill Trott)

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