EQT Corp. told analysts on Thursday that it has shifted to “stable operations” after a year of upheaval, even as some headwinds facing the company — namely, a brewing proxy fight — intensified this month.
Stable operations mean cutting down on drilling and fracking times, finding more cost savings at the company, and generally putting the operational mishaps of last year behind.
The Downtown-based oil and gas driller posted a loss of $2.2 billion for last year, or $8.60 per share, compared with net income of $1.5 billion, or $8.04 per share during 2017.
The loss came from impairments. The company wrote down more than $2.7 billion from the sale of oil and gas properties in Texas and Kentucky last year.
It also impaired goodwill by $531 million. Goodwill is the difference between what the company paid for assets and the current market value of those assets.
Another $279 million in operating expenses were the result of leases that had lost some value or expired.
A major lawsuit settlement also ate into the bottom line.
On Wednesday, EQT announced that it will pay out $53 million to settle a years-long class-action lawsuit filed by scores of West Virginia landowners who said the company had shorted their royalty payments by deducting costs to process and transport the gas before it was sold.
As part of the settlement, EQT also promised not to deduct such expenses from those leases going forward.
The company did not announce a date for its annual shareholder meeting.
Brothers Toby and Derek Rice, formerly with Rice Energy, have been pressuring the company to commit to an April date for the shareholder meeting, in line with how EQT has done it for many years with the exception of 2018.
Mr. McNally told analysts the decision on the timing of the meeting rests with the board of directors, which, along with the management team, is a target of the Rice brothers’ effort at a crew change.
The Rice team — not including Danny Rice, an EQT board member and former CEO of Rice Energy — has challenged EQT on inefficiencies in its operations and said it could deliver more cash flow to shareholders.
But on Thursday, Mr. McNally told analysts that company’s work to cut cost is “exceeding my expectations.”
By reconfiguring some logistics practices and contracts with suppliers, EQT identified another $50 million in savings, he announced.
“Our entire organization is moving forward with a sense of urgency,” he said.
While taking care to highlight his confidence in the current team, Mr. McNally also promised to announce a new COO by the end of the first quarter. That person is supposed to bring a “change in mindset,” he said, but also will not veer far from the current plan established by the company.
The war or words and claims with the Rice brothers continued on Thursday, with Mr. McNally again calling their plan unrealistic and saying it tells an “incomplete and misleading story.”
The Rice brothers’ stated goal is to replace the current management team and board of directors, and to install Toby Rice as CEO and former Rice executives as department heads.
Mr. McNally pushed back on the Rices’ claims that the wells they drilled at Rice Energy were superior to EQT wells.
The Rice wells happened to be in the sweetest spot of the Marcellus Shale play, Mr. McNally said, so they’d be expected to produce more gas. Also, they weren’t hampered by interference from wells drilled into the shallower Upper Devonian formation — a practice that EQT has since stopped.
He reiterated that EQT’s footprint is several times larger than Rice’s was and that while it is using digital and data tools, it must take care to integrate Rice’s technology into EQT’s “ecosystem.”
“The most relevant and compelling technologies are far from dormant at EQT,” he assured, in response to Toby Rice’s complaints earlier this month.
When an analyst asked about using Rice’s land tracking technology to manage leases and reduce land costs, Mr. McNally waved off the premise.
“There is money that will have to be spent to maintain our land position,” he said. That can be done through lease payments or by drilling on certain properties to hold leases.
“There is no magic app that’s going to decrease the land spend by $100 million,” he said.
Anya Litvak: alitvak@post-gazette.com or 412-263-1455.
First Published: February 14, 2019, 7:30 p.m.