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Blue Jenkins, left, talks with Rob McNally, CEO of EQT, right, during their fundamentals update meeting in  Mr. McNally's conference room.
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This is the last job EQT CEO Rob McNally wants to have. But will that work?

Jessie Wardarski/Post-Gazette

This is the last job EQT CEO Rob McNally wants to have. But will that work?

Rob McNally’s Costa Rican vacation was interrupted by a call from Jim Rohr.

It was August 2018. Mr. McNally, his wife, Sue, and four kids had planned to spend two weeks adventuring in the rugged Caribbean.

A few days in, Mr. Rohr, the longest-serving director on the board of EQT Corp., called to summon him back to Pittsburgh, into a room at the Duquesne Club to interview for EQT’s top spot. 

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This is what Mr. McNally, on a college graduation scuba diving trip to Mexico, had told his father he wanted to achieve in life: to be the CEO of a significant energy company. 

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And there he was at 47, having zigzagged from engineering and sales to investment banking to the top financial post at EQT. With the ultimate goal within reach, Mr. McNally kissed his family goodbye and flew back to Pittsburgh.

His wife and kids were on a packed van heading to a zipline when Mr. McNally called with the news. She put him on speakerphone and held her breath.

“We got it,” he said.

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The car erupted in cheers.

“You can’t tell anybody,” Mr. McNally said.

They continued to yell it into the Costa Rican jungle.

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The celebration was brief.

EQT was still reeling from the unexpected departure of its last CEO, Steve Schlotterbeck, who huffed off the job when the board declined to raise his compensation to $10 million, from $9 million. Less than a year had passed since EQT acquired Rice Energy Inc., overcoming a bruising campaign by activist shareholders who initially opposed the deal and then demanded the company split into separate drilling and pipeline firms.

As Mr. McNally’s appointment was announced, the corporate apparatus was focused on preparing for that split. Things in the drilling fields had gotten off track to the tune of a $300 million cost overrun, which was revealed in a disastrous call with analysts in late October.

Mr. McNally, then still the company’s CFO, took a hit. He claims he learned of the operating issues late in the quarter and has blamed the EQT’s siloed structure and punitive environment for not being told sooner. Analysts and some former employees have said Mr. McNally either knew or should have known about a derailment that significant.

The morning of the analyst call, the executives were unprepared, said Jimmi Sue Smith, EQT’s CFO. The team didn’t have a cohesive message, she said. Even as the call was beginning, they were still piecing together what had gone wrong.

“I knew it would be bad,” Mr. McNally said. “But I didn’t know how bad.”

The day of the call, EQT’s stock price slid 13 percent.

Mr. McNally officially became the CEO a few weeks later. And in a few more weeks, he’d become a target of a proxy war waged by former Rice Energy founders Toby and Derek Rice, who said Mr. McNally was part of the problem and — nothing personal, but ...  — needed to be replaced at once. The logical replacement, they argued, was Toby Rice.

By all accounts, Mr. McNally has remained unflappable. He kept his cool during some brutal shareholders meetings last year when investors looked him in the eye and asked questions like, “Do you have any idea what you’re doing,” according to Ms. Smith, who went along.

When his sons came home from Sewickley Academy one day and asked if those two brothers are going to take his job, Mr. McNally casually dismissed it.

“He’s always the one saying, ‘It’ll be fine,’” his wife said.

In Mr. McNally’s modest office on the 29th floor of EQT Plaza — next to a wall with large canvas prints of his kids, opposite his standing desk and a side table with Alex Epstein’s “The Moral Case for Fossil Fuels” on top — is a whiteboard with EQT’s new mantra: New company. New team. New focus.

Mr. McNally thought it up after a weekend of writer’s block while preparing for company town halls in January. He’d done several after taking office, but the poor third-quarter financial results, the Rice brothers’ campaign, the largest layoff in EQT history and the death of his father-in-law resulted in a two-month hiatus.

By the time he was ready to resume, the task had become more urgent — to ward off panic, keep employees from jumping ship and get them invested enough to help in a turnaround.

EQT rented a room at the Benedum Center where Mr. McNally talked for an hour about a new day, a cultural reset.

“Let’s not get distracted by the activists,” he urged. “Act like this is your business.”

In the weeks that followed, the messaging would make its way to poster boards and public presentations and laminated place mats around the office. It remains on Mr. McNally’s whiteboard as a reminder.

Scribbled next to it and since erased was another reminder: “#1 EQT slate, no Rice. #2 EQT slate with D. Rice. #3 EQT slate, short Rice. #4 We lose.”

Remember the goal

Mr. McNally was born in Denver and moved to Illinois at 11 when his father, John McNally, was transferred to what was then Shell Oil’s Wood River refinery.

The younger McNally was a gifted and curious child who wasn’t much interested in academics, his father said. Good grades came without effort and he saved his hard work for the basketball court and the football field where he was a “star quarterback.”

After college, he took a job with Schlumberger, one of the world’s largest oilfield service firms. It was the kind of company that his father, a 30-year veteran of Shell, expected could span an entire career. 

But soon, Mr. McNally started business school at night and once he’d gotten his MBA, he announced he’d be leaving Schlumberger to become an investment banker.

“You’re nuts,” his father told him. “Here you are, you’re progressing up the chain, they’re offering you stock options. Why would you do that?”

Mr. McNally reminded him of the goal laid out during that scuba diving trip to Mexico. CEOs need a financial background, he reasoned.

The investment banking job came with some unexpected perks. Mr. McNally became good friends with a co-worker who introduced Mr. McNally to his sister, Sue Smith.

Both were in their mid-30s. Mr. McNally had recently gotten divorced. Ms. Smith, a software consultant, was tired of her hectic travel schedule and ready to settle down in Houston, her hometown.

“Handsome and polite,” Mr. McNally made his intentions known from the beginning. “His goal,” Ms. McNally recalled, was to become the “CEO of a large energy company.”

The couple married in 2006 and a few months later Ms. McNally became pregnant with their first son, Luke. 

Two years and two jobs later, Mr. McNally got his first shot at running a company. And he didn’t like it.

He was installed as CEO of a private-equity funded oilfield services firm in Utah. The company hauled and disposed of wastewater. A few months after Mr. McNally took the helm, one of its truck drivers rolled over a vehicle. The driver wasn’t wearing a seat belt and was crushed when the truck rolled back onto its wheels.

This, and not the current proxy fight, was the hardest time of Mr. McNally’s career, he said -— when he told the driver’s family the news, when he watched the kids at the funeral. It was excruciating.

When he returned to the office, Mr. McNally made driving without a seat belt an automatically fireable offense. Within a few weeks, he was forced to dismiss a loyal, longtime employee spotted unstrapped on the job.

“I think that’s what people underestimate about being president,” he said. “There’s a lot of hard things to do.”

His dream of being CEO has less to do with power and more to do with having a space to flex his strategic muscles, Mr. McNally said. During a leadership training program back at Schlumberger, promising young employees spent the weekend playing something akin to a “complex game of Monopoly.” 

“And I loved it,” he said. “I won the game and that’s when I said, ‘This is what I wanted to do.”

Phoenix or ostrich

On a recent Thursday morning in May, Mr. McNally entered EQT’s board room, most of which is occupied by a glimmering white, U-shaped table, and took a seat in the center. About 20 people from human resources were already seated.

The meeting was important for a few reasons: one, it signaled a shift from the previous HR regime that Mr. McNally, in a rare slip, likened to the Gestapo.

It also allowed the boss to show benevolence with one fell swoop: casual dress, within reason, is now allowed; flexible work hours received eager approval. “It’s the right thing to do,” Mr. McNally said. When the HR team recommended EQT expand maternity leave from up to 40 days to six weeks, the boss told them to bump it up to 12 weeks.

“We’re not trying to compete with small-cap start-up businesses,” he said. “If we took the companies that people really want to work for — UPMC, PNC — what do they do?”

He explained that it’s about changing the culture. “In Pittsburgh, we’re competing with all the tech companies here now. They surely are OK with wearing jeans.”

Toby Rice, who sometimes talks about Rice Energy as if it was an actual tech company, would later lampoon the results of this human resources session.

Before the acquisition, the Rice office in Canonsburg was nothing if not fun. It was a place where guests might be treated to buttered coffee or shown a wrestling belt crowning Rice Energy “the self-appointed champions of the Marcellus.” 

In an interview with the Pittsburgh Post-Gazette, Mr. Rice earlier this month said changing the dress code isn’t the same as changing the company’s culture.

This is what the past few months have been like — an aggressive dance between each side’s aggressive messaging. Each letter, each glossy slide deck is followed by an immediate rebuttal and reframing of claims — so that just weeks away from the annual shareholder meeting July 10, Mr. McNally and Mr. Rice sound like they’re describing two completely different entities.

One version of EQT is a phoenix. The other an ostrich.

This dynamic plays off the personalities of the challenger and the incumbent.

Mr. McNally, who reads every word of every document that goes out to shareholders “at least once,” lets those missives do the talking. He rarely mentions Mr. Rice by name and regards EQT as a place where the big boys play. What was good for Rice Energy, a “family business,” he says, doesn’t necessarily translate to the company he leads.

Rice Energy, founded by three Rice brothers with initial funding from their hedge-fund manager dad, was about being in the club and being in on the joke. Showing up to buy assets at a bankruptcy auction in Mickey Mouse T-shirts. Ending their last public company earnings call with boy band lyrics. Naming every employee in an ad campaign that read, “Our greatest source of energy isn’t from shale. It’s from our people,” and padding the list with Hulk Hogan, Waldo and Monkey McFunkenstein.

Meanwhile, the wildest thing about Mr. McNally might be the closed-up piercing in his ear. He spends his lunch hours working out at the Duquesne Club and his dinners at home with the family. He coached his son’s baseball team. On his commute, Mr. McNally listens to books on tape — some history, some classics. He has an assortment of blue suits.

In person, Mr. McNally is friendly, self-aware and reserved. In financial news interviews that he’s done in the past few months, he seemed prepared but stiff.

“The battle he’s in is a public battle, not a boardroom battle,” said Kevin Neveu, CEO of Precision Drilling, where Mr. McNally served as CFO before coming to EQT in 2016.

“In a boardroom battle, Rob would prevail. Because he should. Because he’s smart. Because he’s hardworking,” Mr. Neveu said. “In the public battle, I can’t handicap that one.”

When EQT called

Mr. McNally wasn’t Mr. Neveu’s first choice for CFO of Precision Drilling. He didn’t even make the short list. When the candidates that looked good on paper failed to impress, Mr. Neveu gave Mr. McNally’s credentials a second look. The two men hit it off.

The job was supposed to be in Houston, where the McNallys thought they’d found their permanent home. But Mr. Neveu asked his new CFO to spend a year in Calgary first. One year turned to three.

On the plane ride to Canada, with two kids under 4 and his wife seven months pregnant, Mr. McNally confessed: “I’m really not qualified for this job.”

Ms. McNally held her hands on her belly and her lips closed. “I can’t even,” she thought. “I have nothing to say. It’s too late.”

Was it a rare moment of insecurity?

Mr. Neveu framed it as self-reflection.

“We talked a lot about this issue of self awareness,” he said. “It’s hard to train self awareness” and Mr. McNally’s patience for people who lack it “can be thin.”

At Precision, the two executives complemented each other nicely. They disagreed frequently and just as frequently would finish each others’ sentences. Mr. McNally made no secret of his expected trajectory.

The McNallys were back in Houston when EQT called.

Mr. McNally agonized over the decision to move for months. When he accepted the offer in Pittsburgh, it was with the understanding that when the next CEO left, he’d have a shot at the top. He didn’t expect it would come so soon.

“I will be happy if this is my last job,” he said recently. “This is the job that I’ve been wanting to have.”

Not many get to see Mr. McNally’s vulnerable side. As someone who does, his friend Joe Pukaite, says EQT’s CEO isn’t consumed by the proxy battle. But of course he’s anxious.

“He’s a human being and he’s got feelings and fears just like everybody else,” Mr. Pukaite said.

On a recent trip to Park City, Utah, as Mr. McNally took in the view, he said to his friend, “You might find me here if I lose my job.”

It’s the only place you can fly into and ski the same day.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455.

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First Published: July 1, 2019, 12:28 p.m.

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