Toby Rice And EQT -- Random Note -- October 22, 2019

Feisty mood.

See the comments at this post, and also see this post.

Subsequent to the linked posts above and a comment from a reader to the first linked post, I received the following from a reader who is much more knowledgeable than I am regarding the shale revolution, particularly with regard to natural gas and the northeast US. From that reader:

The points you raised regarding existing wells/new wells/ wide ranging impacts on company finances are precisely in line with what the new CEO of the country's biggest gas producer has been saying.

A big motivation for Toby Rice to take over the running of EQT was Rice's strident claims (validated by operational data) that a MUCH higher degree of skill was required to juggle SO many interconnected factors in unconventional production.

This has come to pass as wells became closer, product prices hit rock bottom, technological advances - especially in completions - continue apace, capital allocation (and revenue stream) will become "lumpy" as long delays are required to plan/drill/complete/bring to market the hydrocarbons.

You are 100% correct in framing the situation as you have, with the added note being the Bakken operators are somewhat farther along compared to the now-in-the-limelight Permian boys.

I didn't really know much about Toby Rice and EQT. RBN Energy has talked about EQT on many occasions.

So, time to take a look at Mr Rice and EQT. 

Unfortunately this is behind a paywall but I'm sure one can find other articles on Rice Energy.

From June 24, 2017, a really, really long time ago:

Eighteen months ago, the Rice family was pressured to sell shares in their family gas company at all-time-low prices as the natural gas market tanked.

Now the Rice family is selling again. But this time, it is the entire company, and under much more favorable circumstances. On Monday, rival Appalachian gas producer EQT Corp. said it would buy Rice Energy Inc. for $6.7 billion in a deal that is poised to deliver more than $1 billion to the family, whose members make up much of Rice’s management and control roughly 18% of the company’s shares, according to securities filings.

The merger, which will create one of country’s largest natural gas producers, shows how the shale boom continues to mint great fortunes even after the bounty of oil and gas around the world depressed energy prices.

With gas in particular, timing is everything. Prices for the fuel, which is used in heating and to generate electricity, is prone to wild swings as unpredictable as the weather.

In late 2015, the warmest winter on record pulled down gas futures to all-time, inflation-adjusted lows, dragging down Rice’s stock. To avoid a margin call, the family sold a slug of shares they had borrowed against. Had they been able to hang on to those five million shares, the family would now be nearly $100 million richer.

Under terms of the EQT deal, Rice shareholders are due $5.30 in cash and about one-third of an EQT share. Based on EQT’s closing stock price the day before the deal was announced, that equates to about $27.05 for every Rice share.

Still, the family is likely one of the gas boom’s biggest winners just a decade after Daniel Rice III and his sons created the company from scratch. Their expertise in oil and coal helped them scout land in the early days of the shale-gas boom in Pennsylvania.

Mr. Rice honed his expertise at BlackRock Inc., where he was a mutual-fund manager specializing in energy when his family started the gas company. One early move was a deal to drill in areas controlled by a coal company that Mr. Rice’s BlackRock fund invested in.

Much, much more at the link if one can get to it.

Did the Rice family do the right thing?

Share price of EQT:

• October 27, 2014: $53.70
• October 30, 2017: $34.18
• Closing price yesterday, October 21, 2019: $9.55

Many, many observations but I'm sure everyone has there own observations. But it's an incredible article over at the WSJ on this family. What a great country. Absolutely amazing what an individual can do in this country.