Speaker 1:
From the Library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, your Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome, Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
The world needs its energy. It's a simple statement, but it comes with massive geopolitical and economic implications. I'm old enough to remember my parents waiting in gas lines. And for much of my life, the US was a net importer of energy, relying on crude oil coming from countries around the globe to keep the wheels of our economy running. That all changed in 2019 when the US officially became a net exporter. Part of the reason behind this seismic shift is how we get our energy. It's a combination of American grit, innovation, and the shale revolution. A mix of hydraulic fracturing or fracking and horizontal drilling allowed the US to significantly increase its oil and natural gas production.
Josh King:
Growing up when I did, we thought oil extraction was like, what Jed Clampett did, shooting at some food and up from the ground comes a bubbling crude. It was never that easy. And now it's a data-driven technology enabled business that is reshaping our economy and our relationship with energy. In 2020, according to the US Energy Information Administration, about 38% of all US natural gas consumption went to the electric power sector, the source of about 33% of the power sector primary energy consumption. Much of us, without even realizing it, rely on natural gas to keep our lights on, to help us do our work, and keep us cool on a warm summer day.
Josh King:
It's easy to take energy for granted, but when drilling a little deeper, there's a complex series of businesses and people who are working indefatigably to keep our lights on. One of those is EQT, the largest natural gas producer in the US with almost 20 trillion cubic feet equivalent of proved reserves across 1.8 million acres in the Marcellus and Utica Shale of the Appalachian Basin. EQT traces its origins back more than 130 years, but its story today is one that focuses on transforming the country's relationship with energy through better technology and more efficient processes.
Josh King:
Behind the company is Toby Rice, the President and CEO, who after running his own energy business, took the helm of EQT. His leadership has transformed the business model and created tremendous shareholder value by reducing well and legacy costs, all while increasing efficiencies with better operating practices, technology, and a focus on a more sustainable business. Our conversation with Toby Rice is coming up right after this.
Speaker 3:
Whether it's markets, exchanges, or networks, connection makes everything possible. The connection between data and technology, innovation and expertise, and most of all, between people and opportunity. For over 20 years, ICE has transformed markets, products, and processes to make things work better, faster, smarter, from modernizing energy and commodity trading to revolutionizing the bond markets. Whether it's the world's largest stock exchange or the dream of home ownership, we do more than see the big picture. We create it. You may not know our name, but we bet you know our network. ICE, make the connection.
Josh King:
Our guest today, Toby Rice, is President and CEO of EQT Corporation, the largest producer of natural gas in the United States. Toby previously served as the President, COO, and Founder of Rice Energy before its sale to EQT in 2017. EQT operates in Pennsylvania, West Virginia, and Ohio, and seeks to leverage operational efficiencies, technology, and sustainability to improve the way it produces environmentally sustainable, reliable, and low-cost energy. Welcome Toby, Inside the ICE House.
Toby Rice:
Hey, thanks Josh.
Josh King:
So Toby, in the introduction, I mentioned how energy production has undergone a data and technology revolution. America's pastime to more mixed success has seen a similar shift. You were an all-star or an All-American right fielder at Rollins College. What did the sport of baseball teach you about data and business?
Toby Rice:
Oh, I think, yeah, sports for me, taught me about winning and what it takes. And I think our last season where we went to the World Series was pretty good analogy. We had a team that none of us were all stars, but when we all worked together, we produced some pretty amazing results. And eventually got a bit to go to the college World Series.
Toby Rice:
I think, looking at running a business is very, very analogous. It requires over a thousand different pieces of information that needs to change hands before you can go from saying you want to a drill a well in a field to actually getting a well drilled and putting the hydrocarbon into a pipeline. The coordination that it takes to win on that front is going to be governed by data and your technology and how that data moves throughout the organization. So, it's an incredible amount of teamwork, and technology is really the infrastructure that we use to facilitate great teamwork to enable world class results. And that is what winning is in business.
Josh King:
I mean, beyond the teamwork, going back to your time at Rollins, we all know in some ways, how Bill James transformed baseball through sabermetrics. Were you guys aware back then of the data that was driving the sports key indicators or were you just running field and catching, throwing?
Toby Rice:
Yeah, it was more of a ladder back in 2004. I'd say the secret behind our success was just work ethic and putting in the time to really understand what we needed to do to win. And that's the work that I think is going to be necessary underneath any team, is having a strong work ethic that can be sort of accentuated by world class teamwork is the key to what I think is producing championship teams.
Josh King:
So you're in the CWS, I guess, in 2004, but you shared in a couple of interviews that you and your brothers founded Rice Energy in 2007 out of an apartment in Pittsburgh. Can you tell us a little bit about what that conversation looked like and how the three of you became actually interested in energy in the first place?
Toby Rice:
The brothers, we grew up in Massachusetts. A lot of people are surprised to hear that we didn't grow up in the oil field. We grew up in Massachusetts, a state that does not have any exposure to the oil and gas industry, aside from the gasoline we consume at the pumps. So it wasn't until after I got through with my baseball career at college, where I had a conversation with my father who was an oil and gas investor, managed a pretty large portfolio investing in energy. And I had a 10 minute conversation with him about my career, and we talked about the oil and gas industry. And after 10 minutes, it was very clear it was an industry that was high competition, high risk, potentially high reward. And it seemed to me like a modern day treasure hunt. And I got really excited about it.
Toby Rice:
So I went down to Texas to get my degree in petroleum engineering and focusing on hydraulic fracturing in unconventional reservoirs. That knowledge was really applying that knowledge that I learned, allowed us to test some new technology on the frack space, which we were able to see increase the productivity of the wells that we were performing these operations on by 20%, 30%, 50%. And that's where the light bulb went off. Everybody talks about technology is the key to differentiated results. Well, that's how it started, was with leveraging the right frack technology, the right application. That was the edge that we were looking for to give us the ability to compete in a very challenging business.
Toby Rice:
Just so you guys know, the success rate of an oil and gas startup is around 2%. So we wanted to make sure we had a good edge with hydraulic fracturing and the opportunity is that our father had some dollars set aside that was enough to seed us. It wasn't much, but it was enough to get going around $10 million. And so that was the opportunity for us. And with an edge and the opportunity, that was the combination that allowed us to say we were going to start an oil and gas company and do it in an apartment out of Pittsburgh.
Josh King:
I'm thinking of that sort of growing up in New England and heading down to Texas migration very similar to our 41st president, George Herbert Walker Bush, leaving the northeast and heading down to west Texas. I grew up in Massachusetts as well. I went to the Boston Garden to see WWF matches on a Saturday night. Rice Energy outperformed its peers by a wide margin. And you and your brothers even had custom heavyweight wrestling belts made to commemorate the productive wells. What did you learn in those early days, the process of running that business, and was it difficult to break into the business that was so long dominated by established companies like your then competitor EQT?
Toby Rice:
It was incredibly challenging. Think about this. You've got three brothers from Massachusetts who don't know anything about oil and gas, and of course we don't have any relationships in oil and gas. So trying to break into what is a pretty close circle industry, very tight-knit. One of the best things about the oil and gas industry is a lot of tight bonds, but can make it a little bit challenging to get in there. So it was hard for us to find deals.
Toby Rice:
Our first deals we actually had to do at Rice Energy was deals that we found at NAPE, the North American Prospect Exposition which looking back now it's probably not the best place to find a high quality deal. But yeah, so it was really difficult and challenging. And our success, people can look at the results. We outperformed our peers by 90% during our time as a public company, something that we're really proud of.
Toby Rice:
We built the company, had a world class culture, and we were named top workplace in Pittsburgh for the large companies. And it's easy for people to look at the success that we've had. But when you look at the history, the brothers are incredibly grateful more than anybody because we know that there was a series of coin flips that we had to flip for the success of the company, heads, we win, tails, we're gone. We had to flip that coin multiple times to be able to have the success that ultimately turned into the $8.2 billion sale of Rice Energy to EQT in 2017.
Josh King:
So that deal was done in 2017. What drove the decision and what value did you see in joining forces with the company?
Toby Rice:
Everything that we do is driven by producing value for our stakeholders, for our shareholders specifically. So it was easy for us to do because the Rice family was such a large shareholder of Rice Energy. We had gone through the exploration phase, understanding where the shale was highly productive. We had gone through the land grab phase and secured the rights to develop over 250,000 acres. We had gone through the technological innovation and taking, applying device frack design, the right drilling techniques to take well productivity from 100 units of gas to 200 units of gas. And really for us, we were looking at the table and saying, "Okay, what's next? How can we create another level of value for our stakeholders?"
Toby Rice:
And what we realized was the key to getting a step change in drilling economics for the dollars that we were investing was to go from drilling 8,000 foot lateral lengths to 12,000 foot lateral lengths. And we could not do that on our own. We needed joining acreage to be able to drill 12,000 foot laterals. And that acreage was owned by EQT.
Toby Rice:
And so we decided to put our assets together. And what that allowed us to do is drill 12,000 foot laterals across our entire portfolio. That had the impact of juicing our drilling economics by over 30%. So we really teed up the company to knock it out of the park and set our shareholders up to get a step change in drilling economics. And that was really the underpinning of the deal, was just the industrial logic and the value created by drilling longer laterals.
Toby Rice:
In addition to that, really made the company relevant the combination of Rice and EQT, created the country's largest natural gas producer. And anytime you can do anything bigger than Exxon in our business, that's something that should be noted. And we've achieved some pretty world class scale that we thought would have the opportunity to provide future innovation upside across a large platform.
Josh King:
I mean, for a little bit of the time, Toby, the outcome was a little bit in question. I mean, two years after you're talking about the sale to EQT, it's 2019. You and your brother led a campaign to gain control over EQT. It was a successful venture with more than 80% of votes cast in support of the nominees that you guys laid out. And you had support from your largest shareholder, T. Rowe Price, and several of the large hedge funds.
Josh King:
Some people have successfully gone through an exit. They might have just walked away from what's happening, head up to Kennebunkport, go back to New England and Boston. What's happening at the new company, but why did you and your brother feel like it was worth fighting to change EQT from inside?
Toby Rice:
In 2018, when we sold, we really thought we were setting the company up to knock it out of the park. 2018, the company announced a $300 million operational miss. Okay, that was obviously a big issue, but the real concerning thing, as a large EQT shareholder ourselves for the Rice family was the fact that the company bought back $500 million of stock three months before announcing the operational miss. Now that to me is a sign of a disconnected organization, a broken operating model. The way that the company was operating was unsustainable and was really destroying the type of or not capable of realizing the potential that we saw in this business.
Toby Rice:
So shareholders reached out to us and said first thing was, "Hey, are these assets broken?" We said, "No, the assets are still world class, but they need a different team." Shareholders asked us, if we would come back and be involved. And what really drove us to do it was really realizing the full potential of EQT and our investment.
Toby Rice:
In addition to that, it was also the relationships and the deals that we signed with our land owners, making sure that they were getting the full potential of their leasehold rights. It was providing the safest work environment for our service providers and making sure that everything we were doing was going to maximize the value creation for all stakeholders and communities.
Toby Rice:
We thought we could do it a better way. We had a really ... It was a radical change in the way a business operates. We evolved from our plant centered on evolving from small scale, yeah, single pad development to large scale combo development, where we go from drilling four or five wells from a pad to planning on drilling 15 to 20 wells across four pads, sequentially. The level of collaboration, it takes coordination to do that, is incredible. Can only be achieved with a modern operating model that's centered on a digital work environment and 500 applications. So to keep everybody connected.
Toby Rice:
And so that was really the heart of the plan that we had. And we put that out. It was a grueling nine months proxy contest. And I'd say looking back, what is one thing we overlooked? The brothers, we've done some pretty amazing deals throughout our career. And I think foolishly, we may have looked at this as like taking over EQT is just going to be like another deal. But we were wrong about that. Quite frankly, it was grueling. It was one of the most challenging experiences of our careers. I'd say mine and Derek's in particular, and Kyle Derham, who was side by side with us and Will Jordan. But we prevailed and it was worth it. Shareholders voted overwhelmingly 80% to support our board of directors.
Toby Rice:
And what we've been doing since then in the last 24 months is doing exactly what we said we were going to do. And what we've done is we've dramatically reduced the cost structure here at EQT. We've pulled over $700 million of annualized costs out of this business. We've implemented our digital work environment. We've increased digital engagement for our employees by over 350%. We're executing combo development at 80% of our operations. And we've turned the free ... We've created a free cash flow profile that's robust.
Josh King:
Then, you're in a strong enough financial position, as you're talking about your balance sheet in 2020, to acquire the new business. You announced the largest natural gas acquisition in the fourth quarter of 2020, and that's Chevron's Appalachian gas operations. How did that business fit into your strategy?
Toby Rice:
It was adjacent. The Chevron asset it's a few hundred thousand acres essentially in our backyard. What's really interesting is there's a lot of those opportunities when you have a large operational footprint, a lot of those opportunities exist. As you mentioned, we have over 1.8 million acres of leasehold. And that creates a tremendous amount of potential opportunities within that operational footprint. And when you pair that up with our digital work environment and our highly motivated workforce engaged team, that allows us to be able to pick up and capture those opportunities.
Toby Rice:
I think one of the things that we've always strived to do from when we were in apartment in Pittsburgh, to when we were a public company at Rice to running the largest natural gas operator in the country is always take care of the details, but never lose sight of the big picture. Our modern operating model, the people, the culture, the process, the technology, big or small. We really consider that like a vacuum cleaner to suck up every penny, nickel, and dime that presents itself, whether that's an attractive sand contract or a water deal, or a bolt-on lease position, or maybe an attractive mineral buy.
Toby Rice:
And that, having that backing cleaner running is great. But to be able to do that over bigger footprint is going to create more opportunities and create more value. A lot of people don't see that aspect of our business because they just see the splashy acquisition headlines like Chevron. But behind the scenes, that vacuum cleaner is running and we are sucking up pennies, nickels, dimes, quarters. And at our scale, pennies, nickels, dimes, and quarters translates to millions of dollars.
Toby Rice:
When I reflect on what was the secret behind Rice's success, what was the one thing that allowed Rice to outperform our peers by 90%, it was that mentality of taking care of the details. It was the track record of sucking up those penny, nickels, dimes, every opportunity they presented. And what's exciting is that's exactly what we're doing here at EQT. We're doing on a bigger scale and I'm confident that we're going to continue our track record of saying that we're going to be outperforming peers.
Josh King:
So you say that you never lose sight of the big picture. You're always sucking up the pennies, nickles, dimes, and quarters. Yet EQT sells natural gas and NGLs to marketers, utilities, and industrial companies in Appalachia. But more than 60% of that volume is outside of the region. Can you walk us through the types of customers that you serve, who's putting your gas to work?
Toby Rice:
Yeah. So your normal utilities, the power generation is a big customer for us. And it's something that we're really excited about being a dry gas producer and staying true to being a dry gas producer. At the end of the day, I mean, our customers are the ones that consume electricity. And one of the things that we're incredibly proud about is the role that natural gas has played in the environmental transformation that we've seen in the United States over the last 10 years. People are surprised that when they realize that the United States has lowered their emissions by over 25%, from 2009 to 2020. That's a very impressive stat. And what did we do? How did we do that as a country? We did that by replacing coal fire generation with natural gas fired electric generation.
Toby Rice:
And over that period of time, natural gas use in our grid, natural gas went from consisting of about 20% of our power generation to 40% of our power generation. And you compare that to 10% gains that were added from renewables. It's clear that natural gas has played the leading role in not only meeting the energy demands of a robust US economy, but also meeting the needs of lowering emissions across the country and doing it at scale.
Josh King:
You've made through EQT some bold commitments to protecting the environment, Toby. Your strong management systems have effectively driven down your emissions. And as a result, your operations have one of the lowest greenhouse gas emissions intensities in the country. You've set out to achieve net zero Scope 1 and Scope 2 GHG emissions by or before 2025. Why is net zero so important for EQT?
Toby Rice:
Well, for us, it's about efficiency, it's about proving that we're doing things as good as we can. And being net zero for Scope 1 and 2, this is really about ... that emissions is really about the ... we could call that the cleanliness of our operations. So being net zero by 2025 is an aggressive goal. For Scope 1 and 2, we're really excited about that. The other goals that we've said is we're going to be reducing our greenhouse gas emissions profile by over 70% during that period of time. And then we're also going to be lowering our methane emissions by over 65% during that period of time.
Toby Rice:
We have initiatives that we're running that give us incredible amount of confidence in our ability to generate these goals. One of the big ones is replacing a piece of equipment on our locations, which is accountable for about 90% of our methane emissions today. Replacing these pneumatic devices is the piece of equipment. We have over 8,800 of these devices on our locations. And this has just been built up over time across our 2,500 well boards.
Toby Rice:
We have an initiative that is going to retire and replace every single one of those pieces of equipment, and we're shooting to get that done over the next couple years for a modest cost of around $20 million. And so it's going to be an incredibly cost-effective way for us to saw our emissions profile in half, and even make what is a really peer leading emissions intensity rating today, it's going to make it even better in the future. We're producing very good right now. And these goals are only going to showcase how clean we can actually be as a natural gas producer.
Josh King:
So I don't know if this is related to that, Toby, but in 2020, your board approved the creation of an innovation fund to help the company pursue its ESG strategies. What is the fund set out to do, and how are you tracking against those goals?
Toby Rice:
Our latest presentation that we've put out, you can find it eqt.com is titled ESG and EQT. And on slide 15, I think, we actually laid out our company strategies, the first being evolved, the second being consolidated, and the third being new ventures. New ventures for us, while evolve is all about maximizing the amount of free cash flow that we can generate from our existing assets, it's all about realizing the potential of EQT, and consolidation is all about picking up opportunities to grow our free cash flow per share and grow our nav per share. New ventures for us is about finding ways to achieve sustainable growth, which is something that the industry has lost its ability to just add rigs and add production growth.
Toby Rice:
We think that this energy transition space is going to present a lot of opportunities that will allow us to get back a really important lever, which is sustainable growth, and bring that to oil and gas, bring that to EQT. So we're looking at a lot of different opportunities to help facilitate the search. We've established a $75 million budget to really look at some ideas and get us through a pilot phase for some of the interesting opportunities we're looking at.
Toby Rice:
What makes an opportunity interesting for us? Number one, it's about promoting natural gas demand opportunities that will allow us to leverage our assets, our wells, our pipelines, our employees knowledge, skill sets, the engineers we have, the relationships we have with service providers. We've got amazing technologists in the oil and gas industry. Just look at what we're doing. I mean, we've brought energy independence to this country with shale, a formation that has less permeability than concrete. And the technology we have that allowed us to unlock shale, those bright minds can be used to solve some of these new issues that people have. We're super excited about.
Toby Rice:
So those guiding principles have translated to a couple of things. Number one is we're thinking about natural gas is such a cheap feedstock of energy. We look at this and say, is there any other things that we can ... Can we transform natural gas into a lower carbon product? And the answer is yes. Natural gas can be used as a feedstock to produce blue hydrogen. And we believe at EQT we can do that in a zero carbon way by taking the CO2 exhaust that comes as a byproduct of that transformation and inject that CO2 back into our depleted well boards.
Toby Rice:
So could be an interesting opportunity. We're running a pilot to check it out. And there's a couple other things that we're thinking about, but what you will see with EQT is we are staying true to being an energy producer. We're just looking at ways to extend the performance of a really amazing energy source, which is natural gas.
Josh King:
Transformation of natural gas, and what EQT is doing to get there. Toby, after the break, we're going to dive deeper into your outlook on energy markets, your culture, and where the future's going to take us all. That's coming up right after this.
Speaker 3:
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Josh King:
Welcome back. Before the break, Toby Rice, the President and Chief Executive Officer of EQT Corporation and I were discussing his background, the company's mission, and its work in the ESG space. Switching gears now, Toby, energy prices last year saw some historic volatility. Economists and pundits have commented on OPEC+'s role and the disagreements between Russia and Saudi Arabia. What does the oil and gas market look like on a global scale today from your perspective at EQT?
Toby Rice:
So I think we've seen a much more disciplined approach from the US producers. And I hope that this discipline will reduce some of the volatility that we see in commodity prices. Looking outside of oil and just really focusing on gas, we think that the market opportunity for natural gas is very compelling. We think that there's an opportunity for natural gas, for price to be a little bit more polished than where the strips sit today.
Toby Rice:
One of the things that we need to think about when we think about big macro is what are some of the big trends that are happening in the world? And everybody is talking about climate change. Everybody's talking about zero carbon economy and lowering emissions. And I think that when a lot of these actions are turning into policies right now, and one of the ... when we look at the world and the desire for a lower carbon future, and we look at the track record that what natural gas has done in the United States lowering emissions by 25%, we say, well, can we recreate that story on a world stage?
Toby Rice:
And the answer is yes. With a robust LNG economy that we've developed here in the United States, natural gas is at a really neat period of time where it's actually going to evolve from being a regional commodity that's constrained by continents and pipelines to being a global commodity through transformation to LNG and shipped across all parts of the world.
Toby Rice:
What this allows is it allows the retirement of coal as a power generation source, exactly what we did in the US, and the market opportunity is huge. People are surprised when they realize that over 5 billion tons of coal are being used to generate electricity around the world today. That translates to about 175 BCF a day of natural gas market opportunity. And to make that number relevant, the United States currently produces about 90 BCF of gas a day. So you're talking about a potential market that's two times larger than the current market for natural gas in the US. That's what's available. And we've got the tools to be able to reach that. And you've got a public sentiment that is calling for a lower carbon future, that's natural gas, to meet the energy needs and the climate goals that the world has.
Toby Rice:
So we think that's a very super high level bullish sentiment, but the laws of supply and demands will create some volatility in the short term, but looking out, we think it's a positive story for natural gas.
Josh King:
You say you've got the tools to be able to reach it, but you also need the people to be able to drive those tools. In a lot of your interviews and presentations, Toby, you've focused on the importance of keeping your workforce engaged. EQT was named a 2021 national top workforce by Energage and exceeded the average engagement score for all top workplaces by 9%. As we enter the second half of 2021, how are you thinking about keeping your people so focused and why is it so critical to your mission?
Toby Rice:
It's absolutely critical. Culture is so important for us, because I believe that culture, a great culture is going to drive great employee engagement. And engaged employees are the employees that take care of the details. And those details is where we can find ... By taking care of the details is where we're going to create value. So it's very simple. Great culture translates to great value.
Toby Rice:
Culture has always been a really important thing. When we talk about the success of Rice Energy, we talk about outperforming peers and having a great stock price. But the next thing we talk about is having a great culture being a top workplace in Pittsburgh.
Toby Rice:
The transformation of culture here at EQT has been one of those under the water scenes that has been pretty remarkable. We put a slide on that ESG report presentation, where you can actually see EQT's culture when we stepped in quite frankly was toxic. And the employee engagement, EQT scored in the first percentile. That's at the bottom of the list. And what we've done in less than a year has taken that engagement, and now it's in the top 70th percentile of companies. And that's what's allowed us to be a great ... be awarded top workplace.
Toby Rice:
When you think about just the rate of change that we're doing on the culture side, it's tremendous. And what have we done? We've broadened radical. We've completely changed the way the organization works. So what I think is behind employee engagement is you want to have employees that are happy. And for us, we think that happy employees are employees that are productive, challenged, recognize and having fun. Everything thing we do is designed to make employees more productive, challenged, and recognized.
Toby Rice:
On the last part, having fun, this is really where we've really putting the boost to the culture and the organization. In the last couple months, we've implemented a new metrics program that is going to allow us to actually showcase the winning that's taking place in the organization and do that in real-time and do that digitally. And it's actually really fun. We've got a winometer that I look at every day. And every time somebody puts out a metric that's winning, we celebrate that. We're currently at over 350 wins out of the 1100 metrics we have. And so we'll continue to win more.
Toby Rice:
And when you think about, we talk about culture and there's a lot of things that people talk about, and they can talk about the workspace and the commute and the dress code. But you know what make it real simple? Nothing builds culture like winning. And that's what we've been doing at EQT since we got here. And now we've got even more technology that's going to allow us to win even more in the future.
Josh King:
Is the winometer part of the digital work environment, this online communications treasure trove of institutional knowledge that you're talking about, or is that's something different?
Toby Rice:
No, that's exactly what it is. It's in our digital work environment, and it's available on our cell phones, it's available on our desktops, anywhere our employees are. The winometer is right there with them. And it's something that when we talk about recognition is a key part to driving employee happiness.
Toby Rice:
Well, when I can see the 15 metrics that an employee's doing and that they're winning on 10 of them, we can really, really set the table for us to recognize their results. And for the five metrics that they're not losing, they're just not winning yet, is what it was marked as, now we can focus the coaching on those efforts, and that's going to drive the productivity of that employee.
Toby Rice:
And you can see how all of this is made possible with digital tech, the digital solutions that we're running in our digital work environment. But this tool that we've built is one of 600 applications that I believe in some shape or form have just as equal impact on the culture of our organization.
Josh King:
The Appalachian Basin has been an important part of your company's history for more than a hundred years. I guess, EQT's earliest origins start in about 1884 with Michael and Obadiah Haymaker right outside of Pittsburgh. EQT created the position of local government and community affairs specialists to really provide that local and personalized points of contact for stakeholders, where your colleagues actually live and work. Tell us a little bit about these positions and how they engage with the local communities.
Toby Rice:
Our company mission is to be the operator of choice for all stakeholders. And that means local communities is an important stakeholder at EQT. What we've done to be a great, to become the operator of choice for the communities, and that's ultimately measured by our vision to be the operator that communities embrace. Some of the ways that we do that is through just being a great partner and that's establishing lines of communication.
Toby Rice:
So we have from a state level to a county level down to the individual townships, we have representatives at EQT to work with the county executives, the township officials, in case there's any issues because our residents will sometimes go to the government officials and they will work directly with us. In addition to that, we've spent a lot of time building a piece of technology that will really streamline the issues and requests that we're feeling from the community. So from a reactive state, we're able to process those very quickly, get the subject matter experts involved across all corners of the company to get these issues resolved and get them answers.
Toby Rice:
And then on the proactive side of things, we've sort of totally overhauled the way that we do our giving program here at EQT. We've introduced a geographic footprint and a giving category where we really are focusing our donation efforts within our operating footprint. That operating footprint is the communities that are going to be in the round our operation. So in that front, $3.5 million about annual is what we donate. We have an EQT Foundation, which is an amazing tool, which EQT in the past has seeded that with over ... I think was when it started, it was around $30 to $40 million. So that's a sustainable source of donations that we do outside of EQT in addition to what we're doing.
Toby Rice:
And then on top of that, our operations, one of the things we want to do is make the communities better. And from our operations, and we do that by investing massive dollars in infrastructure to support our operations while we're drilling, but it's going to benefit the communities that they can enjoy this infrastructure for the future. And we're talking about upgrading roads.
Toby Rice:
We've spent over $20 million a year investing in road infrastructure. I mean, those are large budgets for these parts of Pennsylvania where these townships may only have a budget of a million dollars a year. For us to come in and say, "We're spending 20 million upgrading roads," this is materially meaningful. And quite honestly, the communities really appreciate what we do. And we're grateful that they can recognize the good that we bring to their worlds.
Josh King:
As you wrap up, Toby, sort of staying in that space a little bit, at the end of March, the Bipartisan Policy Center announced that you'd be joining its energy project as a member of the American Energy Innovation Council. The news highlighted some of the technologies that EQT is using to reduce environmental impact, but it also focused on the potential for natural gas to play this meaningful part in the transition to low-cost and low-climate impact energy. How is your work on the committee going and what are you all focused on?
Toby Rice:
I think in the energy debate, we've all been talking about science and everybody's talking about science. Well, now the science has led us to a point where we're really going to start putting policies in place that I think are going to really result in actions. And before we set those actions in place, what I want to do is make sure that people understand we've talked about the science. Now we need to talk about the math. And the math is the pluses and minuses for the actions and the way that the world is working right now.
Toby Rice:
And I think unfortunately, the oil and gas industry has ... Nobody's done the math on the oil and gas industry. It seems like they're just looking at the minuses, which is the emissions that are associated with our product use. But nobody's looking at the positives. Nobody's looking at the trillion dollars of cost savings that we've saved consumers around the United States, how many millions of jobs that that's created, not just for the oil and gas industry, but how many millions of jobs does low-cost energy provide for our manufacturing facilities. The energy reliability that we provide is unmatched.
Toby Rice:
In addition to that, we are also a tool that can show when done effectively, you can actually reduce emissions in a country when you utilize more natural gas. So that is the message. It's a message about math. It's showing the positives about what we do. We've got an amazing message in this industry. Energy consumption is the driving factor behind human progress. What we do in the oil and gas industry is the driving force behind driving that human progress. I'm here to let people know, hear that side of the story, and know that this is an industry that has the capability of doing tremendous things.
Toby Rice:
You mentioned it in the opening remarks. 10 years ago, this country said we've got to be energy independent. That was such a large ambitious goal. People thought it was impossible. But guess what? Who brought that to this country? The oil and gas industry did. And we did it with amazing technology, amazing people, amazing ambition. And we made in 2019, we made America a net energy exporter. We delivered energy independence to the United States.
Toby Rice:
Now there's a new goal. And the new goal is let's be more thoughtful about our emissions. Well, guess what? Guess who's going to solve of this energy transition? I believe it's going to be the same guys that show they have the ability to do big goals, the same guys that delivered energy independence. So this is an industry that is going to be part of the solution. It's going to be a driving solution. And we want to make sure that we're included in the ability to help bring the world closer to the goals of continuing to drive human progress and meeting the environmental goals. And that's really what I see my role in that committee.
Josh King:
Science, math, technology, human progress, energy independence. Toby, finally, as we leave you, I got to acknowledge that you are a couple decades younger than the average S&P 500 CEO. To return to that old baseball analogy, you'd have to say that you are in the early innings. Where do you think that EQT and your career goes from here?
Toby Rice:
A few years from now, I want to be able to get up on stage, and I want to talk about the success of our strategy. I want to get on stage and mention the massive free cashflow generation this company has annually, have that be over a billion dollars a year ... well over a billion dollars a year. I want to talk about our consolidation, the results of our consolidation strategy and how we've captured billions of dollars of synergies by picking up, being smart, disciplined, consolidating in our operation footprint. And I want to be able to get up on stage, say we found a potential opportunity that could present a new growth opportunity to play a part in a more sustainable future.
Toby Rice:
All of these things is designed to make EQT more sustainable, more profitable, and secure a bright future for us. I hope that we're going to play a driving force in this energy debate that I think is going to be taking place over the next really going to come to a head over the next 12 to 24 months. And we're going to be vocal in that process, so that we continue on our path of what I believe is a very bright for EQT.
Josh King:
More sustainable, more profitable. Five years from now, Toby, I hope you'll join me in person at the New York Stock Exchange and give us a report card of how it went.
Toby Rice:
Look forward to it.
Josh King:
Thanks so much for joining us Inside the ICE House. That's our conversation for this week. Our guest was Toby Rice, President and Chief Executive Officer of EQT Corporation.
Josh King:
If you liked what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a question or a comment you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @icehousepodcast. Our show's produced by Stefan Capri with production assistance from Pete Ash and Ian Wolfe. I'm Josh King, your host signing off from the Library of the New York Stock Exchange. Thanks for listening. We'll talk to you next.
Speaker 1:
The information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, expressed or implied, as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
