Pittsburgh-based EQT Corp. is cutting 23% of its workforce, or 196 jobs, as it presses ahead with a new direction led by CEO Toby Rice.
As part of an ongoing reorganization, EQT is simplifying its corporate structure and will now have only 15 departments instead of the previous 58. The reductions represent $50 million of annual general and administrative (G&A) costs, management said.
The move comes as no surprise. It marks another step in EQT's transformation after it acquired Rice Energy in 2017 for $8 billion and completed a series of transactions to become the nation's largest natural gas producer. When Rice took the helm in July after a nine-month proxy battle, the new management team was expected to slash spending.
“We firmly believe this is a step we must take to create a more efficient organization and to enable our employees to succeed,” Rice said EQT plans to provide updated G&A guidance when it issues 3Q2019 earnings results.
The CEO has been conducting a listening tour of sorts with landowners and employees since he took over, and the company is remaking its operational strategy to push for better performance and stronger shareholder returns. As part of those efforts, a committee was formed to help leadership evaluate the company, which Rice said has determined the "future state” organizational structure.
"This future state will challenge, empower and support employees so we can achieve our strategic goals of reducing costs, improving efficiency and realizing the full potential of our asset base for the benefit of all stakeholders," he said.
Rice ousted former CEO Robert McNally, who was thrust into the position to lead EQT last year after Steven Schlotterbeck resigned. The latest cuts come after another round earlier this year overseen by McNally, when about 100 people were laid off, including top executives.
The management team has been remade twice in less than a year. Late last month, CFO Jimmi Sue Smith was fired and replaced by long-time Rice associate Kyle Derham, who is serving as interim CFO.
EQT's move to reduce staff follows similar decisions across the upstream sector. Encana Corp., CNX Resources Corp. and Laredo Petroleum Inc., among others, have cut hundreds of jobs combined this year as they implement efficiencies aimed at appeasing restive investors. The efforts also come amid volatile commodity prices that are pressuring the industry.
“As we’ve been laser focused on G&A rightsizing as a key toward improving free cash flow for the entire industry, we see EQT’s announcement as a step in the right direction but also see additional running room,” said analysts at Tudor, Pickering, Holt & Co. (TPH) on Wednesday.
TPH said the job cuts could help lower expenses even more in the future as the company continues to execute on other options to reduce costs. “Shareholders have given the team a mandate to give the corporate cost structure a head-to-toe makeover.”