Former Rice Energy executives Derek and Toby Rice have escalated a dispute over company strategy with the EQT board of directors, threatening to introduce a shareholder proposal that would install Toby Rice as the company's new chief executive along with a new board.

The Rice brothers said a plan by EQT to rectify operational inefficiencies and generate free cash flow does not adequately address fundamental shareholder concerns, namely "that management lacks the relevant operational experience, track record and vision to realise the value of EQT’s underlying assets".

EQT, which became the largest US natural gas producer by volume when it acquired Rice Energy in 2017, said earlier that it planned to leave production relatively flat in 2019 and focus on generating free cash flow.

It also said it hoped to address operational problems with the planned appointment of a chief operations officer and the formation of a capital and operational efficiencies committee.

The plan eschews a proposal sent by Toby and Derek Rice to the board last year that called for a board shake-up and the potential appointment of the brothers' own candidates. The Rices had pitched a business plan that could add an incremental $400 million to $600 million of pre-tax free cash flow on top of EQT’s current plan, which could equal greater than $1 billion of free cash flow per year.

The brothers said they had met last week with the board to present their plan, which has garnered support from hedge fund DE Shaw, which controls 4.5% of the company.

However, the Rices said that EQT “did not get back to us and has instead taken steps away from a resolution supported by many shareholders”.

“In light of EQT’s unwillingness to acknowledge the fundamental change needed to achieve acceptable results for the benefit of all shareholders, we will be asking shareholders to reconstitute the board with new board members who better understand EQT’s industry and business and will support Toby Rice (as chief executive) to lead the transformation.”

However, in a presentation posted on Tuesday to the EQT website, the company said the Rice plan was flawed.

In particular, the claim of $400 million to $600 million in free cash flow, among other things, ignores market conditions, applies only to a certain subset of wells, and fails to account for key well cost components, according to the presentation.

EQT plans to keep its 2019 production relatively flat at 1.47 trillion cubic feet equivalent to 1.51 Tcfe, compared to 2018 production sales volumes which totalled 1.49 Tcfe.

The company also scaled back its capital spending forecast to $1.9 billion to $2 billion, compared to its 2018 budget of $2.4 billion.

EQT also plans to cut costs, and said it had identified around $100 million of annual reductions in administrative and well development costs. Half of those savings are from previously announced workforce reductions.

The rest are expected to come from "near-term operational process improvements and other capital reductions that will lower development costs," driven by optimised water handling processes, "fleet rationalisation and other drilling and completion process changes", EQT said.

The company also revealed what it called its "Target 10% Initiative" to look at the entire development programme and identify opportunities to further reduce capital costs.