Current RICE Stock Info

Rice Energy expands dry gas Marcellus position by 85,000 net acres with Vantage Energy acquisition

Rice Energy (ticker: RICE) announced that it will acquire Vantage Energy for approximately $2.7 billion total consideration. The deal consists of $1.02 billion in cash, the assumption and retirement of assumed net debt of approximately $700 million, and the issuance of 39.1 million shares of Rice Energy Appalachia (REA) valued at approximately $980 million. The deal will expand Rice’s core Marcellus acreage by 85,000 net acres, the company said in a press release Tuesday.

The E&P assets acquired in the deal include 85,000 net acres in Greene County, Pennsylvania, with rights to the deeper Utica Shale on approximately 52,000 net acres and 37,000 net acres in the Barnett Shale. Second quarter 2016 net production of the acquired assets was 399 MMcfe/d (approximately 65% Appalachia, 35% Barnett).

The core midstream assets to be acquired by Rice Midstream Partners (ticker: RMP) for approximately $600 million include 30 miles of dry gas gathering and compression assets. As part of the transaction, Rice Energy will dedicate the acquired Pennsylvania acreage to RMP to provide gas gathering, compression and water services. RMP intends to fund the midstream asset acquisition through borrowings under its revolving credit facility and potential equity and debt financings prior to closing, or the issuance to Rice Energy of up to $250 million of RMP common units representing limited partner interests.

Assuming $6,000 per flowing BOE and a net E&P price of $2.1 billion for the Marcellus production and acreage only, the price paid on a per acre basis is $5,800. The company also noted in its press release the potential to capture another 20,000-40,000 net acres in the area.

Production expected to grow 70% in 2017, with MLP 20% distribution growth target through 2023

The transaction will give Rice control of a drilling inventory of 1,164 locations that generate average single well returns of approximately 95% at strip pricing, said RICE. Pro forma the deal, Rice anticipates its Marcellus drilling and completion capital investments to increase by $40 million to reflect ongoing activity on the acquired acreage. The company also expects its land capital budget to increase by $35 million as a result of anticipated successful organic leasing and leasehold costs associated with the acquired acreage.

For 2017, Rice Energy expects its drilling and completion budget to reach $1.04 billion at its midpoint, with production of 1,318 MMcfe/d at its midpoint, a 70% increase over the company’s 2016 estimated net production based on the midpoint of guidance.

The company believes that it can keep debt leverage below 2.5x while still extending the 20% growth in the RMP’s annual distribution through 2023.


To help fund the deal, Rice also announced a public offering of its stock. The company priced its 40 million-share stock offering at $25.50 per share with the option for an additional six million shares. The initial offering for 40 million shares has an implied value of $1.02 billion before fees, which should largely cover the cash portion of the Vantage acquisition. With the overallotment and the membership interest in REA, along with the $600 million from its MLP, the deal should have a net neutral, or very modest, impact on the balance sheet, according to a report from Stephens today.

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