Rice Energy Inc. (NYSE: RICE) announced it has entered into a purchase and sale agreement to acquire Vantage Energy, LLC and Vantage Energy II, LLC for approximately $2.7 billion, including the assumption of debt. In connection with the acquisition, Rice Midstream Partners LP (NYSE: RMP) will purchase the acquired midstream assets from Rice Energy for $600 million. The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions.
The E&P assets to be acquired by Rice Energy include approximately 85,000 net core Marcellus acres(1) inGreene 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 RMP 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.
Transaction Highlights
- Core acquisition with organic upside potential
- Expands high return inventory of drilling locations by 66%
- Leasehold is approximately 50% held or owned in fee
- Extends RMP's 20% distribution growth target through 2023
- Immediately accretive and credit enhancing to both E&P and RMP
- Positions Rice Energy as the premier dry gas Appalachia company with 231,000 net acres, approximately 70% 2017 estimated production growth and 2017 estimated leverage of less than 2.5x
Following this transaction, Rice Energy will control approximately 231,000 net acres in the Marcellus and Ohio Utica cores with an inventory of 1,164 drilling locations that generate average single well returns of approximately 95% at strip pricing. Similarly, Rice Midstream Partners will control one of the largest and most concentrated core dry gas acreage dedications in the Marcellus Shale, covering approximately 199,000 acres in Washington and Greene Counties.
Daniel J. Rice IV, Chief Executive Officer, commented, "This deal represents the largest core dry gas Marcellus acquisition to date, one that is truly transformational for Rice Energy, Rice Midstream Partners and our respective shareholders. This acquisition adheres to our proven strategy of pursuing core shale gas acreage, leveraging our industry-leading technical shale team to deliver best-in-class well results and capturing a greater share of the value chain through our premier midstream services business. Our transaction financings are meant to strengthen Rice Energy's balance sheet even further, including positioning us to capture an additional 20,000 – 40,000 acres of leasehold adjacent to our existing position. Our proven success developing the Marcellus Shale in Greene County gives us tremendous confidence in our ability to generate meaningful growth and create substantial value on the acquired assets for both Rice Energy and Rice Midstream Partners, and we look forward to seamlessly integrating the acquired assets into our leading-edge shale development in Appalachia."
Roger Biemans, CEO of Vantage Energy, said "Vantage, together with its three sponsors – Quantum, Riverstone, and Lime Rock – has assembled one of the largest and most attractive core dry gas positions in the Marcellus Shale. We believe the combination of Rice and Vantage creates the premier natural gas company in the country. Rice will have a multi-decade inventory of the most economic dry gas in North America, a tremendous growth story for its midstream business, and a management team that has proven its ability to execute on its strategy."
About Rice Energy
Rice Energy Inc. is an independent natural gas and oil company engaged in the acquisition, exploration and development of natural gas and oil properties in the Appalachian Basin.
For more information, please visit www.riceenergy.com.
About Rice Midstream Partners
Rice Midstream Partners LP is a fee-based, growth-oriented limited partnership formed by Rice Energy Inc. to own, operate, develop and acquire midstream assets in the Appalachian basin. RMP provides midstream services to Rice Energy and third-party companies through its natural gas gathering, compression, and water assets in the dry gas cores of the Marcellus and Utica Shales.
For more information, please visit www.ricemidstream.com.
About Vantage Energy
Vantage Energy is a growth-oriented, independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties in the United States, with a focus on the Appalachian basin. Vantage Energy received investments from affiliates of Quantum Energy Partners, Riverstone Holdings LLC and Lime Rock Partners.
