Rice Energy to buy Vantage Energy for $2.7bn

OREANDA-NEWS. September 28, 2016. Rice Energy's purchase of Vantage Energy for \\$2.7bn gives it control over one of the largest dry gas footprints in the Marcellus shale.

A modest recovery in natural gas prices since the 17-year low of below \\$1.65/mmBtu touched in March has prompted an increase drilling activity and has whet some producers' appetites for more acreage. Nymex gas for October delivery last week hit a 20-month settlement high of \\$3.057/mmBtu.

The Marcellus shale in the Appalachian region of the US is leading the rebound in gas drilling. Gross gas output from the top US gas-producing field by volume in August was up by about 6pc from a year earlier, and producers are eyeing pipeline projects that should add an estimated 5 Bcf/d (142mn m?/d) in takeaway capacity from the region next year.

The price recovery also means that producers have increasingly been able to tap debt and equity markets, which could fuel more mergers and acquisitions.

Through the deal Rice Energy will receive Appalachian exploration and production assets of about 85,000 net acres in Greene County, Pennsylvania, with rights to the deeper Utica shale on about 52,000 net acres. The deal also includes 37,000 net acres in the Barnett shale in Texas.

The assets produced 339mn cf/d in the second quarter, with Appalachian production accounting for the lion's share of 65pc. The acreage includes an inventory of 1,164 drilling locations.

The deal also positions the company to buy an additional 20,000-40,000 acres of leasehold adjacent to its existing position, Rice Energy chief executive Daniel Rice said.

The price includes \\$1.02bn in cash, assumption and retirement of about \\$700mn of debt and about 39.1mn shares of common stock of Rice Energy, valued at about \\$980mn.

The acquisition is expected to close in the fourth quarter.

Rice Energy has updated its 2016 capital spending budget and guidance to reflect the transaction. The company increased its Marcellus drilling and completion capital investments by \\$40mn and its land capital budget by \\$35mn. Rice Energy now expects to produce as much as 775mn cf/d of natural gas equivalent (mn cfe/d) this year, up by 5pc from its August estimate.

The company produced 758mn cfe/d in the second quarter, up by 43pc from a year earlier.