Rice Energy Announces 2016 Capital Budget and Guidance

24 Feb, 2016, 17:01 ET from Rice Energy Inc.

CANONSBURG, Pa., Feb. 24, 2016 /PRNewswire/ -- Rice Energy Inc. (NYSE: RICE) ("Rice Energy") today announced its 2016 capital budget and guidance. Estimated capital investments and financial guidance include:

  • E&P capital budget (including leasehold acquisitions) of $640 million, a 14% reduction from the prior year capital spend
  • E&P capital budget funded entirely with cash on hand(1) and operating cash flow
  • Clean balance sheet that exits 2016 with E&P leverage of approximately 3.0x and an undrawn revolver
  • 2016 net production forecast of 700 – 740 MMcfe/d, a 27% – 34% increase over 2015 net production
  • 87% of forecasted 2016 production (based on guidance midpoint) hedged at an average price of $3.26/MMbtu
  • Healthy E&P cash operating margins of 55% - 65%
  • Rice Midstream Holdings LLC ("RMH") capital budget of $155 million, a 38% reduction from 2015 levels
  • Rice Midstream Partners LP (NYSE: RMP) ("RMP") capital budget of $150 million, a 12% reduction from 2015 investments
  • Midstream value continuing to grow with expected RMH EBITDA of $40 - $45 million, a 100% increase above 2015 gathering and compression EBITDA, and RMP distribution growth of 20%

Commenting on the 2016 capital budget and guidance, Daniel J. Rice IV, Chief Executive Officer, said, "We believe that our 2016 capital budget highlights the resiliency of our assets and appropriately reflects the challenging time for our industry. Our capital budget has been established with a goal of generating healthy returns while maintaining a strong balance sheet throughout the year. We believe the combination of our 30% return wells at strip pricing, healthy balance sheet, disciplined hedging approach, and our right-sized firm transportation portfolio to favorable markets allows us to economically develop our E&P assets in a manner that drives value in both our E&P and midstream operations."

Further commenting on the 2016 capital budget and guidance, Grayson T. Lisenby, Chief Financial Officer, said, "As evidenced by our recently announced $375 million RMH preferred equity investment by EIG, the significant embedded value of our midstream assets continues to provide a meaningful financing lever despite the headwinds faced today. This equity investment positions us to maintain a healthy balance sheet in 2016 with the proceeds along with expected cash flow fully funding our 2016 E&P budget. Building off the momentum we created in 2015, our capital budget is front half of 2016 weighted, and we expect to exit 2016 with E&P leverage at approximately 3.0 times and an undrawn revolver. We've further protected our balance sheet and returns with 87% of our production hedged at $3.26 per MMbtu."

1.

Pro forma for the $375 million preferred equity transaction that closed on February 22, 2016.

 

2016 Capital Budget

We plan to allocate our capital investments according to the table below:

 

2016 Capital Budget ($ in millions)

E&P

Operated Marcellus

$

285

Operated Ohio Utica

$

175

Non-operated Ohio Utica

$

100

Total Drilling & Completion

$

560

Land(1)

$

80

Total E&P

$

640

Midstream

Rice Midstream Holdings LLC

$

155

Rice Midstream Partners LP

$

150

Total Midstream

$

305

1.

Excluding acquisitions.

 

Exploration and Production

Drilling and completion capital is expected to total $560 million in 2016, a 10% reduction as compared to 2015. On our Marcellus acreage in southwestern Pennsylvania, we plan to spud 25 net Marcellus wells and turn to sales 27 net wells with an average lateral length of 7,700 feet. We expect our Marcellus well costs to average $1,100 per lateral foot in 2016, which is a 7% reduction as compared to 2015 costs. On our operated Utica acreage in Belmont County, Ohio we plan to spud 12 net Utica wells and place into sales 13 net wells with an average lateral length of 9,300 feet. We expect our operated Utica well costs to average $1,450 per lateral foot in 2016, which is a 12% reduction as compared to 2015 costs. In addition, we expect to participate as a non-operator in the drilling of 5 net Utica wells and the completion of 14 net Utica wells with an average lateral length of 8,200 feet, all of which are located in Belmont County and operated by Gulfport Energy Corporation (NASDAQ: GPOR). Due to improved drilling efficiencies gained in 2015, we released one horizontal rig in January and are currently operating one Marcellus horizontal rig and one Ohio Utica horizontal rig.

We have budgeted $80 million for land in 2016, primarily to secure strategic leaseholds within our core development areas in Washington and Greene Counties, Pennsylvania, and Belmont County, Ohio.

Midstream

In 2016, we plan to invest $155 million to further develop our 100%-owned Belmont County gathering system and to fund our portion of capital requirements of our recently announced midstream joint venture Strike Force Midstream LLC with Gulfport Energy. Separately, RMP will invest $150 million for the continued buildout of its gathering and compression systems in Pennsylvania and fresh water systems in Pennsylvania and Ohio.

2016 Financial and Operational Guidance

Our 2016 net production is expected to average between 700 – 740 MMcfe/d for the year, a 27% – 34% increase over 2015.

Our 2016 guidance is based on the key assumptions in the table below:

                                                                                               

Net Wells

Spud

Online

Operated Marcellus

25

27

Operated Ohio Utica

12

13

Non-operated Ohio Utica

5

14

Total Net Wells

42

54

Lateral Length (ft.) of Wells Turned Online

Operated Marcellus

7,700

Operated Ohio Utica

9,300

Non-operated Ohio Utica

8,200

Total Net Production (MMcfe/d)

700 – 740

% Natural gas

100%

% Operated

85%

% Marcellus

65%

Pricing:

FT Fuel & Variable (Deduction) ($/Mcfe)

$

(0.14)

-

$

(0.16)

Heat Content (Btu/Scf)

Marcellus

1050

Utica

1080

Cash Operating Costs ($/Mcfe)

Lease Operating Expense                     

$

0.22

-

$

0.25

Gathering and Compression

$

0.45

-

$

0.50

Firm Transportation

$

0.35

-

$

0.40

Production Taxes and Impact Fees

$

0.04

-

$

0.06

Total Cash Operating Costs

$

1.06

-

$

1.21

Cash G&A  ($ in millions)

E&P

$

85

-

$

90

Midstream

$

25

-

$

28

Total Cash G&A

$

110

-

$

118

Midstream Adjusted EBITDA(1) ($ in millions)

Rice Midstream Holdings LLC

$

40

-

$

45

Rice Midstream Partners LP

$

110

-

$

120

Total Midstream Adjusted EBITDA

$

150

-

$

165

1.

Please see "Supplemental Non-GAAP Financial Measure" for a description of Adjusted EBITDA.

 

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 our website at www.riceenergy.com.

Forward Looking Statements

This release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than historical facts included in this release, that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), projected operational results, projected Adjusted EBITDA, production growth, the timing and number of well completions, the timing of completion and nature of midstream projects, business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although we believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.

We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering and sale of natural gas and oil. These risks include, but are not limited to: commodity price volatility; inflation; lack of availability of drilling and production equipment and services; environmental risks; drilling and other operating risks; regulatory changes; the uncertainty inherent in estimating natural gas reserves and in projecting future rates of production, cash flow and access to capital; and the timing of development expenditures. Information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by us will be realized, or even if realized, that they will have the expected consequences to or effects on us, our business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Supplemental Non-GAAP Financial Measure (Unaudited)

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define Adjusted EBITDA as net income (loss) before interest expense, income tax benefit, depreciation and amortization, stock compensation expense and incentive unit expense. Adjusted EBITDA is not a measure of net income as determined by GAAP.

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SOURCE Rice Energy Inc.



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