Rice Energy Announces 2015 Capital Budget and Guidance

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Feb 17, 2015, 08:30 ET

CANONSBURG, Pa., Feb. 17, 2015 /PRNewswire/ -- Rice Energy Inc. (NYSE: RICE) ("Rice Energy") today announced its 2015 capital budget and guidance. Estimated capital investments and financial guidance include:

2015 estimated net production of 450 – 470 MMcfe/d, an expected increase of 64 – 72% over 2014 net production
2015 annual capital budget of $890 million, compared to $1.1 billion invested in 2014, excluding acquisitions
$680 million of budgeted Marcellus and Utica E&P activities to be funded entirely with $712 million of liquidity exiting 2014 and expected 2015 cash flow
$210 million of budgeted retained midstream investments to be funded entirely with newly created $300 million midstream credit facility
84% of forecasted 2015 production hedged at an average price of $3.60/MMBtu, based on mid-point of guidance
100% of forecasted 2015 production covered by firm transportation with approximately 65% of estimated production delivered to markets outside Appalachia

Commenting on the 2015 capital budget and guidance, Daniel J. Rice IV, Chief Executive Officer, said, "Our 2015 capital budget reflects both our disciplined approach to managing our business and our prudent investment strategy. This allows us to focus our efforts on driving shareholder value through continued successful development of our low-cost, high-returning Marcellus and Utica shale assets. We have reduced our drilling and completion budget by approximately 40% from our previous preliminary capital spend plans, while lowering our production forecast by only 8%, decreasing exposure to unhedged local prices. During 2015, the majority of our production is contracted for delivery to premium markets outside of Appalachia, and approximately 84% of our expected production is hedged to protect our revenues and cash flows. Finally, we're entering 2015 with sufficient liquidity to fund our entire 2015 development program."

2015 Capital Budget

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

2015 Capital Budget (in millions)
E&P
Marcellus	$	340
Utica – Operated⁽¹⁾	$	155
Utica – Non-Operated	$	65
Total Drilling & Completion	$	560
Leasehold Acquisitions	$	120
Total E&P Capital Expenditures	$	680

Retained Midstream
Ohio Midstream and Water Systems⁽²⁾	$	210
Total Capital Expenditures	$	890

Exploration and Production

In Pennsylvania, we expect to spud 43 gross (39 net) horizontal Marcellus wells (100% operated) and turn to sales 31 gross (26 net) horizontal Marcellus wells with an average lateral length of 7,100 feet. In addition, we are currently drilling our first Pennsylvania Utica well, which we expect to complete and turn to sales in the second half of 2015. In Ohio, we expect to spud 19 gross (12 net) horizontal Utica wells and turn to sales 12 gross (7 net) horizontal Utica wells with an average lateral length of 9,500 feet. On our non-operated properties in Ohio, we expect to spud 38 gross (9 net) horizontal Utica wells and turn to sales 15 gross (2 net) horizontal Utica wells with an average lateral length of 7,200 feet. We are currently operating two horizontal rigs in Pennsylvania and two horizontal rigs in Ohio. We plan to release one Ohio horizontal rig at the end of its contract in mid-2015 and operate three horizontal rigs for the remainder of 2015.

Our leasehold budget is focused on acreage additions within our existing core position and to extend lateral lengths for wells in our long-term development plan.

Retained Midstream

We plan to invest $210 million to continue the build out of our Ohio gas gathering system and to expand our fresh water distribution systems in Ohio and Pennsylvania. By the end of 2015, we expect our Ohio gas gathering system will be 50 miles in length with total system capacity of 2.6 MMDth/d. In addition, by year end 2015, we expect our fresh water distribution systems will be fully operational and capable of delivering up to 9.2 MMgpd for our well completion operations in Pennsylvania and 16.5 MMgpd for our well completion operations in Ohio.

2015 Financial and Operational Guidance

Our 2015 average daily net production is expected to be between 450 – 470 MMcfe/d (100% natural gas, 93% operated). This range represents a 64 – 72% increase over 2014 average daily net production and is driven by our continued successful development of the Marcellus Shale in Pennsylvania and the Utica Shale in Ohio. Our 2015 retained midstream Adjusted EBITDA⁽³⁾ is expected to range between $35 and $40 million, with 10% attributable to third party business.

(1)	Includes one Pennsylvania Utica well.
(2)	Excludes $60 million of midstream capital expenditures incurred by RMP prior to its initial public offering payable by Rice in 2015.
(3)	Please see "Supplemental Non-GAAP Financial Measure" for a description of Adjusted EBITDA.

Our 2015 guidance is based on the key assumptions in the table below:


	2015 Guidance
Net Wells Spud
Marcellus			39
Utica – Operated⁽¹⁾			13
Utica – Non-operated			9
Utica⁽¹⁾			22
Total Net Wells Spud			61

Net Wells Turned to Sales
Marcellus			26
Utica – Operated⁽¹⁾			8
Utica – Non-operated			2
Utica⁽¹⁾			10
Total Net Wells Turned to Sales			36

Average Lateral Lengths of Net Wells IP (ft.)
Marcellus			7,100
Utica – Operated⁽¹⁾			9,500
Utica – Non-Operated			7,200

Heat content (Btu/Scf)
PA – Marcellus			1050
OH – Utica			1080

	Low			High
Average daily production (MMcfe/d)	450			470
% Natural gas			100%
% Operated			93%
% Marcellus			78%

Average costs per Mcfe:
Lease operating expense	$	(0.30)		$	(0.27)
Gathering and compression	$	(0.49)		$	(0.44)
Firm transportation	$	(0.54)		$	(0.49)
Production taxes and impact fees	$	(0.05)		$	(0.04)
Total average cash costs	$	(1.38)		$	(1.24)

Cash general and administrative (in millions)	$	60		$	55

Retained midstream Adjusted EBITDA⁽²⁾	$	35		$	40
RMP Adjusted EBITDA⁽³⁾	$	28		$	30
Total Midstream Adjusted EBITDA	$	63		$	70

(1)	Includes one Pennsylvania Utica test well.
(2)	Includes $10 million of retained midstream cash G&A.
(3)	Represents Rice Energy's 50% ownership in RMP. Rice Energy owns 3,623 common units and 28,753,623 subordinated units in RMP. RMP has 57,507,246 total units outstanding as of December 31, 2014.

Commodity Hedge Position

For calendar 2015, we currently have 405 BBtu/d of NYMEX Henry Hub and Appalachia hedge contracts at a weighted average floor price of $3.71 per MMBtu. In addition, we have 120 BBtu/d of basis hedge contracts consisting of 58 BBtu/d of Gulf Coast basis contracts at an average price of ($0.18) per MMbtu, 37 BBtu/d of TCO basis contracts at an average price of ($0.42) per MMBtu, and 25 BBtu/d of Dominion South basis contracts at an average price of ($0.79) per MMBtu. The weighted average floor price of our 405 BBtu/d 2015 hedge portfolio, including our basis swaps, is $3.60 per MMBtu, representing 84% of our 2015 expected production, based on the midpoint of guidance.

Financial Strength and Liquidity

As of December 31, 2014, our liquidity position of $712 million consisted of $483 million available under our senior secured revolving credit facility and $229 million of cash on hand, which we expect will be sufficient to completely fund our 2015 drilling and completion and leasehold budget of $680 million. In addition, our midstream holding subsidiary has in place a new $300 million revolver sufficient to fund expected retained midstream development capital expenditures of $210 million.

Rice Energy's capital budget excludes Rice Midstream Partners LP (NYSE: RMP) 2015 capital budget of $180 million relating to infrastructure development and compressor station installation in Pennsylvania. RMP has $477 million of liquidity as of December 31, 2014, consisting of a $450 million undrawn revolving credit facility and $27 million of cash on hand. RMP announced its 2015 capital budget and guidance today in a separate news release, which can be found at www.ricemidstream.com.

Conference Call

Rice Energy will host a conference call on March 12, 2015 at 9:00 a.m. Eastern time (8:00 a.m. Central time) to discuss fourth quarter and full-year 2014 financial and operating results. To listen to a live audio webcast of the conference call, please visit Rice Energy's website at www.riceenergy.com. A replay of the conference call will be available for two weeks and can also be accessed from our homepage.

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.