Rice Energy (RICE): Consolidating Marcellus With Vantage Acquisition - Jefferies
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Jefferies analyst, Jonathan Wolff, reiterated his Buy rating on shares of Rice Energy (NYSE: RICE) after the company announced the acquisition of Vantage Energy for total consideration of $2.7 B. RICE will acquire Vantage’s upstream assets for $2.1 B, while RICE's midstream subsidiary (RMP) will acquire associated midstream/processing rights for $600 MM. RICE will acquire the assets by paying Vantage $1.72 B in cash and issuing 39.1 MM shares to Vantage. RICE also announced an equity deal for 40 MM shares priced at $25.50 (~6% off the close).
Vantage owns 85,000 net Marcellus acres (all in Green County, PA) and 37,000 net Barnett acres. Vantage's 2Q production was 399 MMcfe/d (65% Appalachia/35% Barnett), but has likely declined (per the S1) due to low reinvestment.
When backing out midstream value of $600 MM and using $3k per flowing MMcfe for production value, we arrive at an acreage cost of ~$10,600 per acre (ascribing no value to the Barnett acres). This compares to the recent Greene County acreage sale (that Vantage bought from ANR out of bankruptcy) at ~$12,400 per acre.
No change to the price target of $31.
Shares of Rice Energy closed at $27.14 yesterday.
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