Rice Energy (RICE): Consolidating Marcellus With Vantage Acquisition - Jefferies

September 27, 2016 7:16 AM EDT
Get Alerts RICE Hot Sheet
Price: $20.98 --0%

Rating Summary:
    25 Buy, 6 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 6 | Down: 10 | New: 6
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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.

For an analyst ratings summary and ratings history on Rice Energy click here. For more ratings news on Rice Energy click here.

Shares of Rice Energy closed at $27.14 yesterday.

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