S&P Places Rice Energy (RICE) on CreditWatch Positive

September 27, 2016 3:07 PM EDT

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S&P Global Ratings said that it affirmed its 'B' corporate credit rating on Rice Energy Inc. (NYSE: RICE), and placed its ratings on the company, including the corporate credit rating, on CreditWatch with positive implications.

"The CreditWatch placement reflects the potential for an upgrade when the acquisition closes," said S&P Global Ratings' credit analyst Michael McConnell. "If the transaction closes as expected, we could raise our ratings on Rice Energy, based on the company's business risk profile assessment improving to weak from vulnerable due to its increased scale and reserve size."

Upon the acquisition's closing, we expect Rice Energy to benefit from increased scale, scope, and diversity, resulting from the larger reserve base and increase in production, which the company now expects to grow by 70% in 2017. At the same time, we expect the company's credit measures to improve slightly as a result of the proposed equity funding and increase in production.

Our 'B' corporate credit rating on Rice Energy is based on our assessment of the company's business risk profile as vulnerable and its financial risk profile as aggressive. For a complete credit rating rationale, see the summary analysis, published March 25, 2016, on RatingsDirect.

We expect the company to have adequate liquidity pro forma for the transaction, with liquidity sources exceeding uses by more than 1.2x.

During the 90-day CreditWatch period, we will gather additional information on the transaction, including the ultimate size of the company's borrowing base after the deal closes. If the transaction is completed as proposed, we would expect to raise our ratings on Rice Energy, based on the company's larger scale, scope, diversity, and slightly improved credit measures. We expect to resolve the CreditWatch status upon closing of the acquisition, which we expect to occur by year-end.

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