Rice Energy to buy Vantage Energy for $2.7 billion

Rice Energy Inc., Canonsburg, Pa., has agreed to acquire Englewood, Colo.-based shale gas producer Vantage Energy LLC and Vantage Energy II LLC for $2.7 billion including debt.  

Vantage’s exploration and production assets include 85,000 net core Marcellus shale acres in Greene County, Pa., with rights to the deeper Utica shale on 52,000 net acres. The firm also has 37,000 net acres in the Barnett shale of North Texas. The assets' combined second-quarter net production was 399 MMcfed, with 65% from Appalachia and 35% from the Barnett.

Its midstream business covers 30 miles of dry gas gathering and compression assets, the entirety of which Rice Energy in turn will sell to affiliate Rice Midstream Partners LP for $600 million. Rice Energy has pledged to dedicate its acquired Pennsylvania acreage to RMP for gas gathering, compression, and water services.

Following completion of the two deals, expected in the fourth quarter, Rice Energy will have 231,000 net acres in the Marcellus and Ohio Utica cores with an inventory of 1,164 drilling locations, and RMP will have a core dry gas Marcellus position covering 199,000 acres in Washington and Greene counties in Pennsylvania.

“Our transaction financings are meant to strengthen Rice Energy's balance sheet even further, including positioning us to capture an additional 20,000-40,000 acres of leasehold adjacent to our existing position,” said Daniel J. Rice IV, Rice Energy chief executive officer, upon announcement of the Vantage deal.

Rice Energy has increased its Marcellus drilling and completion capital investments for 2016 by $40 million to reflect ongoing activity on the acquired acreage. In 2017, Rice Energy expects a drilling and completion budget of $950 million–1.125 billion and net production of 1.280–1.355 bcfd of gas equivalent, which is 70% above its increased 2016 estimate based on the midpoint of the guidance.

Vantage in May outbid Rice Energy for Pennsylvania Land Resources LLC, a subsidiary of bankrupt Alpha Natural Resources Inc., in a $339.5-million transaction. The deal comprised leasehold interest in 27,400 net undeveloped Marcellus acres, including rights to the deep Utica on 23,500 net acres, in central Greene County.

Formed in 2006 through investments by private equity firms Quantum Energy Partners, Riverstone Holdings LLC, and Lime Rock Partners, Vantage entered the Barnett in 2007 and Marcellus in 2010. The firm this month filed for an initial public offering with the US Securities and Exchange Commission (SEC) after canceling one 2 years earlier because of falling commodity prices.

Contact Matt Zborowski at matthewz@ogjonline.com.

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