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News Release

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November 02, 2016
Rice Energy Reports Third Quarter 2016 Financial and Operating Results
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CANONSBURG, Pa., Nov. 2, 2016 /PRNewswire/ -- Rice Energy Inc. (NYSE: RICE) ("Rice Energy") today reported third quarter 2016 financial and operating results. Highlights to date include:

  • Third quarter net production increased 23% over the prior year quarter to an average of 747 MMcfe/d, after taking into account a decrease of approximately 27 MMcfe/d related to a prior period adjustment
  • Third quarter 2016 exit rate production of approximately 800 MMcfe/d
  • Third quarter net income of $91 million, a 40% increase relative to the prior year quarter
  • Adjusted EBITDAX(1) of $133 million, a 13% increase over the prior year quarter
  • Achieved record quarterly Rice Midstream Holdings LLC ("RMH") gathering throughput of 812 MDth/d, a 155% increase over the prior year quarter and 23% higher than second quarter 2016
  • Completed acquisition of Vantage Energy for $2.7 billion in October
  • Completed underwritten public offering of 46 million shares of common stock in October, providing approximately $1.2 billion of net proceeds
  • Increased credit facility borrowing base to $1 billion(2) from $875 million in October
  • Exited the quarter with strong third quarter liquidity position of $1.6 billion(3)(4) and low leverage ratio of net debt to LTM Further Adjusted EBITDAX of 1.4x(3)(5)(6)

Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "Our third quarter results reflect continued execution of our returns-focused strategy, as we further increased efficiencies and reduced development costs, while protecting the balance sheet. We completed our transformative acquisition of Vantage Energy, one that enhances our premier portfolio of high-returning projects and extends RMP's runway for future growth. Our extensive core acreage position is underpinned by a balanced firm transportation portfolio and systematic hedging strategy to support continued growth. We continue to be well-positioned to benefit from an improving price environment, which positions us for continued success in 2017."

1.

Please see "Supplemental Non-GAAP Financial Measures" for a description of Adjusted EBITDAX, Further Adjusted EBITDAX and a related reconciliation of Adjusted EBITDAX to the comparable GAAP financial measure.

2.

Vantage Energy assets are not included in borrowing base redetermination.

3.

Pro forma for the Vantage Energy acquisition, which closed on October 19, 2016, the October borrowing base increase and the exercise of the underwriters' option to purchase 6,000,000 additional shares in connection with our September public offering of 40,000,000 shares of common stock.

4.

Excludes Rice Midstream Partners LP.

5.

Pro forma for the RMP private placement of 20,930,233 common units, the borrowings under the RMP credit facility used to fund the Vantage Energy midstream assets acquisition, which closed on October 19, 2016, and the October RMP revolving credit facility increase.

6.

 Pro forma leverage does not include Vantage Energy EBITDAX.

 


Third Quarter 2016 Consolidated Results


Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016






Total production (MMcfe/d)


747



726


 % Gas


100

%


100

%

  % Operated


86

%


87

%

  % Marcellus


65

%


68

%






NYMEX Henry Hub price ($/MMBtu)


$

2.81



$

2.29


Average basis impact ($/MMBtu)


(0.45)



(0.26)


FT fuel and variables ($/MMBtu)


(0.13)



(0.13)


Btu uplift (MMBtu/Mcf)


0.13



0.09


Pre-hedge realized price ($/Mcf)


2.36



1.99


Realized hedging gain ($/Mcf)


0.51



0.84


Post-hedge realized price ($/Mcf)


2.87



2.83


Capacity optimization ($/Mcf)


0.04



0.02


Adjusted realized price ($/Mcf)


$

2.91



$

2.85







Operating revenues (in thousands)


$

198,920



$

494,860


Realized gain on derivative instruments (in thousands)


34,895



166,350


Total operating revenues and realized gain on derivative instruments (in thousands)


$

233,815



$

661,210







Average costs per Mcfe:





Lease operating(1)


$

0.17



$

0.16


Gathering, compression and transportation


0.43



0.43


Production taxes and impact fees


0.05



0.04


General and administrative(1)


0.35



0.34


Depreciation, depletion and amortization


1.21



1.24







Net income (loss) (in thousands)


$

91,078



$

(44,326)


Adjusted EBITDAX (in thousands)


$

133,396



$

373,519







RMH throughput (MDth/d)


812



642


% Third-party


61

%


63

%


1.

Excludes non-cash equity compensation expense of $0.3 million and $5.6 million attributable to lease operating and general and administrative expenses, respectively, for the three months ended September 30, 2016, and $0.5 million and $16.4 million for the nine months ended September 30, 2016, respectively.

Third Quarter 2016 Financial Results

For the three months ended September 30, 2016, average realized natural gas price, before the effect of hedges, was $2.36 per Mcf. After giving effect to hedges, our average natural gas price was $2.87 per Mcf. Our average adjusted realized price, including capacity optimization and the impact of hedges, was $2.91 per Mcf. Approximately 79% of our third quarter production received favorable Gulf Coast, TCO or Midwest pricing. Our average basis differential for the quarter was ($0.45) per MMBtu, while TETCO M2 and Dominion South averaged ($1.35) and ($1.32) per MMBtu, respectively, below NYMEX Henry Hub for the quarter.

Per unit cash production costs (lease operating; gathering, compression and transportation; and production taxes and impact fees) were $0.65 per Mcfe, a 4% decrease from the prior year quarter. We reported net income of $91 million, a 40% increase over the prior year quarter. Adjusted EBITDAX for the quarter was $133.4 million, a 13% increase over the prior year quarter. We reported adjusted net income(1) of $1 million, or $0.00 income per diluted share after excluding unrealized gains on derivative contracts and other non-recurring income and expense items.

We invested $161 million, including $91 million to drill and complete operated Marcellus and Ohio Utica wells and $15 million for non-operated Ohio Utica development. In addition, we invested $32 million in leasehold activity and $23 million in our RMH midstream assets.

1.

Please see "Supplemental Non-GAAP Financial Measures" for a description of adjusted net income (loss) and a related reconciliation to net income (loss), the comparable GAAP financial measure.

 

Year to Date 2016 Financial Results

For the nine months ended September 30, 2016, average realized natural gas price, before the effect of hedges, was $1.99 per Mcf. After giving effect to hedges, our average natural gas price was $2.83 per Mcf. Our average adjusted realized price, including capacity optimization and the impact of hedges, was $2.85 per Mcf.

Per unit cash production costs were $0.63 per Mcfe, a 6% decrease from the prior year period. We reported a net loss of ($44.3) million or ($0.30) per diluted share. Year to date Adjusted EBITDAX was $373.5 million, a 24% increase over the prior year. We reported adjusted net loss of ($53.6) million, or ($0.36) per diluted share.

We invested $556 million, including $347 million to drill and complete operated Marcellus and Ohio Utica wells and $60 million for non-operated Ohio Utica development. In addition, we invested $77 million in leasehold activity and $72 million in our RMH midstream assets.

Acquisition of Vantage Energy

On October 19, 2016, we completed the previously announced acquisition of Vantage Energy, LLC and Vantage Energy II, LLC for approximately $2.7 billion, including the assumption of debt. In connection with the acquisition, Rice Midstream Partners LP (NYSE: RMP) ("RMP" or the "Partnership") purchased the acquired midstream assets from Rice Energy for $600 million.

The acquisition includes upstream assets consisting of approximately 85,000 net core Marcellus acres(1) in Greene County, Pennsylvania, with rights to the deeper Utica Shale on approximately 52,000 net acres and 37,000 net acres in the Barnett Shale. Second quarter 2016 net production of the acquired assets was 399 MMcfe/d (approximately 65% Appalachia, 35% Barnett). The midstream assets include 30 miles of dry gas gathering and compression assets. As part of the transaction, Rice Energy dedicated the acquired Pennsylvania acreage to RMP to provide gas gathering, compression and water services. Aggregate consideration paid at closing was approximately $2.7 billion, which consisted of approximately $1 billion cash, the assumption and retirement of approximately $700 million of debt and the issuance of units in Rice Energy Operating LLC, a subsidiary of Rice Energy, that are immediately exchangeable into 40 million shares of Rice Energy common stock, valued at $1 billion.

1.

Includes approximately 5,000 net royalty acres, the majority of which are leased to Rice Energy.

 

Financial Position and Liquidity

In October 2016, we completed an underwritten public offering of 46 million shares of our common stock priced at $25.50 per share for $1.2 billion net proceeds. Net proceeds were used to fund a portion of the Vantage Energy acquisition and for general corporate purposes.

On October 19, 2016, our upstream revolving credit facility was amended and restated to, among other things, increase our borrowing base to $1 billion, representing a 14% increase from $875 million.

In October 2016, S&P Global Ratings upgraded our corporate credit rating to 'B+' from 'B' by S&P Global Ratings. Our issue-level rating on our existing $1.3 billion senior unsecured notes was increased to 'BB-' from 'B-'. Similarly, Moody's upgraded our Corporate Family Rating (CFR) to 'B1' from 'B2' and the senior unsecured notes rating was confirmed at 'B3'.

As of September 30, 2016, our liquidity position, excluding RMP, after giving pro forma effect to the closing of the Vantage Acquisition, was $1.6 billion(1)(2), consisting of $1.3 billion of upstream liquidity and $293 million of RMH liquidity. After giving effect to the closing of the Vantage Acquisition but without including any contribution of Vantage Energy to our Further Adjusted EBITDAX, our consolidated net debt to LTM Further Adjusted EBITDAX ratio was 1.4x as of September 30, 2016.

1.

Pro forma for the Vantage Energy acquisition, which closed on October 19, 2016, the October borrowing base increase and the exercise of the underwriters' option to purchase 6,000,000 additional shares in connection with our September public offering of 40,000,000 shares of common stock.

2.

Excludes Rice Midstream Partners LP.

 

Third Quarter 2016 Operating Results

Third quarter net production increased 23% over the prior year quarter to 68.7 Bcfe, or an average of 747 MMcfe/d, after taking into account a decrease of approximately 27 MMcfe/d related to a prior period adjustment. This adjustment relates to a reduction in our working interest and net revenue interest across various Ohio Utica drilling units, as a result of our electing to not participate in certain acreage cross-conveyances. Third quarter 2016 exit rate production was approximately 800 MMcfe/d.

As of September 30, 2016, our core leasehold position was approximately 235,000 acres(1), consisting of approximately 176,000 net Marcellus acres in Washington and Greene Counties, Pennsylvania and 59,000 net Ohio Utica acres primarily in Belmont County, Ohio. In addition, we hold approximately 101,000 net Utica acres across our Pennsylvania leasehold position.

Marcellus Shale

During the third quarter, we drilled 10 net and completed 10 net Marcellus wells for an average cost of $720 per lateral foot. As planned, we did not turn to sales any wells during the quarter.

As of September 30, 2016, we have turned to sales 18 gross (18 net) Marcellus wells during the year.

Utica Shale

During the third quarter, we turned to sales 11 gross (7 net) operated horizontal Utica wells with an average lateral length of approximately 9,400 feet and participated in 12 gross (5 net) non-operated Utica wells turned to sales. In addition, we drilled 2 net and completed 2 net Utica wells during the third quarter for an average cost of $1,100 per lateral foot.

As of September 30, 2016, we have turned to sales 20 gross (13 net) operated and 14 net non-operated Utica producing wells during the year.

Our second horizontal Ohio Utica rig commenced drilling activity in October, and we expect to spud an additional two net operated Utica wells this year.

1.

Pro forma for the Vantage Energy acquisition, which closed on October 19, 2016.

 

Rice Midstream Holdings LLC

For the three months ended September 30, 2016, gathering volumes averaged 812 MDth/d, a 155% increase over the prior year quarter and a 23% increase relative to second quarter 2016, with 61% attributable to third-party volumes. Compression volumes were 483 MDth/d, a 5% increase relative to second quarter 2016, with 66% attributable to third-party volumes. Gathering and compression revenues totaled $19 million. Operation and maintenance expense totaled $1 million, and operating income was $10.9 million.

For the nine months ended September 30, 2016, gathering volumes averaged 642 MDth/d, a 190% increase over the prior year period, with 63% attributable to third-party volumes. Compression volumes were 436 MDth/d, with 64% attributable to third-party volumes. Gathering and compression revenues totaled $41.5 million. Operation and maintenance expense totaled $2.4 million, and operating income was $18.1 million.

As of September 30, 2016, RMH had $266 million of availability on its revolving credit facility and $27 million of cash on hand, resulting in $293 million of total liquidity.

2016 Rice Energy and RMH Capital Budget and Guidance Update

We updated our 2016 capital budget and net production guidance for the Vantage Energy acquisition, which closed on October 19, 2016. Our revised 2016 estimated E&P capital budget, excluding acquisitions, is $735 million, including $600 million for drilling and completion and $135 million for land capital investments. Our Marcellus drilling and completion activity increased by $40 million to $270 million to reflect ongoing activity across the acquired acreage. Our land capital budget increased by $35 million to $135 million as a result of anticipated organic leasing and leasehold costs associated with the acquired Vantage Energy acreage. Furthermore, we increased our 2016 annual net production guidance range to 780 - 800 MMcfe/d, primarily for the closing of the Vantage Energy acquisition.

2016 Capital Budget ($ in millions)

E&P



Operated Marcellus

$

270


Operated Ohio Utica

$

240


Non-Operated Ohio Utica

$

90


Total Drilling & Completion

$

600


Land(1)

$

135


Total E&P

$

735





Rice Midstream Holdings LLC

$

140




1.

     Excluding acquisitions.

 

Our updated 2016 guidance is presented in the table below:

Net Wells

Spud


Online

Operated Marcellus

44


34

Operated Ohio Utica

22


13

Non-operated Ohio Utica

7


14

Total Net Wells

73


61



Lateral Length (ft.) of Wells Turned Online


Operated Marcellus

7,100

Operated Ohio Utica

9,300

Non-operated Ohio Utica

8,200



Total Net Production (MMcfe/d)

780 - 800

      % Natural gas

100%

      % Operated

90%

      % Marcellus

70%



Pricing:


FT Fuel & Variable (Deduction) ($/Mcfe)

$   (0.13)   -   $   (0.15)

Heat Content (Btu/Scf)


      Marcellus

1050

      Utica

1080



 

Cash Operating Costs ($/Mcfe)






Lease Operating Expense




$

0.16

-

$

0.18



Gathering and Compression




$

0.43

-

$

0.47



Firm Transportation




$

0.34

-

$

0.36



Production Taxes and Impact Fees




$

0.03

-

$

0.05


Total Cash Operating Costs




$

0.96

-

$

1.06







Cash G&A ($ in millions)




E&P




$

70

-

$

75



RMH




$

10

-

$

15


Total Cash G&A




$

80

-

$

90


We are unable to provide a projection of full-year 2016 RMH net income, the most comparable financial measure to RMH Adjusted EBITDA, calculated in accordance with GAAP. We are unable to project RMH net income because this metric includes the impact of certain non-cash items such as depreciation expense that we are unable to project with any reasonable degree of accuracy without unreasonable effort. Please see the "Supplemental Non-GAAP Financial Measures" section of this news release.

Our RMH capital budget decreased to $140 million due to scheduled projects shifting from 2016 to 2017 and reduced pipeline buildout costs. Our RMH Adjusted EBITDA is unchanged, and we expect it to be within a range of $40 - $45 million for 2016.

Preliminary Rice Energy 2017 Outlook

In connection with the Vantage Energy acquisition, we provided a preliminary 2017 outlook for our capital budget and net production. We expect our drilling and completion budget to be within a range of $950 - $1,125 million. Furthermore, we expect 2017 net production to be within a range of 1,280 - 1,355 MMcfe/d, an approximate 67% increase over 2016 estimated net production, based on the mid-point of guidance.

Rice Midstream Partners LP

For the three months ended September 30, 2016, gathering volumes averaged 957 MDth/d, a 43% increase over the prior year quarter and a 2% increase relative to second quarter 2016, with 32% attributable to third-party volumes. Compression volumes were 745 MDth/d, a 1,810% increase over the prior year quarter and a 32% increase relative to second quarter 2016, with 42% attributable to third-party volumes. Fresh water delivery volumes were 135 million gallons or an average of 1.5 MMgal/d, a 41% decrease over the prior year quarter and a 60% decrease relative to second quarter 2016. The anticipated sequential quarter decrease was due to timing of well completion activity by Rice Energy in the quarter.

For the nine months ended September 30, 2016, gathering volumes averaged 909 MDth/d, a 45% increase over the prior year period, with 29% attributable to third-party volumes. Compression volumes were 488 MDth/d, an 821% increase over the prior year period, with 47% attributable to third-party volumes. Fresh water delivery volumes were 932 million gallons or an average of 3.4 MMgal/d, a 62% increase over the prior year period, with 14% attributable to third-party volumes.

RMP controls one of the largest and most concentrated core dry gas acreage dedications in the Marcellus Shale, covering approximately 201,000 acres(1) in Washington and Greene Counties.

Financial Position and Liquidity

The Partnership priced a private placement of 20,930,233 common units for gross proceeds of approximately $450 million on September 30, 2016, and subsequently closed the transaction on October 7, 2016. RMP used the net proceeds from the private placement to fund a portion of the acquisition from Rice Energy of midstream assets associated with the Vantage Energy acquisition.

On October 19, 2016, RMP's credit facility was increased to $850 million, representing an 89% increase from $450 million.

As of September 30, 2016, RMP had $685 million(2) of availability on its revolving credit facility and $2 million of cash on hand, resulting in $687 million(2) of total liquidity.

On October 20, 2016, RMP declared a quarterly distribution of $0.2370 per unit for the third quarter 2016, an increase of $0.0135 per unit, or 6%, relative to second quarter 2016, which places RMP in the second tier of the IDR splits. The distribution will be payable on November 10, 2016 to unitholders of record as of November 1, 2016.

RMP's third quarter results were released today and are available at www.ricemidstream.com.

1.

Pro forma for the Vantage Energy midstream assets acquisition, which closed on October 19, 2016.

2.

Pro forma for the RMP private placement of 20,930,233 common units, the borrowings under the RMP credit facility used to fund the Vantage Energy midstream assets acquisition, which closed on October 19, 2016, and the October RMP revolving credit facility increase.

Commodity Hedge Position

As depicted in the table below, following the Vantage Energy acquisition, for 2017 we have 1,136 BBtu/d hedged at a total weighted average floor price of $3.15 per MMBtu, representing approximately 82% of expected production (based on the midpoint of guidance). Please see the "Derivatives Information" table at the end of this press release for more detailed information about our derivatives positions.

Fixed Price Derivatives

4Q16

2017

2018

2019

2020

NYMEX Volume Hedged Excl. Calls (BBtu/d)

742

871

957

480

298

NYMEX Wtd Avg. Fixed Floor Price ($/MMBtu)

$3.28

$3.15

$3.02

$2.96

$2.98

Total Volume Hedged Excl. Calls (BBtu/d)

975

1,136

1,230

577

298

Total Wtd Avg. Fixed Floor Price ($/MMBtu)

$3.09

$2.97

$2.86

$2.87

$2.98

Conference Call

Rice Energy will host a conference call on November 3, 2016 at 10:00 a.m. Eastern time (9:00 a.m. Central time) to discuss third quarter 2016 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.

Please visit www.riceenergy.com to view a presentation containing supplemental third quarter 2016 information.

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 or incorporate herein 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, production growth, basis exposure, hedging, the timing and number of well completions, forecasted gathering volumes, revenues, adjusted EBITDAX, distribution growth, distributable cash flow, 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, NGLs 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; the timing of development expenditures, risks related to joint venture operations, the ultimate timing, outcome and results of integrating the operations of Vantage Energy; the effects of the business combination of Rice Energy and Vantage Energy, including the combined company's future financial condition, results of operations, strategy and plans; potential adverse reactions or changes to business relationships resulting from fully combining the businesses; and the ability of Rice Energy and RMP to recognize the expected benefits and synergies of the transactions. 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.

 

Rice Energy Inc.

Consolidated Statements of Operations

(Unaudited)



Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016

(in thousands, except share data)

2016


2015


2016


2015

Operating revenues:








Natural gas, oil and natural gas liquids sales

$

162,354



$

130,145



$

397,108



$

327,947


Gathering, compression and water distribution

25,176



13,388



73,456



34,755


Other revenue

11,390



88



24,296



3,353


Total operating revenues

198,920



143,621



494,860



366,055










Operating expenses:








Lease operating

11,668



12,325



31,557



35,006


Gathering, compression and transportation

29,597



24,248



84,898



55,510


Production taxes and impact fees

3,695



1,955



8,005



5,103


Exploration

3,396



830



9,934



1,925


Midstream operation and maintenance

4,080



4,831



18,225



10,963


Incentive unit expense (income)

5,920



(686)



44,902



45,870


Acquisition expense

614





1,171




Stock compensation expense

5,953



4,214



16,994



11,681


Impairment of fixed assets





2,595




General and administrative

24,365



24,113



67,721



62,028


Depreciation, depletion and amortization

83,195



89,275



247,132



227,996


Amortization of intangible assets

411



408



1,222



1,224


Other expense (income)

10,153



(265)



25,800



3,624


Total operating expenses

183,047



161,248



560,156



460,930










Operating income (loss)

15,873



(17,627)



(65,296)



(94,875)


Interest expense

(24,421)



(23,949)



(73,744)



(63,437)


Other (loss) income

(1,900)



698



862



1,894


Gain on derivative instruments

183,915



127,072



52,539



184,729


Amortization of deferred financing costs

(1,247)



(1,313)



(4,416)



(3,722)


Income (loss) before income taxes

172,220



84,881



(90,055)



24,589


Income tax (expense) benefit

(81,142)



(19,797)



45,729



(18,335)


Net income

91,078



65,084



(44,326)



6,254


Less: Net income attributable to noncontrolling interests

(16,665)



(6,134)



(55,535)



(16,833)


Net income (loss) attributable to Rice Energy Inc.

74,413



58,950



(99,861)



(10,579)


Less: Preferred dividends and accretion of redeemable noncontrolling interests

(8,581)





(19,983)




Net income (loss) attributable to Rice Energy Inc. common stockholders

$

65,832



$

58,950



$

(119,844)



$

(10,579)


Weighted average number of shares of common stock—basic

157,021,239



136,381,909



148,911,387



136,330,198


Weighted average number of shares of common stock—diluted

159,111,560



136,521,828



148,911,387



136,330,198


Income (loss) per share—basic

$

0.42



$

0.43



$

(0.80)



$

(0.08)


Income (loss) per share—diluted

$

0.41



$

0.43



$

(0.80)



$

(0.08)


 

Rice Energy Inc.

Segment Results of Operations

(Unaudited)


Exploration and Production Segment




Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016

(in thousands, except volumes)


2016


2015


2016


2015










Operating volumes:









Natural gas production (MMcf)


68,524



55,806



198,269



142,454


Oil and NGL production (MBbls)


35



37



132



216


Total production (MMcfe)


68,733



56,031



199,058



143,752











Operating results:









Operating revenues:









Natural gas, oil and NGL sales


$

162,695



$

130,145



$

397,449



$

327,947


Other revenue


11,390



88



24,296



3,353


Total operating revenues


174,085



130,233



421,745



331,300











Operating expenses:









Lease operating


11,668



12,325



31,557



35,006


Gathering, compression and transportation


56,957



41,654



156,467



102,021


Production taxes and impact fees


3,695



1,955



8,005



5,103


Exploration


3,396



830



9,934



1,925


Incentive unit expense (income)


5,751



(453)



42,763



43,930


Acquisition costs


614





614




Impairment of fixed assets






2,595




Stock compensation expense


4,053



2,657



10,035



7,889


General and administrative


15,934



18,592



45,027



48,007


Depreciation, depletion and amortization


79,736



84,408



234,207



216,665


Other expense (income)


10,063



(71)



25,561



2,979


Total operating expenses


191,867



161,897



566,765



463,525











Operating loss


$

(17,782)



$

(31,664)



$

(145,020)



$

(132,225)











Average costs per Mcfe:









Lease operating


$

0.17



$

0.22



$

0.16



$

0.24


Gathering and compression


0.44



0.39



0.42



0.37


Transportation


0.39



0.36



0.37



0.34


Production taxes and impact fees


0.05



0.03



0.04



0.04


Exploration


0.05



0.01



0.05



0.01


Incentive unit expense


0.08



(0.01)



0.21



0.31


Stock compensation


0.06



0.05



0.05



0.05


General and administrative


0.23



0.33



0.23



0.33


Depreciation, depletion and amortization


1.16



1.51



1.18



1.51




Rice Midstream Holdings Segment



Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016

(in thousands, except volumes)


2016


2015


2016


2015










Operating volumes:









Gathering volumes (MDth/d):


812



319



642



221


Compression volumes (MDth/d):


483





436













Operating results:









Operating revenues:









Gathering revenues


$

16,189



$

8,691



$

33,969



$

17,879


Compression revenues


2,796





7,540




Total operating revenues


18,985



8,691



41,509



17,879











Operating expenses:









Midstream operation and maintenance


960



410



2,418



935


Incentive unit expense


169



(158)



2,139



892


Acquisition expense






484




Stock compensation expense


1,291



452



4,231



476


General and administrative


4,058



1,384



9,958



3,699


Depreciation, depletion and amortization


1,577



928



4,222



1,887


Other expense




153





153


Total operating expenses


8,055



3,169



23,452



8,042











Operating income


$

10,930



$

5,522



$

18,057



$

9,837




Rice Midstream Partners Segment



Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016

(in thousands, except volumes)


2016


2015


2016


2015










Operating volumes:









Gathering volumes (MDth/d):


957



671



909



629


Compression volumes (MDth/d):


745



39



488



54


Water services volumes (MMgal):


135



227



932



575











Operating results:









Operating revenues:









Gathering revenues


$

28,473



$

19,722



$

80,408



$

54,445


Compression revenues


5,030



420



9,931



1,594


Water services revenues


7,564



9,933



51,818



29,107


Total operating revenues


41,067



30,075



142,157



85,146











Operating expenses:









Midstream operation and maintenance


4,559



4,421



17,292



10,028


Incentive unit expense




(75)





1,048


Acquisition expense






73




Stock compensation expense


609



1,105



2,728



3,316


General and administrative


4,373



4,137



12,736



10,322


Depreciation, depletion and amortization


5,489



4,417



17,714



10,454


Amortization of intangible assets


411



407



1,222



1,223


Other expense


90



(347)



239



492


Total operating expenses


15,531



14,065



52,004



36,883











Operating income


$

25,536



$

16,010



$

90,153



$

48,263


 

Rice Energy Inc.
Supplemental Non-GAAP Financial Measures
(Unaudited)

Adjusted EBITDAX and Further Adjusted EBITDAX are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) before non-controlling interest; interest expense; income taxes; depreciation, depletion and amortization; amortization of deferred financing costs; amortization of intangible assets; derivative fair value (gain) loss, excluding net cash receipts on settled derivative instruments; non-cash stock compensation expense; non-cash incentive unit expense; exploration expenses; and other non-recurring items. We define Further Adjusted EBIDAX as Adjusted EBIDAX after non-controlling interest and water revenue adjustment. Neither Adjusted EBITDAX nor Further Adjusted EBITDAX is a measure of net income as determined by United States generally accepted accounting principles, or GAAP.

Management believes Adjusted EBITDAX is a useful measure to the users of our financial statements because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Management believes Further Adjusted EBITDAX is useful because it allows them to assess the level of consolidated leverage of the company and compare this level to peers.  The adjustments made to Adjusted EBITDAX to calculate Further Adjusted EBITDAX address the intercompany eliminations of items impacting Adjusted EBITDAX as a result of the consolidation of RMP, the outstanding indebtedness of which is consolidated with that of the company without regard to non-controlling interest. These adjustments include the addition of non-controlling interest as well as a water revenue adjustment attributable to charges for fresh water delivery services and produced water hauling services provided by RMP to the company, a charge that generates revenue for RMP but does not have a corresponding expense at the company level, as such costs are capitalized.

Adjusted EBITDAX and Further Adjusted EBITDAX should not be considered as alternatives to, or more meaningful than, net income as determined in accordance with GAAP or as indicators of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX and Further Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX or Further Adjusted EBITDAX. Our computations of Adjusted EBITDAX and Further Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. We believe that these measures are widely followed measures of operating performance used by investors.

We have not provided projected RMH net income or a reconciliation of projected RMH Adjusted EBITDA to projected RMH net income, the most comparable financial measure calculated in accordance with GAAP. We are unable to project RMH net income because this metric includes the impact of certain non-cash items such as depreciation expense that we are unable to project with any reasonable degree of accuracy without unreasonable effort. Therefore, we are unable to provide projected RMH net income, or the related reconciliation of projected RMH Adjusted EBITDA to projected net income.

The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDAX to the GAAP financial measure of net income (loss).

(in thousands)

Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016


Twelve Months Ended
September 30, 2016

Adjusted EBITDAX reconciliation to net income (loss):






Net Income (loss)

$

91,078



$

(44,326)



$

(318,579)


Interest expense

24,421



73,744



97,753


Depreciation, depletion and amortization

83,195



247,132



341,920


Amortization of deferred financing costs

1,247



4,416



5,818


Amortization of intangible assets

411



1,222



1,630


Acquisition expense

614



1,171



2,406


Impairment of fixed assets



2,595



20,845


Impairment of goodwill





294,908


Gain on derivative instruments (1)

(183,915)



(52,539)



(141,558)


Net cash receipts on settled derivative instruments (1)

34,895



166,350



242,578


Non-cash stock compensation expense

5,953



16,994



21,841


Non-cash incentive unit expense

5,920



44,902



35,129


Income tax expense (benefit)

81,142



(45,729)



(51,946)


Gain from sale of interest in gas properties





(953)


Exploration expense

3,396



9,934



11,146


Acquisition break-up fee



(1,939)



(1,939)


Other expense

1,704



5,127



5,883


Non-controlling interest

(16,665)



(55,535)



(62,039)


Adjusted EBITDAX(2)

$

133,396



$

373,519



$

504,843




1.

The adjustments for the derivative fair value (gains) losses and net cash receipts on settled commodity derivative instruments have the effect of adjusting net income (loss) for changes in the fair value of derivative instruments, which are recognized at the end of each accounting period because we do not designate commodity derivative instruments as accounting hedges. This results in reflecting commodity derivative gains and losses within Adjusted EBITDAX on a cash basis during the period the derivatives settled.

2.

Excluded from the above Adjusted EBITDAX reconciliation is the impact of non-controlling interest and the elimination of intercompany water revenues between Rice Energy subsidiaries and Rice Midstream Partners of $16.7 million and $7.5 million for the three months ended September 30, 2016, respectively, and $55.5 million and $38.6 million for the nine months ended September 30, 2016, respectively. When including these impacts, our Further Adjusted EBITDAX is $157.6 million for the three months ended September 30, 2016, and our consolidated net debt to LTM Further Adjusted EBITDAX ratio is 1.4x.

 

Rice Energy Inc.
Supplemental Non-GAAP Financial Measure
(Unaudited)

Adjusted net income (loss) is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define adjusted net income (loss) as net income (loss) before derivative fair value (gain) loss, excluding net cash receipts on settled derivative instruments incentive unit expense and other non-recurring items. Adjusted net income (loss) is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP.

We believe that many investors use adjusted net income (loss) in making investment decisions and in evaluating our operational trends and our performance relative to other oil and gas producing companies.

The following table presents a reconciliation of the non-GAAP financial measure of adjusted net income (loss) to the GAAP financial measure of net income (loss).

(in thousands)

Three Months Ended
September 30, 2016


Nine Months Ended
September 30, 2016

Reconciliation to net income (loss) attributable to Rice Energy Inc:




Net income (loss) attributable to Rice Energy Inc.

$

74,413



$

(99,861)


Impairment of fixed assets



2,595


Gain on derivative instruments (1)

(183,915)



(52,539)


Net cash receipts on settled derivative instruments (1)

34,895



166,350


Incentive unit expense

5,920



44,902


Other expense

1,704



5,127


Income tax effect of reconciling items

67,765



(120,128)


Adjusted net income (loss) attributable to Rice Energy Inc.

$

782



$

(53,554)




1.

The adjustments for the derivative fair value (gains) losses and net cash receipts on settled commodity derivative instruments have the effect of adjusting net income (loss) for changes in the fair value of derivative instruments, which are recognized at the end of each accounting period because we do not designate commodity derivative instruments as accounting hedges. This results in reflecting commodity derivative gains and losses within adjusted net income on a cash basis during the period the derivatives settled.

 

Rice Energy Inc.

Supplemental Balance Sheet Data

(Unaudited)


(in thousands)

September 30,
2016

Adjusted

Pro forma
September 30,
2016

Cash and cash equivalents

$

1,543,088


$

(976,000)


$

567,088


Long-term debt




Senior Secured Revolving Credit Facility




6.25% Senior Notes Due April 2022(1)

$

887,413



$

887,413


7.25% Senior Notes Due May 2023(2)

391,169



391,169


Midstream Holdings Revolving Credit Facility

34,000



34,000


RMP Revolving Credit Facility


165,000


165,000


Total long-term debt

$

1,312,582


$


$

1,477,582


Net debt (cash)

$

(230,506)


$


$

910,494




1.

Net of unamortized deferred finance costs of $12,587.

2.

Net of unamortized deferred finance costs of $6,337.

 


Rice Energy Inc.

Derivatives Information

(Unaudited)


The table below provides data associated with our derivatives as of October 31, 2016 for the periods indicated:


All-In Fixed Price Derivatives

4Q16


2017


2018


2019


2020











NYMEX Natural Gas Swaps:










Volume Hedged (BBtu/d)

702



556



642



290



298


Wtd Average Swap Price ($/MMBtu)

$

3.30



$

3.24



$

2.98



$

2.95



$

2.98












NYMEX Natural Gas Collars:










Volume Hedged (BBtu/d)

40



260



285



170




Wtd Average Floor Price ($/MMBtu)

$

2.89



$

3.09



$

3.15



$

3.00



$


Wtd Average Call Price ($/MMBtu)

$

3.58



$

3.62



$

3.63



$

3.52



$












NYMEX Natural Gas Calls:










Volume Hedged (BBtu/d)



50



80



110



135


Wtd Average Price ($/MMBtu)

$



$

3.60



$

3.48



$

3.55



$

3.47












NYMEX Natural Deferred Puts:










Volume Hedged (BBtu/d)



55



30



20




Wtd Avg. Net Floor Price ($/MMBtu)

$



$

2.50



$

2.77



$

2.80



$












NYMEX Volume Excl Calls (BBtu/d)

742



871



957



480



298


NYMEX Volume Incl Calls (BBtu/d)

742



921



1,037



590



433


Swap, Collar & Put Floor ($/MMBtu)

$

3.28



$

3.15



$

3.02



$

2.96



$

2.98












WAHA Natural Gas Swaps










Volume Hedged (BBtu/d)

56



45



15



5




Wtd Average Swap Price ($/MMBtu)

$

3.04



$

3.07



$

3.01



$

3.29



$












Dominion Natural Gas Swaps










Volume Hedged (BBtu/d)

177



219



257



92




Wtd Average Swap Price ($/MMBtu)

$

2.29



$

2.24



$

2.23



$

2.34



$












Total Fixed Price Derivatives










Volume Hedged Excl. Calls (BBtu/d)

975



1,136



1,230



577



298


Volume Hedged Incl. Calls (BBtu/d)

975



1,186



1,310



687



433


Wtd Average Swap Price ($/MMBtu)

$

3.09



$

2.97



$

2.86



$

2.87



$

2.98












Basis Contract Derivatives










Appalachian Basis Swaps










Volume Hedged (BBtu/d)

165



173



170



240



252


Wtd Average Swap Price ($/MMBtu)

$

(1.19)



$

(1.03)



$

(0.67)



$

(0.59)



$

(0.56)












Other Basis Swaps










Volume Hedged (BBtu/d)

367



212



104



45



20



Wtd Average Swap Price ($/MMBtu)

$

(0.12)



$

(0.12)



$

(0.13)



$

(0.18)



$

(0.12)












Physical Triggered Basis










Appalachian Fixed Basis (Physical)










Volume Hedged (BBtu/d)

21





4



25



45


Wtd Average Swap Price ($/MMBtu)

$

(0.79)



$



$

(0.58)



$

(0.58)



$

(0.61)












Other Fixed Basis (Physical)










Volume Hedged (BBtu/d)

131



147



125



92



42


Wtd Average Swap Price ($/MMBtu)

$

(0.13)



$

(0.12)



$

(0.14)



$

(0.16)



$

(0.15)












Total Basis Swaps(Financial + Physical)










Volume Hedged (BBtu/d)

684



533



403



402



359


Wtd Average Swap Price ($/MMBtu)

$

(0.40)



$

(0.42)



$

(0.37)



$

(0.45)



$

(0.49)


 

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/rice-energy-reports-third-quarter-2016-financial-and-operating-results-300356217.html

SOURCE Rice Energy Inc.

Julie Danvers, Director of Investor Relations, (832) 708-3437, Julie.Danvers@RiceEnergy.com