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News Release

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August 02, 2017
Rice Energy Reports Second Quarter 2017 Results and Updates 2017 Capital Budget
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CANONSBURG, Pa., Aug. 2, 2017 /PRNewswire/ -- Rice Energy Inc. (NYSE: RICE) ("Rice Energy") today reported second quarter 2017 financial and operating results. Highlights include:

  • Net production averaged 1,354 MMcfe/d, a 6% increase from first quarter 2017
  • Rice Midstream Holdings LLC ("RMH") gathering throughput averaged 1,175 MDth/d, a 21% increase from first quarter 2017
  • Lease operating expense of $0.14 per Mcfe, a 30% decrease relative to first quarter 2017
  • Net income attributable to common stockholders of $62.9 million, or $0.30 per diluted share
  • Reported Adjusted EBITDAX(1) of $229.5 million
  • Exited the quarter with low leverage(1) of 1.5x
  • Entered into a definitive merger agreement pursuant to which EQT Corporation (NYSE: EQT) ("EQT") will acquire all of the outstanding shares of Rice Energy common stock for total net consideration of approximately $6.7 billion
  • Acquired 16,500 net undeveloped acres in the Marcellus Shale core primarily in Greene County, Pennsylvania for $180 million in July 2017
  • Entered into a purchase and sale agreement ("PSA") to sell the Barnett assets producing 76 MMcfe/d for $175 million, subject to customary closing purchase price adjustments

Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "We delivered solid results this quarter, a reflection of the hard work and dedication of our entire team. We achieved record production and throughput, significantly reduced our operating costs, increased our core acreage position by almost 20,000 net acres and divested a non-core asset. I am proud of our team's collaborative efforts, evidenced by our strong quarterly results and successful strategic transactions."

1.

Please see Supplemental "Non-GAAP Financial Measures" for a description of Adjusted EBITDAX, Further Adjusted EBITDAX and related reconciliations to the comparable GAAP financial measures. Leverage is defined as the ratio of net debt to last twelve months Further Adjusted EBITDAX.


2017 Capital Budget Update

We are updating our 2017 drilling and completion capital ("D&C") budget to reflect well costs continuing to trend below budget driven by operational efficiencies in both the Marcellus and Utica that offset previously anticipated rising service costs. Additionally, we are increasing our land capital budget due to continued success acquiring leasehold and royalties that extend lateral lengths, lower cost structure and increase single well returns primarily in Greene County, Pennsylvania. We decreased our D&C capital budget from $1,035 million to $965 million, a decrease of 7%. We increased our land budget from $225 million to $245 million and also expect to spend an additional $115 million on royalty acquisitions. At RMH, we decreased our capital budget from $315 million to $300 million, a 5% decrease, as capital projects are trending below budget relative to prior expectations.

Proposed Merger with EQT Corporation

As previously announced, on June 19, 2017, Rice Energy and EQT entered into a definitive merger agreement, pursuant to which EQT will acquire all of the outstanding shares of Rice Energy common stock for total net consideration of approximately $6.7 billion, consisting of 0.37 shares of EQT common stock and $5.30 in cash per share of Rice Energy common stock. EQT will also obtain Rice Energy's midstream assets, including a 92% interest in Rice Midstream GP Holdings LP, which owns 100% of the general partner incentive distribution rights and 28% of the limited partner interests in Rice Midstream Partners LP (NYSE: RMP) ("RMP"), and the retained midstream assets currently held at Rice Energy. EQT will also assume, retire or refinance approximately $1.5 billion of net debt and preferred equity. Subject to the approval by both Rice Energy and EQT shareholders and certain customary regulatory and other closing conditions, the transaction is expected to close in the fourth quarter 2017.

In light of the pending merger with EQT, we have discontinued providing guidance and long-term outlook information regarding our results of operations. In addition, investors are cautioned not to rely on historical forward-looking statements regarding guidance and long-term outlook information, which forward-looking statements spoke only as of the date provided and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.


Second Quarter 2017 Results






Consolidated Results


Three Months Ended

June 30, 2017


Six Months Ended

June 30, 2017






Operating revenues (in thousands)


$

398,307



$

792,113







Operating expense


(in thousands)


($ / Mcfe)


(in thousands)


($ / Mcfe)

Lease operating(1)


$

17,485



$

0.14



$

39,944



$

0.17


Gathering, compression, transportation


39,131



0.32



78,557



0.33


Production taxes and impact fees


6,679



0.05



12,832



0.05


General and administrative(1)


32,997



0.27



61,735



0.26


Depreciation, depletion and amortization


145,904



1.18



282,782



1.19









(in thousands)


(per diluted share)


(in thousands)


(per diluted share)

Net income attributable to common stockholders


$

62,869



$

0.30



$

28,239



$

0.14


Adjusted EBITDAX(2)


$

229,507





$

473,726




Adjusted net income


$

42,560



$

0.20



$

72,210



$

0.35





Financial position (in millions)


As of June 30, 2017

Total liquidity(3)


$

1,726

Cash and cash equivalents


$

162

Long-term debt


$

1,600

Leverage(2)


1.5x

As of June 30, 2017, our liquidity position, excluding RMP, was $1,726 million comprised of $1,499 million of upstream liquidity ($110 million of cash on hand and $1,389 million revolver availability) and $227 million of RMH liquidity ($39 million of cash on hand and $188 million revolver availability). Our balance sheet remains strong with low leverage(2) of 1.5x.

1.

Excludes stock-based compensation expense of $0.2 million and $6.2 million attributable to lease operating and general and administrative expenses, respectively, for the three months ended June 30, 2017 and $0.4 million and $11.3 million is included in lease operating and general and administrative expenses, respectively, for the six months ended June 30, 2017.

2.

Please see Supplemental "Non-GAAP Financial Measures" for a description of Adjusted EBITDAX, Further Adjusted EBITDAX and related reconciliations to the comparable GAAP financial measures. Leverage is defined as the ratio of net debt to last twelve months Further Adjusted EBITDAX.

3.

Excludes Rice Midstream Partners LP.

 


E&P Segment Results


Three Months Ended

June 30, 2017


Six Months Ended
June 30, 2017






Production





Net production (Bcfe)


123



238


Net production (MMcfe/d)


1,354



1,313


Operated


93%



92%







Operating revenues (in thousands)





Natural gas, oil & NGL sales


$

348,892



$

705,726


Other revenue


11,350



17,979


Realized loss on derivative instruments


(17,390)



(29,753)


Total operating revenues and realized loss on derivative instruments


$

342,852



$

693,952







Realized Pricing ($/MMBtu)





NYMEX Henry Hub price


$

3.18



$

3.25


Average basis impact


(0.41)



(0.34)


FT fuel and variables


(0.08)



(0.09)


Btu uplift (MMBtu/Mcf)


0.14



0.14


Pre-hedge realized price ($/Mcf)


2.83



2.96


Post-hedge realized price ($/Mcf)


$

2.69



$

2.84







Operating expenses


(in thousands)


($ / Mcfe)


(in thousands)


($ / Mcfe)

Lease operating(1)


$

17,580



$

0.14



$

40,039



$

0.17


Gathering and compression


53,854



0.44



100,567



0.42


Transportation


32,061



0.26



67,243



0.28


Production taxes and impact fees


6,679



0.05



12,832



0.05


Exploration


7,106



0.06



11,118



0.05


General and administrative(1)


20,730



0.17



39,950



0.17


Depreciation, depletion and amortization


141,478



1.15



273,317



1.15







Operating income (in thousands)


$

58,441



$

50,734







E&P capital expenditures (in millions)





Operated Marcellus


$

96



$

203


Operated Ohio Utica


69



133


Non-operated Utica


25



34


Total Drilling & Completion


190



370


Land(2)


53



104


Total


$

243



$

474







Financial position (in millions)




As of June 30, 2017

E&P liquidity




$

1,499


Cash and cash equivalents




$

110


Long-term debt




$

1,281



















 

E&P Operational Highlights


Three Months Ended

June 30, 2017



Marcellus


Utica


Barnett


Total

Production (MMcfe/d)


885


393


76


1,354










Operational activity (net wells)









Drilled


22


4



26

Completed


9


7



16

Average lateral lengths


9,200


9,800












Appalachia net acres


190,000


65,000



255,000(3)

During the quarter, we turned to sales 18 net Marcellus wells with an average lateral length of 9,200 feet and 7 net operated Utica wells with an average lateral length of 10,500 feet. Our second quarter development costs per lateral foot were under budget and averaged $805 in the Marcellus and $1,105 in the Utica for wells drilled and completed.

Subsequent to quarter end, we completed an acquisition of 16,500 net acres in the Marcellus Shale core in Pennsylvania and West Virginia from an undisclosed seller for $180 million. This acquisition is highly complementary to our existing position and consists of 11,700 net undeveloped acres in Greene County, Pennsylvania and 4,800 net undeveloped acres in Monongalia and Wetzel counties, West Virginia. The leasehold has attractive terms with an average NRI of 86% and 97% of it is held in fee or expires beyond 2021. The acquired Greene County acreage is automatically dedicated to RMP pursuant to its gas gathering and compression and water services agreements.

In addition, on July 11, 2017, we entered into a PSA to sell approximately 36,000 net non-core Barnett Shale acres to an undisclosed private buyer for $175 million, subject to customary closing purchase price adjustments. Included in the transaction is approximately 76 MMcfe/d of second quarter net production. Proceeds from the sale will be used for general corporate purposes and the transaction is expected to close in the third quarter 2017 with an effective date of January 1, 2017.

1.

Excludes stock-based compensation expense of $0.2 million and $4.9 million attributable to lease operating and general and administrative expenses, respectively, for the three months ended June 30, 2017 and $0.4 million and $8.9 million is included in lease operating and general and administrative expenses, respectively, for the six months ended June 30, 2017.

2.

Excludes $37 million and $49 million of royalty purchases for the three and six months ended June 30, 2017, respectively. During the first six months of the year, we added approximately 6,000 royalty acres.

3.

Excludes 16,500 net Marcellus acres acquired subsequent to quarter end.

 


RMH Segment Results

(in thousands, except volumes)


Three Months Ended
June 30, 2017


Six Months Ended
June 30, 2017






Operating volumes (MDth/d)





Gathering volumes





Affiliate


452



457


Third-party


723



616


Total


1,175



1,073







Compression volumes






Affiliate


216



256


Third-party


230



246


Total


446



502


Operating revenues





Gathering


$

29,334



$

52,874


Compression


2,613



5,918


Total


31,947



58,792







Total operating expenses


11,847



18,858


Operating income


$

20,100



$

39,934







Capital expenditures (in millions)


$

44



$

113







LP + IDR cash distributions received from RMP(1) (in millions)


$

9



$

17







Financial position (in millions)




As of June 30, 2017

RMH liquidity




$

227


Cash and cash equivalents




$

39


Revolving credit facility




$

113








Acreage dedication




172,000


Third-party




72%


Second quarter gathering throughput averaged 1,175 MDth/d, which consisted of 921 MDth/d related to the operations of Rice Olympus Midstream ("ROM") and 523 MDth/d related to the operations of Strike Force Midstream, offset by an elimination of 270 MDth/d that is related to operations of both ROM and Strike Force Midstream

1.

Net of 91.75% ownership interest.


 

RMP Segment Results

(in thousands, except volumes)


Three Months Ended

 June 30, 2017


Six Months Ended
June 30, 2017






Operating volumes (MDth/d)





Gathering volumes





Affiliate


1,144



1,074


Third-party


216



224


Total


1,360



1,298







Compression volumes







Affiliate


676



635


Third-party


216



224


Total


892



859







Water services assets (MMGal)







Pennsylvania


149



373


Ohio


275



416


Total


424



789







Operating revenues





Gathering


$

40,314



$

76,534


Compression


6,270



12,052


Water


25,793



46,541


Total


72,377



135,127







Total operating expenses


25,364



47,518


Operating income


47,013



87,609







Capital expenditures (in millions)


$

41



$

73







Financial position (in millions)




As of June 30, 2017

RMP liquidity




$

656


Cash and cash equivalents




$

12


Revolving credit facility




$

206







Acreage dedication




221,000


Third-party




13%


On July 21, 2017, RMP declared a quarterly distribution of $0.2711 per unit for the second quarter 2017, an increase of $0.0103 per unit, or 4%, relative to first quarter 2017. The distribution will be payable on August 17, 2017 to unitholders of record as of August 8, 2017.

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

Conference Call

Rice Energy will host a conference call on August 3, 2017 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss second quarter 2017 results. The conference format will only include prepared remarks, given the restrictions related to discussing the signed merger agreement with EQT.

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.

About Rice Energy

Rice Energy Inc. is an independent natural gas and oil company focused on 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, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 incorporated 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, further Adjusted EBITDAX; distribution growth, distributable cash flow, the timing of completion and nature of midstream projects, the terms, timing and completion of any acquisitions or divestitures, 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; and risks related to joint venture operations. 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.

This release does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval. This communication relates to a proposed business combination between EQT and Rice.

In connection with the proposed transaction, EQT has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4 on July 27, 2017, that includes a joint proxy statement of EQT and Rice and also constitutes a prospectus of EQT. Each of EQT and Rice also plan to file other relevant documents with the SEC regarding the proposed transactions. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. The definitive joint proxy statement/prospectus(es) for EQT and/or Rice will be mailed to shareholders of EQT and/or Rice, as applicable.

INVESTORS AND SECURITY HOLDERS OF EQT AND RICE ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents containing important information about EQT and Rice, once such documents are filed with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by EQT will be available free of charge on EQT's website at www.eqt.com or by directing a request to Investor Relations, EQT Corporation, EQT Plaza, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3111, Tel. No. (412) 553-5700. Copies of the documents filed with the SEC by Rice will be available free of charge on Rice's website at www.riceenergy.com or by directing a request to Investor Relations, Rice Energy Inc., 2200 Rice Drive, Canonsburg, Pennsylvania 15317, Tel. No. (724) 271-7200.

EQT, Rice and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of Rice is set forth in Rice's proxy statement for its 2017 annual meeting of shareholders, which was filed with the SEC on April 17, 2017. Information about the directors and executive officers of EQT is set forth in its proxy statement for its 2017 annual meeting, which was filed with the SEC on March 6, 2017. These documents may be obtained free of charge from the sources indicated above.

Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when such materials become available. Investors should read the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from EQT or Rice using the sources indicated above.

Rice Energy Inc.

Consolidated Statements of Operations

(Unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,

(in thousands, except share data)

2017


2016


2017


2016

Operating revenues:








Natural gas, oil and natural gas liquids sales

$

348,892



$

122,312



$

705,726



$

234,754


Gathering, compression and water services

38,065



23,728



68,408



48,280


Other revenue

11,350



9,958



17,979



12,906


Total operating revenues

398,307



155,998



792,113



295,940










Operating expenses:








Lease operating

17,485



8,913



39,944



19,888


Gathering, compression and transportation

39,131



27,169



78,557



55,301


Production taxes and impact fees

6,679



2,659



12,832



4,310


Exploration

7,106



5,548



11,118



6,538


Midstream operation and maintenance

8,326



4,596



14,962



14,144


Incentive unit expense

4,800



14,840



7,683



38,982


Acquisition expense

2,408



84



2,615



556


Stock compensation expense

6,411



6,232



11,701



11,042


Impairment of gas properties





92,355




Impairment of fixed assets







2,595


General and administrative

32,997



23,123



61,735



43,356


Depreciation, depletion and amortization

145,904



84,752



282,782



163,937


Amortization of intangible assets

406



403



808



811


Other expense

13,207



11,457



19,365



15,648


Total operating expenses

284,860



189,776



636,457



377,108










Operating income (loss)

113,447



(33,778)



155,656



(81,168)


Interest expense

(27,269)



(24,802)



(54,292)



(49,323)


Other income

273



2,549



453



2,762


Gain (loss) on derivative instruments

103,558



(201,555)



88,779



(131,376)


Loss on embedded derivatives

(15,417)





(15,417)




Amortization of deferred financing costs

(3,426)



(1,618)



(6,078)



(3,169)


Income (loss) before income taxes

171,166



(259,204)



169,101



(262,274)


Income tax (expense) benefit

(33,917)



120,496



(33,341)



126,871


Net income (loss)

137,249



(138,708)



135,760



(135,403)


Less: Net income attributable to noncontrolling interests

(53,724)



(17,977)



(78,533)



(38,870)


Net income (loss) attributable to Rice Energy Inc.

83,525



(156,685)



57,227



(174,273)


Less: Preferred dividends and accretion of redeemable noncontrolling interests

(20,656)



(7,944)



(28,988)



(11,402)


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

$

62,869



$

(164,629)



$

28,239



$

(185,675)










Earnings (loss) per share—basic

$

0.31



$

(1.07)



$

0.14



$

(1.28)


Earnings (loss) per share—diluted

$

0.30



$

(1.07)



$

0.14



$

(1.28)



 

Rice Energy Inc.

Segment Results of Operations

(Unaudited)

Exploration and Production Segment



Three Months Ended

June 30,


Six Months Ended

June 30,

(in thousands, except volumes)

2017


2016


2017


2016









Operating volumes:








Natural gas production (MMcf)

121,942



68,702



235,133



129,744


Oil and NGL production (MBbls)

208



41



431



97


Total production (MMcfe)

123,189



68,946



237,719



130,325










Operating results:








Operating revenues:








Natural gas, oil and NGL sales

$

348,892



$

122,312



$

705,726



$

234,754


Other revenue

11,350



9,958



17,979



12,906


Total operating revenues

360,242



132,270



723,705



247,660










Operating expenses:








Lease operating

17,580



8,913



40,039



19,888


Gathering, compression and transportation

85,915



51,307



167,810



99,510


Production taxes and impact fees

6,679



2,659



12,832



4,310


Exploration

7,106



5,548



11,118



6,538


Incentive unit expense

4,664



14,141



7,464



37,012


Acquisition costs

1,356





1,563




Impairment of gas properties





92,355




Impairment of fixed assets







2,595


Stock compensation expense

5,083



3,347



9,268



5,982


General and administrative

20,730



15,191



39,950



29,092


Depreciation, depletion and amortization

141,478



79,515



273,317



154,471


Other expense

11,210



11,097



17,255



15,500


Total operating expenses

301,801



191,718



672,971



374,898










Operating income (loss)

$

58,441



$

(59,448)



$

50,734



$

(127,238)










Average costs per Mcfe:








Lease operating

$

0.14



$

0.13



$

0.17



$

0.15


Gathering and compression

0.44



0.42



0.42



0.41


Transportation

0.26



0.32



0.28



0.35


Production taxes and impact fees

0.05



0.04



0.05



0.03


Exploration

0.06



0.08



0.05



0.05


Incentive unit expense

0.04



0.21



0.03



0.28


Stock compensation

0.04



0.05



0.04



0.05


General and administrative

0.17



0.22



0.17



0.22


Depreciation, depletion and amortization

1.15



1.15



1.15



1.19


 

Rice Midstream Holdings Segment




Three Months Ended

June 30,


Six Months Ended

June 30,

(in thousands, except volumes)


2017


2016


2017


2016










Operating volumes:









Gathering volumes (MDth/d)


1,175



658



1,073



556


Compression volumes (MDth/d)


446



461



502



412











Operating results:









Operating revenues:









Gathering revenues


$

29,334



$

9,240



$

52,874



$

17,776


Compression revenues


2,613



2,633



5,918



4,748


Total operating revenues


31,947



11,873



58,792



22,524











Operating expenses:









Midstream operation and maintenance


991



457



1,738



1,458


Incentive unit expense


136



699



219



1,970


Acquisition expense


556



84



556



484


Stock compensation expense


1,201



1,751



2,174



2,940


General and administrative


5,196



3,325



9,007



5,900


Depreciation, depletion and amortization


1,790



1,556



3,187



2,645


Other expense


1,977





1,977




Total operating expenses


11,847



7,872



18,858



15,397











Operating income


$

20,100



$

4,001



$

39,934



$

7,127


 

Rice Midstream Partners Segment




Three Months Ended

June 30,


Six Months Ended

June 30,

(in thousands, except volumes)


2017


2016


2017


2016










Operating volumes:









Gathering volumes (MDth/d)


1,360



934



1,298



885


Compression volumes (MDth/d)


892



564



859



358


Water services volumes (MMGal)


424



335



789



797











Operating results:









Operating revenues:









Gathering revenues


$

40,314



$

26,249



$

76,534



$

51,934


Compression revenues


6,270



3,787



12,052



4,902


Water services revenues


25,793



16,511



46,541



44,254


Total operating revenues


72,377



46,547



135,127



101,090











Operating expenses:









Midstream operation and maintenance


9,701



4,187



17,880



12,733


Acquisition expense


496





496



73


Stock compensation expense


127



1,134



259



2,119


General and administrative


7,071



4,607



12,778



8,363


Depreciation, depletion and amortization


7,543



6,855



15,164



12,225


Amortization of intangible assets


406



403



808



811


Other expense


20



361



133



149


Total operating expenses


25,364



17,547



47,518



36,473











Operating income


$

47,013



$

29,000



$

87,609



$

64,617


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 (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 EBITDAX as Adjusted EBITDAX 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 the addition of a water revenue adjustment attributable to charges for fresh water delivery services and produced water hauling services provided by RMP to RICE, a charge that generates revenue for RMP but does not have a corresponding expense at the RICE 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.

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
June 30, 2017


Twelve Months Ended
June 30, 2017

Adjusted EBITDAX reconciliation to net income:




Net income

$

137,249



$

22,344


Interest expense

27,269



104,596


Depreciation, depletion and amortization

145,904



487,300


Amortization of deferred financing costs

3,426



10,454


Amortization of intangible assets

406



1,631


Acquisition expense

2,408



8,168


Impairment of gas properties



113,208


Impairment of fixed assets



20,462


(Gain) loss on derivative instruments (1)

(103,558)



81


Net cash (payments) receipts on settled derivative instruments (1)

(17,390)



39,863


Non-cash stock compensation expense

6,411



33,605


Non-cash incentive unit expense

4,800



20,462


Income tax expense

33,917



18,000


Exploration expense

7,106



19,739


Loss on embedded derivatives

15,417



15,417


Other expense



6,508


Non-controlling interest attributable to midstream entities

(33,858)



(98,236)


Adjusted EBITDAX(2)

$

229,507



$

823,602




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 $33.9 million and $17.1 million, respectively, for the three months ended June 30, 2017 and $98.2 million and $56.4 million, respectively, for the twelve months ended June 30, 2017. When including these impacts, our Further Adjusted EBITDAX is $280.5 million and $978.2 million for the three and twelve months ended June 30, 2017, respectively. Our consolidated net debt to last twelve months Further Adjusted EBITDAX ratio is 1.5x. Also included in the above reconciliation is the non-controlling interest attributable to Rice Energy Operating LLC, as we view our business on a fully diluted basis.

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 impairment of gas properties, impairment of fixed assets, derivative fair value (gain) loss, net cash receipts on settled derivative instruments, incentive unit expense, acquisition 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 to the GAAP financial measure of net income.

(in thousands)

Three Months Ended
June 30, 2017


Six Months Ended
June 30, 2017

Reconciliation to net income attributable to Rice Energy Inc:




Net income

$

137,249



$

135,760


Non-controlling interest attributable to midstream entities

(33,858)



(61,692)


Impairment of gas properties



92,355


Gain on derivative instruments (1)

(103,558)



(88,779)


Net cash payments on settled derivative instruments (1)

(17,390)



(29,753)


Incentive unit expense

4,800



7,683


Loss on embedded derivatives

15,417



15,417


Income tax effect of reconciling items

39,900



1,219


Adjusted net income attributable to Rice Energy Inc.(2)

$

42,560



$

72,210




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.

2.

Excluded from the above Adjusted net income reconciliation is the impact of non-controlling interest of $33.9 million and $61.7 million for the three and six months ended June 30, 2017, respectively.


 

Rice Energy Inc.
Supplemental Non-GAAP Financial Measure

Finding and development cost ("F&D") 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 F&D as gross drilling and completion capital expenditures divided by gross estimated ultimate recovery.

Management believes that F&D 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 to other oil and gas producing companies.

 

Rice Energy Inc.

Supplemental Balance Sheet Data

(Unaudited)


The table below provides supplemental balance sheet data as of June 30, 2017.


(in thousands)

June 30, 2017

Cash and cash equivalents

$

161,540


Long-term debt


Senior Secured Revolving Credit Facility


6.25% Senior Notes Due April 2022(1)

$

889,104


7.25% Senior Notes Due May 2023(2)

392,175


Midstream Holdings Revolving Credit Facility

112,500


RMP Revolving Credit Facility

206,000


Total long-term debt

$

1,599,779


Net debt

$

1,438,239




1.

Net of unamortized deferred finance costs and original discount issuances of $10,896 (in thousands).

2.

Net of unamortized deferred finance costs and original discount issuances of $7,825 (in thousands).

 

Rice Energy Inc.

Derivatives Information

(Unaudited)


This table provides data associated with our derivatives as of July 20, 2017 for the periods indicated:


All-In Fixed Price Derivatives

Rem.
2017


2018


2019


2020


2021











NYMEX Natural Gas Swaps:










Volume Hedged (BBtu/d)

724



665



445



570



338


Wtd Average Swap Price ($/MMBtu)

$

3.22



$

3.00



$

2.92



$

2.92



$

2.85












NYMEX Natural Gas Collars:










Volume Hedged (BBtu/d)

290



285



190






Wtd Average Floor Price ($/MMBtu)

$

3.08



$

3.15



$

3.00



$



$


Wtd Average Call Price ($/MMBtu)

$

3.73



$

3.63



$

3.50



$



$












NYMEX Natural Gas Calls:










Volume Hedged (BBtu/d)

90



120



130



135



20


Wtd Average Price ($/MMBtu)

$

3.54



$

3.32



$

3.51



$

3.47



$

3.70












NYMEX Natural Gas Deferred Puts:










Volume Hedged (BBtu/d)

90



30



20






Wtd Avg. Net Floor Price ($/MMBtu)

$

2.60



$

2.77



$

2.80



$



$












NYMEX Volume Excl Calls (BBtu/d)

1,104



980



655



570



338


NYMEX Volume Incl Calls (BBtu/d)

1,194



1,100



785



705



358


Swap, Collar & Put Floor ($/MMBtu)

$

3.13



$

3.04



$

2.94



$

2.92



$

2.85












Waha Natural Gas Swaps










Volume Hedged (BBtu/d)

68



22



9






Wtd Average Swap Price ($/MMBtu)

$

3.05



$

3.01



$

3.29



$



$












Dominion Natural Gas Swaps










Volume Hedged (BBtu/d)

235



257



92






Wtd Average Swap Price ($/MMBtu)

$

2.21



$

2.23



$

2.34



$



$












Total Fixed Price Derivatives










Volume Hedged Excl. Calls (BBtu/d)

1,406



1,259



756



570



338


Volume Hedged Incl. Calls (BBtu/d)

1,496



1,379



886



705



358


Wtd Average Swap Price ($/MMBtu)

$

2.97



$

2.87



$

2.87



$

2.92



$

2.85












Basis Contract Derivatives










Appalachian Basis










Volume Hedged (BBtu/d)

550



361



450



515



340


Wtd Average Swap Price ($/MMBtu)

$

(1.07)



$

(0.65)



$

(0.58)



$

(0.56)



$

(0.54)












Other Basis (MichCon/Gulf Coast)










Volume Hedged (BBtu/d)

494



302



167



73



20


Wtd Average Swap Price ($/MMBtu)

$

(0.12)



$

(0.13)



$

(0.15)



$

(0.14)



$

(0.12)












Total Basis Swaps










Volume Hedged (BBtu/d)

1,044



663



617



588



360


Wtd Average Swap Price ($/MMBtu)

$

(0.62)



$

(0.42)



$

(0.47)



$

(0.51)



$

(0.51)












WTI Swaps










Volume Hedged (Bbls/d)

50










Wtd Average Swap Price ($/bbl)

$

45



$



$



$



$












NGL Swaps










Volume Hedged (Bbls/d)

496










Wtd Average Swap Price ($/bbl)

$

15



$



$



$



$


 

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SOURCE Rice Energy Inc.

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