Rice Energy Investor Presentation

25 Pages·2016·1.18 MB·English

by  Daniel Rice

RICE
MIDSTREAM
PARTNERS
Capturing the Core:
Transformative Acquisition of Vantage Energy Inc.
September 26, 2016
1 www.riceenergy.com
Acquisition Summary – Enhancing Core, Dry-Gas Position in Appalachia
Transaction  On September 26, 2016 Rice Energy and Rice Midstream Partners
announced the acquisition of Vantage Energy for total consideration of PA
OH
$2.7 billion
WV
– RICE will acquire Vantage’s upstream assets for $2.1 billion
– RMP will acquire Vantage’s midstream assets for $600 million WEST VIRGINIA
Upstream Assets  ~85,000 net Marcellus acres in Greene County, PA(1)
– 462 net locations that generate 110% IRRs at strip(2)
– 50% of Marcellus acreage is held (HBP/HBO) or owned in fee
– No significant leasehold obligations until 2019+
– 99% operated and 84% 8/8ths net revenue interest
 ~52,000 net PA Utica acres (113 net locations)
 ~37,000 net Barnett acres
 399 MMcfe/d 2Q16 net production
– 268 MMcfe/d Appalachia, 131 MMcfe/d Barnett
Midstream Assets  100% of PA acreage will be dedicated to RMP for gathering,
compression and water infrastructure
 Midstream assets include dry gas gathering and compression systems
– 30 miles of dry gas gathering pipeline with >400 MMcf/d capacity
– 7,100 horsepower of compression
 313 MMcf/d 1H16 throughput(3)
RICE Acreage Vantage Acreage
Anticipated Closing  Q4 2016
__________________________
1. Includes ~5,000 net royalty acres, the majority of which are leased to RICE.
2. Strip pricing as of 7/29/16, 2016 estimated well cost of $850 per lateral foot.
3. Includes 52 MMcf/d attributable to Vantage’s joint venture partner’s interest in the system. Vantage closed on the acquisition of its joint venture partner’s interest in the system in September 2016.
2 www.riceenergy.com
Strategic Acquisition Consistent with RICE’s Strategy

Core acquisition with organic upside potential Vantage Energy Inc.
 ~174,000 effective net acres
 Increases RICE’s acreage by ~55%(1)
– ~85,000 PA Marcellus(3)
 Increases Marcellus locations by ~95%
– ~52,000 PA Utica
 Positions RICE as largest acreage holder in Greene County
– ~37,000 Barnett
 Creates 20,000-40,000 acres of in-fill leasehold opportunities
 399 MMcfe/d 2Q16 net
production
 – 268 MMcfe/d Appalachia
Expands high return inventory of drilling locations by ~66%
– 131 MMcfe/d Barnett
 Single well returns of ~110%(2) with low F&D cost of ~$0.50/Mcf
 RICE’s operational scale allows for seamless integration
Washington
 Operate development program of 45 net wells per year

Leasehold is ~50% held or owned in fee
 No significant HPB or leasehold obligations until 2019+
 High average 8/8ths NRI of approximately 84%

Extends RMP’s 20% distribution growth target through 2023
 Increases RMP’s acreage dedication by ~67%
 Leading midstream footprint across southwest Appalachia
 100% of acreage dedicated to RMP, strengthening organic project backlog
 Expanded footprint increases third-party midstream opportunities
 Greene
Immediately accretive and credit enhancing to both E&P and RMP
 Accretive to RICE’s NAV per share and E&P cash flow per share
 RICE’s 2020E IDR cash flow increases by $10MM
RICE Acreage
 5-10% accretive to RMP’s 2017E distributable cash flow per unit
Vantage Acreage
__________________________
1. Excludes PA Utica and Barnett acreage.
2. Marcellus single well returns and strip pricing as of 7/29/16, 2016 estimated well cost of $850 per lateral foot.
3. Includes ~5,000 net royalty acres, the majority of which are leased to RICE.
3 www.riceenergy.com
Proven Acreage with Consistent Results
PA Marcellus
Producing Marcellus Wells – SW PA
Cumulative Production versus Time(2)
 Vantage’s 72 producing Marcellus wells de-
risk the acquired asset base 12,000,000
– Consistent results indicate uniform shale
properties across position
– EUR’s of 2.16 Bcf/1,000’ consistent with 10,000,000
RICE Wells
RICE’s Marcellus development )
f
c
M
– Single well returns of ~110% at strip
( Vantage Wells

pricing(1) n 8,000,000
o
i
t
 Development visibility through 2017 via c
u
d
wells in progress, permits in hand and o
r
contiguous, drill-ready acreage P 6,000,000
e
v
 Combined acreage further enhances i
t
a
capital efficiency at RICE and RMP in 2017 lu
m
and beyond
u 4,000,000
C
– Maximizes development economics via
longer laterals, more wells per pad and
more pads per development run
2,000,000
– Integrated upstream/midstream
development schedule to minimize
Peer Wells LEGEND
midstream capex spend and leasehold
RICE Wells
RICE Acreage
-
extensions
Vantage Wells
0 500 1000 1500 2000 2500
Vantage Acreage
Days Online Peer Wells
Combining the Two Most Effective Marcellus Producers in SW PA
__________________________
1. Strip pricing as of 7/29/16, 2016 estimated well cost of $850 per lateral foot.
2. Data for RICE based on actuals through 7/6/16, peer data based on Pennsylvania Department of Environmental Protection productionreports through 5/1/16.
4 www.riceenergy.com
RICE’s Proven Approach is Repeatable on the Acquired Assets
 Since IPO, RICE has efficiently developed and grown its core dry gas E&P and midstream assets
 By following the same playbook with the same team, RICE intends to replicate its success on the acquired asset base
Opportunity
IPO To Date To Date
Set Through
Jan 2014 2Q16 2Q16
2020
Washington, PA
Core Focus Areas Greene, PA Greene, PA
Belmont, OH
Appalachia Net Core
(2)
90,000 151,000 85,000 > 120,000
Acres (1)
Appalachia Net
(3)
209 758 268 > 700
Production, MMcfe/d
Midstream
(4)
Throughput ~275 1,592 313 > 1,000
(MDth/d)
Acquisition Size, Quality and Opportunity Set Bear an Uncanny Resemblance to Rice Energy in 2014
__________________________
1. Excludes PA Utica.
2. Includes ~5,000 net royalty acres, the majority of which are leased to RICE.
3. Appalachian production only.
4. Represents 1H16 average throughput of 313 MMcf/d. Includes 52 MMcf/d attributable to Vantage’s joint venture partner’s interest in the system. Vantage closed on the acquisition of its joint venture partner’s interest in the system in September 2016.
5 www.riceenergy.com
Compelling Pro Forma Company Profile
2016E Production 720-740 MMcfe/d 35 MMcfe/d(1) 755-775 MMcfe/d
~70%YoY
2017E Production 900-955 MMcfe/d 380-400 MMcfe/d 1,280-1,355 MMcfe/d
Growth
$560MM D&C $40MM D&C(1) $600MM D&C
2016E Upstream Capex
$125MM Land $10MM Land(1) $135MM Land
$700-775MM D&C $250-350MM D&C $950-1,125MM D&C
2017E Upstream Capex
$130-150MM Land $30-40MM Land $160-190MM Land
Appalachia Net Acres(2) 151,000 acres 85,000 acres(3) 231,000 acres
Appalachia Locations(2) 702 462 1,164
Marcellus EUR (Bcf/1,000’) 2.16 2.16 2.16
Enterprise Value $6.3B $2.7B $9.0B
YE 2017E
2.6x N/A 2.2x
Net Debt / Adj. EBITDAX(4)
__________________________
Note: Market data as of 9/23/2016
1. Vantage 2016 estimates assume 11/15/2016 close.
2. Excludes PA Utica.
3. Includes ~5,000 net royalty acres, the majority of which are leased to RICE.
4. Please see “Adjusted EBITDAX Reconciliation” for reconciliations to comparable GAAP financial measures.
6 www.riceenergy.com
Rice Energy – Unique Combination of Size, Growth and Returns
Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6
>$7B Enterprise 
     
Value
>50% 2017E 
     
Growth
>225,000 Core 
     
Dry Acres
>1,000 Core 
     
Dry Locations
<2.5x Net Debt 
     
(1)
/Adj. EBITDAX
Retained 
     
Midstream

     
GP Ownership
__________________________
Note: Peers include AR, CNX, COG, EQT, GPOR and RRC. Based on FactsetResearch and management estimates as of September 23, 2016.
1. Please see “Adjusted EBITDAX” for reconciliations to comparable GAAP financial measures.
7 www.riceenergy.com
Acquisition Structure and Financing Overview
KEYTRANSACTION DETAILS PRO FORMA CAPITALIZATION
 $2.7B consideration privately negotiated with Vantage consisting of $1.72B ($MM) June 30, 2016 Adjusted PF 6/30/16
cash and $980MM RICE equity issued to Vantage’s sponsors(1) Cash
Rice Energy $513 ($120) $393
 Ascribed $2.1B upstream and $600MM midstream valuation
Rice Midstream Holdings $38 - $38
 $1B financings under-levers RICE’s balance sheet and positions RICE to Rice Midstream Partners $15 - $15
capture an additional 20,000 –40,000 acres of leasehold Total consolidated cash $566 - $446
 RICE revolver upsized from $750MM to $1B Mezzanine equity $373 - $373
– Expect to further upsize revolver incorporating Vantage assets by YE16 Long-term debt
Rice Energy
 RMP intends to fund the midstream asset acquisition through borrowings
E&P credit facility - - -
under its revolving credit facility and either potential equity and debt
6.25% Senior notes due 2022 $900 - $900
financings prior to closing, or the issuance to RICE of up to $250MM RMP 7.25% Senior notes due 2023 $397 - $397
common units Total Rice Energy debt $1,297 - $1,297
Rice Midstream Holdings credit facility $25 - $25
 Transaction includes 99 MDth/d and 257 MDth/d of 4Q16 and 2017 Waha/
Rice Midstream Partners credit facility - $350 $350
Dominion hedges at a wtd. avg. price of $2.45/MMBtu and $2.44/MMBtu Total consolidated debt $1,322 $350 $1,672
 RMP revolver upsized from $450MM to $850MM Net debt $757 $350 $1,226
 Vantage will receive one board seat Net Debt/LTM EBITDA YE17 Target
E&P 1.8x 1.4x <2.0x
 Expect to close in 4Q16
RICE Consolidated 1.3x 1.5x <2.5x
SOURCES AND USES Liquidity
E&P RCF availability $750 $250 $1,000
Purchase Price $2,700
Rice Midstream Holdings RCF availability $325 - $325
RICE $2,100
Rice Midstream Partners RCF availability $450 $50 $500
RMP $600 Letters of Credit ($214) - ($214)
Total consolidated cash $566 ($120) $446
Sources ($MM) Uses ($MM) Total liquidity $1,877 $180 $2,057
RICE Equity to Public $1,000 Upstream $1,400
RICE Equity to Vantage 980 Midstream 600
RICE Cash on Hand 120 Repay Vantage Debt 700
RMP Units/Financing Proceeds 250
RMP Revolver 350
Total Sources $2,700 Total Uses $2,700
_______________________
1. Equity consideration paid to Vantage owners will be in the form of membership interests in Rice Energy Appalachia, LLC, a wholly-owned subsidiary of Rice Energy Inc., that are immediately exchangeable for approximately 39.1 million shares of Rice Energy Inc. common stock,
allowing for tax deferral of the equity portion of the consideration.
8 www.riceenergy.com
Rice Midstream Partners (NYSE:RMP)
9 www.riceenergy.com
Acquisition Expands Core Midstream Footprint
 Vantage Energy Inc.
Core Acquisition Adjacent to Existing RMP Infrastructure
~132,000 effective dedicated acres
PA
OH
– ~80,000 PA Marcellus(1)
 Highly complementary to existing infrastructure and acreage dedication
– ~52,000 PA Utica
 Assets include dry gas gathering and compression systems WV
313 MMcf/d 1H16 throughput(2)
WEST VIRGINIA

Increases RMP’s acreage dedication by ~67%
 Leading midstream footprint across southwest Appalachia
Washington
 100% acreage dedicated to RMP, strengthening organic project backlog
 Will fall under the existing RICE/RMP GGA and have the same fee structure
 Provides optionality on emerging PA Utica

Extends RMP’s 20% distribution growth target through 2023
TETCO
 Project backlog adds 462 Marcellus locations to RICE inventory
 Expanded midstream footprint increases opportunities to provide third-party Greene
gathering and water services

Maintains Financial Strength
Legend
 5-10% accretive to RMP’s 2017E distributable cash flow per unit RMP Gathering Pipeline
RICE Acreage
 Targeting <2.25x YE16 RMP leverage Vantage Acreage RMP Water Pipeline
Vantage Pipeline
3rdParty Dedicated to RMP
 Ample liquidity and financial flexibility to support future investments
Vantage Water Pipeline
Acquisition Significantly Adds to RMP’s Highly Visible Growth
_______________________
1. Excludes ~5,000 net royalty acres, the majority of which are leased to RICE.
2. Includes 52 MMcf/d attributable to Vantage’s joint venture partner’s interest in the system. Vantage closed on the acquisition of its joint venture partner’s interest in the system in September 2016.
10 www.riceenergy.com