RICE MIDSTREAM PARTNERS LP 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 Six Months Ended
June 30, 2017 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 (in thousands) (per diluted
share) 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 Six Months Ended
June 30, 2017
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 Three Months Ended Six Months Ended
June 30, 2017 June 30, 2017
(in
thousands,
except
volumes)
-----------
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 Three Months Ended Six Months Ended
June 30, 2017
(in thousands,
except volumes) 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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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 Twelve Months Ended
June 30, 2017 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 Six Months Ended
June 30, 2017 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 $7,825 (in
thousands).
Rice Energy Inc.
Derivatives Information
(Unaudited)
This table provides data associated with our derivatives as of July 20, 2017 for the periods indicated:
All-In Fixed Price
Derivatives Rem. 2018 2019 2020 2021
2017
--- ----
NYMEX Natural Gas Swaps:
------------------------
Volume Hedged (BBtu/d) 724 665 445 570 338
Wtd Average Swap Price
($/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.
