Rice Energy Shares Lower On News Of Acquisition, Common Share Offering

Rice Energy IncRICE shares are steeply lower Tuesday after it announced it's pricing its underwritten public offering of 40 million of its common stock at $25.50 per share.

The stock, which closed Monday's session at $27.14, is down 7.4 percent at $25.11 on three times its average volume.

Jeffries noted the company has agreed to acquire privately-held Vantage Energy for $2.7 billion, with the deal expected to add 85,000 adjacent development acres in its core Marcellus development area. Rice is set to acquire Vantage's upstream assets for $2.1 billion and its RMP mid-stream subsidiary will buy the associated midstream/processing rights for $600 million. The deal is structured to be paid $1.72 billion in cash and 39.1 million in shares.

Analyst Jonathan Wolff highlighted the fact that Vantage had twice planned IPOs and had to shelve the plans. The analyst noted that the company's second quarter production was 399 MMcfe/d. This, the analyst believes, would have dipped due to low reinvestment.

Commenting on the acquisition, Jeffries said it has an initial positive view, given the extended duration of upstream/MLP growth and the seemingly reasonable price. The firm, however, was seeking additional information from the call on potential margin enhancement through improved transport and plans for the Barnett.