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Key Takeaways From Rice Energy's Acquisition Announcement

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Key Takeaways From Rice Energy's Acquisition Announcement

Johnson Rice & Co. is positive on Rice Energy Inc (NYSE: RICE)'s deal to buy Vantage Energy Inc (NYSE: VEI)'s upstream assets for $2.1 billion. Separately, Rice Midstream Partners LP (NYSE: RMP) agreed to acquire Vantage's midstream assets for $600 million.

The upstream deal, which results in dilution of about 55 percent for common stockholders, boosts Rice's Marcellus core acreage by about 55 percent. Production from the Vantage assets in the second quarter was about 400 Mmcfe/d.

"As a first cut at deal metrics, we apply $2,500 per Mcfe/d to the 400 Mmcfe/d in production to estimate the PDP value at $1.0 billion, and we value the 37,000 Barnett acres at $500/acre back off a further $18.5 million," analyst Charles Meade wrote in a note.

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

"The implied ~$1,080 million for the 80,000 acres of Marcellus leasehold yields ~$13,500 per acre, an attractive metric in our view," Meade continued.

Meanwhile, on acquiring midstream assets, Rice Midstream Partners will receive a gas gathering pipeline with capacity of more than 400 Mmcf/d and 7,100 horsepower of compression.

Meade has a Hold rating on Rice Energy shares.

At time of writing, shares of Rice Energy fell 7.18 percent to $25.19.

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Latest Ratings for RICE

DateFirmActionFromTo
Sep 2017Goldman SachsDowngradesBuyNeutral
Aug 2017Stephens & Co.DowngradesOverweightEqual-Weight
Jul 2017JefferiesDowngradesBuyHold

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