Independent producer Rice Energy said Monday it’s acquiring fellow independent Vantage Energy and Vantage Energy II for roughly $2.7 billion, including debt.
In connection with the deal, Rice Midstream Partners (RMP) will purchase the acquired midstream assets from Rice Energy for $600 million, Kallanish Energy reports.
Total consideration consists of roughly $1.02 billion in cash, the assumption and retirement of assumed debt of approximately $700 million and the issuance of membership interests in Rice Energy Appalachia immediately exchangeable into roughly 39.1 million shares of Rice Energy common stock, valued at approximately $980 million.
The issuance of membership interests in Rice Energy Appalachia will allow for tax deferral of the equity portion of the sales price paid to Vantage sellers.
“This deal represents the largest core dry gas Marcellus acquisition to date, one that is truly transformational for Rice Energy, Rice Midstream Partners and our respective shareholders,” said Daniel J. Rice IV, CEO of the company, based just south of Pittsburgh.
The E&P assets to be acquired by Rice include roughly 85,000 core Marcellus acres in Greene County, Southwestern Pennsylvania, with rights to the deeper Utica Shale on approximately 52,000 acres, and 37,000 acres in the Barnett Shale of North Texas.
Second-quarter production from the acquired assets was 399 million cubic feet-equivalent per day (MMcfe/d) (roughly 65% from the Appalachian Basin, 35% from the Barnett).
The core midstream assets to be acquired by RMP include 30 miles of dry gas gathering and compression assets.
As part of the transaction, Rice Energy will dedicate the acquired Pennsylvania acreage to RMP to provide gas gathering, compression and water services.
Following the deal, Rice Energy will control approximately 231,000 acres in the Marcellus and Ohio Utica cores, with an inventory of 1,164 drilling locations that generate average single-well returns of roughly 95% at strip pricing.
Similarly, Rice Midstream Partners will control one of the largest and most concentrated core dry gas acreage dedications in the Marcellus Shale, covering approximately 199,000 acres in Pennsylvania’s Washington and Greene counties.
“Vantage, together with its three sponsors: (private equity firms) Quantum Energy Partners, Riverstone Holdings, and Lime Rock Partners, has assembled one of the largest and most attractive core dry gas positions in the Marcellus Shale,” said Roger Biemans, CEO of Englewood, Colorado-based Vantage.
All acquisitions are expected to close concurrently in the fourth quarter.