Marcellus-focused Rice Energy plans to go public

Former BlackRock Inc. (NYSE: BLK) managing director Dan Rice III and sons plan to go public with their five-year-old, Marcellus- and Utica-focused Rice Energy Inc., Canonsburg, Pa., listing it on the NYSE as RICE.

Dan Rice IV, 33, is chief executive officer and previously was an investment banker for Tudor, Pickering, Holt & Co. Securities Inc. and an analyst for offshore driller Transocean Ltd. (NYSE: RIG), Houston.

Toby Rice, 31, president and chief operating officer, was founder and president of frac-technology firm ZFT LLC. Derek Rice, 28, is vice president, exploration and geology; previously, he worked as a wellbore geologist for an oilfield service company.

Prior to joining BlackRock, Rice III, 62, was a portfolio manager for State Street Research & Management. Currently, he is lead portfolio manager for GRT Capital Partners LLC's energy division.

The Rice family formed the E&P in 2008 and gained private-equity backing, from Natural Gas Partners in 2012 currently totaling $300 million.

The producer holds some 43,351 net (45,562 gross) acres over Marcellus shale, mostly in Washington County, and 46,488 net (48,660 gross) over the Utica/Point Pleasant play, mostly in Belmont County, Ohio. Since its first horizontal Marcellus completion in October 2010, it drilled 37 more of these wells with a 100% success rate and laterals averaging some 5,700 feet. Estimated ultimate recovery is between 1.2- and 2.9 billion cu. ft. (Bcf) of gas per 1,000 feet of lateral. It had four rigs drilling its inventory in December of an estimated 349 gross (325 net) additional Marcellus well locations.

Third-quarter 2013 production was 128 million cubic feet per day (MMcf/d) from the Marcellus wells as well as from its three horizontals in the overlying Upper Devonian. It expects most (36,932 net) of its Marcellus acreage is prospective for gas from this formation as well, resulting in 211 gross (194 net) potential additional drilling locations.

Meanwhile, in the Utica play, it spudded its first attempt, Bigfoot 7H, in October in Belmont County and has two rigs drilling for it there where it estimates it has 753 gross (233 net) prospective well locations. Bigfoot encountered bottom-hole pressure of 8,800 pounds per square inch (psi), nearly 0.7 psi per foot, and had to be plugged, however. Rice plans to drill an adjacent horizontal with a new plan to handle the reservoir pressure.

Proved reserves as of Sept. 30 were 552 Bcf, all in southwestern Pennsylvania. Plans are to invest $1.1 billion, consisting of $299 million in the Marcellus, $132 million in the Utica, $386 million in further acreage acquisitions and $263 million for take-away infrastructure.

In December, coal operator Alpha Natural Resources Inc. (NYSE: ANR) agreed to sell to Rice its 50% interest in a Marcellus joint venture for $100 million in cash and $200 million in stock.

In October, Rice and Gulfport Energy Corp. (Nasdaq: GPOR), Houston, agreed to jointly develop some 50,000 net acres over Utica in Belmont County with Rice as operator of acreage in the northern area of the deal (27,000 net acres) and Gulfport as operator in the south (23,000 net acres).

The company plans to use IPO proceeds to pay $240 million of bank debt and the $100 million to Alpha; the balance will be used for capex. NGP plans to sell some of its interest.

Other members of management include Grayson Lisenby, chief financial officer formerly with NGP and investment-banking firm Barclays Capital Inc. (NYSE: BCS); Ryan Kanto, vice president, production, formerly with Encana Corp. (NYSE: ECA); John LaVelle, vice president, drilling, formerly president of Geological Engineering Services Inc.; and Varun Mishra, vice president, completions, formerly with EOG Resources Inc. (NYSE: EOG).

—Nissa Darbonne

McClendon's company goes to public seeking $2 billion

A company tied to Aubrey McClendon is on the prowl for $2 billion from public investors as his company bears down on the Utica.

Call it an act of faith in a big name. The investment is a blind offering, meaning investors won't be able to see what the company owns prior to plunking down a minimum of $5,000. Mc-Clendon has been active in the Utica following a $1.7-billion joint venture in October.

In mid-December, American Energy Capital Partners (AECP), the partnership linked to Chesapeake Energy's former chief executive, filed an S-1, a document used in the initial registration for new securities.

The partnership's ultimate goal is to cash out by flipping the business in five to seven years.

“We are a bit cautious on this strategy since industry focus has shifted from flipping acreage to more efficient operations over the past 12 to 18 months,” says Hsulin Peng, an analyst with Baird Energy.

The partnership's units will pay a monthly dividend equaling a 6% yield or $1.20 per unit. The units will not be publicly traded.

McClendon's management company is entitled to receive a 2% fee of the cost of the contract price for each property acquired, whether it's producing or non-producing oil and gas properties.

“McClendon's core competency is E&P A&D, so we will be monitoring his progress carefully,” Peng says. “Generally we think increased funding for AECP is a modest positive for Utica names given the partnership's leasing focus in the play to date.”

The partnership will be managed by AECP Management LLC, which was formed in July 2013 by McClendon. He is the chief executive and sole member of the management company since it was formed to oversee existing and future oil and natural gas assets.

McClendon is bankable and should attract interest. He co-founded Chesapeake Energy Corp. (NYSE: CHK), Oklahoma City, in May 1989 and built it into one of the top drilling companies until his resignation in April. During his leadership, Chesapeake discovered the Haynesville shale, Utica shale, Powder River Niobrara shale, Tonkawa Sand and Mississippi Lime unconventional plays.

AECP Management has a staff of more than 125 oil and gas professionals with extensive industry experience. The team has expertise in engineering, drilling, operations, geoscience, land, finance, accounting, IT, marketing and administration.

Despite McClendon's pedigree, the companies involved in the offering go to great lengths to note that they have no prior operating history or established financing sources.

“Investing in our units involves a high degree of risk,” the S-1 says.

In October, McClendon raised $1.7 billion in equity and debt through a joint venture between Red Hill Development, part of the family-owned Kimble Cos., and McClendon's American Energy-Utica LLC (AEU).

—Darren Barbee

Marathon to deploy more rigs, sell N. Sea assets

Marathon Oil Corp. (NYSE: MRO), Houston, will push ahead in 2014 with a 28-rig program in its big three shale plays: Eagle Ford, Bakken and Oklahoma Woodford, the company said in early December.

The company also laid out plans for marketing its assets in the UK and North Sea and an aggressive share-repurchase program of $2.5 billion.

Marathon announced its 2014 capex budget at $5.9 billion, with $5.5 billion earmarked for E&P. More than 60% of its budget will be directed toward its high-growth, liquids-rich North American resource play assets.

The company previously indicated a range of $5- to $6 billion.

“We were modeling total capex of $5.6 billion,” says Bill Herbert, managing director, co-head of securities, for Simmons & Co. “This represents a 14% increase year- over- year.”

MRO's rig program is underpinned by 2.4 billion barrels of oil equivalent (BOE) of 2P (proven plus probable) unconventional resource, double that of 2011. The company estimates more than 4,500 net well locations. Marathon plans to increase rig counts by 20% in the Eagle Ford and Bakken, and by 100% in the Oklahoma Woodford.

Herbert says Marathon is now running 15 rigs in the Eagle Ford, five in the Bakken and two in Oklahoma. “This implies 18 rigs in the Eagle Ford, six in the Bakken and four in Oklahoma in 2014,” he said.

The company forecasts overall production growth of about 4%, excluding Alaska, Angola and Libya.

Marathon also announced it would market assets in the UK and Norway to simplify and concentrate its portfolio.

The company has budgeted about $1.4 billion on its conventional North American and international E&P assets to “provide stable production, income and cash flow.”

—Darren Barbee

Ridgewood Energy closes latest fund at $1.1 billion

Ridgewood Energy Corp., a private upstream investment company based in Montvale, NJ, and Houston, has closed its latest private-equity fund, Ridge-wood Energy Oil and Gas Fund II LP, with total commitments of $1.1 billion, reaching its hard cap. The fund, which had an original target amount of $750 million, has been formed by Ridgewood to invest in oil projects in the US deep waters of the Gulf of Mexico.

The fund's commitments were sourced from 39 institutional investors, including a number of leading state and union pension plans, well-known university endowments and foundations, and a number of funds, private wealth managers and family offices.

Fund II has already invested in two oil wells, one of which, the Dantzler Project, was drilled in partnership with Noble Energy Inc. (NYSE: NBL), Houston, and resulted in an oil discovery.

Ridgewood's $1.1 billion in commitments secured by Fund II comes in addition to $700 million in capital and commitments it currently manages on behalf of Riverstone Holdings LLC, the energy-focused private-equity firm, through entities known as ILX Holdings I LLC and ILX Holdings II LLC (which are affiliates of Riverstone's two most recent private-equity funds).

Eaton Partners LLC acted as placement agent for the fund. Vinson & Elkins LLP served as fund counsel.

M&A news

  • Bill Barrett Corp. (NYSE: BBG) closed on its sale of the West Tavaputs natural gas property located in the Uinta Basin to affiliates of EnerVest Ltd. for $369 million.
    Denver's Barrett holds interests in properties in the Piceance, Uinta and Denver-Julesburg basins in the Rocky Mountain region.
    Houston-based EnerVest, founded in 1992, acquires, develops and operates oil and gas fields in 15 states.
  • Houston-based Buckeye Partners LP (NYSE: BPL) completed its purchase of 20 liquid petroleum products terminals with total storage capacity of 39 million bbl. for $850 million from New York-based Hess Corp. (NYSE: HES).
  • Denver-based SM Energy Co. (NYSE: SM) closed its previously announced Anadarko Basin divestiture package to various affiliates of Houston-based EnerVest Ltd. for $329 million.
    Production from the assets for the third quarter of 2013 was approximately 8,500 BOE per day, 75% of which is natural gas. The production constituted about 6% of Denver-based SM's total production in the quarter.
    Wells Fargo Securities LLC served as financial advisor to SM Energy.
  • BreitBurn Energy Partners LP (Nasdaq: BBEP) completed the acquisition of oil and natural gas properties in the Permian Basin in Texas from CrownRock LP for $282 million.
    The partnership also completed acquisitions of additional interests in certain of the acquired assets from a wholly owned subsidiary of Lynden Energy Corp. (TSXV: LVL) for about $20 million more.
  • Jones Energy Inc. (NYSE: JONE), Austin, Texas, closed its acquisition of properties in the Anadarko Basin from Houston-based Sabine Oil & Gas LLC for $195 million.
    The assets acquired include about 26,000 net acres in the Cleveland, Tonkawa and Marmaton plays in the Texas Panhandle and western Oklahoma.
    The acquisition is a bolt-on to Jones' Cleveland play and adds an additional 186 locations. Overall, it adds 40% to Jones' Cleveland acreage and a 35% increase in Cleveland locations.
    The company funded the acquisition with debt.
  • Penn Virginia Corp. (NYSE: PVA) announced it will sell substantially all of its natural gas midstream assets in the Eagle Ford play for $100 million.
    The Radnor, Pa.-based company entered into a definitive agreement with a newly formed affiliate of ArcLight Capital Partners LLC, a Boston-based investment firm with $10 billion under management.
    PVA is selling a natural gas gathering and gas lift system, including some 119 miles of pipelines and associated facilities located in Gonzales and Lavaca counties, Texas. The sale is expected to close in first-quarter 2014.
    After paying its partners, the company intends to use the remaining proceeds of $95 million to help fund its 2014 capital expenditure plan, estimated in October at about $540 million.
    Acquest Advisors LLC was PVA's financial advisor on the transaction.
  • Buccaneer Energy Ltd. (OTC: BCGYF), Houston, has agreed to sell certain assets in its Alaska operations for US$65.2 million.
    The company executed a sale and purchase agreement with Fort Worth, Texas-based BlueCrest Energy Inc. to sell 25% interest in the Cosmopolitan project located offshore Alaska in the Cook Inlet for $41.25 million including the repayment of a $1.25 million bond.
    Additionally, the company executed a membership interest purchase agreement with Teras Investments Pte. Ltd. for the sale of 50% equity interests in Kenai Offshore Ventures LLC for $23.95 million. Proceeds from that sale will be used to repay debt and for working capital purposes. The sale was expected to close in mid-January.
  • EQT Corp. (NYSE: EQT) completed the transfer of its natural gas distribution business, Equitable Gas Co. LLC, to Peoples Natural Gas for $740 million in cash.
    In addition to the cash price, EQT will receive some Marcellus midstream assets and some commercial contracts that are expected to generate at least $40 million in earnings before interest, taxes, depreciation and amortization (EBITDA).
    The newly acquired Marcellus midstream assets include some 200 miles of transmission pipelines and four storage pools.
  • Pioneer Natural Resources Co. (NYSE: PXD) and Pioneer Southwest Energy Partners LP (NYSE: PSE) completed their merger of Pioneer Southwest with a wholly owned subsidiary of Pioneer.
    The merger consolidates properties of Pioneer and Pioneer Southwest in the Midland Basin in West Texas. The merger is expected to facilitate Pioneer's plans to fully and optimally develop the area utilizing horizontal drilling and is expected to provide organizational, operational and administrative efficiencies.
    Pioneer Southwest survived the merger as an indirect wholly owned subsidiary of Pioneer. As a result of the completion of the merger, common units of Pioneer Southwest ceased trading. Shares of Pioneer common stock will continue to be traded on the New York Stock Exchange under the ticker symbol PXD.
    Pioneer Natural Resources Co. is headquartered in Irving, Texas.

Additional news

  • GE Capital, Corporate Finance (NYSE: GE) is administrative agent on $72.5 million of senior secured credit facilities to Permian Basin Materials LLC, a newly formed affiliate of WL Ross & Co. LLC. The credit facilities are being used to support the simultaneous acquisitions of Crockett County Mining Ltd., Highland Concrete Co. and Wallach Concrete Inc. and for ongoing working capital needs.
    The combined operations of Permian Basin Materials will be a leading producer of construction aggregates and concrete for general construction and energy markets in the Permian Basin region of West Texas and southeast New Mexico. In total, PBM will own or lease 10 aggregates mines and 16 ready-mix concrete plants in the region.

People news

  • Ralph A. Hill of Tulsa-based WPX Energy (NYSE: WPX) stepped down as president, chief executive and board member. James J. Bender became interim president, chief executive and board member in Hill's place, effective December 31. Hill will stay with WPX through next March to help with the transition.
    Hill spent more than 32 years working in various roles at Williams (NYSE: WMB) and then WPX. Hill and his team eventually helped WPX spin off from Williams in 2012.
    Bender is currently WPX' senior vice president and general counsel. Bender will serve as interim chief while the board's permanent selection search process for Hill continues.
  • Brian McCabe will rejoin Credit Suisse (NYSE: CS) in March 2014 as a managing director and co-head of the Americas Oil & Gas Group in the investment-banking department, based in Houston. Most recently he was with Morgan Stanley & Co. (NYSE: MS) as co-head of its North American energy practice. He worked at Credit Suisse earlier in his career.
    McCabe will now lead Credit Suisse's oil and gas group along with Tim Perry, who also retains his responsibilities as co-head of the global upstream effort. They report to Osmar Abib, global head of oil and gas.

For company news—both real-time and archives—see OilandGasInvestor.com.

Comments