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Ohio Utica Shale

Rice Energy: Utica well producing, leases added in Ohio, Pa.

By Bob Downing Published: August 11, 2014

From Rice Energy today:

CANONSBURG, Pa., Aug. 11, 2014 /PRNewswire/ -- Rice Energy Inc. (NYSE: RICE) today reported second quarter 2014 financial and operational results, provided updated basis differential information, and updated full year 2014 guidance.

Second Quarter Highlights

  • Second quarter 2014 net production of 241 MMcfe/d, a 15% increase from first quarter 2014 volumes, and an 84% increase above second quarter 2013 pro forma(2) volumes
  • Achieved 280 MMcfe/d net production for the month of June 2014, a 101% increase above pro forma June 2013 volumes, and a 60% increase from our year end 2013 pro forma exit rate
  • Average realized natural gas price (before the impact of hedging) of $4.12/Mcf in the second quarter 2014
  • Second quarter 2014 Adjusted EBITDAX(1) of $50.4 million
  • First Utica well, the Bigfoot 9H, was turned to sales and is performing above management's expectations
  • Turned online 10 Marcellus wells (9.1 net) with an average lateral length of ~8,400 feet that produced 132 MMcf/d gross for the month of June 2014
  • Leasehold position has grown to 126,606 net acres. Increased Pennsylvania leasehold position to 75,834 net acres, including the recently completed ~22,000 acre Greene County acquisition, and increased Ohio leasehold position to 50,772 net acres
  • Second quarter 2014 adjusted net income(1) of $4.0 million, or $0.03 per diluted share
  • Second quarter 2014 cash operating costs of $0.76 per Mcfe

Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "Our results for the first half of 2014 are a reflection of the hard work and dedication of our entire team. We brought online 14 Marcellus wells and our first Utica well, which tested at a stabilized rate of 42 million cubic feet of gas per day and is shaping up to be one of the best wells in our company's history. In addition, we've managed to grow our core acreage position by 40% since IPO, and we are confident this growing inventory of high rate of return projects in the Marcellus and Utica will generate significant value for our shareholders for many years to come."

 

(1) Please see "Supplemental Non-GAAP Financial Measures" for a description of Adjusted EBITDAX and adjusted net income

(2) References to pro forma throughout this earnings release relate to our acquisition of the remaining 50% interest in our Marcellus joint venture from Alpha Natural Resources, Inc. on January 29, 2014

 

Second Quarter 2014 Results

 
 

Three Months Ended
June 30, 2014

Six Months Ended
June 30, 2014

         

Natural gas production (MMcf)

21,966

 

38,356

 

Oil and natural gas liquids (NGL) production (Bbls)

550

 

550

 

Total production (MMcfe)

21,969

 

38,359

 
         

Average natural gas price before effects of hedges per Mcf

$

4.12

 

$

4.72

 

Average natural gas price after effects of hedges per Mcf(1)

$

3.68

 

$

4.17

 

Average oil and NGL price per Bbl

$

57.57

 

$

57.57

 

Average costs per Mcfe:

       

Lease operating

$

0.30

 

$

0.31

 

Gathering, compression and transportation

$

0.42

 

$

0.43

 

Production taxes and impact fees

$

0.04

 

$

0.04

 

General and administrative

$

0.68

 

$

0.69

 

Depletion, depreciation and amortization

$

1.48

 

$

1.51

 
 

(1) The effect of hedges includes realized gains and losses on commodity derivative transactions.

 

Second Quarter Financial Results

During the second quarter 2014, our daily net production averaged 241 MMcfe/d. This compares to pro forma second quarter 2013 daily net production of 131 MMcfe/d, an 84% increase. Total net natural gas production for the quarter was 22.0 Bcf. Our second quarter 2014 realized natural gas price, before the effect of hedges, was $4.12 per Mcf. After giving effect to hedges, our average natural gas price was $3.68 per Mcf. Per unit cash production costs (lease operating; gathering, compression and transportation; and production taxes and impact fees) were $0.76 per Mcfe. Adjusted EBITDAX for the quarter was $50.4 million. Depreciation, depletion and amortization expense was $32.6 million, while realized loss on derivative instruments was $9.8 million. We reported adjusted net income of $4.0 million, or $0.03 per diluted share when excluding unrealized gains and losses on derivative contracts and other non-recurring income and expense items.

Year to Date Financial Results

Our pro forma natural gas daily net production average for the first six months of the year was 225 MMcfe/d, an increase of 105% compared to pro forma daily net production of 110 MMcfe/d for the first half of 2013. Total pro forma natural gas production for the first half of 2014 was 40.8 Bcf. For the six month period ended June 30, 2014, our realized natural gas price, before the effect of hedges, was $4.72 per Mcf. After giving effect to hedges, our average natural gas price was $4.17 per Mcf. Per unit cash production costs were $0.78 per Mcfe. Adjusted EBITDAX for the first half of 2014 was $105.9 million. Depreciation, depletion and amortization expense was $58.1 million, while realized loss on derivative instruments was $21.0 million. We reported adjusted net income of $13.9 million, or $0.11 per diluted share.

Operational Highlights - Pennsylvania

For the second quarter of 2014, Pennsylvania net production averaged 240 MMcfe/d, a 15% increase over the first quarter of 2014 and an 84% increase over pro forma second quarter 2013 production. The sequential period production growth was the result of 10 new Marcellus wells (9.1 net) with an average 8,400 foot lateral. Specifically, in late April we turned online 6 wells (5.1 net) in eastern Washington County with an average 8,087 foot lateral, and in early May we turned online 4 wells (4.0 net) in western Greene County with an average 9,000 lateral. These 10 wells averaged 132 MMcf/d gross for the month of June and continue to perform in line with management's expectations. In total, we exited the second quarter with 51 producing Marcellus wells (320,000 gross lateral feet) and 3 producing Upper Devonian wells (14,000 gross lateral feet), all operated by Rice Energy.

In Pennsylvania, we have 51 Marcellus wells in progress totaling 360,000 gross lateral feet (100% operated, average approximately 95% working interest). We anticipate these 51 wells being turned to sales over the next 12 months.

The following table provides certain operational data as of July 31, 2014, related to the 10 gross Marcellus wells brought online during the second quarter 2014.

Average
Wells per Pad

 

Average Lateral
Length (Feet)

 

Aggregate Periodic
Flow Rates
(MMcf/d) 0-90 Days

 

Average
D&C ($/Foot)

4

 

9,134

 

13.5

 

$

1,227

 

2

 

5,993

 

11.5

 

$

1,511

 

4

 

9,000

 

N/A

 

$

1,126

 
 

 

The following table provides operational data as of July 31, 2014 related to the 51 Marcellus producing wells as of June 30, 2014.

View News Release Full Screen
               

Periodic Flow Rates (MMcf/d)

   

Year(s)

 

Wells
Turned
Into Sales

 

Average
Wells per
Rig Move

 

Average
Lateral
Length
(Feet)

 

0-90

 

91-180

 

181-360

 

361-720

 

D&C
($/Foot)

2010-2011

 

6

 

1.4

 

3,281

 

5.7

 

6.0

 

4.4

 

2.7

 

2,377

2012

 

9

 

2.0

 

5,731

 

9.2

 

10.0

 

6.8

 

6.1

 

1,663

2013

 

22

 

2.1

 

6,286

 

11.2

 

10.6

 

7.9

 

NA

 

1,469

Q1 2014

 

4

 

4.0

 

6,691

 

12.7

 

9.4

 

NA

 

NA

 

1,348

Q2 2014

 

10

 

3.3

 

8,452

 

12.9

 

NA

 

NA

 

NA

 

1,243

Total

 

51

 

2.0

 

6,291

 

10.4

 

9.7

 

6.6

 

3.2

 

1,556

 
 

Operational Highlights - Ohio

As previously reported, during the quarter we successfully tested our first Utica well, Bigfoot 9H, a 6,950 foot lateral with 40 frac stages located in Belmont County, Ohio. This well tested at a stabilized flow rate of 42 MMcf/d with flowing casing pressures of 5,850 psi and in June was placed into sales under our restricted choke program. After 49 days of production, the Bigfoot 9H has cumulatively produced 676 MMcf of natural gas and continues to flow at a restricted rate of 14 MMcf/d. Of note, we are extremely encouraged by the lower than expected pressure decline during the first two months of production. The well is currently still flowing with casing pressures over 5,650 psi and given the consistent and predictable pressure decline, we expect Bigfoot 9H to flow at a restricted rate of 14 MMcf/d for at least 365 days. The expected one year cumulative production is now anticipated to be approximately 5.1 Bcf, a 35% increase over our original estimate of 3.8 Bcf.

In Belmont County, we are also in the process of completing our second and third Utica Shale wells, the Blue Thunder 10H and 12H. Both of these wells have lateral lengths of 9,000 feet and will each be completed with 52 stages. We expect the final stages to be completed in the coming days, and we remain on schedule for first sales from this pad in September.

Our drilling operations are moving forward with one horizontal rig and two new fit for purpose tophole rigs. These top hole rigs will be used to drill down to kickoff point on all wells, which we believe will result in significant time and costs savings during our 2015 pad drilling campaign. We initiated drilling operations in the second quarter on a three-well pad and an adjacent two-well pad with lateral lengths of 9,000 feet. These two pads are part of a "tandem completion" pilot project, where both sets of wells will be completed simultaneously to test our planned full scale development strategy.

Leasehold Highlights

During the second quarter 2014, we closed on approximately 13,928 net acres of organic leases, comprised of approximately 9,856 net acres in Washington and Greene Counties, Pennsylvania, and 4,072 net acres in Belmont County, Ohio. As of June 30, 2014, our leasehold position was 104,606 net acres, comprised of approximately 53,834 net acres in Pennsylvania that is prospective for the Marcellus, Upper Devonian and Utica Shales, and 50,772 net acres in Ohio that is prospective for the Utica Shale. In addition, we closed our previously announced Greene County acquisition on August 1, 2014, which added an additional 22,000 net acres to our Pennsylvania acreage position. We now hold 126,606 net acres in the cores of the Marcellus and Utica Shales, representing an approximate 40% increase in our leasehold position since IPO. 

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