Greene County Acreage Acquisition
Greene County Acreage Acquisition Supplemental Slides April 12, 2016
$200MM Stalking Horse Bid Transaction Highlights RICE is uniquely positioned to acquire ANR’s natural gas assets - highly complementary to existing upstream footprint and midstream infrastructure Checks all of the boxes for an attractive acquisition
Core acreage in our focus counties
Contiguous to existing footprint in central Greene County ~27,400 net undeveloped Marcellus acres / ~23,500 net undeveloped Utica acres ~3,200 gross acres of fee minerals are currently leased to RICE and are generating royalty cash flow
PENNSYLVANIA
PA
OH
SW Marcellus Core
WV
Washington
Ability to use midstream platform to enhance value Acreage ideally located for RMP to provide midstream services through connection to existing system No existing midstream dedication RICE captures midstream value through RMP LP and GP ownership Extends runway for future RMP distribution growth Attractive return profile consistent with existing assets Economic returns of ~40% at strip pricing(1) Comparable geology with acreage de-risked by adjacent well results Attractive NRI on acquired assets with total of ~6,200 acres owned in fee Manageable expiry profile Undeveloped leasehold is ~44% held by production/operations or in fee No change to RICE’s 2016 capital budget
__________________________ Note: Subject to purchase price adjustments. 1. Strip pricing as of 4/8/16 2. Peers include RRC, CNX, EQT and CVX
2
Greene
Deep PA Utica Core
LEGEND RICE Acreage
RICE Producing Wells
Acquisition Acreage
Peer Producing Wells(2)
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Expanding Core Dry Gas Position
~27,400 net core Marcellus acres complementary to existing position – Adds 182 net core drilling locations – 37% increase in Marcellus locations – ~44% acreage HBP, held by operations or owned in fee – Marcellus single well returns of ~40% at strip(1)
Pro-Forma E&P Assets Marcellus
OH Utica
Net Acres
Stacked potential: ~23,500 net PA Utica acres provides additional inventory upside and optionality – Adds 50 net core drilling locations – 48% increase in PA Utica locations – Development natural extension for RICE – Can utilize infrastructure from Marcellus production
PA Utica
Net Drilling Locations(2) 247,900 Developed
72,500 *
197,000
155
*
49,000
56,000
56,000
~3,200 gross acres owned in fee that is leased to RICE and is generating royalty cash flow today – Royalty acres on producing and non-producing acreage on RICE leased acreage in Greene county – ~$4MM of 2015 cash flow
215 119,400
92,000
12/31/15
Implied per acre purchase price of ~$6,600 per Marcellus acre(3) represents a compelling transaction multiple compared to recent Marcellus transactions
143
669
Pro Forma
* Stacked Pay on PA Acreage
Strategic assets complementary to existing portfolio and extend inventory of high-return locations __________________________ 1. Strip pricing as of 4/8/16. 2. Net undeveloped locations as of 12/31/15, pro forma for the Greene County Prospective Acquisition. See slide entitled “Additional Disclosures” on detail regarding RICE’s methodology for the calculation of locations. 3. Calculated as $200 million of total purchase price less $20 million attributed to the value of royalty rights (at assumed 5.0x multiple on 2015 royalty payments) divided by 27,400 net Marcellus acres.
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Advantaged Midstream & Downstream Solutions Legend
Acreage will be dedicated to Rice Midstream Partners (NYSE: RMP) –
Increases RMP’s core dedication to ~142,000 gross acres
–
Marcellus acreage dedication has increased by 70% since IPO
RMP Gathering Pipeline RMP Gathering Pipeline Beaver to be Constructed RMP Water Pipeline RMP Water Pipeline to Brooke be Constructed RMP Water Interconnect
PENNSYLVANIA
RICE Acreage
Acreage within close proximity to RMP’s existing infrastructure –
RMP experienced in constructing and operating dry gas midstream systems in central Greene County, PA
–
Adjacent to RMP’s Greene County gathering system with connections into TCO, DTI, TETCO
3rd Party Dedicated to RMP Acquisition Acreage
Washington
Access to interstate pipelines through RICE’s substantial long-term firm transport to premium markets –
933 MMBtu/d FT on TETCO, TCO and DTI with firm paths to premium Midwest and Gulf Coast markets
–
Flexible optionality to produce into improving local markets
TETCO TCO
RICE captures midstream cash flows through ~38% LP ownership plus ~92% ownership of IDRs in RMP
TETCO
Greene
PA
OH WV
WEST VIRGINIA
Increases Core Acreage Dedication to RMP by 25% 4
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Sale Process and RICE Competitive Advantages RICE ADVANTAGES
363 SALE PROCESS OVERVIEW
Rice Energy expects to be named as stalking horse bidder for the Alpha assets and has signed an Asset Purchase Agreement, which will be filed with the bankruptcy court to seek court’s approval
– Contiguous acreage adjacent to existing position in Greene County
– Stalking horse bidder selected after a broad marketing process led by seller’s financial advisor
As the stalking horse bidder, Rice Energy is strategically better positioned than other potential bidders for the assets
– Midstream advantage with existing infrastructure in close proximity and RMP to provide midstream support and interconnectivity
Pursuant to standard bankruptcy court proceedings, there will be a public auction process to follow The potential acquisition represents an asset transaction for Rice Energy with a tax basis step-up Rice Energy is buying natural gas assets only, which will be free and clear of any legal liabilities associated with the coal assets
Knowledge of assets and geologically similar to existing Marcellus/Utica acreage
Rice Energy has deep expertise in operating in areas with coal mining activities – Successful JV with Alpha prior to IPO
5
Purchase price includes bid protections, which include a break-up fee and expense reimbursement
Rice Energy has had substantial input in negotiating the Asset Purchase Agreement and has had the ability to perform substantial due diligence on the assets and the sale process generally www.riceenergy.com
Rice Energy Strategy Allocate 100% of Capital to Core Assets with Attractive Returns Maintain a Strong Balance Sheet Protect Returns and Balance Sheet through FT Portfolio and Systematic Hedging Strategically Position Midstream to Maximize Value Promote Operational Excellence through Innovation, Safety and Environmental Stewardship
Long-Term Shareholder Value Creation 6
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Appendix
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Well Positioned to Navigate Environment
Financial Strength – Healthy balance sheet, ample liquidity and robust hedges – – – –
Highly concentrated acreage position in the most economic areas of the Marcellus and Utica Shale – – –
Core Locations(2): 669 net undeveloped Marcellus wells + 215 net undeveloped OH Utica wells + 155 net undeveloped PA Utica wells Resilient Economics: Development and operating cost declines have driven avg. breakeven PV-10 to ~$2.15/MMBtu (~15% lower than 2015) Compelling Returns in Challenging Market: ~40% Pre-Hedge IRRs at strip pricing(3)
Midstream is a valuable and differentiated element of the RICE story – – –
2016 budget focused on balance sheet and E&P returns while creating significant future midstream value Healthy Balance Sheet: Expect to exit 2016 at ~3.0x E&P leverage with no dependence on drop downs or capital markets Ample Liquidity: $1.4B of liquidity(1): $1.1B E&P and $300MM RMH Robust & Attractive Hedges: 87% of 2016 production hedged at $3.26/MMBtu; majority of 2017 production hedged at $3.14/MMBtu
#1 Gatherer in the Dry Gas Core: 275,000 acres(4) dedicated from 3 of the 5 most active operators in SW Appalachia Unique Financial Advantages: ~$1.0B of midstream monetizations and financings to date with ~$1.3B of estimated remaining drop down inventory and GP Holdings with expected future value of $1.0B+ High Growth MLP: RMP expects 20% distribution growth with current asset base while maintaining 1.3x-1.5x coverage in 2016
Firm Transportation (FT) Portfolio is right-sized for RICE’s production growth and basis outlook – –
Right-Sized: FT covers >80% of 2016 production and decreases to ~60% by 2020 Right Exposure: Expect local basis to improve from $0.75 in 2016 (30% of production) to $0.50 in 2020 (~40% of production)
__________________________ 1. As of 12/31/2015 pro forma for the preferred equity transaction of $375 million. 2. Net undeveloped locations as of 12/31/15, pro forma for the Greene County Prospective Acquisition. See slide entitled “Additional Disclosures” on detail regarding RICE’s methodology for the calculation of locations. 3. Strip pricing as of 4/8/16. See Economics slide for more detailed assumptions used to generate single well economics. 4. Excludes ~49K net PA Utica acres dedicated to RMP from RICE and additional PA Utica acreage dedicated to RMP from EQT.
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RICE trades at Attractive Valuation Relative to Peers
RICE trades at a 3.9x discount to peers despite a strong financial position, core assets and growing cash flow The median EBITDA multiple implies a $29.12 RICE stock price, an 86% premium to current price(1) EV / 2016E EBITDA
25.0 x
Peer Median – 12.7x
Net Debt / 2016E EBITDA
9.0 x
Peer Median – 4.1x
8.0 x 7.0 x 6.0 x 15.0 x
5.0 x 4.0 x
10.0 x
3.0 x 2.0 x
5.0 x
Net Debt / 2016E EBITDA
EV / 2016E EBITDA
20.0 x
1.0 x 0.0 x 2016E EBITDA Growth % Hedged in 2016
0.0 x RICE Positive 87%
Peer 1 Negative 60%
Peer 2 Positive 100%
Peer 3 Positive 42%
Peer 4 Positive 68%
Peer 5 Negative 5%
Peer 6 Negative 71%
Peer 7 Negative 14%
__________________________ Note: Peer group includes AR, CNX, COG, EQT, GPOR, RRC, and SWN. Not pro forma for proposed RICE equity issuance and acquisition. 1. Figures based on IBES consensus EBITDA and YE 2016 net debt, pro forma for equity offerings. Stock price as of 4/08/16.
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Track Record of Low-Cost Growth MARCELLUS D&C COSTS ($/FT.) $1,439
UTICA D&C COSTS ($/FT.)
PER UNIT CASH COSTS ($/MCFE)(1) $1.80
$2,457 $1,237
$1,181
$1.50
$0.44
$1,150 $1,651
$1,450
$1.34
$0.43
$0.38
$0.34
$0.38
$0.38
$0.38
$0.36
$0.43
$0.31
$0.26
2013 LOE and Taxes
2014 2015 FT Gathering G&A
$0.55
2013
2014
2015
2016E
PROVED RESERVES (BCFE)
2014
2015
2016E
NET PRODUCTION (MMCFE/D)
MIDSTREAM THROUGHPUT (MDTH/D) 1,200
1,700 1,306 599
894
685
247
662
552 1,015
350 249
644
2013
2014 PD
127 2015
400
2013
720
401
274 2014
2015
PUD
2016E
__________________________ 1. E&P segment costs. RICE gathering agreements in OH and PA began in 2015. Gathering fee per Mcfe applied to 2013 and 2014 to show a comparison on apples to apples basis.
10
2013
800
647
175
2014
2015 PA
2016E
OH www.riceenergy.com
Attractive Single Well Economics
RICE continues to drive down D&C and operating costs to maximize returns Inventory currently generates ~40% returns at strip(1); HHUB PV10 breakevens of $2.08-$2.18 HHUB DRY GAS SINGLE WELL ECONOMICS
200% 173%
175%
159%
IRR
150% 124%
125%
114%
100%
83%
75%
77%
25%
Dotted lines represent previously reported economics
49%
50% 25%
47%
23%
– NYMEX $2.50 ($/MMBtu)
$3.00 Net Locations (2) HHUB PV-10 Breakeven ($/MMBtu)
$3.50
$4.00
669
168 (3)
$2.08
$2.18
$4.50
__________________________ Note: See appendix for summary of assumptions used to generate single well IRRs. Marcellus 750’ and Utica 1,000’ economics assume E&P is burdened by 50% of the gathering and compression fee and 50% of water completion fees (RICE owns a 41% LP interest in RMP, 100% of RICE Ohio Midstream and 100% of RMP IDRs). 1. Strip as of 4/8/16. 2. Pro forma for the Greene County Prospective Acquisition. 3. Excludes ~47 wet OH Utica net undeveloped locations and ~155 dry gas PA Utica net undeveloped locations.
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Differentiated Long-Term Production per Well Our drilling and completion techniques have yielded greater production profile per well than our peers WASHINGTON & GREENE COUNTY HISTORICAL PRODUCTION(1) Cumulative Production (Bcfe)
UTICA & SUSQUEHANNA, PA HISTORICAL PRODUCTION(2) Cumulative Production (Bcfe)
RICE has 5 of the top 10 wells based on cumulative production
10.0
9.0
RICE has the top 8 Utica wells based on average rate
10.0
9.0
8.0
8.0
7.0
7.0
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
–
– –
250
Peer Marcellus
500
750
1,000
1,250
Days Online
Rice Greene
1,500
Rice Washington
1,750
–
2,000
250
500
750
1,000
1,250
1,500
1,750
2,000
Days Online Rice Geneseo
Peer Susquehanna, PA (Marcellus)
Peer Utica
Peer Belmont
Peer Monroe
Rice Utica
__________________________ 1. Data for RICE based on actuals through 12/31/15, peer data based on Pennsylvania Department of Environmental Protection production reports through 11/30/15. 2. Data for RICE based on actuals through 12/31/15, peer data based on Ohio Department of Natural Resources report through 9/30/15.
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Most Efficient Growth in Appalachia
RICE’s peer-leading production growth is driven by a focus on well quality, not quantity RICE reached over 850 MMcfe/d of gross operated production with fewer wells than every other operator(1) in Appalachia Chart below demonstrates RICE’s ability to rapidly grow production w/ a clear path to 1 Bcf/d & beyond w/ ~1,200+ wells left to drill MMcf/d
PRODUCTION VERSUS WELLS - TOP PRODUCERS IN APPALACHIA(1) SW Appalachia Operators NE Appalachia Operators
153 Operated Wells
Producing Well Count
__________________________ 1. Horizontal Marcellus and Utica wells only. Data for RICE based on actuals through 1/31/2016, peer data based on Pennsylvania Department of Environmental Protection and Ohio Department of Natural Resources production reports through September 30, 2015. RICE production excludes acquired CHK wells. Peers: APC, AR, CHIEF, CHK, COG, CNX, EQT, GPOR, NFG, RRC, SWN & TLM.
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Asset Quality – Industry High Grading to Quality RICE’s footprint is located in the epicenter of remaining activity in Appalachia due to best in class economics Appalachia Rig Counts(1): 2007 - 2016 200
March 2016: 34 Rigs
Early 2012 Peak of 175 Rigs
180
# of Rigs
160 140
March 2016 34 Rigs
120
Ohio
100
Pennsylvania
Nov 2008 34 Rigs
80 60
RICE Acreage
40
PA Marcellus & Utica
20 0
2007
2008
2009
2010
2011
2012
2013
2014
Acquisition Acreage
2015
2016
West Virginia
2017
Current Rig
Top Ten Active Operators Rig Count
0 Peer 1 Peer 2 Rice Energy Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10
5
10
15
25
14
7 4
8
3 3
4 5
2 2 2 1 1 1
20
Laid Down From Peak Active
4 12 7 4 10 6
__________________________ 1. RigData + Baker Hughes Rig Reports.
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Pennsylvania Utica: A Natural Extension for Rice The Utica core extends directly underneath RICE’s Pennsylvania assets. Initial RICE and Industry wells point to massive resource potential. OH WV PA RICE Acreage
Guernsey
CNX Test 61 MMcfe/d
Acquisition Acreage
Belmont
7,500’
9,500’
Marshall
Washington / Greene
10,500’
12,000 – 13,000’
RRC Test 59 MMcfe/d
Current Rig(1) Deep Test Report
CNX Test 61 MMcfe/d
Washington
Point Pleasant Core Greene
EQT Tests 42 – 73 MMcfe/d
Porosity 12%
6%
RICE Deep Utica Well In Sales, 12 MMcfe/d choked Expect flat production for 700+ days
Peer Results 10-30 MMcfe/d Wet Gas
RICE OH Utica Peer Results RICE PA Utica >40 MMcfe/d 40-60 Peer Results MMcfe/d 60-70 MMcfe/d
RICE Belmont County, OH
RICE PA Utica:
Dry Gas
Dry Gas
Dry Gas
0%
RICE PENNSYLVANIA UTICA 1 Producing Well
One well placed online in August 2015 Lateral Length: 5800’ Initial Pressure: 10,000 psi Expect to be competitive with Marcellus/OH Utica returns at $15MM well costs
RICE Greene County, PA
RICE OHIO UTICA 16 Producing Wells
__________________________ 1. RigData January 2016 Report.
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Marcellus Type Curve – Updated MARCELLUS SINGLE WELL TYPE CURVE Restricted Rate
14.0
Cumulative Production Current Prior 1 Year 3.4 3.8 2 Year 5.2 5.6 5 Year 8.1 8.2 10 Year 10.6 10.3 EUR 15.1 13.9
MMcf/d
12.0 10.0 8.0 6.0
Var. (0.4) (0.4) (0.1) 0.3 1.2
Type curve reflects more aggressive choke management program to drive increased EURs on longer laterals
4.0 2.0 – –
0.50
1.00 1.50 2.00 Revised Marcellus 750' Type Well
2.50
3.00 3.50 Previous Marcellus Type Well
4.00
4.50 Years
TYPE CURVE UPDATES
EUR (Bcf / 1,000') Lateral Length EUR (Bcf) Interwell Spacing (ft)
Current 2.16 7,000 15.1 750
Marcellus Prior Var. (%) 1.98 9% 7,000 – 13.9 9% 750 –
Choke (MMcf/d per 1,000') Flat Time (days) 1-Year Cum. (Bcf) 2-Year Cum. (Bcf)
1.50 180 3.4 5.2
1.85 150 3.8 5.6
(19%) 20% (12%) (8%)
5-Year Cum. (Bcf) 10-Year Cum. (Bcf)
8.1 10.6
8.2 10.3
(2%) 4%
77% $10.1
46% $5.8
67% 74%
IRR ($3.50 HHUB) PV-10 ($ mm) ($3.50 HHUB)
__________________________ Note: See appendix for summary of assumptions used to generate single well IRRs.
RICE revised Marcellus type well to reflect latest production history, which resulted in an increase to EURs – 136 operated wells online
Updated choke management program to maximize long-term production & PV-10
Updated economic assumptions including D&C, operating and FT costs – Operating costs decreased ~40% – FT costs decreased ~25% – D&C / foot decreased 8% 16
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Utica Type Curve – Updated UTICA SINGLE WELL TYPE CURVE 20.0
Restricted Rate
Choke management extends flat time from 9 months to 12 months. Incorporated historical decline data.
15.0 MMcf/d
Cumulative Production Current Prior Var. 1 Year 5.8 5.2 0.6 2 Year 9.0 7.8 1.2 5 Year 12.5 11.3 1.2 10 Year 15.2 14.2 1.0 EUR 21.0 19.9 1.1
10.0 5.0 – –
0.50
1.00
1.50
2.00
Ohio Utica 1,000' Type Well
2.50
3.00
Previous Utica Type Well
3.50
4.00 Years
TYPE CURVE UPDATES EUR (Bcf / 1,000') Lateral Length EUR (Bcf) Interwell Spacing (ft)
Current 2.33 9,000 21.0 1,000
Utica Prior Var. (%) 2.50 (7%) 8,000 13% 20.0 5% 750 33%
Choke (MMcf/d per 1,000') Flat Time (days) 1-Year Cum. (Bcf) 2-Year Cum. (Bcf)
1.80 365 5.8 9.0
1.87 270 5.2 7.8
(4%) 35% 12% 16%
5-Year Cum. (Bcf) 10-Year Cum. (Bcf)
12.5 15.2
11.3 14.2
11% 7%
83% $13.7
56% $10.3
48% 33%
IRR ($3.50 HHUB) PV-10 ($ mm) ($3.50 HHUB)
RICE revised Utica type well to reflect latest production history – 16 operated wells online RICE has observed interference between wells spaced at 750’, and believe 1,000’ spacing may be the
optimal development spacing to maximize PV-10 in the current environment
Updated economic assumptions including D&C, operating and FT costs – Operating costs decreased ~40% – FT costs decreased ~25% – D&C / foot decreased 3%
__________________________ Note: See appendix for summary of assumptions used to generate single well IRRs.
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Economics PV10 & IRRS (1)
ECONOMIC ASSUMPTIONS
Economics Adjusted for Gathering Ownership at $3.50 HHUB and $27/bbl NGLs
90%
$16.0
83% 80%
77%
$14.0
$13.7
70%
$12.0
60% $10.1
IRR
50% $8.0 40% $6.0 30%
25%
$4.7 $4.0
20%
$2.0
10%
–
0% Marcellus
OH Utica Dry
OH Utica Wet
PV10 ($MM)
$10.0
Marcellus
Utica Dry
Utica Wet
Type Well Assumptions Spacing Lateral Length EUR (Bcf/1,000') NGL Yield (bbls/mmcf) Gas Shrink Pre-Processed EUR (Bcfe) Post-Processed EUR (Bcfe) % Gas Heat Content (Btu/Scf) Initial Choke (MMcf/d per 1,000') Flat Period (days)
750 7,000 2.16 – – 15.1 15.1 100% 1,050 1.50 180
1,000 9,000 2.33 – – 21.0 21.0 100% 1,080 1.80 365
1,000 9,000 1.83 26 11% 16.5 17.2 85% 1,159 1.41 180
D&C Assumptions (2) D&C ($MM) D&C per Lateral ($ per foot)
$8.0 $1,150
$13.0 $1,450
$13.0 $1,450
Operating Expenses (NRI Gas) Fixed Operating Expenses ($/well/month) Variable Operating Expenses ($/Mcf)
$6,692 $0.11
$6,692 $0.11
$6,692 $0.11
Other Costs/Expenses (NRI Gas) Well Impact Fee? Severance Taxes ($/Mcf) Avg. Royalty (3)
Yes – 16.5% 18%
No $0.04 20%
No $0.04 20%
Gathering, Processing and Compression (NRI Gas) Gathering, Compression, Processing Fees ($/Dth) NGL Fractionation and Transport ($/bbl)
$0.45 –
$0.46 –
$1.00 $5.80
Adjusted Gathering and Compression Fees ($/Dth) Midstream Adjustment
$0.23 50%
$0.23 50%
$1.00 –
Firm Transportation and Basis (NRI Gas) Basis + Fuel (Variable) % of Gas Price Wtd. Avg Reservation Fee + Commodity Fee (Fixed) $/Dth All-In Assuming $3.50 HHUB (NRI) Inventory(3) Net Undeveloped Locations NRI Undeveloped Horizontal Feet (MM ft)
(9%) ($0.42) ($0.75)
487 669 3.9 2.8
168 1.2
18
Operating costs reduced ~40%
Average demand fee updated for royalty charge-back 47 0.3
Economics Summary (Adj. for Midstream Ownership In Each Area, $3.50 HHUB, $27/bbl NGLs) PV-10 Single Well $10.1 $13.7 $4.7 IRR 77% 83% 25% Payback (Months) 16 14 35 Breakeven Realized ($/Dth) $2.08 $2.18 $2.85
IRR PV10 __________________________ 1. Economics assume E&P is burdened by 50% of the gathering and compression fee and 50% of water completion fees (RICE owns a 41% LP interest in RMP, 100% of RICE Ohio Midstream and 100% of RMP IDRs). 2. D&C costs are fully burdened by water completion fees of ~$50 per lateral foot in the Marcellus and ~$65 per lateral foot in the Utica. 3. Pro forma for the Greene County Prospective Acquisition.
D&C costs revised lower
Western Greene locations included in Marcellus; Utica interwell spacing increased to 1,000’
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RICE 4Q 2015 Adjusted EBITDAX Reconciliation ($ in thousands) Adjusted EBITDAX reconciliation to net income (loss): Net income Interest expense Depreciation, depletion and amortization Impairment of gas properties Impairment of goodwill Amortization of deferred financing costs Amortization of intangible assets (1) Gain on derivative instruments Net cash receipts on settled derivative instruments
Three Months Ended
Year Ended
December 31, 2015
December 31, 2015
$
$
(1)
Acquisition expense Non-cash stock compensation expense Non-cash incentive unit (income) expense Income tax expense Gain from sale of interest in gas properties Exploration expense Other expense Non-controlling interest Adjusted EBITDAX Further Adjusted EBITDAX reconciliation: Adjusted EBITDAX
(267,999) 87,446 322,784 18,250 294,908 5,124 1,632
(89,019)
(273,748)
76,228
193,908
1,111 4,847
1,235 16,528
$
(9,773) (6,217) 1,212 756 (6,504) 132,153
$
36,097 12,118 (953) 3,137 4,380 (23,337) 431,510
$
132,153
$
431,510
(2)
Non-controlling interest
(3)
Water revenue adjustment Further Adjusted EBITDAX
(274,253) 24,009 94,787 18,250 294,908 1,403 408
$
6,504
23,337
5,577 144,234
27,336 482,183
$
__________________________ Note: Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) before noncontrolling interest; interest expense; income taxes; depreciation, depletion and amortization; amortization of deferred financing costs; amortization of intangible assets; derivative fair value (gain) loss, excluding net cash receipts on settled derivative instruments; non-cash stock compensation expense; non-cash incentive unit expense; exploration expenses; and other non-recurring items. Adjusted EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP. 1. The adjustments for the derivative fair value (gains) losses and net cash receipts on settled commodity derivative instruments have the effect of adjusting net income (loss) for changes in the fair value of derivative instruments, which are recognized at the end of each accounting period because we do not designate commodity derivative instruments as accounting hedges. This results in reflecting commodity derivative gains and losses within Adjusted EBITDAX on a cash basis during the period the derivatives settled. 2. Add back non-controlling interest to Adjusted EBITDAX to calculate leverage metrics. 3. Add back RMP water distribution revenue from RICE’s working interest share of the water fees that was eliminated in the RICE consolidation.
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Cautionary Statements FORWARD-LOOKING STATEMENTS This presentation and the oral statements made in connection therewith may contain “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, regarding Rice Energy’s strategy, future operations, financial position, estimated revenues and income/losses, projected costs, as amended, prospects, plans and objectives of management are forward-looking statements. These statements often include the words “could,” “believe,” “anticipate,” “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “project,” “budget,” “potential,” or “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include estimates of Rice Energy’s reserves, expectations of plans, strategies, objectives and anticipated financial and operating results of Rice Energy, including as to Rice Energy’s drilling program, production, hedging activities, and capital expenditure levels. These forward-looking statements are based on Rice Energy’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Rice Energy assumes no obligation to and does not intend to update any forward looking statements included herein. You are cautioned not to place undue reliance on any forward-looking statements. Rice Energy cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond their control, incident to the exploration for and development, production, gathering and sale of natural gas, natural gas liquids and oil. These risks include, but are not limited to, commodity price volatility; inflation; lack of availability of drilling and production equipment and services; environmental risks; drilling and other operating risks; regulatory changes; the uncertainty inherent in estimating natural gas reserves and in projecting future rates of production, cash flow and access to capital; the timing of development expenditures; risks relating to joint venture operations; and the other risks described under “Risk Factors” in Rice Energy’s most recent Form 10K, Form 10-Q and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Rice Energy’s actual results and plans could differ materially from those expressed in any forward-looking statements. This presentation has been prepared by Rice Energy and includes market data and other statistical information from sources believed by Rice Energy to be reliable, including independent industry publications, government publications or other published independent sources. Some data are also based on Rice Energy’s good faith estimates, which are derived from its review of internal sources as well as the independent sources described above. Although Rice Energy believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness. NON-PROVEN OIL AND GAS RESERVES The SEC permits oil and gas companies, in their filings with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions and certain probable and possible reserves that meet the SEC’s definition for such terms. We may use certain broader terms such as EUR (estimated ultimate recovery of resources), and we may use other descriptions of volumes of potentially recoverable hydrocarbon resources throughout this presentation that the SEC does not permit to be included in SEC filings. These broader classifications do not constitute reserves as defined by the SEC, and we do not attempt to distinguish these classifications from probable or possible reserves as defined by SEC guidelines. Our estimates of EURs have been prepared by our independent reserve engineers. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized, particularly in areas or zones where there has been limited or no drilling history. We include these estimates to demonstrate what we believe to be the potential for future drilling and production by the company. Actual locations drilled and quantities that may be ultimately recovered from our properties will differ substantially. In addition, we have made no commitment to drill all of the drilling locations which have been attributed to these quantities. Ultimate recoveries will be dependent upon numerous factors including actual encountered geological conditions, the impact of future oil and gas pricing, exploration and development costs, and our future drilling decisions and budgets based upon our future evaluation of risk, returns and the availability of capital and, in many areas, the outcome of negotiation of drilling arrangements with holders of adjacent or fractional interest leases. Estimates of resource potential and other figures may change significantly as development of our properties provide additional data and therefore actual quantities that may ultimately be recovered will likely differ from these estimates. Our forecast and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells, the undertaking and outcome of future drilling activity and activity that may be affected by significant commodity price declines or drilling cost increases. Certain of Rice Energy's wells are named after superheroes and monster trucks, some of which may be trademarked. Despite their size and strength, Rice Energy's wells are in no manner affiliated with such superheroes or monster trucks. Initial production rates are subject to decline over time and should not be regarded as reflective of sustained production levels. In particular, production from horizontal drilling in shale oil and natural gas resource plays and tight natural gas plays that are stimulated with extensive pressure fracturing are typically characterized by significant early declines in production rates.
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Additional Disclosures Determination of Identified Drilling Locations as of December 31, 2015 (not pro forma for Greene County Prospective Acquisition): Net undeveloped locations are calculated by taking RICE’s total net acreage and multiplying such amount by a risking factor which is then divided by RICE’s expected well spacing. RICE then subtracts net producing wells to arrive at undeveloped net drilling locations. Undeveloped Net Marcellus Locations – RICE assumes these locations have 7,000 foot laterals and 750 foot spacing between wells which yields approximately 121 acre spacing. In the Marcellus, RICE applies a 20% risking factor to its net acreage to account for inefficient unitization and the risk associated with its inability to force pool in Pennsylvania. As of December 31, 2015, RICE had approximately 92,000 net acres in the Marcellus which results in 487 undeveloped net locations. Undeveloped Net Ohio Utica Locations – RICE assumes these locations have 9,000 foot laterals and 1,000 foot spacing between wells which yields approximately 207 acre spacing. In the Ohio Utica, RICE applies a 10% risking factor to its net acreage to account for inefficient unitization. As of December 31, 2015, RICE had approximately 56,000 net acres prospective for the Utica in Ohio which results in 215 undeveloped net locations. This excludes ~2,500 net acres in Guernsey and Harrison Counties in Ohio. Undeveloped Net Pennsylvania Utica Locations – RICE assumes these locations have 8,000 foot laterals and 2,000 foot spacing between wells which yields approximately 367 acre spacing. In the Pennsylvania Utica, RICE applies a 20% risking factor to its net acreage to account for inefficient unitization. As of December 31, 2015, RICE had approximately 49,000 net acres prospective for the Utica in Pennsylvania which results in 105 undeveloped net locations.
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$200MM Stalking Horse Bid Transaction Highlights RICE is uniquely positioned to acquire ANR’s natural gas assets - highly complementary to existing upstream footprint and midstream infrastructure Checks all of the boxes for an attractive acquisition
Core acreage in our focus counties
Contiguous to existing footprint in central Greene County ~27,400 net undeveloped Marcellus acres / ~23,500 net undeveloped Utica acres ~3,200 gross acres of fee minerals are currently leased to RICE and are generating royalty cash flow
PENNSYLVANIA
PA
OH
SW Marcellus Core
WV
Washington
Ability to use midstream platform to enhance value Acreage ideally located for RMP to provide midstream services through connection to existing system No existing midstream dedication RICE captures midstream value through RMP LP and GP ownership Extends runway for future RMP distribution growth Attractive return profile consistent with existing assets Economic returns of ~40% at strip pricing(1) Comparable geology with acreage de-risked by adjacent well results Attractive NRI on acquired assets with total of ~6,200 acres owned in fee Manageable expiry profile Undeveloped leasehold is ~44% held by production/operations or in fee No change to RICE’s 2016 capital budget
__________________________ Note: Subject to purchase price adjustments. 1. Strip pricing as of 4/8/16 2. Peers include RRC, CNX, EQT and CVX
2
Greene
Deep PA Utica Core
LEGEND RICE Acreage
RICE Producing Wells
Acquisition Acreage
Peer Producing Wells(2)
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Expanding Core Dry Gas Position
~27,400 net core Marcellus acres complementary to existing position – Adds 182 net core drilling locations – 37% increase in Marcellus locations – ~44% acreage HBP, held by operations or owned in fee – Marcellus single well returns of ~40% at strip(1)
Pro-Forma E&P Assets Marcellus
OH Utica
Net Acres
Stacked potential: ~23,500 net PA Utica acres provides additional inventory upside and optionality – Adds 50 net core drilling locations – 48% increase in PA Utica locations – Development natural extension for RICE – Can utilize infrastructure from Marcellus production
PA Utica
Net Drilling Locations(2) 247,900 Developed
72,500 *
197,000
155
*
49,000
56,000
56,000
~3,200 gross acres owned in fee that is leased to RICE and is generating royalty cash flow today – Royalty acres on producing and non-producing acreage on RICE leased acreage in Greene county – ~$4MM of 2015 cash flow
215 119,400
92,000
12/31/15
Implied per acre purchase price of ~$6,600 per Marcellus acre(3) represents a compelling transaction multiple compared to recent Marcellus transactions
143
669
Pro Forma
* Stacked Pay on PA Acreage
Strategic assets complementary to existing portfolio and extend inventory of high-return locations __________________________ 1. Strip pricing as of 4/8/16. 2. Net undeveloped locations as of 12/31/15, pro forma for the Greene County Prospective Acquisition. See slide entitled “Additional Disclosures” on detail regarding RICE’s methodology for the calculation of locations. 3. Calculated as $200 million of total purchase price less $20 million attributed to the value of royalty rights (at assumed 5.0x multiple on 2015 royalty payments) divided by 27,400 net Marcellus acres.
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Advantaged Midstream & Downstream Solutions Legend
Acreage will be dedicated to Rice Midstream Partners (NYSE: RMP) –
Increases RMP’s core dedication to ~142,000 gross acres
–
Marcellus acreage dedication has increased by 70% since IPO
RMP Gathering Pipeline RMP Gathering Pipeline Beaver to be Constructed RMP Water Pipeline RMP Water Pipeline to Brooke be Constructed RMP Water Interconnect
PENNSYLVANIA
RICE Acreage
Acreage within close proximity to RMP’s existing infrastructure –
RMP experienced in constructing and operating dry gas midstream systems in central Greene County, PA
–
Adjacent to RMP’s Greene County gathering system with connections into TCO, DTI, TETCO
3rd Party Dedicated to RMP Acquisition Acreage
Washington
Access to interstate pipelines through RICE’s substantial long-term firm transport to premium markets –
933 MMBtu/d FT on TETCO, TCO and DTI with firm paths to premium Midwest and Gulf Coast markets
–
Flexible optionality to produce into improving local markets
TETCO TCO
RICE captures midstream cash flows through ~38% LP ownership plus ~92% ownership of IDRs in RMP
TETCO
Greene
PA
OH WV
WEST VIRGINIA
Increases Core Acreage Dedication to RMP by 25% 4
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Sale Process and RICE Competitive Advantages RICE ADVANTAGES
363 SALE PROCESS OVERVIEW
Rice Energy expects to be named as stalking horse bidder for the Alpha assets and has signed an Asset Purchase Agreement, which will be filed with the bankruptcy court to seek court’s approval
– Contiguous acreage adjacent to existing position in Greene County
– Stalking horse bidder selected after a broad marketing process led by seller’s financial advisor
As the stalking horse bidder, Rice Energy is strategically better positioned than other potential bidders for the assets
– Midstream advantage with existing infrastructure in close proximity and RMP to provide midstream support and interconnectivity
Pursuant to standard bankruptcy court proceedings, there will be a public auction process to follow The potential acquisition represents an asset transaction for Rice Energy with a tax basis step-up Rice Energy is buying natural gas assets only, which will be free and clear of any legal liabilities associated with the coal assets
Knowledge of assets and geologically similar to existing Marcellus/Utica acreage
Rice Energy has deep expertise in operating in areas with coal mining activities – Successful JV with Alpha prior to IPO
5
Purchase price includes bid protections, which include a break-up fee and expense reimbursement
Rice Energy has had substantial input in negotiating the Asset Purchase Agreement and has had the ability to perform substantial due diligence on the assets and the sale process generally www.riceenergy.com
Rice Energy Strategy Allocate 100% of Capital to Core Assets with Attractive Returns Maintain a Strong Balance Sheet Protect Returns and Balance Sheet through FT Portfolio and Systematic Hedging Strategically Position Midstream to Maximize Value Promote Operational Excellence through Innovation, Safety and Environmental Stewardship
Long-Term Shareholder Value Creation 6
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Appendix
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Well Positioned to Navigate Environment
Financial Strength – Healthy balance sheet, ample liquidity and robust hedges – – – –
Highly concentrated acreage position in the most economic areas of the Marcellus and Utica Shale – – –
Core Locations(2): 669 net undeveloped Marcellus wells + 215 net undeveloped OH Utica wells + 155 net undeveloped PA Utica wells Resilient Economics: Development and operating cost declines have driven avg. breakeven PV-10 to ~$2.15/MMBtu (~15% lower than 2015) Compelling Returns in Challenging Market: ~40% Pre-Hedge IRRs at strip pricing(3)
Midstream is a valuable and differentiated element of the RICE story – – –
2016 budget focused on balance sheet and E&P returns while creating significant future midstream value Healthy Balance Sheet: Expect to exit 2016 at ~3.0x E&P leverage with no dependence on drop downs or capital markets Ample Liquidity: $1.4B of liquidity(1): $1.1B E&P and $300MM RMH Robust & Attractive Hedges: 87% of 2016 production hedged at $3.26/MMBtu; majority of 2017 production hedged at $3.14/MMBtu
#1 Gatherer in the Dry Gas Core: 275,000 acres(4) dedicated from 3 of the 5 most active operators in SW Appalachia Unique Financial Advantages: ~$1.0B of midstream monetizations and financings to date with ~$1.3B of estimated remaining drop down inventory and GP Holdings with expected future value of $1.0B+ High Growth MLP: RMP expects 20% distribution growth with current asset base while maintaining 1.3x-1.5x coverage in 2016
Firm Transportation (FT) Portfolio is right-sized for RICE’s production growth and basis outlook – –
Right-Sized: FT covers >80% of 2016 production and decreases to ~60% by 2020 Right Exposure: Expect local basis to improve from $0.75 in 2016 (30% of production) to $0.50 in 2020 (~40% of production)
__________________________ 1. As of 12/31/2015 pro forma for the preferred equity transaction of $375 million. 2. Net undeveloped locations as of 12/31/15, pro forma for the Greene County Prospective Acquisition. See slide entitled “Additional Disclosures” on detail regarding RICE’s methodology for the calculation of locations. 3. Strip pricing as of 4/8/16. See Economics slide for more detailed assumptions used to generate single well economics. 4. Excludes ~49K net PA Utica acres dedicated to RMP from RICE and additional PA Utica acreage dedicated to RMP from EQT.
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RICE trades at Attractive Valuation Relative to Peers
RICE trades at a 3.9x discount to peers despite a strong financial position, core assets and growing cash flow The median EBITDA multiple implies a $29.12 RICE stock price, an 86% premium to current price(1) EV / 2016E EBITDA
25.0 x
Peer Median – 12.7x
Net Debt / 2016E EBITDA
9.0 x
Peer Median – 4.1x
8.0 x 7.0 x 6.0 x 15.0 x
5.0 x 4.0 x
10.0 x
3.0 x 2.0 x
5.0 x
Net Debt / 2016E EBITDA
EV / 2016E EBITDA
20.0 x
1.0 x 0.0 x 2016E EBITDA Growth % Hedged in 2016
0.0 x RICE Positive 87%
Peer 1 Negative 60%
Peer 2 Positive 100%
Peer 3 Positive 42%
Peer 4 Positive 68%
Peer 5 Negative 5%
Peer 6 Negative 71%
Peer 7 Negative 14%
__________________________ Note: Peer group includes AR, CNX, COG, EQT, GPOR, RRC, and SWN. Not pro forma for proposed RICE equity issuance and acquisition. 1. Figures based on IBES consensus EBITDA and YE 2016 net debt, pro forma for equity offerings. Stock price as of 4/08/16.
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Track Record of Low-Cost Growth MARCELLUS D&C COSTS ($/FT.) $1,439
UTICA D&C COSTS ($/FT.)
PER UNIT CASH COSTS ($/MCFE)(1) $1.80
$2,457 $1,237
$1,181
$1.50
$0.44
$1,150 $1,651
$1,450
$1.34
$0.43
$0.38
$0.34
$0.38
$0.38
$0.38
$0.36
$0.43
$0.31
$0.26
2013 LOE and Taxes
2014 2015 FT Gathering G&A
$0.55
2013
2014
2015
2016E
PROVED RESERVES (BCFE)
2014
2015
2016E
NET PRODUCTION (MMCFE/D)
MIDSTREAM THROUGHPUT (MDTH/D) 1,200
1,700 1,306 599
894
685
247
662
552 1,015
350 249
644
2013
2014 PD
127 2015
400
2013
720
401
274 2014
2015
PUD
2016E
__________________________ 1. E&P segment costs. RICE gathering agreements in OH and PA began in 2015. Gathering fee per Mcfe applied to 2013 and 2014 to show a comparison on apples to apples basis.
10
2013
800
647
175
2014
2015 PA
2016E
OH www.riceenergy.com
Attractive Single Well Economics
RICE continues to drive down D&C and operating costs to maximize returns Inventory currently generates ~40% returns at strip(1); HHUB PV10 breakevens of $2.08-$2.18 HHUB DRY GAS SINGLE WELL ECONOMICS
200% 173%
175%
159%
IRR
150% 124%
125%
114%
100%
83%
75%
77%
25%
Dotted lines represent previously reported economics
49%
50% 25%
47%
23%
– NYMEX $2.50 ($/MMBtu)
$3.00 Net Locations (2) HHUB PV-10 Breakeven ($/MMBtu)
$3.50
$4.00
669
168 (3)
$2.08
$2.18
$4.50
__________________________ Note: See appendix for summary of assumptions used to generate single well IRRs. Marcellus 750’ and Utica 1,000’ economics assume E&P is burdened by 50% of the gathering and compression fee and 50% of water completion fees (RICE owns a 41% LP interest in RMP, 100% of RICE Ohio Midstream and 100% of RMP IDRs). 1. Strip as of 4/8/16. 2. Pro forma for the Greene County Prospective Acquisition. 3. Excludes ~47 wet OH Utica net undeveloped locations and ~155 dry gas PA Utica net undeveloped locations.
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Differentiated Long-Term Production per Well Our drilling and completion techniques have yielded greater production profile per well than our peers WASHINGTON & GREENE COUNTY HISTORICAL PRODUCTION(1) Cumulative Production (Bcfe)
UTICA & SUSQUEHANNA, PA HISTORICAL PRODUCTION(2) Cumulative Production (Bcfe)
RICE has 5 of the top 10 wells based on cumulative production
10.0
9.0
RICE has the top 8 Utica wells based on average rate
10.0
9.0
8.0
8.0
7.0
7.0
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
–
– –
250
Peer Marcellus
500
750
1,000
1,250
Days Online
Rice Greene
1,500
Rice Washington
1,750
–
2,000
250
500
750
1,000
1,250
1,500
1,750
2,000
Days Online Rice Geneseo
Peer Susquehanna, PA (Marcellus)
Peer Utica
Peer Belmont
Peer Monroe
Rice Utica
__________________________ 1. Data for RICE based on actuals through 12/31/15, peer data based on Pennsylvania Department of Environmental Protection production reports through 11/30/15. 2. Data for RICE based on actuals through 12/31/15, peer data based on Ohio Department of Natural Resources report through 9/30/15.
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Most Efficient Growth in Appalachia
RICE’s peer-leading production growth is driven by a focus on well quality, not quantity RICE reached over 850 MMcfe/d of gross operated production with fewer wells than every other operator(1) in Appalachia Chart below demonstrates RICE’s ability to rapidly grow production w/ a clear path to 1 Bcf/d & beyond w/ ~1,200+ wells left to drill MMcf/d
PRODUCTION VERSUS WELLS - TOP PRODUCERS IN APPALACHIA(1) SW Appalachia Operators NE Appalachia Operators
153 Operated Wells
Producing Well Count
__________________________ 1. Horizontal Marcellus and Utica wells only. Data for RICE based on actuals through 1/31/2016, peer data based on Pennsylvania Department of Environmental Protection and Ohio Department of Natural Resources production reports through September 30, 2015. RICE production excludes acquired CHK wells. Peers: APC, AR, CHIEF, CHK, COG, CNX, EQT, GPOR, NFG, RRC, SWN & TLM.
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Asset Quality – Industry High Grading to Quality RICE’s footprint is located in the epicenter of remaining activity in Appalachia due to best in class economics Appalachia Rig Counts(1): 2007 - 2016 200
March 2016: 34 Rigs
Early 2012 Peak of 175 Rigs
180
# of Rigs
160 140
March 2016 34 Rigs
120
Ohio
100
Pennsylvania
Nov 2008 34 Rigs
80 60
RICE Acreage
40
PA Marcellus & Utica
20 0
2007
2008
2009
2010
2011
2012
2013
2014
Acquisition Acreage
2015
2016
West Virginia
2017
Current Rig
Top Ten Active Operators Rig Count
0 Peer 1 Peer 2 Rice Energy Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10
5
10
15
25
14
7 4
8
3 3
4 5
2 2 2 1 1 1
20
Laid Down From Peak Active
4 12 7 4 10 6
__________________________ 1. RigData + Baker Hughes Rig Reports.
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Pennsylvania Utica: A Natural Extension for Rice The Utica core extends directly underneath RICE’s Pennsylvania assets. Initial RICE and Industry wells point to massive resource potential. OH WV PA RICE Acreage
Guernsey
CNX Test 61 MMcfe/d
Acquisition Acreage
Belmont
7,500’
9,500’
Marshall
Washington / Greene
10,500’
12,000 – 13,000’
RRC Test 59 MMcfe/d
Current Rig(1) Deep Test Report
CNX Test 61 MMcfe/d
Washington
Point Pleasant Core Greene
EQT Tests 42 – 73 MMcfe/d
Porosity 12%
6%
RICE Deep Utica Well In Sales, 12 MMcfe/d choked Expect flat production for 700+ days
Peer Results 10-30 MMcfe/d Wet Gas
RICE OH Utica Peer Results RICE PA Utica >40 MMcfe/d 40-60 Peer Results MMcfe/d 60-70 MMcfe/d
RICE Belmont County, OH
RICE PA Utica:
Dry Gas
Dry Gas
Dry Gas
0%
RICE PENNSYLVANIA UTICA 1 Producing Well
One well placed online in August 2015 Lateral Length: 5800’ Initial Pressure: 10,000 psi Expect to be competitive with Marcellus/OH Utica returns at $15MM well costs
RICE Greene County, PA
RICE OHIO UTICA 16 Producing Wells
__________________________ 1. RigData January 2016 Report.
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Marcellus Type Curve – Updated MARCELLUS SINGLE WELL TYPE CURVE Restricted Rate
14.0
Cumulative Production Current Prior 1 Year 3.4 3.8 2 Year 5.2 5.6 5 Year 8.1 8.2 10 Year 10.6 10.3 EUR 15.1 13.9
MMcf/d
12.0 10.0 8.0 6.0
Var. (0.4) (0.4) (0.1) 0.3 1.2
Type curve reflects more aggressive choke management program to drive increased EURs on longer laterals
4.0 2.0 – –
0.50
1.00 1.50 2.00 Revised Marcellus 750' Type Well
2.50
3.00 3.50 Previous Marcellus Type Well
4.00
4.50 Years
TYPE CURVE UPDATES
EUR (Bcf / 1,000') Lateral Length EUR (Bcf) Interwell Spacing (ft)
Current 2.16 7,000 15.1 750
Marcellus Prior Var. (%) 1.98 9% 7,000 – 13.9 9% 750 –
Choke (MMcf/d per 1,000') Flat Time (days) 1-Year Cum. (Bcf) 2-Year Cum. (Bcf)
1.50 180 3.4 5.2
1.85 150 3.8 5.6
(19%) 20% (12%) (8%)
5-Year Cum. (Bcf) 10-Year Cum. (Bcf)
8.1 10.6
8.2 10.3
(2%) 4%
77% $10.1
46% $5.8
67% 74%
IRR ($3.50 HHUB) PV-10 ($ mm) ($3.50 HHUB)
__________________________ Note: See appendix for summary of assumptions used to generate single well IRRs.
RICE revised Marcellus type well to reflect latest production history, which resulted in an increase to EURs – 136 operated wells online
Updated choke management program to maximize long-term production & PV-10
Updated economic assumptions including D&C, operating and FT costs – Operating costs decreased ~40% – FT costs decreased ~25% – D&C / foot decreased 8% 16
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Utica Type Curve – Updated UTICA SINGLE WELL TYPE CURVE 20.0
Restricted Rate
Choke management extends flat time from 9 months to 12 months. Incorporated historical decline data.
15.0 MMcf/d
Cumulative Production Current Prior Var. 1 Year 5.8 5.2 0.6 2 Year 9.0 7.8 1.2 5 Year 12.5 11.3 1.2 10 Year 15.2 14.2 1.0 EUR 21.0 19.9 1.1
10.0 5.0 – –
0.50
1.00
1.50
2.00
Ohio Utica 1,000' Type Well
2.50
3.00
Previous Utica Type Well
3.50
4.00 Years
TYPE CURVE UPDATES EUR (Bcf / 1,000') Lateral Length EUR (Bcf) Interwell Spacing (ft)
Current 2.33 9,000 21.0 1,000
Utica Prior Var. (%) 2.50 (7%) 8,000 13% 20.0 5% 750 33%
Choke (MMcf/d per 1,000') Flat Time (days) 1-Year Cum. (Bcf) 2-Year Cum. (Bcf)
1.80 365 5.8 9.0
1.87 270 5.2 7.8
(4%) 35% 12% 16%
5-Year Cum. (Bcf) 10-Year Cum. (Bcf)
12.5 15.2
11.3 14.2
11% 7%
83% $13.7
56% $10.3
48% 33%
IRR ($3.50 HHUB) PV-10 ($ mm) ($3.50 HHUB)
RICE revised Utica type well to reflect latest production history – 16 operated wells online RICE has observed interference between wells spaced at 750’, and believe 1,000’ spacing may be the
optimal development spacing to maximize PV-10 in the current environment
Updated economic assumptions including D&C, operating and FT costs – Operating costs decreased ~40% – FT costs decreased ~25% – D&C / foot decreased 3%
__________________________ Note: See appendix for summary of assumptions used to generate single well IRRs.
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Economics PV10 & IRRS (1)
ECONOMIC ASSUMPTIONS
Economics Adjusted for Gathering Ownership at $3.50 HHUB and $27/bbl NGLs
90%
$16.0
83% 80%
77%
$14.0
$13.7
70%
$12.0
60% $10.1
IRR
50% $8.0 40% $6.0 30%
25%
$4.7 $4.0
20%
$2.0
10%
–
0% Marcellus
OH Utica Dry
OH Utica Wet
PV10 ($MM)
$10.0
Marcellus
Utica Dry
Utica Wet
Type Well Assumptions Spacing Lateral Length EUR (Bcf/1,000') NGL Yield (bbls/mmcf) Gas Shrink Pre-Processed EUR (Bcfe) Post-Processed EUR (Bcfe) % Gas Heat Content (Btu/Scf) Initial Choke (MMcf/d per 1,000') Flat Period (days)
750 7,000 2.16 – – 15.1 15.1 100% 1,050 1.50 180
1,000 9,000 2.33 – – 21.0 21.0 100% 1,080 1.80 365
1,000 9,000 1.83 26 11% 16.5 17.2 85% 1,159 1.41 180
D&C Assumptions (2) D&C ($MM) D&C per Lateral ($ per foot)
$8.0 $1,150
$13.0 $1,450
$13.0 $1,450
Operating Expenses (NRI Gas) Fixed Operating Expenses ($/well/month) Variable Operating Expenses ($/Mcf)
$6,692 $0.11
$6,692 $0.11
$6,692 $0.11
Other Costs/Expenses (NRI Gas) Well Impact Fee? Severance Taxes ($/Mcf) Avg. Royalty (3)
Yes – 16.5% 18%
No $0.04 20%
No $0.04 20%
Gathering, Processing and Compression (NRI Gas) Gathering, Compression, Processing Fees ($/Dth) NGL Fractionation and Transport ($/bbl)
$0.45 –
$0.46 –
$1.00 $5.80
Adjusted Gathering and Compression Fees ($/Dth) Midstream Adjustment
$0.23 50%
$0.23 50%
$1.00 –
Firm Transportation and Basis (NRI Gas) Basis + Fuel (Variable) % of Gas Price Wtd. Avg Reservation Fee + Commodity Fee (Fixed) $/Dth All-In Assuming $3.50 HHUB (NRI) Inventory(3) Net Undeveloped Locations NRI Undeveloped Horizontal Feet (MM ft)
(9%) ($0.42) ($0.75)
487 669 3.9 2.8
168 1.2
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Operating costs reduced ~40%
Average demand fee updated for royalty charge-back 47 0.3
Economics Summary (Adj. for Midstream Ownership In Each Area, $3.50 HHUB, $27/bbl NGLs) PV-10 Single Well $10.1 $13.7 $4.7 IRR 77% 83% 25% Payback (Months) 16 14 35 Breakeven Realized ($/Dth) $2.08 $2.18 $2.85
IRR PV10 __________________________ 1. Economics assume E&P is burdened by 50% of the gathering and compression fee and 50% of water completion fees (RICE owns a 41% LP interest in RMP, 100% of RICE Ohio Midstream and 100% of RMP IDRs). 2. D&C costs are fully burdened by water completion fees of ~$50 per lateral foot in the Marcellus and ~$65 per lateral foot in the Utica. 3. Pro forma for the Greene County Prospective Acquisition.
D&C costs revised lower
Western Greene locations included in Marcellus; Utica interwell spacing increased to 1,000’
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RICE 4Q 2015 Adjusted EBITDAX Reconciliation ($ in thousands) Adjusted EBITDAX reconciliation to net income (loss): Net income Interest expense Depreciation, depletion and amortization Impairment of gas properties Impairment of goodwill Amortization of deferred financing costs Amortization of intangible assets (1) Gain on derivative instruments Net cash receipts on settled derivative instruments
Three Months Ended
Year Ended
December 31, 2015
December 31, 2015
$
$
(1)
Acquisition expense Non-cash stock compensation expense Non-cash incentive unit (income) expense Income tax expense Gain from sale of interest in gas properties Exploration expense Other expense Non-controlling interest Adjusted EBITDAX Further Adjusted EBITDAX reconciliation: Adjusted EBITDAX
(267,999) 87,446 322,784 18,250 294,908 5,124 1,632
(89,019)
(273,748)
76,228
193,908
1,111 4,847
1,235 16,528
$
(9,773) (6,217) 1,212 756 (6,504) 132,153
$
36,097 12,118 (953) 3,137 4,380 (23,337) 431,510
$
132,153
$
431,510
(2)
Non-controlling interest
(3)
Water revenue adjustment Further Adjusted EBITDAX
(274,253) 24,009 94,787 18,250 294,908 1,403 408
$
6,504
23,337
5,577 144,234
27,336 482,183
$
__________________________ Note: Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) before noncontrolling interest; interest expense; income taxes; depreciation, depletion and amortization; amortization of deferred financing costs; amortization of intangible assets; derivative fair value (gain) loss, excluding net cash receipts on settled derivative instruments; non-cash stock compensation expense; non-cash incentive unit expense; exploration expenses; and other non-recurring items. Adjusted EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP. 1. The adjustments for the derivative fair value (gains) losses and net cash receipts on settled commodity derivative instruments have the effect of adjusting net income (loss) for changes in the fair value of derivative instruments, which are recognized at the end of each accounting period because we do not designate commodity derivative instruments as accounting hedges. This results in reflecting commodity derivative gains and losses within Adjusted EBITDAX on a cash basis during the period the derivatives settled. 2. Add back non-controlling interest to Adjusted EBITDAX to calculate leverage metrics. 3. Add back RMP water distribution revenue from RICE’s working interest share of the water fees that was eliminated in the RICE consolidation.
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Cautionary Statements FORWARD-LOOKING STATEMENTS This presentation and the oral statements made in connection therewith may contain “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, regarding Rice Energy’s strategy, future operations, financial position, estimated revenues and income/losses, projected costs, as amended, prospects, plans and objectives of management are forward-looking statements. These statements often include the words “could,” “believe,” “anticipate,” “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “project,” “budget,” “potential,” or “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include estimates of Rice Energy’s reserves, expectations of plans, strategies, objectives and anticipated financial and operating results of Rice Energy, including as to Rice Energy’s drilling program, production, hedging activities, and capital expenditure levels. These forward-looking statements are based on Rice Energy’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Rice Energy assumes no obligation to and does not intend to update any forward looking statements included herein. You are cautioned not to place undue reliance on any forward-looking statements. Rice Energy cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond their control, incident to the exploration for and development, production, gathering and sale of natural gas, natural gas liquids and oil. These risks include, but are not limited to, commodity price volatility; inflation; lack of availability of drilling and production equipment and services; environmental risks; drilling and other operating risks; regulatory changes; the uncertainty inherent in estimating natural gas reserves and in projecting future rates of production, cash flow and access to capital; the timing of development expenditures; risks relating to joint venture operations; and the other risks described under “Risk Factors” in Rice Energy’s most recent Form 10K, Form 10-Q and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Rice Energy’s actual results and plans could differ materially from those expressed in any forward-looking statements. This presentation has been prepared by Rice Energy and includes market data and other statistical information from sources believed by Rice Energy to be reliable, including independent industry publications, government publications or other published independent sources. Some data are also based on Rice Energy’s good faith estimates, which are derived from its review of internal sources as well as the independent sources described above. Although Rice Energy believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness. NON-PROVEN OIL AND GAS RESERVES The SEC permits oil and gas companies, in their filings with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions and certain probable and possible reserves that meet the SEC’s definition for such terms. We may use certain broader terms such as EUR (estimated ultimate recovery of resources), and we may use other descriptions of volumes of potentially recoverable hydrocarbon resources throughout this presentation that the SEC does not permit to be included in SEC filings. These broader classifications do not constitute reserves as defined by the SEC, and we do not attempt to distinguish these classifications from probable or possible reserves as defined by SEC guidelines. Our estimates of EURs have been prepared by our independent reserve engineers. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized, particularly in areas or zones where there has been limited or no drilling history. We include these estimates to demonstrate what we believe to be the potential for future drilling and production by the company. Actual locations drilled and quantities that may be ultimately recovered from our properties will differ substantially. In addition, we have made no commitment to drill all of the drilling locations which have been attributed to these quantities. Ultimate recoveries will be dependent upon numerous factors including actual encountered geological conditions, the impact of future oil and gas pricing, exploration and development costs, and our future drilling decisions and budgets based upon our future evaluation of risk, returns and the availability of capital and, in many areas, the outcome of negotiation of drilling arrangements with holders of adjacent or fractional interest leases. Estimates of resource potential and other figures may change significantly as development of our properties provide additional data and therefore actual quantities that may ultimately be recovered will likely differ from these estimates. Our forecast and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells, the undertaking and outcome of future drilling activity and activity that may be affected by significant commodity price declines or drilling cost increases. Certain of Rice Energy's wells are named after superheroes and monster trucks, some of which may be trademarked. Despite their size and strength, Rice Energy's wells are in no manner affiliated with such superheroes or monster trucks. Initial production rates are subject to decline over time and should not be regarded as reflective of sustained production levels. In particular, production from horizontal drilling in shale oil and natural gas resource plays and tight natural gas plays that are stimulated with extensive pressure fracturing are typically characterized by significant early declines in production rates.
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Additional Disclosures Determination of Identified Drilling Locations as of December 31, 2015 (not pro forma for Greene County Prospective Acquisition): Net undeveloped locations are calculated by taking RICE’s total net acreage and multiplying such amount by a risking factor which is then divided by RICE’s expected well spacing. RICE then subtracts net producing wells to arrive at undeveloped net drilling locations. Undeveloped Net Marcellus Locations – RICE assumes these locations have 7,000 foot laterals and 750 foot spacing between wells which yields approximately 121 acre spacing. In the Marcellus, RICE applies a 20% risking factor to its net acreage to account for inefficient unitization and the risk associated with its inability to force pool in Pennsylvania. As of December 31, 2015, RICE had approximately 92,000 net acres in the Marcellus which results in 487 undeveloped net locations. Undeveloped Net Ohio Utica Locations – RICE assumes these locations have 9,000 foot laterals and 1,000 foot spacing between wells which yields approximately 207 acre spacing. In the Ohio Utica, RICE applies a 10% risking factor to its net acreage to account for inefficient unitization. As of December 31, 2015, RICE had approximately 56,000 net acres prospective for the Utica in Ohio which results in 215 undeveloped net locations. This excludes ~2,500 net acres in Guernsey and Harrison Counties in Ohio. Undeveloped Net Pennsylvania Utica Locations – RICE assumes these locations have 8,000 foot laterals and 2,000 foot spacing between wells which yields approximately 367 acre spacing. In the Pennsylvania Utica, RICE applies a 20% risking factor to its net acreage to account for inefficient unitization. As of December 31, 2015, RICE had approximately 49,000 net acres prospective for the Utica in Pennsylvania which results in 105 undeveloped net locations.
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