Rice Energy Reports Third Quarter 2017 Results
CANONSBURG, Pa., Nov. 2, 2017 /PRNewswire/ -- Rice Energy Inc. (NYSE: RICE) ("Rice Energy") today reported third quarter 2017 financial and operating results. Highlights include:
-- Net production averaged 1,440 MMcfe/d, a 6% increase from second quarter
2017
-- Rice Midstream Holdings LLC ("RMH") gathering throughput averaged 1,438
MDth/d, a 22% increase from second quarter 2017
-- Record low lease operating expense of $0.11 per Mcfe, a 21% decrease
from second quarter 2017
-- Net loss attributable to common stockholders of $107.1 million, or $0.49
per diluted share
-- Reported Adjusted EBITDAX((1)) of $233.9 million
-- Exited the quarter with low leverage((1)) of 1.4x
-- Closed the sale of the Barnett assets for $175 million((2))
Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "On behalf of the Rice family and our board, I want to take this opportunity to express our gratitude to our employees and shareholders for their unwavering dedication to Rice Energy's mission of becoming the paradigm for oil and gas companies of the shale generation. We are proud of the shareholder value that we have created while operating within our core values of stewardship, innovation, seeking excellence and teamwork."
Mr. Rice continued, "Our success is a testament to the core assets that we have acquired and developed with our shalennial((3)) team and I am highly confident that our operational momentum, as evidenced by our record third quarter results, will meaningfully contribute to EQT's future success. We are excited to combine our core assets with EQT's to create one of the most complete energy companies in the United States and derive even more long-term value for our shareholders."
1. Please see Supplemental "Non-GAAP
Financial Measures" for a
description of Adjusted EBITDAX,
Further Adjusted EBITDAX and
related reconciliations to the
comparable GAAP financial measures.
Leverage is defined as the ratio of
net debt to last twelve months
Further Adjusted EBITDAX.
2. On September 29, 2017, Rice Energy
received $141 million associated
with the closing of the sale of the
Barnett assets, which reflects
customary purchase price adjustments
attributable to a January 1, 2017
effective date.
3. Shalennial /SH?l?en??l/
noun: (1) an evolving, tech-driven
leader of the shale generation; (2)
an employee of Rice Energy
Special Meeting of Stockholders
We expect to hold a special meeting of stockholders in connection with the proposed merger with EQT Corporation (NYSE: EQT) ("EQT") on November 9, 2017 at 8:00 a.m. local time at Rice Energy's executive offices at 2200 Rice Drive, Canonsburg, PA 15317. Rice Energy stockholders of record at the close of business on September 21, 2017 will be entitled to receive notice of the special meeting and to vote at the special meeting.
Third Quarter 2017 Results
Consolidated Results Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
--- ------------------ ------------------
Operating revenues (in thousands) $365,282 $1,157,395
Operating expenses (in ($ / Mcfe) (in ($ / Mcfe)
thousands) thousands)
--------- ---------
Lease operating(1) $14,392 $0.11 $54,336 $0.15
Gathering, compression,
transportation 45,138 0.34 123,695 0.33
Production taxes and impact fees 6,179 0.05 19,011 0.05
General and administrative(1) 29,906 0.23 91,641 0.25
Depreciation, depletion and
amortization 156,890 1.18 439,672 1.19
(in (per diluted (in (per diluted
thousands) share) thousands) share)
--------- ----- --------- -----
Net loss attributable to common
stockholders $(107,092) $(0.49) $(79,382) $(0.38)
Adjusted EBITDAX(2) $233,858 $710,175
Adjusted net income(3) $11,706 $0.05 $85,481 $0.40
Financial position (in millions) As of September 30, 2017
------------------------
Total liquidity(4) $1,648
Cash and cash equivalents $271
Long-term debt $1,803
Leverage(2) 1.4
As of September 30, 2017, our liquidity position, excluding RMP, was $1,648 million comprised of $1,439 million of upstream liquidity ($187 million of cash on hand and $1,252 million revolver availability) and $209 million of RMH liquidity ($83 million of cash on hand and $127 million revolver availability). Our balance sheet remains strong with low leverage((2)) of 1.4x.
1. Excludes stock-based compensation
expense of $0.1 million and $6.3
million attributable to lease
operating and general and
administrative expenses,
respectively, for the three months
ended September 30, 2017 and $0.5
million and $17.6 million is
excluded in lease operating and
general and administrative expenses,
respectively, for the nine months
ended September 30, 2017.
2. Please see Supplemental "Non-GAAP
Financial Measures" for a
description of Adjusted EBITDAX,
Further Adjusted EBITDAX and
related reconciliations to the
comparable GAAP financial measures.
Leverage is defined as the ratio of
net debt to last twelve months
Further Adjusted EBITDAX.
3. The above Adjusted net income per
diluted share calculation is
computed based on the weighted
average number of diluted shares
outstanding of 220,893,125 and
211,353,970 for the three and nine
months ended September 30, 2017,
respectively.
4. Excludes Rice Midstream Partners LP.
E&P Segment Results Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
--- ------------------ ------------------
Production
Net production (Bcfe) 132 370
Net production (MMcfe/d) 1,440 1,356
Operated 93% 92%
Operating revenues (in
thousands)
Natural gas, oil & NGL sales $303,196 $1,008,922
Other revenue 11,200 29,179
Realized gain (loss) on
derivative instruments 25,642 (1,522)
------ ------
Total operating revenues and
realized loss on derivative
instruments $340,038 $1,036,579
Realized Pricing ($/MMBtu)
NYMEX Henry Hub price $3.00 $3.17
Average basis impact (0.76) (0.51)
FT fuel and variables (0.08) (0.08)
Btu uplift (MMBtu/Mcf) 0.12 0.14
---- ----
Pre-hedge realized price
($/Mcf) 2.28 2.72
Post-hedge realized price
($/Mcf) $2.47 $2.71
===== =====
Operating expenses (in ($ / Mcfe) (in ($ / Mcfe)
thousands) thousands)
--------- ---------
Lease operating(1) $14,419 $0.11 $54,458 $0.15
Gathering and compression 60,068 0.45 160,635 0.43
Transportation 35,795 0.27 103,038 0.28
Production taxes and impact
fees 6,179 0.05 19,011 0.05
Exploration 5,042 0.04 16,160 0.04
General and administrative(1) 18,759 0.14 58,709 0.16
Depreciation, depletion and
amortization 153,221 1.16 426,538 1.15
Operating (loss) income (in
thousands) $(21,396) $29,338
E&P capital expenditures (in
millions)
Operated Marcellus $149 $352
Operated Ohio Utica 69 202
Non-operated Utica 8 42
--- ---
Total Drilling & Completion 226 596
Land(2) 35 139
--- ---
Total $261 $735
==== ====
Financial position (in
millions) As of
September 30, 2017
------------------
E&P liquidity $1,439
Cash and cash equivalents $187
Long-term debt $1,407
E&P Operational
Highlights Three Months Ended
September 30, 2017
---
Marcellus Utica Barnett Total
--------- ----- ------- -----
Production
(MMcfe/d) 899 472 69 1,440
Operational
activity (net
wells)
Drilled 25 7 - 32
Completed 20 10 - 30
Average lateral
lengths 7,750 11,000 - -
Appalachia net
acres 211,000 66,000 - 277,000
During the quarter, we turned to sales three net Marcellus wells with an average lateral length of 6,600 feet and five net operated Utica wells with an average lateral length of 8,000 feet. In addition, we turned to sales four net non-operated Ohio Utica wells. Our third quarter development costs per lateral foot averaged $860 in the Marcellus and $1,150 in the Utica for wells drilled and completed.
1. Excludes stock-based compensation
expense of $0.1 million and $4.7
million attributable to lease
operating and general and
administrative expenses,
respectively, for the three months
ended September 30, 2017 and $0.5
million and $13.6 million is
included in lease operating and
general and administrative
expenses, respectively, for the
nine months ended September 30,
2017.
2. Excludes $36 million and $105 million
of royalty purchases for the three
and nine months ended September 30,
2017, respectively. During the first
nine months of the year, we added
approximately 11,000 royalty acres.
RMH Segment Results Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
(in thousands, except volumes)
-----------------------------
Operating volumes (MDth/d)
Gathering volumes
Affiliate 546 487
Third-party 892 709
--- ---
Total 1,438 1,196
Compression volumes
Affiliate 295 270
Third-party 235 242
--- ---
Total 530 512
Operating revenues
Gathering $36,312 $89,185
Compression 3,212 9,130
----- -----
Total 39,524 98,315
Total operating expenses 10,554 29,413
------ ------
Operating income $28,970 $68,902
Capital expenditures (in millions) $60 $173
LP + IDR cash distributions
received from RMP(1) (in
millions) $9 $26
Financial position (in millions) As of
September 30, 2017
------------------
RMH liquidity $209
Cash and cash equivalents $83
Revolving credit facility $174
Acreage dedication 172,000
Third-party 72%
Second quarter gathering throughput averaged 1,438 MDth/d, which consisted of 1,093 MDth/d related to the operations of Rice Olympus Midstream ("ROM") and 668 MDth/d related to the operations of Strike Force Midstream, offset by an elimination of 323 MDth/d that is related to operations of both ROM and Strike Force Midstream.
1. Net of 91.75% ownership
interest.
RMP Segment Results Three Months Ended Nine Months Ended
September 30, 2017
(in thousands,
except volumes) September 30, 2017
---------------- ------------------
Operating volumes
(MDth/d)
Gathering volumes
Affiliate 1,168 1,106
Third-party 315 254
--- ---
Total 1,483 1,360
Compression volumes
Affiliate 712 661
Third-party 315 255
--- ---
Total 1,027 916
Water services
assets (MMGal)
Pennsylvania 279 652
Ohio 298 714
--- ---
Total 577 1,366
Operating revenues
Gathering $47,068 $123,601
Compression 7,266 19,318
Water 27,367 73,909
------ ------
Total 81,701 216,828
Total operating
expenses 27,054 74,571
------ ------
Operating income 54,647 142,257
Capital expenditures
(in millions) $63 $136
Financial position
(in millions) As of
September 30, 2017
------------------
RMP liquidity $630
Cash and cash
equivalents $2
Revolving credit
facility $222
Acreage dedication 243,000
Third-party 14%
Third quarter gathering throughput averaged 1,483 MDth/d, consisting of 1,168 MDth/d affiliate volumes and 315 MDth/d third party volumes. Freshwater delivery volumes were 577 MMgal, consisting of 431 MMgal affiliate volumes and 146 MMgal third party volumes, driving significant growth as a result of accelerated completion activity.
On October 20, 2017, RMP declared a quarterly distribution of $0.2814 per unit for the third quarter 2017, an increase of $0.0103 per unit, or 4%, relative to second quarter 2017. The distribution will be payable on November 16, 2017 to unitholders of record as of November 7, 2017.
RMP's results were released today and are available at www.ricemidstream.com.
About Rice Energy
Rice Energy Inc. is an independent natural gas and oil company focused on the acquisition, exploration and development of natural gas and oil properties in the Appalachian Basin. For more information, please visit our website at www.riceenergy.com.
Forward Looking Statements
This release includes "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. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than historical facts included or incorporated herein that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), projected operational results, production growth, basis exposure, hedging, the timing and number of well completions, forecasted gathering volumes, revenues, Adjusted EBITDAX, further Adjusted EBITDAX; distribution growth, distributable cash flow, the timing of completion and nature of midstream projects, the terms, timing and completion of any acquisitions or divestitures, business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although we believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.
We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering and sale of natural gas, NGLs 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; and risks related to joint venture operations. Information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by us will be realized, or even if realized, that they will have the expected consequences to or effects on us, our business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
This release does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval. This communication relates to a proposed business combination between EQT and Rice.
In connection with the proposed transaction, EQT has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4 on July 27, 2017, that includes a joint proxy statement of EQT and Rice and also constitutes a prospectus of EQT, and has filed a definitive proxy statement on October 12, 2017. Each of EQT and Rice also plan to file other relevant documents with the SEC regarding the proposed transactions. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. The definitive joint proxy statement/prospectus(es) for EQT and/or Rice will be mailed to shareholders of EQT and/or Rice, as applicable.
INVESTORS AND SECURITY HOLDERS OF EQT AND RICE ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents containing important information about EQT and Rice, once such documents are filed with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by EQT will be available free of charge on EQT's website at www.eqt.com or by directing a request to Investor Relations, EQT Corporation, EQT Plaza, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3111, Tel. No. (412) 553-5700. Copies of the documents filed with the SEC by Rice will be available free of charge on Rice's website at www.riceenergy.com or by directing a request to Investor Relations, Rice Energy Inc., 2200 Rice Drive, Canonsburg, Pennsylvania 15317, Tel. No. (724) 271-7200.
EQT, Rice and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of Rice is set forth in Rice's proxy statement for its 2017 annual meeting of shareholders, which was filed with the SEC on April 17, 2017. Information about the directors and executive officers of EQT is set forth in its proxy statement for its 2017 annual meeting, which was filed with the SEC on March 6, 2017. These documents may be obtained free of charge from the sources indicated above.
Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when such materials become available. Investors should read the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from EQT or Rice using the sources indicated above.
Rice Energy Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30,
September 30,
(in thousands, except share
data) 2017 2016 2017 2016
---- ---- ---- ----
Operating revenues:
Natural gas, oil and natural
gas liquids sales $303,196 $162,354 $1,008,922 $397,108
Gathering, compression and
water services 50,886 25,176 119,294 73,456
Other revenue 11,200 11,390 29,179 24,296
Total operating revenues 365,282 198,920 1,157,395 494,860
Operating expenses:
Lease operating 14,392 11,668 54,336 31,557
Gathering, compression and
transportation 45,138 29,597 123,695 84,898
Production taxes and impact
fees 6,179 3,695 19,011 8,005
Exploration 5,042 3,396 16,160 9,934
Midstream operation and
maintenance 6,536 4,080 21,498 18,225
Incentive unit expense 3,271 5,920 10,954 44,902
Acquisition expense 6,330 614 8,945 1,171
Stock compensation expense 6,469 5,953 18,170 16,994
Impairment of gas properties - - 92,355 -
Impairment of fixed assets - - - 2,595
Loss on sale of Barnett
Assets 15,915 - 15,915 -
General and administrative 29,906 24,365 91,641 67,721
Depreciation, depletion and
amortization 156,890 83,195 439,672 247,132
Amortization of intangible
assets 412 411 1,220 1,222
Other expense 14,876 10,153 34,241 25,800
------ ------ ------ ------
Total operating expenses 311,356 183,047 947,813 560,156
------- ------- ------- -------
Operating income (loss) 53,926 15,873 209,582 (65,296)
Interest expense (28,734) (24,421) (83,026) (73,744)
Other (expense) income (196) (1,900) 258 862
Gain on derivative
instruments 32,534 183,915 121,313 52,539
Gain (loss) on embedded
derivatives 1,049 - (14,368) -
Amortization of deferred
financing costs (3,262) (1,247) (9,340) (4,416)
Income (loss) before income
taxes 55,317 172,220 224,419 (90,055)
Income tax benefit (expense) (10,559) (81,142) (43,900) 45,729
------- ------- ------- ------
Net income (loss) 44,758 91,078 180,519 (44,326)
Less: Net income
attributable to
noncontrolling interests (44,438) (16,665) (122,971) (55,535)
Net (loss) income
attributable to Rice Energy
Inc. 320 74,413 57,548 (99,861)
Less: Preferred dividends
and accretion of redeemable
noncontrolling interests (107,412) (8,581) (136,930) (19,983)
-------- ------ -------- -------
Net (loss) income
attributable to Rice Energy
Inc. common stockholders $(107,092) $65,832 $(79,382) $(119,844)
========= ======= ======== =========
(Loss) earnings per share-
basic $(0.49) $0.42 $(0.38) $(0.80)
(Loss) earnings per share-
diluted $(0.49) $0.41 $(0.38) $(0.80)
Rice Energy Inc.
Segment Results of Operations
(Unaudited)
Exploration and Production Segment
Three Months Ended Nine Months Ended
September 30,
September 30,
(in thousands, except volumes) 2017 2016 2017 2016
---- ---- ---- ----
Operating volumes:
Natural gas production (MMcf) 131,162 68,524 366,295 198,269
Oil and NGL production (MBbls) 215 35 646 132
--- --- --- ---
Total production (MMcfe) 132,449 68,733 370,168 199,058
Operating results:
Operating revenues:
Natural gas, oil and NGL sales $303,196 $162,695 $1,008,922 $397,449
Other revenue 11,200 11,390 29,179 24,296
Total operating revenues 314,396 174,085 1,038,101 421,745
Operating expenses:
Lease operating 14,419 11,668 54,458 31,557
Gathering, compression and
transportation 95,863 56,957 263,673 156,467
Production taxes and impact
fees 6,179 3,695 19,011 8,005
Exploration 5,042 3,396 16,160 9,934
Incentive unit expense 3,177 5,751 10,641 42,763
Acquisition costs 6,410 614 7,973 614
Impairment of gas properties - - 92,355 -
Impairment of fixed assets - - - 2,595
Loss on sale of Barnett Assets 15,915 - 15,915 -
Stock compensation expense 4,794 4,053 14,062 10,035
General and administrative 18,759 15,934 58,709 45,027
Depreciation, depletion and
amortization 153,221 79,736 426,538 234,207
Other expense 12,013 10,063 29,268 25,561
Total operating expenses 335,792 191,867 1,008,763 566,765
Operating income (loss) $(21,396) $(17,782) $29,338 $(145,020)
Average costs per Mcfe:
Lease operating $0.11 $0.17 $0.15 $0.16
Gathering and compression 0.45 0.44 0.43 0.42
Transportation 0.27 0.39 0.28 0.37
Production taxes & impact fees 0.05 0.05 0.05 0.04
Exploration 0.04 0.05 0.04 0.05
Incentive unit expense 0.02 0.08 0.03 0.21
Stock compensation 0.04 0.06 0.04 0.05
General and administrative 0.14 0.23 0.16 0.23
Depreciation, depletion and
amortization 1.16 1.16 1.15 1.18
Rice Midstream Holdings Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except
volumes) 2017 2016 2017 2016
---- ---- ---- ----
Operating volumes:
Gathering volumes (MDth/d) 1,438 812 1,196 642
Compression volumes (MDth/d) 530 483 512 436
Operating results:
Operating revenues:
Gathering revenues $36,312 $16,189 $89,185 $33,969
Compression revenues 3,212 2,796 9,130 7,540
Total operating revenues 39,524 18,985 98,315 41,509
Operating expenses:
Midstream operation and
maintenance 1,505 960 3,242 2,418
Incentive unit expense 94 169 313 2,139
Acquisition expense (115) - 443 484
Stock compensation expense 1,505 1,291 3,679 4,231
General and administrative 4,882 4,058 13,889 9,958
Depreciation, depletion and
amortization 2,067 1,577 5,254 4,222
Other expense 616 - 2,593 -
Total operating expenses 10,554 8,055 29,413 23,452
Operating income $28,970 $10,930 $68,902 $18,057
Rice Midstream Partners Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except
volumes) 2017 2016 2017 2016
---- ---- ---- ----
Operating volumes:
Gathering volumes (MDth/d) 1,483 957 1,360 909
Compression volumes (MDth/d) 1,027 745 916 488
Water services volumes
(MMGal) 577 135 1,366 932
Operating results:
Operating revenues:
Gathering revenues $47,068 $28,473 $123,601 $80,408
Compression revenues 7,266 5,030 19,318 9,931
Water services revenues 27,367 7,564 73,909 51,818
Total operating revenues 81,701 41,067 216,828 142,157
Operating expenses:
Midstream operation and
maintenance 10,259 4,559 28,139 17,292
Acquisition expense 35 411 529 73
Equity compensation expense 169 609 429 2,728
General and administrative 6,265 4,373 19,043 12,736
Depreciation expense 7,667 5,489 22,831 17,714
Amortization of intangible
assets 412 - 1,220 1,222
Other expense 2,247 90 2,380 239
Total operating expenses 27,054 15,531 74,571 52,004
Operating income $54,647 $25,536 $142,257 $90,153
Rice Energy Inc.
Supplemental Non-GAAP Financial Measures
(Unaudited)
Adjusted EBITDAX and Further Adjusted EBITDAX are supplemental non-GAAP financial measures that are 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 (loss) before non-controlling 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. We define Further Adjusted EBITDAX as Adjusted EBITDAX after non-controlling interest and water revenue adjustment. Neither Adjusted EBITDAX nor Further Adjusted EBITDAX is a measure of net income as determined by United States generally accepted accounting principles, or GAAP.
Management believes Adjusted EBITDAX is a useful measure to the users of our financial statements because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Management believes Further Adjusted EBITDAX is useful because it allows them to assess the level of consolidated leverage of the company and compare this level to peers. The adjustments made to Adjusted EBITDAX to calculate Further Adjusted EBITDAX address the intercompany eliminations of items impacting Adjusted EBITDAX as a result of the consolidation of RMP, the outstanding indebtedness of which is consolidated with that of the company without regard to non-controlling interest. These adjustments include the addition of non-controlling interest as well as the addition of a water revenue adjustment attributable to charges for fresh water delivery services and produced water hauling services provided by RMP to RICE, a charge that generates revenue for RMP but does not have a corresponding expense at the RICE level, as such costs are capitalized.
Adjusted EBITDAX and Further Adjusted EBITDAX should not be considered as alternatives to, or more meaningful than, net income as determined in accordance with GAAP or as indicators of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX and Further Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX or Further Adjusted EBITDAX. Our computations of Adjusted EBITDAX and Further Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. We believe that these measures are widely followed measures of operating performance used by investors.
The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDAX to the GAAP financial measure of net income (loss).
(in thousands) Three Months Ended Nine Months Ended Twelve Months Ended
September 30, 2017 September 30, 2017
September 30, 2017
------------------
Adjusted EBITDAX
reconciliation to
net income:
Net income (loss) $44,758 $180,519 $(23,975)
Interest expense 28,734 83,026 108,909
Depreciation,
depletion and
amortization 156,890 439,672 560,995
Amortization of
deferred financing
costs 3,262 9,340 12,469
Amortization of
intangible assets 412 1,220 1,632
Acquisition expense 6,330 8,945 13,883
Impairment of gas
properties - 92,355 113,208
Impairment of fixed
assets - - 20,462
(Gain) loss on
derivative
instruments (1) (32,534) (121,313) 151,462
Net cash receipts
(payments) on
settled derivative
instruments (1) 25,642 (1,522) 36,243
Non-cash stock
compensation expense 6,469 18,170 40,068
Non-cash incentive
unit expense 3,271 10,954 17,813
Income tax expense 10,559 43,900 (52,583)
Exploration expense 5,042 16,160 21,385
(Gain) loss on
embedded derivatives (1,049) 14,368 14,368
Loss on sale of
Barnett Assets 15,915 15,915 15,915
Other expense - - 6,506
Non-controlling
interest
attributable to
midstream entities (39,843) (101,534) (121,414)
------- -------- --------
Adjusted EBITDAX(2) $233,858 $710,175 $937,346
======== ======== ========
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. Excluded from the above Adjusted
EBITDAX reconciliation is the
impact of non-controlling
interest attributable to midstream
entities and the elimination of
intercompany water revenues
between Rice Energy subsidiaries
and Rice Midstream Partners of
$39.8 million and $14.4 million,
respectively, for the three months
ended September 30, 2017, $101.5
million and $46.0 million,
respectively, for the nine months
ended September 30, 2017, and
$121.4 million and $64.7 million,
respectively, for the twelve
months ended September 30, 2017.
When including these impacts, our
Further Adjusted EBITDAX is $288.1
million, $857.7 million and $1.1
billion for the three, nine and
twelve months ended September 30,
2017, respectively. Our
consolidated net debt to last
twelve months Further Adjusted
EBITDAX ratio is 1.4x. Also
included in the above
reconciliation is the non-
controlling interest attributable
to Rice Energy Operating LLC, as
we view our business on a fully
diluted basis.
Rice Energy Inc.
Supplemental Non-GAAP Financial Measures
(Unaudited)
Adjusted net income (loss) 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 net income (loss) as net income (loss) before impairment of gas properties, impairment of fixed assets, derivative fair value (gain) loss, net cash receipts on settled derivative instruments, incentive unit expense, acquisition expense and other non-recurring items. Adjusted net income (loss) is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP.
We believe that many investors use adjusted net income (loss) in making investment decisions and in evaluating our operational trends and our performance relative to other oil and gas producing companies.
The following table presents a reconciliation of the non-GAAP financial measure of adjusted net income to the GAAP financial measure of net income.
(in
thousands) Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
------------------ ------------------
Reconciliation
to
net
income
attributable
to
Rice
Energy
Inc:
Net
income $44,758 $180,519
Non-
controlling
interest
attributable
to
midstream
entities (39,843) (101,534)
Impairment
of
gas
properties - 92,355
Gain
on
derivative
instruments
(1) (32,534) (121,313)
Net
cash
receipts
(payments)
on
settled
derivative
instruments
(1) 25,642 (1,522)
Incentive
unit
expense 3,271 10,954
(Gain)
loss
on
embedded
derivatives (1,049) 14,368
Loss
on
sale
of
Barnett
Assets 15,915 15,915
Income
tax
effect
of
reconciling
items (4,454) (4,261)
Adjusted
net
income
attributable
to
Rice
Energy
Inc.(2) $11,706 $85,481
======= =======
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
net income on a cash basis during
the period the derivatives
settled.
2. The above Adjusted net income
reconciliation deducts the tax
impact of non-controlling
interest attributable to midstream
entities of $39.8 million and
$101.5 million for the three and
nine months ended September 30,
2017, respectively. Also, the
above reconciliation does not
deduct the non-controlling
interest attributable to Rice
Energy Operating LLC, as we view
our business on a fully diluted
basis.
Rice Energy Inc.
Supplemental Balance Sheet Data
(Unaudited)
The table below provides supplemental balance sheet data as of
September 30, 2017.
(in thousands) September 30, 2017
------------------
Cash and cash
equivalents $271,243
Long-term debt
6.25% Senior Notes
Due April 2022(1) 889,668
7.25% Senior Notes
Due May 2023(2) 392,510
Senior Secured
Revolving Credit
Facility 125,000
Midstream Holdings
Revolving Credit
Facility 173,500
RMP Revolving
Credit Facility 222,000
-------
Total long-term
debt $1,802,678
==========
Net debt $1,531,435
==========
1. Net of unamortized deferred
finance costs and original
discount issuances of $10,332
(in thousands).
2. Net of unamortized deferred
finance costs and original
discount issuances of $7,490
(in thousands).
Rice Energy Inc.
Derivatives Information
(Unaudited)
This table provides data associated with our derivatives as of October 9, 2017 for the periods indicated:
All-In Fixed Price
Derivatives Rem. 2018 2019 2020 2021
2017
--- ----
NYMEX Natural Gas Swaps:
------------------------
Volume Hedged (BBtu/d) 720 665 467 578 338
Wtd Average Swap Price
($/MMBtu) $3.22 $3.00 $2.93 $2.92 $2.85
NYMEX Natural Gas Collars:
--------------------------
Volume Hedged (BBtu/d) 290 285 190 - -
Wtd Average Floor Price
($/MMBtu) $3.08 $3.15 $3.00 $ - $ -
Wtd Average Call Price
($/MMBtu) $3.73 $3.63 $3.50 $ - $ -
NYMEX Natural Gas Calls:
------------------------
Volume Hedged (BBtu/d) 50 120 152 135 20
Wtd Average Price
($/MMBtu) $2.92 $3.32 $3.45 $3.47 $3.70
NYMEX Natural Gas Deferred Puts:
--------------------------------
Volume Hedged (BBtu/d) 80 30 20 - -
Wtd Avg. Net Floor Price
($/MMBtu) $2.59 $2.77 $2.80 $ - $ -
NYMEX Volume Excl Calls
(BBtu/d) 1,090 980 677 578 338
NYMEX Volume Incl Calls
(BBtu/d) 1,140 1,100 829 713 358
Swap, Collar & Put Floor
($/MMBtu) $3.14 $3.04 $2.95 $2.92 $2.85
------------------------ ----- ----- ----- ----- -----
Waha Natural Gas Swaps
----------------------
Volume Hedged (BBtu/d) 45 22 9 - -
Wtd Average Swap Price
($/MMBtu) $3.11 $3.01 $3.29 $ - $ -
Dominion Natural Gas Swaps
--------------------------
Volume Hedged (BBtu/d) 250 257 92 - -
Wtd Average Swap Price
($/MMBtu) $2.24 $2.23 $2.34 $ - $ -
Total Fixed Price Derivatives
-----------------------------
Volume Hedged Excl.
Calls (BBtu/d) 1,385 1,259 778 578 338
Volume Hedged Incl.
Calls (BBtu/d) 1,435 1,379 930 713 358
Wtd Average Swap Price
($/MMBtu) $2.97 $2.87 $2.88 $2.92 $2.85
---------------------- ----- ----- ----- ----- -----
Basis Contract Derivatives
--------------------------
Appalachian Basis
-----------------
Volume Hedged (BBtu/d) 500 361 450 515 340
Wtd Average Swap Price
($/MMBtu) $(0.96) $(0.65) $(0.58) $(0.56) $(0.54)
Other Basis (MichCon/Gulf Coast)
--------------------------------
Volume Hedged (BBtu/d) 447 302 167 73 20
Wtd Average Swap Price
($/MMBtu) $(0.13) $(0.13) $(0.15) $(0.14) $(0.12)
Total Basis Swaps
-----------------
Volume Hedged (BBtu/d) 947 663 617 588 360
Wtd Average Swap Price
($/MMBtu) $(0.57) $(0.41) $(0.46) $(0.51) $(0.52)
---------------------- ------ ------ ------ ------ ------
WTI Swaps
---------
Volume Hedged (Bbls/d) 50 - - - -
Wtd Average Swap Price
($/bbl) $45 $ - $ - $ - $ -
NGL Swaps
---------
Volume Hedged (Bbls/d) 496 - - - -
Wtd Average Swap Price
($/bbl) $15 $ - $ - $ - $ -
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SOURCE Rice Energy Inc.
