Rice Energy Inc. has lost an opportunity to bolt on 27,400 net Marcellus Shale acres near its core in Southwest Pennsylvania after it was outbid on Monday by a Vantage Energy Inc. subsidiary that offered to pay nearly $140 million more for the assets at auction.
Rice had entered into a $200 million stalking horse asset purchase agreement for the acreage owned by a subsidiary of bankrupt coal producer Alpha Natural Resources Inc. that was approved last month by the U.S Bankruptcy Court for the Eastern District of Virginia (see Shale Daily, April 13). Vantage Energy Appalachia II LLC, Alpha said Tuesday, bid $339.5 million for the assets, which are located in Greene County and also include 23,500 prospective Utica Shale acres. The bankruptcy court must approve the acquisition at a hearing on May 26.
Colorado-based Vantage Energy already holds 48,000 net Marcellus acres in Greene County. The privately-owned company also operates in the Fort Worth and Uinta-Piceance basins. Alpha said the company was among five bidders for the assets, adding that another bid of $335 million was the next best.
The loss wasn't all bad for Rice, which already has about a 10 year drilling inventory across 197,000 acres in Ohio and Pennsylvania. As the stalking horse bidder, the company is now entitled to break-up fees and reimbursement of up to $3.5 million, it said in a U.S. Securities and Exchange Commission filing on Tuesday. Rice had also completed a common stock offering last month to help fund the potential bolt-on that raised $312 million. Those funds, the company said in its SEC filing, would now be used for general corporate purposes, which could include funding a portion of its 2017 capital budget.
Alpha filed for Chapter 11 bankruptcy protection in August 2015. Earlier this year, lenders authorized the sale of a core group of assets, including the financially unencumbered natural gas properties owned by subsidiary Pennsylvania Land Resources LLC (see Shale Daily, Feb. 12). Alpha has noted in court documents since then that the Marcellus acreage attracted widespread interest.
Last month, both EQT Corp. and Appalachian upstart American Petroleum Partners (APP) LLC filed objections to Rice's stalking horse bid, indicating that they would be interested in paying the $200 million for the assets (see Shale Daily, April 28). The companies argued that the floor Rice established as the stalking horse and the fees it would be entitled to if it lost at auction would gave it an unfair advantage, saying it was unnecessary given all the interest in the acreage.
When asked if the company had bid for the assets, a representative of APP told NGI's Shale Daily that they were "not at liberty to discuss the transaction." EQT spokesperson Natalie Cox simply said the company was not the successful buyer. EQT announced earlier this month, though, that it would acquire 62,500 net acres in West Virginia from Statoil ASA for $407 million in cash (see Shale Daily, May 3).
APP secured an equity commitment of up to $800 million last year to lease and operate land in Ohio, West Virginia and Pennsylvania (see Shale Daily, March 24). The company is actively leasing in Greene County, according to its website.
In separate news, Rice said in its filing that its borrowing base was increased from $750 million to $875 million. The company's year-end proved reserves increased by 30% from 2014 to 1.7 Tcfe. The company grew 2015 production to 552 MMcfe/d, up more than 100% from 2014. Its midstream assets in Ohio have also grown significantly in recent quarters (see Shale Daily, May 6).
The increase, combined with its recent stock offering, leaves Rice with $1.5 billion in liquidity.