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Rice Energy Inc. is tying up loose ends ahead of a merger with EQT Corp. that's expected to close in the fourth quarter, announcing Thursday that it recently added nearly 20,000 net acres to its core in the Appalachian Basin and sold the Barnett Shale assets it obtained in the broader acquisition of Vantage Energy Inc. subsidiaries last year.
The company paid $180 million for 16,500 net acres in West Virginia and Pennsylvania last month. While it didn't identify the seller, public records show the company acquired all of Lola Energy LLC's assets, mostly in Greene County, PA, where Rice has amassed a sizeable acreage position that EQT plans to focus strongly on after the acquisition is completed.
Rice also agreed to sell 36,000 net acres in the Barnett of North Texas for $175 million in a deal that’s expected to close in the third quarter. The properties produced 76 MMcfe/d in the second quarter.
The company took no questions from financial analysts during a short call to discuss second quarter earnings on Thursday. Management has also stopped providing guidance in light of the merger. CEO Daniel J. Rice said the company remains committed to close on the deal with EQT by the end of the year.
He also continued to plug the cost synergies the acquisition is expected to create, which have faced scrutiny from some investors who believe EQT is overpaying for Rice. Under the terms of the deal, EQT would acquire Rice for $6.7 billion and would assume or refinance $1.5 billion of Rice's net debt and preferred equity.
EQT management said during its earnings call last week that longer laterals, administrative savings, buying power and marketing optimization, among other things created by the deal, could generate up to $7.5 billion in synergies. The merger would also create the nation's largest natural gas producer, according to Natural Gas Supply Association data and NGI calculations.
Rice set a production record of 1.354 Bcfe/d in the second quarter, up from 758 MMcfe/d in the year-ago period and a 6% increase from 1Q2017. COO Toby Rice highlighted technology on the call that fits with the merger and its consolidation goals. The company modified its drilling assembly in the Utica Shale to reduce cycle times and brought to sales a "combo set" of 19 Marcellus Shale wells on four adjacent pads in the company's "most ambitious development project" to date.
"Our combo development methodology applied to these wells represents what we believe is the future of development in the Appalachian Basin and is only achievable with a consolidated acreage position," he said.
Revenue for the second quarter increased to $398.3 million from $156 million in the year-ago period. Rice reported net income of $62.9 million (30 cents/share) for the quarter, compared to a net loss of $164.6 million (minus $1.07) in 2Q2016.