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Consol, Rice Look to Raise Combined $1B Through Private Offerings

In separate announcements, Consol Energy Inc. and Rice Energy Inc., two heavyweights in the Appalachian Basin, said they are looking to raise more than $1 billion through private offerings, as both look to weather low commodity prices.

On Tuesday, Pittsburgh-based Consol said it intends to sell $650 million of senior notes, which would be due in 2023. Consol, which is shifting its focus from coal to natural gas production (see Shale DailyOct. 28, 2013), said it intends to use proceeds from the sale, plus borrowings under its revolving credit facility, to purchase all of the approximately $1.02 billion in its outstanding 8.25% senior notes that are coming due in 2020. The company said some of the proceeds will also go toward purchasing $250 million in outstanding senior notes due in 2021.

As part of the industry-wide belt-tightening, Consol said earlier this month that it would cut $80 million from its drilling budget for 2015, reducing it to $920 million (see Shale DailyMarch 13).

Meanwhile, Canonsburg, PA-based Rice said Monday that it plans to sell $400 million in 7.25% senior notes, which would also come due in 2023. The notes would be set at 99.233%, for a yield to maturity of 7.375%. The company said it expects the private placement to close on Thursday, subject to customary closing conditions.

Rice said it plans to use the net proceeds from the sale, estimated at $389.3 million, to fund general corporate purposes, including capital expenditures (capex). Earlier this month, the company said it plans to cut its overall drilling and completion budget by 40%, to $890 million, in order to focus more on its narrow position in the Utica Shale (see Shale DailyMarch 12).

In a note Monday, Moody’s Investors Service said it had assigned a B3 rating to Rice’s proposed offering, and changed its Speculative Grade Liquidity (SGL) rating from SGL-2 to SGL-3. The firm said Rice’s B2 Corporate Family Rating (CFR) and other debt ratings were unchanged, and the rating outlook remains positive.

"The change to Rice's SGL rating reflects the company's improved liquidity profile as a result of [the] proposed bond offering, with strong pro forma cash balances and credit facility availability to fund the company's cash flow outspending," said Gretchen French, vice president and senior credit officer for Moody’s. "Our positive outlook on Rice reflected in our March 19 rating action remain unchanged."

French said Rice’s B2 CFR rating is aided by the company’s low-cost, early entry position into the Marcellus Shale, but added that the company faces years of outspending cash flows as it looks to develop and hold its acreage position in the Marcellus and Utica shales.

“An upgrade could be considered if Rice successfully grows production at sound returns while also maintaining sufficient liquidity and debt/average daily production less than $25,000 per boe/d and retained cash flow/debt of at least 15%,” French said. “A downgrade is possible if debt to average daily production is sustained above $30,000 boe/d or liquidity tightens.”

Whiting Petroleum Corp. also announced this week that its plans to issue 35 million shares of common stock and $1.75 million in debt (see related story).

Last week, Houston-based Carrizo Oil & Gas Inc. said it plans to offer 4.5 million shares of common stock, priced at $45.50/share, with an option for underwriters to purchase up to 675,000 additional shares. Carrizo, whose core acreage is in the Eagle Ford Shale in South Texas, said it intends to use the proceeds from the stock sale to repay borrowing under its revolving credit facility, and for general corporate purposes (see Shale DailyFeb. 24).

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