Rice Energy Inc. more than doubled its year-over-year production in the first quarter, when for the first time its nascent Ohio Utica Shale program contributed meaningfully to its sales volumes.
The company produced 440 MMcfe/d during the quarter, up 111% from the year-ago period and 11% from the fourth quarter. Unlike last year, when Rice Energy's Pennsylvania Marcellus Shale wells accounted for 100% of first quarter volumes, the Utica made up about 15% of quarterly production this year. A big part of the Utica's gains, said CEO Daniel J. Rice, were better-than-expected results from the company's horizontal Ohio wells.
All of the company's operations are concentrated in Washington and Greene counties, PA, and Belmont County, OH. Since it went public early last year, Rice Energy's Appalachian footprint has jumped from roughly 91,000 net acres to 145,000 net acres, including an additional 7,000 acres that were added in Ohio during the first quarter (see Shale Daily, Jan. 31, 2014). Rice Energy had just three operated Utica wells at the end of last year, with one -- the Bigfoot 9H -- thus far producing 4.6 Bcf in the 315 days it's been online.
But while it turned another Utica well to sales during the first quarter and a test of the formation in southwestern Pennsylvania is on track and meeting management's expectations, the company won't ramp-up Utica development anytime soon (see Shale Daily, March 12).
"There's nothing that we would see just from initial production at our first Pennsylvania Utica well that would cause us to shift capital away from our [core assets]," Rice said. "I think we're enthusiastic about the Pennsylvania Utica, but at the same time we recognize the costs and current commodity prices. You know, we're going to play a real slow hand with evaluating the Pennsylvania Utica."
The company did increase its full-year guidance to 470-490 MMcfe/d from the previously announced 450-470 MMcfe/d. But despite the fact that the company is "becoming confident" in the Utica's "repeatability" from Ohio to Pennsylvania, Rice said, it plans to stick with more development in the Marcellus Shale this year, where well costs are cheaper. The company plans to turn inline 26 Marcellus Shale wells this year and just seven Utica wells.
An increase in sales volumes helped lift revenue from $90.4 million in 1Q2014 to $109.5 million last quarter. Lower natural gas prices, though, cut into profits. Including hedges, Rice Energy realized an average first quarter natural gas price of $3.06/Mcf, down from $4.82/Mcf in the year-ago period.
The company reported net income of $152,000 ($0/share), dropping steeply from a profit of $129.4 million ($1.04/share) in 1Q2014. In addition to lower commodity prices, higher production expenses and contract termination fees of nearly $2 million brought down profits.