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Rice to Acquire Gathering Assets in Southwest Pennsylvania

Pure-play Appalachian operator Rice Energy Inc. has agreed to acquire gathering assets in southwest Pennsylvania from a subsidiary of M3 Midstream LLC for $110 million in cash.

The deal includes permits and rights-of-way in Washington and Greene counties that will allow the company to construct an 18-mile, 30-inch diameter pipeline connecting its northern gathering system to the Texas Eastern pipeline.

Under a purchase and sale agreement, Rice Poseidon Midstream, a wholly-owned subsidiary, will acquire other assets consisting of a 28-mile gathering system in eastern Washington County, where the bulk of Rice's 43,551 net Marcellus acres are located. The deal is subject to customary purchase adjustments and Rice said it expects the transaction to close in March.

"The M3 Appalachia transaction represents a unique opportunity for Rice that is consistent with our strategic focus of proactively investing in our midstream to facilitate our upstream growth," said CEO Daniel J. Rice. "In addition to acquiring a strategic gathering system supported by third-party contracts, the footprint of the northern system provides us with the opportunity to accelerate development drilling and strengthen our leasing efforts in a key operational area."

The deal marks Rice's first publicly announced acquisition since it raised $594.5 million in a $21/share public offering on Jan. 24 (see Shale Daily, Jan. 31). In its filing prospectus, the company said it will spend $1.08 billion on capital expenditures this year, including $368 million to acquire additional leasehold and another $263 million for the construction and operation of its own midstream infrastructure (seeShale Daily, Dec. 17, 2013).

The company currently owns and operates a gathering system that can handle up to 1.5 Bcf/d. It also has contracted another 110 MMcf/d of capacity on third-party systems. Once fully constructed, the latest acquisitions are expected to have a capacity of more than 1 Bcf/d.

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