“Rice adds to its acreage position in the Marcellus, through its acquisition of Vantage Energy. In doing so, Rice added 85,000 net acres (55% increase), along with 399 million cubic feet equivalent per day (Mmcfe/d) of production to a current base of 758 Mmcfe/d. Additionally, Rice will be assuming $700 million in Vantage Energy debt. We expect the transaction to close in 4Q16, with subsequent increases in production to be realized in 2017. The transaction will be financed in part by Rice’s 40 million share issuance (approximately a 30% increase to share count), and cash on hand. We note a 7% decline in the stock price following the announcement, which we see as an overdone kneejerk reaction. Given our expectations for subsequent increases in production and EBITDA, we would encourage investors to add to their positions in Rice, particularly at current levels. We also note that the acquisition brings with it an additional 462 net well locations, offering internal rates of return (IRR) estimates of 110%.
In our opinion, Rice’s acquisition purchase price seems more than reasonable. If viewed purely on the basis of acreage, we calculate a transaction price of $31,765 per acre. However, when taking the acquired production into account, we estimate a per acre cost is closer to $1,200 (valuing production at $6,500 per flowing Mcfe). Given precedent transactions within the Marcellus, we contend that Rice received good value for its purchase price, and expect it to be accretive to future earnings.
We reiterate our BUY rating, while increasing our price target to $30. We see the downtick in price following the announcement, as an opportunity for investors to either establish new long positions in Rice, or add to current ones. We value Rice on the basis of daily production, proved reserves, and projected EBITDA (exhibit 2). Moreover, we increase our production mark to incorporate the new acquisition. In doing so, we arrive at a price of $30 per share, implying 20% additional upside, given current prices.
,” National Securities’ analyst commented.
Several other equities analysts have also recently issued reports on RICE. Deutsche Bank AG boosted their target price on Rice Energy from $19.00 to $21.00 and gave the stock a hold rating in a research report on Tuesday, June 14th. Zacks Investment Research upgraded Rice Energy from a hold rating to a buy rating and set a $26.00 target price on the stock in a research report on Wednesday, June 29th. Barclays PLC boosted their target price on Rice Energy from $16.00 to $19.00 and gave the stock an equal weight rating in a research report on Thursday, July 14th. Citigroup Inc. upped their price target on Rice Energy from $19.00 to $22.00 and gave the stock a neutral rating in a report on Monday, July 18th. Finally, Stifel Nicolaus upped their price target on Rice Energy from $24.00 to $30.00 and gave the stock a buy rating in a report on Friday, August 5th. Seven equities research analysts have rated the stock with a hold rating and fourteen have issued a buy rating to the stock. Rice Energy currently has an average rating of Buy and a consensus price target of $24.50.
Shares of Rice Energy (NYSE:RICE) opened at 26.11 on Wednesday. The stock’s market capitalization is $4.09 billion. Rice Energy has a 52 week low of $7.92 and a 52 week high of $29.36. The company’s 50 day moving average price is $26.55 and its 200-day moving average price is $21.00.
Rice Energy (NYSE:RICE) last released its earnings results on Wednesday, August 3rd. The company reported ($1.07) earnings per share (EPS) for the quarter, missing the Thomson Reuters’ consensus estimate of ($0.06) by $1.01. Rice Energy had a positive return on equity of 1.01% and a negative net margin of 70.19%. The business had revenue of $116 million for the quarter, compared to analyst estimates of $180.12 million. During the same quarter in the previous year, the firm posted $0.03 EPS. The business’s revenue for the quarter was up 2.7% on a year-over-year basis. Equities research analysts predict that Rice Energy will post $0.01 EPS for the current year.
Several hedge funds and other institutional investors have recently modified their holdings of the company. Quadrature Capital Ltd purchased a new position in shares of Rice Energy during the first quarter valued at $379,000. NFC Investments LLC raised its position in shares of Rice Energy by 15.7% in the first quarter. NFC Investments LLC now owns 339,313 shares of the company’s stock valued at $4,737,000 after buying an additional 46,011 shares during the period. Spark Investment Management LLC purchased a new position in shares of Rice Energy during the first quarter valued at $837,000. JVL Advisors L.L.C. raised its position in shares of Rice Energy by 9.9% in the first quarter. JVL Advisors L.L.C. now owns 2,301,529 shares of the company’s stock valued at $32,129,000 after buying an additional 207,400 shares during the period. Finally, Brookfield Asset Management Inc. raised its position in shares of Rice Energy by 36.3% in the first quarter. Brookfield Asset Management Inc. now owns 56,370 shares of the company’s stock valued at $787,000 after buying an additional 15,010 shares during the period. 95.95% of the stock is currently owned by institutional investors and hedge funds.
Rice Energy Company Profile
Rice Energy Inc (Rice Energy) is an independent natural gas and oil company. The Company is engaged in the acquisition, exploration and development of natural gas, oil and natural gas liquids (NGL) properties in the Appalachian Basin. The Company conducts its operations through two segments: Exploration and Production, and Midstream.
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