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Rice Energy to spin off Pa. gas pipeline operations

| Monday, Aug. 11, 2014, 8:39 a.m.

Rice Energy Inc. plans to spin off its pipeline gathering and water systems in the Pennsylvania natural gas fields as a publicly traded company.

The announcement Monday by the Cecil-based company follows a trend among energy companies tapping the Marcellus and Utica shale formations as they look for more investors to fund expansion.

Rice said it will sell 10 million shares of stock to help fund its 2014 capital budget. The company said it plans to spend $1.2 billion this year, including $570 million on drilling and completing wells.

Rice stock closed up 75 cents to $27.52, a 2.8 percent increase.

CEO Daniel Rice IV said he could not discuss details related to the spinoff, such as how much money the company plans to raise or how many shares it will sell in the master limited partnership, or MLP. The company will submit a confidential plan to the Securities and Exchange Commission and hopes to complete an initial public offering in the first quarter of 2015.

Rice shares have appreciated 32 percent since the company went public in January at $21 a share. The successful IPO and stock appreciation have given the company valuable currency to fund its growth.

Rice's stock sale includes 7.5 million shares held by the company and 2.5 million held by other stockholders. Based on its Friday closing price of $26.77 per share, the company said in a securities filing that it expects to net $192.5 million from the sale after deducting underwriting expenses. Rice on Tuesday reported a $7.9 million loss, or 6 cents per share, during the three months that ended June 30, down from $19.6 million, or 23 cents per share, during the same period last year.

Revenue rose to $91.9 million from $23.9 million on the heels of an 84 percent increase in gas production. The company known for its unique well names brought online 10 new Marcellus wells during the quarter and its first Utica well in Ohio, on a well pad dubbed “Bigfoot.”

The company noted several expenses that hurt its profits, including an $11 million loss on derivatives during the quarter.

Other drillers, including Downtown-based EQT Corp., have had success putting their “midstream” operations — the pipes, processors and other infrastructure needed to get gas from the field to markets — into MLPs as Rice is looking to do. The spinoffs continue to generate revenue for the owners while standing alone as a separate investment option.

Cecil-based Consol Energy Inc. said in June it would form an MLP for those operations in a joint venture with Houston-based Noble Energy, its partner in other drilling arrangements.

David Conti is a staff writer for Trib Total Media. He can be reached at 412-388-5802 or dconti@tribweb.com.

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