Energy Business

Rice MidStream Sets Price for IPO

Rice Energy Inc. (NYSE: RICE) has announced the pricing of the Rice Midstream Partners L.P. initial public offering. The offering will consist of 25 million common units with an overallotment option for 3.75 million additional shares, which will be priced at $16.50 per unit. The company will list on the New York Stock Exchange under the symbol RMP.

The underwriters for the offering are Barclays, Citigroup, Wells Fargo, Goldman Sachs and RBC Capital Markets. The offering is expected to take place on December, 17 2014.

Rice Midstream Partners will own, operate, develop and acquire midstream assets in the Appalachian Basin. The company’s initial assets consist of natural gas gathering and compression assets servicing high-quality producers in the rapidly developing dry gas core of the Marcellus Shale in southwestern Pennsylvania.

The company provides its services under long-term, fixed-fee contracts, primarily to Rice Energy in one of its core operating areas. It has also secured dedications from Rice Energy under a 15-year, fixed-fee contract for gathering and compression services. This contract will cover approximately 55,000 gross acres as of the end of June in Washington and Greene Counties, Penn.

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Rice Energy is the largest customer of Rice Midstream, and for the 12 months ending in December 2015 it is expected to make up approximately 84% of gathering volumes. Rice Midstream Partners derives revenues under long-term contracts by charging customers fixed fees for gathering and compression services based on throughput. As of the end of June 2014, a limited number of the wells the company services require compression, but it expects to add additional compression starting in 2015. Near-term revenues are expected to be proportionate to the production volumes of the customers from wells connected or to be connected to Rice Midstream’s systems.

After the offering is complete, the public will own roughly 43.5% limited partner interest in Rice Midstream Partners, or 50% should the over allotment option be exercised. Rice Energy will own the general partner of Rice Midstream and all of its incentive distribution rights.

The proceeds from this offering are intended to be distributed to Rice Energy and are projected in the range of $356 million to $413.9 million, which include a reimbursement of $195.3 million for capital expenditures and to pay roughly $2.7 million in fees related to Rice Midstream’s revolving credit facility.

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