Rice Energy Increases Profit, Expresses Pleasure with Utica Shale
After its first year as a publicly traded company and doubling its leased land in Marcellus and Utica shale plays, Canonsburg-based natural gas company Rice Energy Inc. reported fourth-quarter growth in natural gas production, according to its earnings release on Thursday.
In the fourth quarter, the company reported net income of $103.8 million, or 76 cents per share, on revenue of $129 million. That’s up compared to a loss of $15 million, or 17 cents per share, on revenue of $27.9 million in the same quarter last year.
For the full year, Rice earned $218.5 million, or $1.70 per share, on revenue of $390.9 million. That’s an increase over 2013’s loss of $35.8 million, or 44 cents per share, on revenue of $88.7 million.
In 2014, the company produced 97.7 billion cubic feet of natural gas, up from 23 Bcf in 2013.On a conference call the company's CEO, Daniel J. Rice IV, expressed their satisfaction with the Utica shale acreage they've been developing. From Seeking Alpha's transcript of the call:
So starting first with our acreage, one of the primary reasons we went public last year was the opportunities we saw on the acreage side within the course of the Marcellus and the Utica. We began 2014 with approximately 93,000 net acres and throughout the course of the year, we added 40,000 net core acres within our operating footprint and we exited the year with 141,000 net acres. From this 141,000 net acres, we have 495 net undeveloped Marcellus drilling locations in Southwestern Pennsylvania and 356 net undeveloped Utica drilling locations in Belmont County, Ohio. We think each of these areas can generate 50% to 90%, single well rate of returns at a $4 NYMEX gas price even when burdened by differentials in our new gathering fee.
Our second goal for 2014, which was proving the production and economic potential of our Utica acreage of Belmont County, Ohio has exceeded our original expectations. We drilled, completed and turned to sales three Utica wells during 2014. The Bigfoot 9H, Blue Thunder 10H, and Blue Thunder 12H.
Bigfoot 9H produced flat 14 million cubic feet of gas per day from June through early December 2014 at which point we increased the rate to 15.5 million per day and the well continues to maintain the same pressure decline profile at this stepped-up flow rate. And we now expect it to produce 5.7 Bcf to 7 Bcf before starting its decline. Our second and third Utica wells, the Blue Thunder 10H and 12H are performing in line with expectations. After 170 days online, each of these wells have cumulatively produced approximately 2.6 Bcf and continue to produce at a restricted rate of 16 million cubic feet of gas per day.
A few weeks ago, we brought online our fourth and fifth Utica wells, the Gold Digger 1H and 3H. These 9,000 foot laterals are a few miles east of our Bigfoot well and are currently producing at a restricted rate of 16 million per day with 6,200 psi of flowing casing pressure on each well.
Our first five producing Utica wells are each flowing $15.5 million to $16 million a day and close to $80 million a day in aggregate. As for an update in our wells in progress in Belmont County, we just finished completion operations on our three well Son-Uva-Digger pad, which is adjacent to the Gold Digger pad and should be turned to sales in the next month or so. We're currently fracking three 12,000 foot laterals on our Mohawk Warrior pad and we expect to have these three wells into sales this summer. Right now, we are running two horizontal rigs in Belmont County and we plan to release one of these rigs when it rolls off contract this summer.
And so for the year in Ohio, we expect to spud 12 net operating Utica wells and turn to sales 18 net Utica wells and we expect 9 net non-operated Utica wells will be spud and 2 net non-operated Utica wells will be turned to sales during 2014. So in aggregate we expect to spud 22 net wells and bring online 10 net wells. As a result of our decreased activity pace in the second half of 2015, we expect to exit 2015 with 12 drilled wells that will be completed in the first half of 2016.
Because of the strong production profile of our Utica wells and our confidence in its repeatability across our 50,000 acre position, we expect rapid growth in 2015 and beyond. We're exploring a new source of NAV potential, which is the Utica shale underneath our Pennsylvania assets. We recently spud our first Pennsylvania Utica well in Western Greene County and this is going to be a 6,000 foot lateral at roughly 12,700 feet total vertical depth.
Based on adjacent competitive results and geologic control we have in the area, we think the reservoir quality is similar to the Utica in Belmont County, and if all goes according to plan, we anticipate fresh production sometime during the fourth quarter this year. While we expect the well to be pretty expensive, it's going to be pretty exciting to see what we can do with this formation at these depths and pressures and the best time to test an expensive deep well like this one is in the deflationary cost service environment like the one we're in. So we'll keep everyone posted, but it's likely to be a few more quarters before we have any meaningful information to share.
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