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SUCCESS PROFILE RICE IS NICE! W


When Rice Energy Inc. first began drilling in the Marcellus and Utica formations in 2010, one might have expected the firm to follow a slow-but-steady growth curve, adding acreage and per- sonnel cautiously as they inched ahead. One would have been wrong. The fledgling driller expanded rapidly, in part by being willing to make all-or-nothing bets in the region that ultimately positioned Rice for an initial public offering in January 2014.


And what a spectacular IPO it was as investors, mostly institutional, gobbled up $1.05 billion of Rice stock when it debuted on the New York Stock Exchange. (The Rice family retains 33 percent of the company and is its largest shareholder.) Rice barely had concluded the IPO when it finalized a debt offer- ing of about $900 million that provided even more cash to fund the company’s ongoing growth and emergence as an important Marcellus and Utica player.


What makes the rise of Rice even more improbable is that the Rice brothers—Danny (Daniel J. Rice IV, CEO), Toby, (president and COO), Derek, (vice president of exploration and geology)— were all in their 20s when they launched Rice Energy. (A fourth brother, Ryan, served an internship with the company.) Born and raised in Boston, they could rattle off Tom Brady’s passing statis- tics more quickly than energy figures. Jokes Toby Rice:


“The only thing we knew about gas was the price we paid at the pump.”


Their apprenticeships were brief as they ramped up a steep learning curve. Danny worked for several energy firms in Texas while Toby studied at Texas A&M University before start- ing a company to advise drillers on hydrofracturing technology. But when they launched Rice Energy in 2007, the brothers had a few things going for them. One was the resources of their father, Daniel J. Rice III, a former BlackRock fund manager who pro- vided the brothers with their early financing. Another was Toby’s experience as a hydraulic fracturing consultant.


BY EVAN PATTAK Managing Editor


...THAT’S WHAT INVESTORS SAID WHEN THEY GOBBLED UP RICE ENERGY’S IPO


“I saw that just from the application of the right technology, you could increase production of the wells, sometimes as much as 100 percent,” Toby Rice says. “That was our edge, and our op- portunity was that our family had enough money to seed the brothers and get the company going. The best part about it was, we didn’t know what we didn’t know. A lot of what we do is com- mon sense—and optimizing that common sense.”


Armed with data, they were willing and able to make calculated bets to establish footprints in the region. That was the case with their initial position in Ohio.


“We basically put the company on the block for that Utica posi- tion,” Toby Rice recalls. “It hasn’t been slow and steady growth. It’s been a lot of big bets. We pulled the trigger once we got comfortable with the data.”


For all that gambler’s mentality, thorough research has enabled Rice to assemble about 90,000 Marcellus and Utica acres with- out many missteps.


“One of the factors that differentiates us from other players in the area and in the industry generally is our focus on individual wells,” Danny Rice says. “A lot of our competitors or peers are concerned about drilling as quickly as possible. We focus on the quality of the individual wells and their economics. Our first Marcellus well was good; our second showed significant improvement, and we were able to learn from our results.”


Also contributing to the company’s meteoric rise are a flat orga- nization and patient, productive relationships with leaseholders.


“We’ve always placed a big emphasis on partnerships with landowners,” Toby Rice confirms. “That’s really what we offer. We want their 100 acres more than a company that already has 1 million acres wants them. That gives us the extra incentive to do a little bit more to be flexible on lease terms.”


“A lot of our competitors or peers are concerned about drilling as


quickly as possible. We focus on the quality of the individual wells and their economics. Our first Marcellus well was good; our second showed significant improvement, and we were able to learn from our results.”


18 Marcellus Quarterly 2014


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