Rice Drilling B raising $60 million for development, acreage in the Marcellus Shale

Posted August 17, 2011

Pittsburgh Business Times - by Patty Tascarella

Rice Drilling B LLC is closing in on raising $60 million, money that will enable it to accelerate development and acquire acreage in the Marcellus Shale.

“We raised $40 million in three weeks,” said vice president and CFO Daniel Rice. “We have a lot of demand for it.”

Canonsburg-based Rice Drilling engages in the drilling, production and leasing of oil and natural gas resources in the Marcellus Shale.

The money was raised through the sale of debt notes. The transaction, a private placement, began July 8, according to an Aug. 3 Securities and Exchange Commission filing made by the four-year-old company, which is a subsidiary of family-owned Rice Energy LP. Rice said it’s likely that the goal will be reached by Aug. 12.

“It’s looking good,” Rice said.

The company expects to hire between five and 10 engineers over the next 12 months; it currently employs 20. Rice’s drilling focus is confined to Washington and Greene counties, where its activity increased from two wells in 2008 to six last year and another six already drilled in 2011. Rice has received 13 new permits for southwestern Pennsylvania so far this year.

It marks the first time the company has turned to outside investors. Rice declined to reveal details of the company’s development plans.

“We’ve been completely self-funded before this,” Rice said.

Rice opted to sell 12 percent senior subordinated convertible debentures, due in 2014.

“This was a good way to reach retail investors,” Rice said. “We looked at private equity, an IPO and going to institutional investors we have contact with. If we went to a hedge fund, they’re here today, but could be gone tomorrow. We saw the retail market as a stable, reliable source of capital.”

It also opens the door to future transactions by building contacts.

“We’re trying to establish relationships with the retail market for future debenture offerings,” Rice said.

Stephen Gurgovits Jr., CEO of F.N.B. Capital Corp., Ross, said that the means of raising capital enabled Rice to retain ownership.

“These folks put a nice financing piece together,” he said. “I’ve not seen a lot of debenture offerings recently, and many of them run over five years. This is on the shorter-end and sounds like a good deal for them at 12 percent. It probably makes sense for their business.”

Investment advisors were Anderson & Strudwick, Richmond, Va.; International Assets Advisory LLC, Orlando, Fla.; Advisory Group Equity Services Ltd., Reading, Mass.; Sunbelt Securities, Houston; and Madison Avenue Securities Inc., San Diego.

“They’re brokering on behalf of their retail clients,” Rice said.

Gurgovits wasn’t surprised that Rice’s offering had such a strong and rapid response.

“It’s a hot market; everyone wants to touch Marcellus at some level,” he said. “Just look at the market. The Fed said Tuesday that rates are going to be low for what seems to be perpetuity. People are going to try to find ways to make money.”

Rice Drilling B LLC
Based: Canonsburg
Founded: 2007
President: Toby Rice
Employees: 20
Web site: www.riceenergy.com