UPDATE 2-Rice Energy natgas output forecast lower than expected

Thu Mar 13, 2014 11:41am EDT

* Posts fourth-quarter loss due to production costs

* Sets 2014 capital budget of $1.23 bln vs $629 mln year-ago

* Expects to spend 35 pct of budget on Marcellus

* Fourth-quarter production more than doubles

* Shares fall as much as 6 percent

March 13 (Reuters) - Rice Energy Inc a natural gas producer which went public two months ago, forecast a smaller-than-expected rise in full-year production, sending its shares down as much as 6 percent.

Rice said it expects production to more than double in 2014 as it increased spending on its wells in Pennsylvania's Marcellus shale field, but analysts said the outlook fell below Wall Street estimates.

"2014 production is a bit lower than what the Street was hoping for, though I believe company is being conservative," SunTrust Robinson Humphrey's Neal Dingmann said.

Rice said it expects 2014 net production to average between 260-310 million cubic feet of natural gas equivalent per day (mmcf/d), the midpoint of which is below market estimates of 304 mmcf/d, according to analysts at Tudor, Pickering, Holt & Co.

Rice, founded by former BlackRock Inc portfolio manager Daniel Rice and his family in 2007, almost doubled its 2014 budget to boost its acreage in Marcellus and bring more wells to production, hoping to take advantage of stronger natural gas prices.

Prices have firmed this year as the bitterly cold weather in North America drove demand, after years of declines due to excess supplies.

The U.S. Energy Information Administration raised its 2014 forecast to $4.44 per million British thermal units from $4.17 in its short-term energy outlook report released on Tuesday.

The stronger prices helped production at Rice, which also has assets in Ohio's Utica shale field, to average 126 mmcf/d in 2013. Output more than doubled to 154 mmcf/d in the fourth quarter ended Dec. 31.

To further boost production this year, Rice almost doubled its 2014 budget to $1.23 billion, about 35 percent of which is earmarked for the natural gas-rich Marcellus Shale.

The company said production growth would be weighted to the latter half of the year when about two-thirds of its 37 wells in Marcellus would come online and 6 out of 7 wells in Utica would start producing, CFO Grayson Lisenby said on a conference call.

Rice, which has set aside $385 million of its 2014 budget for leasehold acquisitions in 2014, said it was looking at buy 10,000 acres, 7,000 of which will be in the Marcellus field, CEO Daniel Rice said on the call.

The company also earmarked $265 million for infrastructure development. Rice said last month it would buy a 28-mile natural gas pipeline and gathering system in Pennsylvania for $110 million.

Rice's larger rival Antero Resources Corp, which also operates in Marcellus and Utica, expects output to rise by at least two-thirds this year. Antero went public in October.

Rice's fourth-quarter net loss was $8.7 million, or 7 cents per share, driven by production costs, an expense related to depreciation, depletion and amortization and loss on derivative instruments. The company did not provide results for the year-earlier period.

Founder Daniel Rice left BlackRock in 2012 in the wake of a potential conflict of interest that involved the exploration and production company. A unit of Rice Energy at the time had a joint venture with Alpha Natural Resources Inc, one of his mutual fund's top holdings.

Rice Energy shares fell nearly 2.6 percent to $23.80 in afternoon trading. They have risen as much as 12 since their debut in January on the New York Stock Exchange.

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