Rice Energy Inc. (NYSE: RICE) said Nov. 5 it has sold its water services business to Rice Midstream Partners LP (NYSE: RMP) through a dropdown with its subsidiary, Rice Midstream Holdings LLC.
The transaction is valued at $200 million and includes a $25 million earn out to be paid upon achievement of certain increases in connected water sources.
The dropdown includes Midstream Holdings' Pennsylvania and Ohio fresh water distribution systems and related facilities located in the Marcellus and Utica shales.
The assets provide access to 15.9 million gallon per day of fresh water from the Monongahela River, the Ohio River and other regional water sources. The fresh water distribution systems include 123 miles of water pipeline, 143 million gallons of water impoundment capacity, as well as related pumping stations, take point facilities and measurement facilities.
The deal gives Rice Midstream Holdings the right to provide fresh water for well completion operations and to collect, recycle or dispose of flowback and produced water for Rice in Washington and Greene counties, Pa., and Belmont County, Ohio (the services area).
In addition, Rice Midstream Partners has been given the exclusive right to acquire and/or develop water treatment facilities in the services area.
Rice Midstream Partners also priced a private placement of about 13.4 million common units for gross proceeds of $175 million and announced increased 2015 guidance.
Simmons & Company International was exclusive financial adviser to the conflicts committee and provided a fairness opinion for the dropdown transaction. Akin Gump Strauss Hauer & Feld LLP was legal counsel to the conflicts committee. Vinson & Elkins LLP was legal counsel to Rice Energy.
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