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Rice Energy’s Free Cash Flow: Must-Know Trends

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Rice’s cash flows

In this part of the series, we’ll look at Rice Energy’s (RICE) cash flows. In 2Q16, Rice reported cash flow from operations (or CFO) of ~$76 million. This total was ~17.4% lower than its CFO in 2Q15. The drop was primarily due to lower realized energy prices.

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Rice’s free cash flow

Rice’s  free cash flow (or FCF), which is its operating cash flow minus its capital expenditure (capex), has remained negative over the past six quarters, as the graph above shows. Rice’s FCF was -$119 million in 2Q16.

Rice’s capex in 2016

RICE’s 2Q16 capex was $148 million, which included $95 million in drilling and completion expenses, $19 million in non-operated expenses, $14 million in land-related expenses, and $20 million invested in Rice Midstream Holdings.

As we noted in our previous series , RICE increased its E&P or exploration and capex guidance to $660 million in 2Q16 from the $640 million it had provided in 1Q16. This change represents a decline of 11% compared to 2015 E&P budget.

RICE noted in its 2Q16 earnings release that due to cost savings and operational efficiencies, its Marcellus drilling and completion budget decreased from $285 million to $230 million. These savings will be reinvested in Rice’s Utica operations. RICE also increased its land budget by $20 million to “opportunistically add organic leasehold.”

Many upstream companies have slashed their 2016 capital expenditures due to lower energy prices (USO) (UNG). Anadarko Petroleum (APC) and Hess (HES) have announced capex cuts of ~50% and 40%, respectively, compared to 2015 levels. Chesapeake Energy’s (CHK) 2016 capex guidance is 57% lower at the midpoint compared to 2015 levels.

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