Wednesday, September 1, 2010

Butler County, PA - Marcellus Shale Update

By Andrea:

Rex Energy Corp. (REX) announced recently that it will be entering into a joint venture inolving approximately 12.9 net acres of their Marcellus shale assets in Butler County, Pennsylvania:

In Butler County, Pennsylvania, Rex Energy will sell a 15% non-operated interest in 42,200 gross (41,100 net) acres to Sumitomo for approximately $61.6 million, or $10,000 per net acre. One-half of the purchase price will be paid in cash at the time of closing, with the remaining fifty percent of the purchase price to be paid in the form of a drilling carry of 80% of Rex Energy's drilling and completion costs in the area. In connection with the transaction, the parties agreed to form an area of mutual interest (an "AMI") in Butler County. After the sale is completed, Rex Energy will own approximately 34,900 net acres within the Butler County AMI.

Rex Energy will act as the leasing agent in the Butler County AMI. Pursuant to the agreement, Sumitomo has agreed to pay all of the costs to lease approximately 9,000 net acres in the Butler County AMI (the "Phase I Leasing"), and will pay Rex Energy a leasing management fee of $1,000 per net acre during the Phase I Leasing. Upon the conclusion of the Phase I Leasing, Rex Energy and Sumitomo will cross assign interests in the leases to provide a uniformity of interest in each lease in the Butler County AMI. Assuming the full 9,000 net acres are leased, the final ownership percentages in the Butler County AMI would be approximately 70% Rex Energy and 30% Sumitomo, and Rex Energy's net acreage would remain at approximately 34,900 net acres in the AMI.

Rex Energy has also agreed to sell 30% of its interests in twenty Marcellus Shale wells within the Butler County area, including eleven wells in progress, for approximately $19.1 million. In addition, Rex Energy will sell 30% of its interest in Keystone Midstream Services, LLC, a mid-stream joint venture with Stonehenge Energy Resources, L.P., and its existing refrigeration plant for approximately $3.9 million.

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