Rex Energy Corporation
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State College, Pennsylvania-based Rex Energy Corporation (NASDAQ: REXX) is an oil and gas exploration and production company that made the Marcellus shale formation a major focus of its operations.
Rex was reported in September, 2008 to have drilled its first Marcellus shale test well in Westmoreland County, Pennsylvania. This was the first of three vertical wells in the county that were planned to be drilled to a depth of 9,000 feet. The company holds approximately 70,000 net acres of Marcellus shale leases.
An October, 2008 report stated that Rex also had active locations in Butler County, Pennsylvania. It owned a 50% interest with a partner in two wells there. Initial production on these wells was approximately 675 Mcf per day. (See July, 2009 revision of ownership percentage below)
In March, 2009 there was a further update that Rex also had two wholly-owned wells in Butler County that were selling between 50 and 400 mcf/d or as much as the pipelines were able to accept in that area.
The above mentioned March update indicated that Rex was building a refrigeration processing plant in Butler County that initially is to be able to handle between 3-5 Mcf/d, but would be expandable up to 25 Mcf/d.
In November, 2008, the company reported that drilling was complete on the three above mentioned vertical test wells in Westmoreland County. Two had already been hydro-fractured, and a third one was to be hydro-fractured in November. In a March 2009 update the company announced a third well in southwest Pennsylvania with an average flow-rate of 1.4 million cu. ft./day. This was probably the same one previously mentioned in Westmoreland County.
Also, in early December, 2008 it was reported that Rex had two wells in Clearfield County, Pennsylvania--one was complete and on another one drilling was still underway. Both were to be completed by year-end 2008.
Rex also had acreage in Centre County, Pennsylvania.
An approximate breakdown of Rex's drilling rights in the State was: * 29,000 acres - Clearfield and Centre Counties * 18,000 acres - Westmoreland County * 13,000 acres - Butler County * 10,000 acres - All other ------ 70,000 acres TOTAL
According to a March, 2009 report Rex owned drilling rights to 62,000 net acres that were prospective for Marcellus shale. Note: Rex has continued to increase its leasehold.
The company had also received permission from the Susquehanna River Basin Commission to withdraw up to four million gallons per day for its Marcellus shale drilling operations.
The company provided an update in December, 2008 that stated the two completed Westmoreland County wells had been producing with a flowrate of 300 to 500 Mcf/d each, and that a third well there was to be complete in mid-December. Drilling was still underway on the Clearfield and Butler County wells.
The company also completed drilling its first vertical test well in Clearfield County, PA having encountered 150 feet of Marcellus Shale formation there. As previously noted, two vertical wells in Butler County, PA., had also been drilled and were expected to be complete during the first quarter of 2009 after a gas processing facility had been installed. The timetable for this got pushed back a little, and the Butler situation is further discussed below.
According to the aforementioned March, 2009 update, by year-end 2008 Rex had seven vertical wells located in three distinct operating regions in Pennsylvania.
In a May, 2009 update, the company announced that it had finished drilling its first horizontal Marcellus shale well in southwest Pennsylvania. It was located in Butler County. The company planned to hydro-fracture and complete the well in June, 2009. Rex was in the process of gearing up to drill a second horizontal well in Westmoreland County, PA. Also, it was analyzing the core taken from the already drilled horizontal one. In addition, it was acquiring seismic data taken from its various areas of operation across the state. The company anticipated drilling several more wells before year-end 2009. It planned to analyze core samples from these wells and to conduct further testing in order to enhance its understanding of the reservoir and serve as a basis for further planning. Gathering pipelines had been established in all its areas of operations and a new gas processing (refrigeration) plant built in Butler County. Rex continued to lease acreage in its prime areas of operations albeit on a very selective basis.
Wells located in Westmoreland County tended to be twice as deep as those in Butler County, and with the increased depth came increased pressure and thus higher production rates. For that reason, most of the horizontal wells planned for the balance of 2009 were to be in the deeper Marcellus shale located in Westmoreland County.
A report in June, 2009 found Rex teaming up with The Williams Cos. to develop roughly 44,000 acres of the former's Marcellus shale leases in Pennsylvania's Centre, Clearfield and Westmoreland counties. Williams planned to invest $33 million in the venture in exchange for a 50% share of Rex's working interest in the leases. The companies termed their agreement a "drill-to-earn" structure. Under the agreement, Williams was to be the well operator and bear 90% of the drilling expense up $33 million on behalf of Rex, or $41 million of its own expenses, in order to earn a 50% share. Willimas had up until the end of 2011 to complete its investment.
Rex also announced in June, 2009 that it had bought out its 50% partner in its Butler County leasehold. The addition of this 6,500 net acres to its Butler acreage brings its total in the county up to roughly 21,250 net acres. The property is located in the neighborhood of Rex's four producing vertical Marcellus wells, its recently completed first horizontal well, and the gas processing plant.
According to an end-of-July, 2009 company update Rex's first horizontal well in Butler County, after having been hydro-fractured, had produced at a flow rate of 2.4 Mmcfe/d for 30 days without seeing any measurable decline in production. It was drilled to a depth of 5,500 feet with a lateral extension of 1,800 feet. It went into production in June. The four vertical wells in Butler County had been shut in pending completion of the gas processing plant. The plant was planned to start up in August, 2009 with initial flow capacity of 5 Mmcf/d that could accommodate both the four vertical wells and the one horizontal one. It was planned to be scaled in stages up to 25 Mmcf/d as production came online from additional horizontal wells planned over the next two years. Rex is continuing to lease additional acreage in Butler County. Williams was not involved in any of Rex's Butler County operations.
The aforementioned end-of-July update noted that Rex had recently completed a second horizontal Marcellus shale well in Westmoreland County, PA that had been stimulated with a seven stage frac, and it was undergoing flow testing. It was expected to be producing by August, 2009. The well had been drilled to a depth of 8200 feet, and had a lateral extension of 2000 feet. A third horizontal well there was in the process of being drilled. These wells were considered to be the first ones in the drilling program with Williams.
Also, in July, 2009, Rex was in the news when several Westmoreland landowners sued the company over alleged breach of contract regarding leases they had signed for drilling rights. One of the suits had already settled out-of-court. However, three landowners in Derry and Ligonier townships had filed a class action lawsuit against Rex in the Westmoreland County Common Pleas Court, claiming that the company had defaulted on its lease agreements with them and failed to make promised payments. The company, defended by Greensburg attorney George N. Stewart is disputing these claims. The plaintiffs are represented by David A. Borkovic of Sewickley.
In September, 2009 Rex announced that it had hired Union Drilling Inc. to bring in a second rig in its Marcellus shale horizontal drilling program. The rig was expected to arrive on location in central Pennsylvania by the end of September. It was to be deployed drilling Rex's first horizontal well in the central part of the state. From there, it was planned to move the rig to Butler County, PA to bolster the company's 2009-2010 drilling program in that development area.
- The company's President and CEO is Benjamin W. Hulburt.
- Thomas (Tom) Stabley is Executive Vice President and CFO.
- William Ottaviani is COO.
- Timothy Beattie is a spokesman for Rex Energy.
