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Rex Energy Adds Wells, Tinkers With Stacked Laterals

As Rex Energy Corp. completes multi-well pads targeting three shale plays in the Appalachian Basin, the company reported a 39% increase in production during the third quarter, part of which executives attributed to "quality midstream solutions" forged in the region.

Rex recorded average daily production of 98.7 MMcfe/d in 3Q2013, which the company said was a 39% increase over 3Q2012. The State College, PA-based company also saw natural gas liquids (NGL) production increase 26.4% in sequential quarters, from 2,006 b/d to 2,538 b/d.

During the third quarter, Rex completed four wells in its Butler Operated Area (BOA), which overlays Butler County, PA. Two wells targeting the Upper Devonian/Burkett Shale -- Stebbins 2H and Perry Township 1HD -- had average five-day sales rates of 7.8 MMcfe/d and 4.6 MMcfe/d, respectively, when adjusted to 4,000-foot laterals.

Meanwhile, Rex also completed two wells on a single pad targeting the Marcellus Shale in the BOA. The Lynn N&S 3H and 5H wells had an average five-day sales rate of about 10.1 MMcfe/d, when adjusted to a 4,000-foot lateral.

Altogether, in the BOA Rex drilled four gross (2.8 net) wells during 3Q2013, with eight gross (5.6 net) wells hydraulically fractured, and nine gross (6.3 net) wells placed into sales. The company had nine gross (6.3 net) wells drilled and awaiting completion as of Sept. 30.

"We continue to be very pleased with our recent well results," CEO Thomas Stabley said during an earnings conference call last week. "With our most recent completions to Stebbins 2H and the Perry Township 1HD, we have seen our liquids mix from our Upper Devonian wells continue to average above 50%."

Stabley added that Rex's position in the Upper Devonian/Burkett was held by production through rights granted in its Marcellus development program. "Given this, we can strategically plan our development of the Upper Devonian/Burkett without the time pressure of expiring leases."

Rex is currently completing a six-well pad, Baillie Trust, in the BOA. Stacked laterals from the wells will target the Upper Devonian/Burkett (two wells) and Marcellus (four wells) shales. The company plans to complete two of the wells before the end of the year.

"This location is especially significant for Rex," Stabley said. "We are utilizing the stacked design to demonstrate that the two formations are, in fact, two separate producing reservoirs. In addition, the drilling of multi-well stacked lateral pads targeting multiple formations could translate into significant cost savings for Rex."

Stabley said the company is on target to fill the current capacity at Bluestone/Sarsen, a cryogenic gas processing complex operated by MarkWest Energy Partners in Evans City, PA, which is also in Butler County. He said all six wells at Baillie Trust will be placed into sales in early December.

"With the additional drilling of two Burkett wells, plus completion time, this milestone has been pushed back slightly," Stabley said. "With our processing capacity at approximately 90 MMcf/d, our midstream partners at MarkWest remain on schedule to commission the Bluestone II complex during 2Q2014, which will give Rex an additional 100 MMcf/d of priority capacity and allow us to continue our development of the BOA."

So far in 2013, Rex has drilled six gross (six net) wells in the Warrior North prospect, which includes about 16,800 gross (16,500 net) acres in Carroll County, OH. The company has also drilled five wells this year in its Warrior South prospect, approximately 7,000 gross (4,300 net) acres in Ohio's Belmont, Guernsey and Noble counties.

Rex completed a five-well pad, J. Anderson, in the Warrior South during 3Q2013. The wells are currently shut-in for a 60-day resting period.

Rex said it is increasing its capital expenditures (capex) budget for the full-year 2013 by $35 million, to a range of $290 million to $310 million. The company cited additional drilling and completion activity in the Appalachian Basin for the increase, as well as exploration costs in the Illinois Basin, non-operated costs in the Ohio portion of the Utica, and further investment in the company's water service subsidiary.

The company reported net earnings of $1.57 million for 3Q2013, resulting in earnings of 3 cents/share. By comparison, the company posted a net loss of $2.19 million for the preceding third quarter, which equated to a loss of 4 cents/share.

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