Rex Energy Corp. said Wednesday that the momentum it has been building since late last year continued throughout the second quarter, with improving completion techniques, reduced drilling days and greater scale helping to cut costs and boost production.

The company said it drilled 11 wells in the Marcellus and Utica shales in 2Q2014 and placed nine into sales, reporting 128.8 MMcfe/d of production, up 50% from the year-ago period. Much of those gains came in the company’s Butler Operated area of western Pennsylvania. Oil and natural gas liquids sales, including ethane sales which began in July, accounted for 30% of production and increased 5% from the first quarter.

During a conference call to discuss earnings with financial analysts on Wednesday, executives attributed reduced drilling time, lower service costs on greater scale and improving efficiencies such as longer laterals and successful downspacing tests, to the quarter’s success. Rex, founded in 2007, has been reporting steady gains since the second half of 2013 with consistent progress in its core areas of western Pennsylvania and southeast Ohio (see Shale Daily, July 29; March 28; Jan. 16).

“One of the main factors that we believe will lead to additional cost efficiencies, in our transition towards greater pad density, is that by simply increasing the average number of wells on a pad by as few as one, we can reduce our all-in drilling cost by $50,000 to $100,000 per well,” said CEO Thomas Stabley. “In the Butler Operated area, our typical rate of return increased approximately 10% during the first half of 2014, with a significant portion of this increase being attributed to the lower well costs.”

Rex said five multi-well pads, with 21 Utica and Marcellus wells combined, will come online by the end of this year in its Butler Operated area, and Warrior North and Warrior South Prospects in Carroll, Belmont, Noble and Guernsey counties, OH.

Rex managed to reduce its year-over-year capital costs by 7% through the first six months of this year. Last year, the company said it would begin downspacing tests in its Butler Operated area and Warrior North Prospect in Carroll County. Those tests have shown encouraging results, according to company officials, who anticipate more data by year’s end.

“In the Warrior North Prospect we will be placing the six-well Grunder pad into sales during the third quarter. The Grunder pad is significant for a number of reasons, not the least of which is that it is located in the western portion of our Warrior North Prospect, which we believe is prospective for higher liquids production as compared to the eastern portion of our acreage,” Stabley said. “We also tested 600-foot and 500-foot downspacing on these wells, and we expect the results to provide us with valuable data points regarding the potential to successfully add locations to our existing inventory, which is currently based on 750-foot spacing between laterals.”

The six-well Baillie Trust pad in the Butler Operated area, which was brought online last year, was the first well to test shorter downspacing and COO Patrick McKinney said thus far the pad has performed as expected.

“After eight months of production history, various interference testing, bottom-hole pressure buildup and transient analysis testing, we have seen no direct indication of any interference between those intervals,” he said.

In May, a 120 MMcf/d expansion at MarkWest Energy Partners LP’s Bluestone II processing facility in Evans City, PA, commenced operations with 100 MMcf/d dedicated to Rex (see Shale Daily, July 7). Not only did that allow Rex to tie in more wells last quarter, it also allowed the company to begin ethane sales, which are providing an incremental bump to its commodity price realizations.

Including the effect of hedges, Rex’s average natural gas price realization for the quarter was $4.05/Mcf, or 62 cents below the average New York Mercantile Exchange settlement price. The company expects that to improve heading into the fall and winter. CFO Michael Hodges said Rex’s natural gas price realization should be 20 to 30 cents above the current Appalachian basis differential this quarter and next.

Rex reported net income of $8.1 million 915 cents/share) in the second quarter. That’s down from the $13.2 million (25 cents/share) it reported in 2Q2013.