Rex Energy Corp. is pushing ahead on its recently acquired Moraine East area in Western Pennsylvania's northern Butler County, announcing Tuesday that it has completed 20 Marcellus and Upper Devonian shale wells there since it started drilling operations last year (see Shale Daily, June 11, 2015).
The company's joint venture (JV) partner in the Moraine, investment firm Benefit Street Partners LLC (BSP), also has elected to participate in the next 12 wells there, increasing its capital commitment from $51.6 million to $98.1 million, Rex said. The company announced the partnership in March, saying BSP would jointly develop 58 wells in the Moraine and the Warrior North Prospect of Ohio's Carroll County that would net it up to $175 million (see Shale Daily, March 2).
Rex added that it has reached an agreement with its gathering partner in the Moraine, Stonehenge Energy Partners II LP, to reduce its overall minimum daily volume commitment in the region, but it didn’t say that would affect this year’s production guidance
The JV was executed as part of a broader financial initiative to protect its acreage from expiring, boost liquidity and pay down debt. The company has made progress in shoring up its balance sheet, announcing the $40 million sale of its Illinois Basin assets in Illinois, Indiana and Kentucky, the exchange of senior notes and a stock swap to reduce interest and dividend payments and generate more cash (see Shale Daily, June 15; March 15)
"The increased $45.7 million capital commitment from BSP, plus proceeds from the recently announced Illinois Basin sale, will provide Rex Energy with over $80 million of additional liquidity in 2016," said CEO Tom Stabley. "The liquidity will enable Rex Energy to continue our plan to hold the majority of the Appalachian Basin acreage by production by mid-year 2017."
Rex acquired its Moraine East assets in a larger 2014 deal with an affiliate of Royal Dutch Shell plc for $120 million (see Shale Daily, Aug. 13, 2014). The properties sit to the north of Rex's core legacy acreage in Butler County, where the company also inked a JV last year with ArcLight Capital Partners LLC to help develop both areas (see Shale Daily, March 31, 2015).
The company first drilled the Moraine in 1Q2015. BSP's latest commitment increases its participation in the area to 30 wells, and helps Rex keep this year's capital expenditures at $35.5 million.
Its 20th well in the Moraine, the Kleaver 2HB, set a company record for longest lateral at 10,200 feet. Rex is currently drilling the third of four wells on its Baird pad there, as well.
A focus on operational efficiencies has also further reduced the company's costs to drill and complete a 6,000 foot lateral on a four-well pad in the Butler Operated area. Rex said its average drilling and completion cost is now $5 million, or 6% less than its previous average of $5.3 million per well, and it expects those costs to keep declining this year.
In the Warrior North, the company recently placed three Utica wells on the Goebeler pad into sales at an average lateral length of 7,500 feet, saying the preliminary results were encouraging with sales rates set to be announced at the end of the second quarter. The company is also currently completing the two-well Perry pad with an average lateral length of 6,650 feet.
Rex management said in May that the company plans to drill another 12 wells in the Moraine this year and up to nine in 2017 to finish holding its acreage there (see Shale Daily, May 11).