Although keeping a lid on the details of the deal for now, Rex Energy Corp. said the Utica Shale joint venture it recently entered into with MFC Drilling Inc. and Abarta Oil & Gas Co. Inc. requires it to drill and complete one well and begin drilling two others by Nov. 15, and requires three additional wells each year until the company satisfies the carry obligation. The JV covers a three county region of eastern Ohio.
Rex is calling the additional acreage Warrior South because it sits just south of its Warrior prospect in Carroll County, OH, (see Shale Daily, April 17). The area of mutual interest covers around 4,500 gross acres in Guernsey, Noble and Belmont counties.
Rex posted a $1.6 million net loss (minus 3 cents/share) in the first quarter, up from a $7.5 million net loss (minus 17 cents) during the first quarter of 2011, the result of a nearly 50% increase in sales revenue and continued operational efficiencies. Because of those efficiencies, Rex shaved its projected operating expenses for the year to between $48 million and $53 million (down from $50-55 million) and increased its production guidance to 67-72 MMcfe/d (up from 63-68 MMcfe/d).
The Ohio acreage adds to Rex's Utica activities in Pennsylvania. Rex is currently drilling its first horizontal Utica well, the Brace 1H in Carroll County, but doesn't expect to complete the well until mid-June or have results until August. The company recently closed on a $6.2 million effort to acquire an additional 15,000 acres in Carroll County and continues to look for acreage in eastern Ohio.
The Ohio acreage is within the liquid-rich window of the Utica, but Rex is also drilling in the dry-gas window of the play on its Marcellus acreage in western Pennsylvania. Rex recently brought the Cheeseman 1H well in Butler County, PA, into service. The well tested at an initial 24-hour rate of 9.2 MMcf/d but Rex curtailed production to 3.6 MMcf/d for 30 days and is currently producing at a constrained rate of 5.3 MMcf/d. Rex plans to drill another Utica well in Butler County, PA, this year, the Hufnagle 1H.
Rex also recently announced plans to divest its Niobrara and midstream assets and expects to have an announcement about those efforts within the next two weeks.
Of the $39.3 million Rex spent during the first quarter, $35.3 million went toward operations in the Marcellus and Utica shales. In the Marcellus, Rex participated in eight wells during the quarter, completing four and bringing five into service. Rex also spent an additional $16.8 million on leasing activities in the Marcellus and Utica.
Following news of encouraging results from Range Resources Corp. wells completed using reduced cluster spacing, Rex announced it has been experimenting with a similar hydraulic fracture, or "super frack," technique on five wells over the past year (see Shale Daily, April 27). On the first of those, the Drushel 3H well completed in April 2011, Rex spaced 21 frack stages at 150-foot intervals along 3,000-foot lateral, instead of 300-foot intervals, resulting in perforations every 30 feet instead of every 60 feet.
While Range said production doubled from wells completed using the technique, Rex COO Patrick McKinney said its initial production rates were "really not overly impressive." But because the wells reported "a much shallower initial production decline and had a much more robust producing pressure profile," Rex said the technique might be useful for increasing estimated ultimate recovery (EUR) rates. Rex recently completed two more wells using variations on the technique and plans to complete at least four additional wells using the technique this year.
"We will keep working to find the most consistent and the most efficient designs," McKinney said. The process adds between $500,000 to $1 million to the cost of each well, he said.
Rex also announced that its joint venture partner WPX Energy is testing the reduced cluster spacing completion technique on two wells in Westmoreland County, PA.