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Rex Energy Gains More Land, Reserves in Appalachia

Rex Energy Corp. said Monday that its estimated proved reserves exceeded 1 Tcfe, thanks in large part to its core operating areas in eastern Ohio and Western Pennsylvania, where the company has reported increasing success in the last year or so (see Shale Daily, Jan. 16).

Rex booked 1.1 Tcfe of estimated proved reserves at mid-year, up 24% from the 849.8 Bcfe the company reported at year-end 2013 (see Shale Daily, Feb. 5). Acreage acquisitions, shallower decline rates and better results in Rex's Butler Operated area of western Pennsylvania and its Warrior Prospects in Carroll, Belmont, Noble and Guernsey counties, OH, helped move reserves higher. PV-10 increased to more than $1 billion from about $668 million at the end of last year, as a result.

Proved reserves were 62% natural gas, while the remainder was attributable to oil, natural gas liquids and condensate. Although the company's stock is expected to remain subdued on a dry production mix, as natural gas trades lower with a cooler forecast, financial analysts continued to note the Pennsylvania-based company's progress in the Appalachian Basin, which has slowly advanced since its founding in 2007.

Rex reported a 7% decline in Marcellus well costs in the Butler Operated area, mainly as a result of reduced drilling time. Rex said it would include those reductions in its year-end PV-10. Wells Fargo Securities analyst Gordon Douthat said overall the company's mid-year update was a positive one, but added that PV-10 could be negatively impacted at the end of this year if natural gas prices remain low.

Still, the company adjusted its Butler decline rates 2% lower, and ethane sales that started last quarter from the Marcellus also helped move estimated ultimate recoveries there from 8.9 Bcfe to 9.7 Bcfe, Douthat said.

Estimated proved developed reserves at Rex were 447.2 Bcfe, up from 356.5 Bcfe at year-end 2013. Estimated proved undeveloped reserves were 610.6 Bcfe, compared to 493.3 Bcfe at the end of last year.

Rex said it acquired 2,200 net acres in the Butler Operated area during the first half of this year, while it factored 31 Utica Shale wells into its reserve estimates, eight of which were not included in its year-end totals.

The company has been drilling longer laterals and testing downspacing across its Appalachian acreage (see Shale Daily, Nov. 11, 2013), while its Marcellus processing capacity increased by 100 MMcf/d in the second quarter (see Shale Daily, July 7). Rex also said in April that it had reached a milestone by signing two separate binding precedent agreements to transport natural gas to the Gulf Coast and Midwest for better pricing exposure (see Shale Daily, April 30).

The company said earlier this month that second quarter production is expected to meet guidance at 128 MMcfe/d. It added Monday that its progress to date will "lead to a significant increase in its inventory of drillable locations by the end of the year."

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