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Rex Energy and ArcLight come to an agreement

Rex Energy Corporation (NASDAQ: REXX) and an affiliate of ArcLight Capital Partners LLC have announced the two have formed a joint venture agreement to develop natural gas wells.

The two companies will work together to develop 32 specifically designed natural gas wells in Butler County. ArcLight will participate and fund 35 percent of the costs to design the wells.  The agreement is planned to reduce Rex Energy’s 2015 capital expenditure program by $60 million, bringing it between $135-145 million.  According to Rex Energy’s press release: “Total consideration for the transaction will equal $67 million, with $16.6 million received at closing. Upon achieving certain threshold triggers of IRR and ROI on specific well groups, ArcLight’s working interest will revert to 17.5 percent. In addition, ArcLight will have the option to participate as a 20 percent working interest partner in 17 additional Moraine East wells in 2016.”

Rex Energy’s Chief Executive Officer Tom Stabley commented on how the joint agreement will benefit Rex Energy when it comes to the company’s capital program:

This joint venture is consistent with our 2015 strategy to further HBP our liquids-rich prospects in the Butler Operated Area, specifically in the Moraine East Area … This new relationship provides greater flexibility for Rex to manage its capital program, while continuing to increase production and reserves. We continue to evaluate solutions that will further enhance our ability to develop the Butler Operated Area.

Along with the agreement to develop natural gas wells, Rex Energy’s bank group also approved a change to the company’s senior secured credit facility. The amendment consists of a new senior secured debt to EBITDAX covenant of 3.0x and removes the total debt to trailing twelve months EBITDAX covenant for good.  The bank group has also approved a $350 million borrowing base.  Stabley thanked the bank group for their support:

I would like to thank the bank group for our strong relationship, and for their continued support of Rex Energy’s strategy.”

Rex Energy has also provide an update for its firsts quarter of 2015 production, the entire 2015 production and operating capital expenditure guidance, which includes the new joint venture agreement.  The following is from the company’s press release:

The company expects first quarter 2015 production volumes to be at the midpoint of its previously announced guidance of 190 – 196 MMcfe/d. Full year 2015 production volumes are expected to range from 185 MMcfe/d – 195 MMcfe/d, representing a 23 percent increase at the midpoint of guidance as compared to 2014 production volumes. In addition, the company expects 2015 operating capital expenditures to be in the range of $135 – $145 million, a 30 percent decrease at the midpoint of the updated 2015 operating capital expenditure guidance as compared to the midpoint of the previous operating capital expenditure program of $180 – $220 million.

Rex Energy is based in State College, Pennsylvania and is an independent oil and gas exploration and production company.  The company currently has operations in the Appalachian and Illinois Basins and is driven to pursue higher potential in exploration and adding to its portfolio.

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