Rex Energy (REXX) to Acquire Properties from Shell Affiliate - Analyst Blog

Independent oil and gas exploration and production company Rex Energy Corporation (REXX) announced that it has entered into an agreement to acquire acreage in its Butler Operated Area from an affiliate of Royal Dutch Shell plc (RDS.A), SWEPI, LP.

The acquisition involves about 207,000 net acres in the Marcellus, Upper Devonian/Burkett and Utica Shales in Pennsylvania and Ohio. The transaction, valued at about $120 million in cash, is anticipated to close in September.

The acquisition brings Rex Energy's total holding (including recent leasing) in the Butler Operated area to about 298,000 gross acres. The company holds full working interest and 83% net revenue interest in the acquired properties.

The current acquisition and future leasing plans are expected to add about 400 potential liquid-rich drilling locations in the company's portfolio. The assets include wells with estimated proved reserves of about 21 billion cubic feet equivalent (Bcfe) and production capacity of about 16 million cubic feet of natural gas per day (Mmcf/d). An additional 13 Mmcf/d of production can be expected from the wells in the development stage.

Rex Energy added that the acquisition provides provision for future expansion as most of the leases on the acreage have an extension option. The company also stated that it plans to add one or two rigs in the acquired properties next year.

Moreover, the company declared plans to offer $125 million in depository shares representing convertible perpetual preferred stock, primarily to fund the acquisition. The remainder of the funds from the offering would be used to finance the company's capital expenditures and for general corporate purposes.  

Currently, Rexx Energy has a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. market in the next one to three months.

Meanwhile, one can consider better-ranked players from the industry like Cheniere Energy, Inc. (LNG) and Clayton Williams Energy, Inc. (CWEI). Both these stocks have a Zacks Rank #2 (Buy).