Rex Energy (REXX) In Marcellus Shale Agreement with Williams (WMB)
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Williams (NYSE: WMB) signed a participation and exploration agreement to develop natural gas wells in the Marcellus Shale with Rex Energy Corporation (Nasdaq: REXX).
Under the agreement, Williams is acquiring a 50-percent interest in approximately 44,000 net acres in Pennsylvania's Westmoreland, Clearfield and Centre counties for $33 million in a "drill to earn" structure.
Williams will drill to earn its 50-percent interest by incurring 90 percent of costs and expenses associated with drilling and completion of wells in the area of mutual interest until it has invested $33 million on behalf of Rex Energy and $41 million in its own costs and expenses. Williams has until the end of 2011 to fulfill its funding obligations and earn its 50-percent interest.
The company will fund the investments with cash on hand. Amounts to be spent in 2009 are within existing capital expenditure guidance.
Once Williams earns its 50-percent interest, the companies will share all costs of joint venture operations in accordance with their participating interests, which are expected to be 50/50. Rex Energy is currently operating the assets in the project areas and will continue to do so through the end of 2009, when Williams will assume operations.
Analysts at KeyBanc called the news a "good move" for REXX and reaffirmed their Buy rating and $9 price target on the stock.
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