Form 8-K REX ENERGY CORP For: Feb 07

February 8, 2018 7:56 AM EST

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 7, 2018

 

 

Rex Energy Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-33610   20-8814402

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

366 Walker Drive

State College, Pennsylvania 16801

(Address of Principal Executive Office and Zip Code)

(814) 278-7267

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 7.01 Regulation FD Disclosure.

Disclosures pursuant to Non-Disclosure Agreements

As noted in previous periodic filings by Rex Energy Corporation (“Rex Energy” or the “Company”), from time to time, the Company engages with its lenders or other holders of its securities, including its 1.0%/8.0% senior secured notes due 2020 (“senior notes”), its preferred stock, and its common stock, regarding potential transactions, or otherwise opportunistically considers strategic financing proposals that management believes may be beneficial to the Company and its stakeholders. These transactions may include proposals for financing or recapitalization, refinancing of existing debt, debt-for-debt or debt-for-equity exchanges, or other restructuring transactions with current investors, affiliates of the Company, and/or other financing or strategic counterparties.

In September 2017, the Company entered into confidentiality agreements and commenced discussions with legal and financial advisors (the “Noteholder Advisors”) for a committee of holders of the senior notes (the “Noteholders”), who have represented to the Company that they hold a substantial portion of the senior notes, to explore one or more possible restructuring, financing, refinancing, reorganization, recapitalization, amendment, waiver, forbearance, asset sale and/or similar transactions involving the Company (a “Possible Transaction”). Subsequent to the date of the execution of these confidentiality agreements, the Noteholder Advisors (a) conducted due diligence on the Company and (b) engaged in discussions with the Company and its advisors.

In early January 2018, the Company entered into confidentiality agreements with the Noteholders to discuss a Possible Transaction (the “NDAs”). During the course of those discussions, and subject to the applicable NDAs, the Company shared certain confidential information with the Noteholders (collectively, the “Cleansing Materials”). The Company is obligated to disclose such information in this Form 8-K pursuant to the terms of the applicable NDAs. Copies of the Cleansing Materials are attached hereto as Exhibit 99.1.

Also following entry into the NDAs, the Company and the Noteholders engaged in negotiations with respect to a Possible Transaction. Attached hereto as Exhibits 99.2 and 99.3 are the most recent term sheet proposals sent by each of the Company and the Noteholders, respectively. In addition, attached hereto as Exhibit 99.4 are the most recent proposals for the material terms of an amendment to the Company’s existing term loan facility. The Company has not yet reached agreement on mutually acceptable terms and conditions with the Noteholders regarding a Possible Transaction. Negotiations between the Company and the Noteholders are ongoing. There are no assurances that the Company and such Noteholders will come to an agreement on the terms of a Possible Transaction.

Rex Energy expects that it will continue to periodically assess its financing alternatives and opportunistically engage with current or potential investors, lenders, or financing providers regarding such alternatives in the future. Any financing, refinancing, or restructuring arrangement may be on terms similar or dissimilar to the proposal described herein, could be subject to additional terms or conditions, could require specific approvals from existing lenders, noteholders and/or shareholders, among others, and would otherwise be subject to the negotiation and execution of definitive documentation. There can be no assurance that any such transaction would result in additional liquidity or that any such transactions can or will be consummated.

In accordance with General Instruction B.2 of Form 8-K, the information under this heading shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth in such a filing.

Cautionary Note Regarding Forward-Looking Statements

Certain Statements in this Form 8-K and the exhibits hereto that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company believes these statements and the assumptions and estimates contained therein are reasonable based on information that is currently available to it. However, management’s assumptions and the Company’s future performance are subject to a wide range of business risks and uncertainties, both known and unknown, and the Company cannot assure that the Company can or will meet the goals, expectations and projections. Any number of factors could cause our actual results to be materially different from those expressed or implied in the Company’s forward looking statements. Further information on the risks and uncertainties that may affect our business is available in the Company’s filings with the SEC, and the Company strongly encourages readers to review and understand those risks. The Company does not assume or undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


Item 9.01 Financial Statements and Exhibits.

(a) Exhibits.

 

Exhibit     
No.   

Description

99.1    Rex Energy Corporate Presentation, January 2018
99.2    Company Term Sheet Proposal
99.3    Noteholder Term Sheet Proposal
99.4    Term Loan Amendment Proposals


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    REX ENERGY CORPORATION
Date: February 8, 2018     By:  

/s/ Curtis J. Walker

    Name:   Curtis J. Walker
    Title:   Chief Financial Officer
CORPORATE PRESENTATION
January 2018
Exhibit 99.1
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Disclosures
2
Forward Looking Statements
Statements in this presentation that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We believe these statements and the assumptions and estimates contained in this presentation are reasonable based on information that is currently available to us. However, management’s assumptions and the company’s future
performance are subject to a wide range of business risks and uncertainties, both known and unknown, and we cannot assure that the company can or will meet the goals, expectations and projections included in this presentation. Any
number of factors could cause our actual results to be materially different from those expressed or implied in our forward looking statements, including (without limitation): economic conditions in the United States and globally; domestic
and global supply and demand for oil, natural gas liquids (“NGLs”) and natural gas; realized prices for oil, natural gas and NGLs and volatility of those prices; the adequacy and availability of capital resources, credit and liquidity, including,
but not limited to, access to additional borrowing capacity and our inability to generate sufficient cash flow from operations to fund our capital expenditures and meet working capital needs; our ability to comply with restrictions imposed
by our term loan credit agreement, secured and unsecured indentures, and other existing and future financing arrangements; our ability to service our outstanding indebtedness; impairments of our natural gas, NGL and condensate asset
values due to declines in commodity prices; conditions in the domestic and global capital and credit markets and their effects on us; new or changing government regulations, including those relating to environmental matters, permitting
or other aspects of our operations;  the willingness and ability of the Organization of Petroleum Exporting Countries to set and maintain oil price and production controls;  the geologic quality of our properties with regard to, among
other things, the existence of hydrocarbons in economic quantities; uncertainties inherent in the estimates of our natural gas, NGL and condensate reserves; our ability to increase natural gas, NGL and condensate production and income
through exploration and development; drilling and operating risks; counterparty credit risks; the success of our drilling techniques in both conventional and unconventional reservoirs; the success of the secondary and tertiary recovery
methods we utilize or plan to employ in the future; the number of potential well locations to be drilled, the cost to drill, and the time frame within which they will be drilled; the ability of contractors to timely and adequately perform their
drilling, construction, well stimulation, completion and production services; the availability of equipment, such as drilling rigs, and infrastructure, such as transportation pipelines, processing and midstream services; the effects of adverse
weather or other natural disasters on our operations; competition in the oil and gas industry in general, and specifically in our areas of operation; changes in our drilling plans and related budgets; the success of prospect development and
property acquisition; the success of our business and financial strategies and hedging strategies; uncertainties related to the legal and regulatory environment for our industry, and our own legal proceeding and their outcome; and our ability
to maintain the listing of our securities on the NASDAQ Capital Market or any other exchange on which our securities trade. Further information on the risks and uncertainties that may affect our business is available in the company’s
filings with the SEC, and we strongly encourage readers to review and understand those risks. We do not assume or undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Presentation of Information
The estimates of reserves in this presentation are based on a reserve report of our independent external reserve engineers as of December 31, 2017. We believe the data we prepared and supplied to our external reservoir engineers in
connection with their preparation of the December 31, 2017 reserve report, and the assumptions, forecasts, and estimates contained therein, are reasonable; however we cannot assure that they will prove to have been correct. Estimates of
reserves can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. In this presentation, references to Rex Energy, Rex, REXX, the Company, we, our and us refer to Rex Energy Corporation and its
subsidiaries. Unless otherwise noted, all references to acreage holdings are as of December 01, 2017 and are rounded to the nearest hundred. All financial information excludes discontinued operations unless otherwise noted. All estimates
of internal rate of return (IRR) are before tax. 
Hydrocarbon Volumes
The SEC permits publicly-reporting oil and gas companies to disclose “proved reserves” in their filings with the SEC. “Proved reserves” are estimates that geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and operating conditions. SEC rules also permit the disclosure of “probable” and “possible” reserves. Rex Energy discloses proved reserves but does not disclose
probable or possible reserves. We may use certain broader terms such as “resource potential,” “EUR” (estimated ultimate recovery of resources, defined below) and other descriptions of volumes of potentially recoverable hydrocarbons
throughout this presentation. These broader classifications do not constitute “reserves” as defined by the SEC and we do not attempt to distinguish these classifications from probable or possible reserves as defined by SEC guidelines. In
addition, we are prohibited from disclosing hydrocarbon quantities that do not constitute reserves in documents filed with the SEC. The company defines EUR as the cumulative oil and gas production expected to be economically
recovered from a reservoir or individual well from initial production until the end of its useful life. Our estimates of EURs and resource potential have been prepared internally by our engineers and management without review by
independent engineers. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater uncertainty of being actually realized. We include
these estimates to demonstrate what we believe to be the potential for future drilling and production by the company. Ultimate recoveries will be dependent upon numerous factors including actual encountered geological conditions, the
impact of future oil and gas pricing, exploration and development costs, and our future drilling decisions and budgets based upon our future evaluation of risk, returns and the availability of capital and, in many areas, the outcome of
negotiation of drilling arrangements with holders of adjacent or fractional interest leases. Estimates of resource potential and other figures may change significantly as development of our resource plays provide additional data and
therefore quantities that may ultimately be recovered will likely differ materially from these estimates.
Potential Drilling Locations
Our estimates of potential drilling locations are prepared internally by our engineers and management and are based upon a number of assumptions inherent in the estimating process. Management, with the assistance of engineers and
other professionals, as necessary, conducts a topographical analysts of our unproved prospective acreage to identify potential well pad locations using operationally approved designs and considering several factors, which may include but
are not limited to access roads, terrain, well azimuths, and well pad sizes. For our operations in Pennsylvania, we then calculate the number of horizontal well bores for which the company appears to control sufficient acreage to drill the
lateral wells from each potential well pad location to arrive at an estimated number of net potential drilling locations. For our operations in Ohio, we calculate the number of horizontal well bores that may be drilled from the potential well
pad and multiply this by the company’s net working interest percentage of the proposed unit and arrive at an estimate number of net potential drilling locations. In both cases, we then divide the unproved prospective acreage by the
number of net potential drilling locations to arrive at an average well spacing. Management uses these estimates to, among other things, evaluate our acreage holdings and formulate plans for drilling. Any number of factors could cause the
number of wells we actually drill to vary significantly form these estimates, including, without limitation, the availability of capital, drilling and production costs, commodity prices, availability of drilling services and equipment, lease
expirations and regulatory approvals.
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Executive Summary
DRAFT
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DRAFT
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Company Overview
4
Appalachian Basin
Net
Acreage
~98,000
Warrior North
Net
Acreage
~11,800
Butler Operated
Net
Acreage
~76,000
Non-Operated
Net
Acreage
~10,200
Production
(1)
3Q17A
182.0 Mmcfe/d
4Q17E
~205.1
Mmcfe/d
4Q17E Exit Rate
~215.2 Mmcfe/d
2017E
~184.1 Mmcfe/d
2018E
250.0 –
260.0 Mmcfe/d
2019E
285.0 –
295.0 Mmcfe/d
Capital
Expenditures
(1)
2017 Net Operational
Capex
~$133.5 million
2018 Net Operational Capex
$105.0 -
$125.0 million
Estimated Production Growth Rate
35% -
45%
2019 Net Operational Capex
$60.0
-
$75.0
million
Estimated Production Growth Rate
10% -
20%
Total
Proved Reserves
2017 Base Proved Reserves/$PV10
3,848 Bcfe/$892.4 MM
2017 PDP Reserves/$PV10
969 Bcfe/$504.6
MM
Rex Energy is a pure-play Appalachian Basin focused company targeting wet-
gas windows in the Pennsylvania Marcellus and Ohio Utica Shales
(1)
Estimates based on Growth Plan


Investment Highlights
5
Best in Class
Human Capital
Safety is Rex Energy’s #1 priority
Core team has been together for six years
Rex’s success is directly correlated to its employees’ success
Focused on developing and retaining our existing talent
Ability to run 2-3 rig program with current team
High Quality Acreage Position
Highly contiguous acreage position in the Appalachian Basin
Large multi-year inventory of ~900+ gross/690 net liquids-rich drilling locations
Average Working Interest: 74%; Average NRI: 63%
99% of acreage held by production
Ready for multi-well pad development
Multiple horizons: Upper Devonian, Marcellus and Utica formations
Current HBP holds all depths –
Marcellus, Upper Devonian Burkett, Dry Gas Utica and Rhinestreet
formations
Prolific
Resource
Proven formations: Marcellus, Upper Devonian and Utica
Derisked
existing acreage with over 200 gross wells placed into sales as of 12/31/2017
Year-End 2017 PDP Reserves: 969 Bcfe; PV10: $504.6 million
Year-End 2017 Base Proved Reserves: 3,848 Bcfe; PV10: $892.4 million
Cost and Capital Efficiency Improvements
HBP acreage allows for flexibility in choosing future locations to drill and complete
Capital spend is focused on best areas of the assets to maximize returns
Enhanced completion design and longer laterals results in maximized financial returns
Established supply chain program that ensures Rex is getting the best value possible from its service providers
Drilling and Completion Enhancements
Average drilling days reduced to 11.1 days in 2017 vs. 16.6 days in 2014 while increasing lateral length by ~2,600’ during same
period
Increased completion stages per day: 5.5 stages/day in 2017 vs. 4.1 stages/day in 2016; more recent jobs 7-10 stages / day
Conducted a comprehensive performance analysis with third party engineering firm on over 160 wells to produce a more optimal
completion design
Comprehensive water management plans
Marketing and Processing Strategy
Recent NGL marketing agreement with BP allows for consistent liquids cash flow and eliminates seasonality
Diversified marketing strategy and active hedging minimizes exposure to large fluctuations in commodity prices and gas basis
differentials
Anchor/shipper with MarkWest
facilities in Butler County
Extensive Geology and Reservoir Insight
Drilled over 220 wells in the Appalachian Basin
Large inventory of logs and cores performed over the past six years
Developed best practices for optimal drilling performance and completion techniques
Minimal science required to unlock optimal value
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Rex has secured ~928 gross/ ~690 net “wet gas” locations
Leasing additional infill acres in Moraine East potentially adds ~160 locations
In addition to the “wet gas” locations identified above, Rex has secured
approximately 400 dry gas Utica locations in the Butler Legacy and Moraine East
areas
Current HBP holds all depths –
Marcellus, Upper Devonian, Utica & Rhinestreet
“Wet Gas” Acreage and Well Counts
Area
Formation
Acres
Well Count
Gross
Net
Gross
Net
Legacy
Marcellus
63,000
44,300
251
177
Burkett
63,000
44,300
318
222
Moraine
East
Marcellus
36,000
31,700
175
141
Burkett
36,000
31,700
154
125
Warrior North
Utica
13,000
11,800
30
25
Total
211,000
163,800
928
690
“Stacked Pay” Effect
6
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Management Profiles
Tom Stabley –
President & Chief Executive Officer
Co-founder of Rex Energy in 2003 –
managed various partnerships
that eventually were consolidated into Rex Energy
Guided the company through reorganization and consolidation that resulted in Rex Energy’s IPO in 2007
Over 20 years of expertise in capital markets, financial reporting, corporate finance and strategic planning
Robert Ovitz –
Chief Operating Officer
Joined Rex Energy in 2014
Over 30 years of extensive technical experience in drilling, completions and HSE as well as leading and managing business
organizations within the E&P space
Prior to joining Rex, he was a Senior Operations Manager for Noble Energy in the Appalachian Basin where he built
Noble Energy’s operational team and presence in the basin
Curt  Walker –
Chief Financial Officer
Joined Rex Energy in 2007
Over 15 years experience in accounting, financial reporting, corporate finance and strategic planning
Previous experience with YRC Worldwide, a Fortune 500 company
Dave
Pratt –
Senior Vice President & Exploration Manager
Joined Rex Energy in 2008
Over 30 years experience as a senior geologist working on projects located throughout the United States
Previous experience in geology with Cabot Oil & Gas, Texaco, Sohio Petroleum and Ensource & Enstar
Mike Eck –
Senior Vice President, Risk Management
Joined Rex Energy in 2010
Over 18 years experience in risk management, process re-engineering and audit
Responsible for the oversight of Rex Energy’s HSE function, Procurement department and Internal Audit group
F. Scott Hodges –
Senior Vice President,
Land & Business
Development
Joined Rex Energy in 2010
Over 20 years experience in acquisition and management of mineral and surface rights and business development
Previous experience as Regional Land Manager for Consol Energy from 1997 -
2010
Mike
Endler –
Vice President, Basin Manager
Joined Rex Energy in 2011
Over 15 years experience in engineering and operations
Previous experience in consulting for the oil and gas industry, specializing in surface facilities and water management
Registered Professional Engineer
Darren Springinatic –
Senior Director, Marketing
Joined Rex Energy in 2012
Over 15 years experience in oil and gas marketing in the U.S. and Canada
Previous experience in oil and gas marketing with Bonavista Petroleum and Hunt Oil
Abhinav Sharma
Director, Reservoir Engineering
Joined Rex Energy in 2010
Over 10 years experience in reservoir engineering
Masters in Petroleum Engineering from University of Texas, Austin
7


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
8
Production (Mmcfe/d)
(1)
LOE ($/Mcfe)
Key Metrics: 2014 –
2020E
Cash G&A ($/Mcfe)
154.4
183.8
195.3
180.0 –
190.0
250.0 –
260.0
280.0 –
300.0
290.0 –
310.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2014
2015
2016
2017E
2018E
2019E
2020E
$1.94
$1.84
$1.78
$1.77 -
$1.82
$1.55 -
$1.60
$1.52 -
$1.57
$1.51 -
$1.56
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
2014
2015
2016
2017E
2018E
2019E
2020E
$0.82
$0.75
$0.54
$0.23 -
$0.28
$0.15 -
$0.20
$0.14 -
$0.19
$0.14 -
$0.19
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
2014
2015
2016
2017E
2018E
2019E
2020E
(1)
Estimates based on Growth Plan


Joint Ventures
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Joint Venture Summary
10
Benefit Street Partners (BSP)
$175.0 million in initial consideration with $134.0
million committed and funded to date
BSP’s initial capital and well commitment has ended
BSP has elected into an additional seven JV AMI wells
to
date
at
a
working
interest
of
15%
-
20%
ArcLight
All 32 wells have been drilled and placed into service
$67.6 million contributed
17.5% reverts to Rex upon ArcLight
achieving hurdle
rate
Sumitomo
Through JV, Sumitomo has 30% interest in Legacy
Butler AMI
Other interests in non-operated areas
Joint Venture Summary
($
in millions)
Benefit Street
Partners
ArcLight
Sumitomo
Date
March 2016
March 2015
August 2010
Type
Joint Exp./Dev.
Agreement
Drilling
Participation &
Exploration
Area
Moraine
East/Warrior North
Legacy
Butler/Moraine East
Legacy
Butler
AMI
Yes
Wellbore
Only
Yes
#
of wells
participated
47
32
139
Acres (Gross/Net)
Warrior North:
6,679/1,336
ME: 36,668/5,985
--
Butler
Legacy:
63,000/18,700
Partners WI%
Initial
Wells –
65%
35.0%
30.0%
Consideration
$175.0
--
--
Commitment
$134.0
--
--
Contributed to Date
$134.0
$67.6
--
Int. Reversion
N/A
IRR/ROI
hurdle
rates
N/A
Other
BSP earned assigned
of 15%-20%
in
acreage located
within each unit
--
--
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Appalachia Benchmarking
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Marcellus Performance Benchmarking
12
EUR (Bcfe) / 1,000 ft.
3.18
3.25
2.15
2.40
2.71
2.46
2.16
2.00
2.95
2.40
2.52
4.40
2.66
1.60
Butler
Central
Butler
South
Moraine
East
Core
Highly Rich
Gas/Cond.
Highly Rich
Gas
Rich Gas
Dry Gas
SW PA Wet
SW PA
Rich
SW PA Dry
Lower
SW PA
Condensate
Source: Company presentations and filings, TPH Research, Wall Street consensus estimates as compiled by FaceSet
as of 12/14/2017
Note: Rex calculations based on November 2017 IR presentation. Peers based on most recently disclosed Marcellus estimates
Peers include AR, CNX, COG, ECR, EQT, and RRC
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
D&C ($MM) / 1,000 ft.
$0.89
$0.87
$0.92
$0.93
$0.93
$0.93
$0.93
$0.82
$0.86
$0.69
$0.94
$0.84
$0.86
Butler
Legacy
Moraine
East
Core
Highly Rich
Gas/Cond.
Highly Rich
Gas
Rich Gas
Dry Gas
SW PA Wet
SW PA
Rich
SW PA Dry
Lower
SW PA
Condensate
Median: $0.92
Median: 2.49
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Operational & Financial Benchmarking
(1)
13
2017E-2018E Production Growth
39%
17%
21%
14%
18%
28%
31%
18%
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Median:
18%
% Liquids (Reserve Based)
43%
7%
39%
35%
3%
7%
15%
18%
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Median:
15%
Production Investment Rate ($/Mcfed)
(2)
Inventory Life –
Years
(3)
$647
$2,203
$1,314
$1,586
$1,530
$1,366
$1,765
$2,475
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Median:
$1,586
37
23
18
19
29
6
15
12
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Median:
18
Source: TPH Research, Wall Street consensus estimates as compiled by FactSet
of 12/14/2017
Note: Rex forecasts and inventory calculations based on November 2017 IR Presentation
Peers include AR, CNX, COG, ECR, EQT, GPOR and RRC
(1)
Based on Growth Plan projections
(2)
2018E
Capex spend/(2018E production less 2017E declined production). Assumes 20% base decline for 2017E
(3)
For Rex, based on 25 wells per year.


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Operational & Financial Benchmarking
(1)
14
Hedge Profile (% of 2018E Production)
(2)
56%
38%
73%
39%
1%
63%
74%
47%
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
2018E PDP
Hedge Profile:
64%
Median:
47%
In-Basin Sales Exposure (% of 2018E NG Production)
54%
48%
26%
54%
77%
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Median:
51%
G&A Burden (2018E G&A/Mcfe)
$0.17
$0.14
$0.13
$0.19
$0.07
$0.12
$0.12
$0.29
REXX
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Median:
$0.13
Source: Company presentations and filings, TPH Research, Wall Street consensus estimates as compiled by FactSet
as of 12/14/2017
Peers include AR, CNX, COG, ECR, EQT, GPOR and RRC
(1)
Based on Growth Plan projections
(2)
Includes volumes from all derivatives


Butler Operated Area
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Legacy Area
Moraine East
Rex 70%/Sumitomo 30%
Rex ~85%/BSP ~15%
Area
Lease Status
Acres
Well Count
Gross
Net
Gross
Net
Legacy
HBP/HBO
62,500
43,950
564
395
Pending
500
350
5
4
Moraine East
HBP/HBO
35,000
30,700
329
266
Pending
1,000
1,000
--
--
Total:
99,000
76,000
898
665
Butler Operated Area
Currently control 898 potential
“wet gas” locations in the
Butler Operated Area
~99% of these locations are
held by production/operations
HBP/HBO
Pending
16
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Gas pipeline from
Moraine East Field
Rex Energy
Regional Office
MarkWest
Gas
Processing
Facilities
Fresh Water Impoundment       
Legacy Butler Operated Area
17
Contiguous acreage position of ~63,000 gross/44,300
net acres
Average working interest: 70%
Sumitomo JV: 30% WI in all wells
ArcLight: 35% WI in 16 wells (will revert to 17.5%)
Gross/Net Potential Locations: 569/399 based on 800’
spacing
Currently have 139 wells placed into sales:
127 Marcellus
10 Upper Devonian Burkett
2 Utica
Recent 5-day average wellhead inlet of 180 MMcf/d
MarkWest
provides gas gathering and processing services
Total capacity: 410 MMcf/d
Capacity dedicated to Rex: 285 MMcf/d (inclusive
of JV partners); currently at 267 MMcf/d
Gas from Moraine East field flows into MarkWest
processing facility via Stonehenge pipeline
Four-Well Wilson Pad
Three extended laterals produced
at an average 5-day sales rate of
11.3 Mmcfe/d and 30-day sales
rate of 11.0 Mmcfe/d
Wells are still exhibiting strong
pressures
Legend:
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Enhanced Performance –
Butler Legacy
(1)
Central
9.7
Bcfe
EUR
(80% ethane)
11.7
Bcfe
EUR
(80% ethane)
15.6 Bcfe
EUR
(80% ethane)
15.7 Bcfe
EUR
(80% ethane)
17.0 Bcfe
EUR
(80% ethane)
8.9
Bcfe
EUR
(55% ethane)
10.7 Bcfe
EUR
(55% ethane)
14.4 Bcfe
EUR
(55% ethane)
14.5 Bcfe
EUR
(55% ethane)
15.9 Bcfe
EUR
(55% ethane)
2013
2014
2015
2016
2017
Completion
Reduced Cluster
Spacing
Reduced
Cluster Spacing
Reduced
Cluster
Spacing
Reduced
Cluster
Spacing
Reduced
Cluster
Spacing
Gross
Avg. 30-
Day Wellhead
Gas IP
(Mcf/d)
3,175
3,683
4,736
4,458
4,234
1   Yr. Decline
50%
48%
44%
40%
33%
Lateral Length
4,000’
4,000’
5,000’
5,000’
5,000
Stages /
Spacing
27 / 150’
33 / 150’
33 / 150’
33 / 150’
33 / 150’
Frac
Sand
(#/ft)
1,800
2,000-2,200
2,200-2,500
2,200-2,500
2,200-2,500
All-In Cost
$5.9 million
$5.7 million
$4.8 million
$4.8 million
$5.2 million
WH EUR
(bcf)/1,000’
1.43
1.44
1.86
1.88
2.71
(1)
See note on Hydrocarbon Volumes and disclaimers at beginning of presentation
18
17.3 Bcfe
EUR
(80% ethane)
16.2 Bcfe
EUR
(55% ethane)
2017
Reduced
Cluster
Spacing
5,535
36%
5,000
33 / 150’
2,200-2,500
$5.2 million
3.01
South
st
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Legacy Butler Marcellus Economics
(1)
Marcellus
Economics
(55%
Ethane
Recovery)
(2)
(1)
See note on Hydrocarbon Volumes and disclaimers at beginning of presentation.
(2)
Economics reflect
55% ethane recovery.
(3)
Average 5-year C3+ differential approx. 52% of Oil, C2 differential approx. is 19% of Oil.
(4)
Historical price differentials applied to Condensate. Gas price differential dependent on future development plans and futures price differentials to Rex markets.
(5)
Strip
Pricing
as
of
11.13.2017
Oil:
2018:
$56.63,
2019:
$54.04,
2020:
$52.47,
2021:
$51.81
,
2022:
$51.75
//
Gas:
2018:
$3.02,
2019:
$2.92,
2020:
$2.86,
2021:
$2.87,
2022:
$2.88
(6)
2016 EUR adjusted for net reserves
19
Butler
Central
3rd Party
YE16
Butler
Central
3rd Party
YE17
Butler
South
3rd Party
YE16
Butler
South
3rd Party
YE17
All-in Well Cost
$6.0 million
$6.0 million
$6.0 million
$6.0 million
Lateral Length
6,700 ft
6,700 ft
6,700 ft
6,700 ft
BCFE/1000ft
(6)
(55% C2)
2.21
3.18
2.12
3.25
% Liquids
(55% C2)
35%
35%
28%
28%
EUR (Bcfe)
(6)
80% / 55% C2
15.8
14.8
22.8
21.3
15.1
14.2
23.1
21.7
IRR
(3,4,5)
$3.00 NYMEX
Oil Price:
2017+: $60
34%
38%
25%
34%
$3.00 NYMEX
Oil Price:
2017+: $55
30%
33%
23%
30%
$3.25 NYMEX
Oil Price:
2017+: $55
36%
39%
29%
38%
Strip Pricing
28%
31%
20%
28%
Avg. 30-day sales rate
(MMcfe/d)
8.0 –
11.0
8.0 –
11.0
8.0 –
11.0
8.0 –
11.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
2,000
4,000
6,000
8,000
10,000
12,000
0
10
20
30
40
50
60
Production Month
Butler South -3rd Party YE16
Butler South -3rd Party YE17
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Butler Central -3rd Party YE16
Butler Central -3rd Party YE17


Production linearly adjusted to 5,000ft equivalent lateral
Plotted above are 28 representative wells in Butler Central with RCS completions
Butler Central Type Curve Evolution-
Adjusted
20
100
1,000
10,000
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
Months
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Production linearly adjusted to 5,000ft equivalent lateral
Plotted above are 17 representative wells in Butler South with RCS completions
Butler
South
Type
Curve
Evolution-
Adjusted
21
100
1,000
10,000
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
Months
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Moraine East
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Legend:
Gas Pipeline (Stonehenge)
Perm. In-Ground Waterline
Stonehenge -
high pressure
discharge line to MarkWest
processing facility
Renick
Impoundment
Fleeger-2
Impoundment
Oakland Twp.
Impoundment
Stonehenge –
Renick
Compressor Station
Lake Oneida –
primary water source
Estimated current total to MarkWest:
Legacy Butler -
180 MMcfd
Moraine East   -
87 MMcfd
267 MMcfd
Moraine East Area
23
Contiguous acreage position of ~36,000 gross/31,700
net acres
Average working interest: 85%
Gross/Net Potential Locations: 329/266 based on 800’
spacing
Leasing additional acreage adds ~160 potential gross
locations
Currently have 37 wells placed into sales:
30 Marcellus
7 Upper Devonian Burkett
Recent 5-day average wellhead inlet of 87 MMcf/d
Gas gathering and field compression by provided by
Stonehenge
Gas from Moraine East field flows into MarkWest
processing facility via Stonehenge pipeline
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Moraine East Area –
Recent Developments
24
Three-well Manuel pad
Drilled to an average lateral length of ~6,750 feet
Placed into sales in 4Q17
Two-well
Frye pad
Drilled to an average lateral length of ~6,300 feet
24-hour sales rate per well of 9.4 Mmcfe/d
On a per lateral foot basis, highest rates achieved in Moraine
East
30-day sales rate per well of 8.5 Mmcfe/d
Six-well Shields pad
24-hour sales rate per well of 9.2 Mmcfe/d
30-day sales rate per well of 7.9 Mmcfe/d
In-line with economic projections for 2017 Moraine East
program
Four-well Mackrell
pad
Drilled to an average lateral length of ~7,630
24-hour sales rate per well of 8.4 Mmcfe/d
Four-well Baird pad
24-hour sales rate of 10.1 Mmcfe/d
Two Marcellus wells produced at an average 24-hour sales rate per
well of 12.1 Mmcfe/d
Baird 4H produced 213 bbls/d of condensate, representing the
highest condensate rate achieved in the Butler Operated Area
30-day sales rate of 7.3 Mmcfe/d
Upcoming
developments
Fourth compressor station expected to be in service in early January
2018
Four-well Kern pad expected to be placed into sales in March 2018
Average lateral length of 8,500’
100% working interest
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Moraine East Sample Unit Development
25
Initial Development
2
nd
Wave of Development
3
rd
Wave of Development
Future Development
3    wave of
development will
require new pad site
Focus on one of the
units (ie: southwest
unit)
Drill 8-12 wells with
avg
lateral length
6,000 -
7,000 feet
Repeat process for
next unit (ie: southeast
unit)
Initial development
of 4 PDP Wells
~4,000 acres are held
by production (HBP)
within the units
Initial wells hold all
depths and formation
Infrastructure
designed to support
future development
Future development
of the remaining
~20-40 wells will
follow a similar
process
Using existing pads
and infrastructure
will provide strong
capital efficiencies
Anticipate
developing 8 –
12
wells at a time
2    wave of
development will
focus on one of the
units (ie: northeast
unit)
Use existing pad sites
Drill 8-12 wells with
avg
lateral length
6,000 -
7,000 feet
Repeat process for
next unit (ie:
southeast unit)
nd
rd
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Achievable Performance Improvements in ME
26
After analyzing the production data from existing
Moraine East wells the latest 2017 wells have been
completed with optimized completion techniques.
Proppant loading, stage size, water ratio, treatment
rates, and other variables have been optimized to
improve performance of latest wells.
These latest wells have been placed at optimized lateral
spacing of ~800 ft. In the past, the Moraine East adjacent
wells were spaced between 600 to 750 ft.  
Performance of longer laterals is being tested in the
Shields and Mackrell
pads. One of the wells is greater
than 10,000 ft.
Frye wells, which were the last set of wells to be
completed in Moraine East, suggest that the casing
pressure is holding steady for longer and the productivity
of these wells is superior to wells completed with
previous generation techniques.
Peak monthly production rates on per foot basis for 2017
ME wells are higher than earlier generation completion
wells at lower choke size.
With these optimized techniques, Rex hopes to unlock
more reserves in the future wells in ME.
8 Gray wells in the planning phase to be D&C in 2018.
Optimized Completions
Earlier Gen. Completions
0.48
0.45
0.49
0.55
0.46
0.46
0.70
0
10
20
30
40
50
60
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Fleeger
Gray
Renick
Fleeger-2
Shields
Mackrell
Frye
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Moraine East Economics
(1)
Marcellus Economics (55% Ethane Recovery)
(2)
(1)
See note on Hydrocarbon Volumes and disclaimers at beginning of presentation.
(2)
Economics reflect 
55% ethane recovery.
(3)
Average 5-year C3+ differential approx. 52% of Oil, C2 differential approx. is 19% of Oil.
(4)
Historical price differentials applied to Condensate. Gas price differential dependent on future development plans and futures price differentials to Rex markets.
(5)
Strip
Pricing
as
of
11.13.2017
Oil:
2018:
$56.63,
2019:
$54.04,
2020:
$52.47,
2021:
$51.81
,
2022:
$51.75
//
Gas:
2018:
$3.02,
2019:
$2.92,
2020:
$2.86,
2021:
$2.87
,
2022:
$2.88
(6)
2016 EUR adjusted for net reserves 
27
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
0
10
20
30
40
50
60
Production Month
ME 3rd Party YE16
ME 3rd Party YE17
REX ME 2017 Program
ME
3rd Party
YE16
ME
3rd Party YE17
Rex ME 2017
Program
All-in Well Cost
$6.5
million
$6.5 million
$6.5 million
Lateral Length
7,500 ft
7,500 ft.
7,500 ft.
BCFE/1000ft
(6)
(55% C2)
1.34
1.74
2.15
% Liquids
(55% C2)
39%
40%
39%
EUR (Bcfe)
(6)
80% / 55% C2
10.7
10.0
13.9
13.0
17.3
16.1
IRR
(3,4,5)
$3.00 NYMEX
Oil Price:
2017+: $60
20%
21%
26%
$3.00 NYMEX
Oil Price:
2017+: $55
17%
18%
23%
$3.25 NYMEX
Oil Price:
2017+: $55
20%
21%
26%
Strip Pricing
15%
16%
21%
Avg. 30-day sales rate
(MMcfe/d
)
6.5 -
9.5
5.0 –
8.0
5.0 –
8.0
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Production linearly adjusted to a 6,000ft equivalent lateral and adjusted for downtime
Average lateral length of existing wells is 6,600 ft. Average lateral length for 2017 wells is 7,500 ft
Wells production flattening since the onset of compression. New production behavior since compression.
PDP
Wells
(North
ME)
are
currently
tracking
1.94
bcfe/1000ft
type
curve.
More
data
needed
to
define
EUR
with
certainty.
Moraine East vs. Type Curve
Compression commencement
month for first 12 wells
28
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Month
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Warrior North
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Warrior North Area
30
Contiguous acreage position of ~13,000 gross/11,800
net acres
Average working interest: 95%
Gross/Net Potential Locations: 30/25 based on 800’
spacing
Currently have 25 wells placed into sales
Gas gathering and field compression by provided by
BlueRacer; gas processed at Natrium facility
NGLs marketed by BlueRacer
Wells average ~70% liquids production
Strong optionality to condensate production
TPL-7
BlueRacer
gathering pipeline
Three-well Jenkins pad placed into
sales on 12/26/2017; 100% WI
Seven-well Goebeler
pad expected to
be placed into sales in April 2018;
71% WI
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


(1)
See note on Hydrocarbon Volumes and disclaimers at beginning of presentation.
(2)
Economics reflect
55% ethane recovery.
(3)
Historical price differentials applied to Condensate. Futures differentials applied for gas production for all scenarios.
(4)
Average 5-year C3+ differential approx. 56% of Oil, C2 differential approx. is 15% of Oil.
(5)
Strip
Pricing
as
of
11.13.2017
Oil:
2018:
$56.63,
2019:
$54.04,
2020:
$52.47,
2021:
$51.81
,
2022:
$51.75
//
Gas:
2018:
$3.02,
2019:
$2.92,
2020:
$2.86,
2021:
$2.87
,
2022:
$2.88.
(6)
2016 EUR adjusted for net reserves
Warrior North Economics
(1)
3rd Party
YE16
3rd Party
YE17
Life Yield=54
3rd Party
YE17
Life Yield=60
Rex Upside
Case 2017
All-in Well Cost
$6.8 million
$6.8 million
$6.8 million
$6.8 million
Lateral Length
6,500 ft
6,500 ft
6,500 ft
6,500 ft
BCFE/1000ft
(6)
1.03
1.05
1.07
1.42
%
Liquids
51%
49%
50%
51%
EUR (MMBOE)
(6)
1.11
1.14
1.16
1.53
IRR
(3,4,5)
$60
52%
35%
43%
55%
40%
27%
33%
44%
43%
29%
35%
46%
40%
26%
32%
43%
Avg. 30-day sales rate (MBOE/d)
1.3 –
1.7
1.2 –
1.6
1.2 –
1.6
1.2 –
1.6
Warrior North Economics (55% Ethane Recovery)
(2)
31
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
0
10
20
30
40
50
60
Production Month
3rd Party YE16
Rex Upside Case 2017
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
3rd Party YE17 LY=54


Transportation & Marketing
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Appalachian Basin Takeaway
33
Natural Gas
Currently selling natural gas in the Gulf Coast and Northeast local
markets (DOMSP & TETCO)
Natural Gas Liquids (NGLs)
NGL’s are currently being sold in domestic markets
Upon Mariner East 2 commencement, a portion of Rex NGL’s will
be sold into international markets
Ethane
Rex sells ethane into international and domestic ethane markets
Canada (Mariner West), Europe (Mariner East) and Mt. Belview
(ATEX)
Marcus
Hook
Mont Belvieu
Perryville, LA
Freeport LNG
DOMSP
LNG Exports
& Mont Belvieu
Ethane Sales
Ethane &
NGL
Exports
Sarnia, Canada
Ethane Exports
Ethane Markets
NGL Markets
Gas Markets
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Marketing Summary
34
Warrior North
Acreage dedication to BlueRacer
for gathering and
processing
Gas is currently being sold into Dominion South
(Dominion) and to M2 (TETCO)
Rex will have access to Rockies Express, Rover, Leech
Express and NEXUS on an interruptible basis
Condensate purchased by Marathon
Butler (Legacy)
Acreage dedication to MarkWest for
gathering/processing/compression
285mcf/d of priority capacity rights
Gas sold into Dominion South (Dominion) and to the
Gulf Coast (Dominion/Texas Gas)
3 ethane markets –
Canada (Mariner West), Europe
(Mariner East), Gulf Coast (ATEX)
Condensate purchased by Marathon
Moraine East
Acreage dedication to Stonehenge for gathering &
compression
Gathering, compression can be expanded to over
400mcf/d
Tiered volume pricing structure &
Tiered minimum volume commitment (MVC)
Ability to bank vols
to use towards MVC
Acreage dedication to MarkWest for processing
Gas sold into Dominion South (Dominion) and to the
Gulf Coast (Dominion/Texas Gas)
3 ethane markets –
Canada (Mariner West), Europe
(Mariner East), Gulf Coast (ATEX)
Condensate purchased by Marathon
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Butler/Moraine East Map
35
8” MarkWest Ethane
Pipeline connecting to
Mariner West
Mariner West
Ethane Pipeline
ATEX Ethane
Pipeline
Mariner East
Ethane Pipeline
Dominion
Transmission
Residue Pipeline
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Warrior North Map
36
Berne Plant
Rex Energy
Acreage
Natrium Plant
TPL-7
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Natural Gas LOE vs. Revenue Deduct
37
Dom South vs. Gulf Coast
($0.65)
($0.14)
($0.05)
($0.67)
Basis (Variable)
Transport (LOE)
Basis (Fixed)
Transport (LOE)
NYMEX $3.00
NYMEX $3.00
$2.21 Net Realized Price
$2.28 Net Realized Price
Rex residue gas is split 50/50 between two primary markets:
Gulf Coast
130,000 Firm Transportation
$0.67 Average Rate
100,000 Gulf Coast transportation began 11/1/2016, remaining 30,000 came online 4/1/2017.
Increase in LOE’s/decrease in basis began at the end of 2016, incremental increase in LOE/decrease in basis in 04/2017
Full year of Gulf Coast transport LOE/reduced basis will be realized in 2018
2016 Differential ($0.92)/LOE ($1.58). 2017 Differential (~$0.30)/LOE (~$1.79).
Dom South
158,000 Firm Transportation
$0.14 Rate
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Rex/BP NGL
Deal Summary
Bluestone C3+ NGL Sale
Rex Energy to sell all C3+ NGL products (less ME2 INEOS commitments) out of the Mark
West Bluestone Facility to BP at improved net back pricing. Term of the deal is January 2018 –
March 2021.
Based on historic NGL price fluctuations, the new improved NGL fixed differentials should
result in increased revenue over the term of the deal.
Fixed NGL differentials, eliminate the seasonality out of pricing, while mitigating the timing
of wells being placed into sales.
Opportunity to enhance net back pricing with a barrel exchange agreement.
Other Enhancements
BP assumed credit requirements to Texas Gas Transmission on behalf of Rex Energy.
38
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Reserve Summary
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Projected Reserves YE17 –
Aries Strip Runs
(1,2)
40
(1)
Strip Pricing as of 11.27.2017 –
Oil: 2018: $57.11, 2019: $53.93, 2020: $51.94, 2021: $50.72, 2022: $50.21// Gas: 2018: $2.95, 2019: $2.91, 2020: $2.87, 2021:
$2.87, 2022: $2.88
(2)
PV10 estimates do not include hedges
NPV10 (MM$)
Net Reserves
(Bcfe)
YE17
YE17
PDP
$504,584
969
PNP
$19,482
32
PUD
$365,709
2,765
PROB
$2,657
82
Total
$892,432
3,848
YE17 Aries Strip Run contains Growth Plan development program along with ~$100MM net capital spend per year
program
until
2029.
Well
count
from
2021
2029
varies
from
18-26.
Most
wells
in
the
development
program
from
2021
2029
are
infills
that
are
already
proven
from
a
performance
standpoint.


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
$307
$9
$98
$71
$-
$20
$0
Butler
West Lawr
Moraine East
Warrior North
Westmoreland
$503
$9
$229
$131
[CELLRANGE]
$20
[CELLRANGE]
Butler
West Lawr
Moraine East
Warrior North
Westmoreland
(1)
Strip Pricing as of 11.27.2017  –
Oil: 2018: $57.11, 2019: $53.93, 2020: $51.94, 2021: $50.72, 2022: $50.21// Gas: 2018: $2.95, 2019: $2.91, 2020: $2.87, 2021: $2.87, 2022: $2.88
Growth Plan NPV10
Strip
(1)
by Area ($MM)
YE17 PDP
Only Growth Plan Run
(1)
YE17 Total Growth Plan Run
(1)
41
892 $MM
505 $MM


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
(1)
Strip Pricing as of 11.27.2017  –
Oil: 2018: $57.11, 2019: $53.93, 2020: $51.94, 2021: $50.72, 2022: $50.21// Gas: 2018: $2.95, 2019: $2.91, 2020: $2.87, 2021: $2.87, 2022: $2.88
YE17 PDP Only Growth Plan Run
(1)
YE17
Total Growth Plan Run
(1)
42
3,848 Bcfe
Growth Plan Net Strip
(1)
Reserves by Area (Bcfe)
969 Bcfe
2,508 Bcfe
11 Bcfe
1,099 Bcfe
196 Bcfe
34 Bcfe
Butler
West Lawr
Moraine East
Warrior North
Westmoreland
677 Bcfe
11 Bcfe
164 Bcfe
83 Bcfe
34 Bcfe
[CELLRANGE]
Butler
West Lawr
Moraine East
Warrior North
Westmoreland


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Growth Plan Reserves Data Sheet
43
Butler Legacy
Central
Butler Legacy
South
Moraine East
Warrior North
EUR (Bcfe)
21.3
21.7
13.0
6.8
EUR
(Mmboe)
3.6
3.6
2.2
1.1
%
Liquids
35%
28%
40%
49%
Lateral Length (ft.)
6,700
6,700
7,500
6,500
Well Cost ($MM)
$6.0
$6.0
$6.5
$6.8
Bcfe/1,000’
3.18
3.25
1.74
1.05
IRR @ Strip Pricing
31%
28%
21%
26%
IRR @ $3.00
gas / $60 oil
38%
34%
26%
35%


Reserves –
Key Takeaways
44
Rex continues to unlock more potential in Legacy Butler, Moraine East and Warrior North
Performed completion study with third party engineering firm to optimize frac
designs for
improvement in IPs and EURs
Currently completing wells with next generation frac
designs in Moraine East and Legacy
Butler
Frye wells, which were completed using optimized design, present a possibility of upside to
current type curves; Frye’s are currently producing at a higher gas rate on a per foot basis at
lower chokes in comparison to other wells
Warrior North completion study is currently ongoing
As presented in production performance slides, there is possible upside to 2017 type curves in
the near future; many wells in Legacy Butler are above 2017 type curves
Longer laterals in the 2018 drilling program present the opportunity to improve economics
Currently, Rex’s core assets are nearly fully delineated and HBP’d, providing the opportunity to
concentrate drilling on the best performing locations to maximize NPV.
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Financial Strategy & Development Plan
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Financial Strategy
46
Increase cash flow in 2018 to achieve cash flow neutrality in 2019 and 2020 while still
achieving moderate growth (5% -
15%)
Utilize existing rig and completion contracts through current terms while maintaining
efficiencies and minimizing termination fees
Select highest return locations while continuing to prove and exploit Moraine East
value
Optimize pad density, completion design and lateral length to achieve strongest return
Continue to optimize existing production
Continue strategy to improve key operational matrix for the company
Ability to access capital markets
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Growth Plan –
Well Activity
47
Well Count Breakdown by Asset Area
Drilling & Completion Capex Breakdown
Capex Breakdown by Asset Area
0
2
4
6
8
10
12
14
16
18
20
2018
2019
2020
Butler Legacy South
Butler Legacy Central
Moraine East
Warrior North
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
2018
2019
2020
Butler Legacy South
Butler Legacy Central
Moraine East
Warrior North
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
2018
2019
2020
Drilling
Completions


DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only
Growth Plan Key Metrics: 2017 –
2020
48
EBITDAX Growth ($MM)
LOE/Mcfe
184.1
255.2
288.5
297.3
2017
2018
2019
2020
$1.79
$1.58
$1.54
$1.53
2017
2018
2019
2020
$0.26
$0.18
$0.17
$0.17
2017
2018
2019
2020
$59.2
$123.0
$119.4
$123.0
2017
2018
2019
2020
Production Growth (Mmcfe/d)
Cash G&A/Mcfe


Financial Projections –
Growth Plan
49
2017A
2018E
2019E
2020E
Average
Daily Production (Mmcfe/d)
184.1
255.2
288.5
297.3
% Liquids
Production
38%
45%
46%
46%
Key Metrics
EBITDAX (000s)
$59,176
$122,994
$119,350
$122,968
LOE/Mcfe
$1.79
$1.58
$1.54
$1.53
G&A/Mcfe
$0.26
$0.18
$0.17
$0.17
Development Plan
CAPEX
(000s)
$133,484
$114,741
$68,469
$95,383
Commodity Price Assumptions
Oil
$49.97
$56.25
$54.25
$54.00
Natural Gas
$3.11
$2.88
$2.80
$2.80
Dominion South Basis Differential
($0.88)
($0.58)
($0.53)
($0.55)
C3+ NGLs (% of NYMEX)
62%
58%
52%
52%
Cash balance as of December 31, 2017 is $15.2 million.
Assumes sale of Westmoreland Non-Op Assets in 2018; estimated annual EBITDAX contribution of $3.5 million.
Term Loan balance as of December 31, 2017 totaled approximately $189.5 million.
Assumes deleveraging transaction.
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Financial Projections –
Reduced Plan
2017A
2018E
2019E
2020E
Average Daily Production (Mmcfe/d)
184.1
259.6
255.1
264.8
% Liquids Production
38%
44%
44%
44%
Key Metrics
EBITDAX (000s)
$59,176
$124,841
$96,719
$107,087
LOE/Mcfe
$1.79
$1.56
$1.60
$1.56
G&A/Mcfe
$0.26
$0.18
$0.19
$0.19
Development Plan
CAPEX (000s)
$133,484
$69,590
$67,250
$69,953
Commodity Price Assumptions
Oil
$49.97
$56.25
$54.25
$54.00
Natural Gas
$3.11
$2.88
$2.80
$2.80
Dominion South Basis Differential
($0.88)
($0.58)
($0.53)
($0.55)
50
Cash balance as of December 31, 2017 is $15.2 million.
Term Loan balance as of December 31, 2017 totaled approximately $189.5 million.
Assumes deleveraging transaction.
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Opportunities and Risks
51
Opportunities and Risks to Plan Achievement
Opportunities
Risks
Most recent base production has exceeded
production profile
Recent well
performance has exceeded current type-
curves
Continue to drive procurement efficiencies by
bundling services and driving competition
Maximize efforts to mitigate legacy production
declines
Continue to employ efficient and lean overhead
operations
Financial flexibility allows for acceleration while
HBP status allows for maximum capital efficiency
Commodity prices, ability to participate in improved
price environment
Ability to access capital markets
Availability and consistency of service crews when not
running a full 12-month development program
Performance and efficiency of processing and midstream
operations
Commodity prices and ability to hedge at attractive levels
Access to capital markets/ability to refinance delayed
draw term loan
Retaining technical staff and continuity of internal
resources
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Appendix: Hedge Positioning
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only


Hedge Position
(1)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Natural Gas
Oil & Condensate
C2
C3+ NGLs
Consolidated
2018
2019
2020
Avg.
Floor:
$2.97
Avg.
Floor:
$2.73
Avg.
Floor:
$47.68
Avg.
Floor:
$47.15
Avg.
Floor:
$12.93
Avg.
Floor:
$12.90
Avg.
Floor:
$33.30
Avg.
Floor:
$26.15
Avg.
Floor:
$2.70
Avg.
Floor:
$52.88
Avg.
Floor:
$12.79
Avg.
Floor:
$31.16
(1)
Hedging position as of 1/1/2018; percent hedged based on PDP
53
64%
60%
37%
DRAFT
FRE 408 Settlement Communication; Not admissible for any purpose; For discussion purposes only

Exhibit 99.2

JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

REX ENERGY CORPORATION

RESTRUCTURING TERM SHEET

January [], 2018

THIS NON-BINDING INDICATIVE TERM SHEET (THIS “TERM SHEET”) DESCRIBES THE MATERIAL TERMS OF PROPOSED RESTRUCTURING AND RECAPITALIZATION TRANSACTIONS (COLLECTIVELY, THE “RESTRUCTURING”) PURSUANT TO WHICH REX ENERGY CORPORATION (THE “COMPANY”) AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES AND ITS AFFILIATES (TOGETHER WITH THE COMPANY, THE “REX ENTITIES”) WILL RESTRUCTURE THEIR CAPITAL STRUCTURE THROUGH A VOLUNTARY [PRE-PACKAGED] PLAN OF REORGANIZATION (THE “PRE-PACKAGED CHAPTER 11 PLAN”) FILED IN CONNECTION WITH VOLUNTARY CASES (THE “CHAPTER 11 CASES”) COMMENCED BY CERTAIN OF THE REX ENTITIES (SUCH REX ENTITIES THAT FILE CHAPTER 11 CASES, THE “DEBTORS”) UNDER CHAPTER 11 OF TITLE 11 OF THE UNITED STATES CODE (THE “BANKRUPTCY CODE”) IN THE UNITED STATES BANKRUPTCY COURT FOR THE [VENUE]] (THE “BANKRUPTCY COURT”).1

THIS TERM SHEET DOES NOT INCLUDE A DESCRIPTION OF ALL OF THE TERMS, CONDITIONS, AND OTHER PROVISIONS THAT ARE TO BE CONTAINED IN THE PRE-PACKAGED CHAPTER 11 PLAN AND OTHER DEFINITIVE DOCUMENTATION GOVERNING THE RESTRUCTURING. SUCH DEFINITIVE DOCUMENTS SHALL SATISFY THE REQUIREMENTS OF ALL APPLICABLE SECURITIES LAWS, THE BANKRUPTCY CODE, AND THIS TERM SHEET.

THIS TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS) AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS AS TO ANY PLAN, IT BEING UNDERSTOOD THAT SUCH SOLICITATION, IF ANY, ONLY WILL BE MADE IN COMPLIANCE WITH APPLICABLE PROVISIONS OF SECURITIES, BANKRUPTCY AND/OR OTHER APPLICABLE LAWS.

THE COMPANY IS ALSO EXPLORING OUT OF COURT TRANSACTIONS WITH ITS LENDERS AND NOTHING HEREIN SHALL BE AN INDICATION THAT THE COMPANY HAS DETERMINED OR WILL DETERMINE TO SEEK RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE.

 

1  NTD: In-court process subject to resolution of the First Lien Term Loan (as defined below) acceptable to the Company and the Ad Hoc Committee (as defined below).


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

Overview
Restructuring Summary    The Rex Entities and certain Second Lien Noteholders (as defined below) (such holders, the “Consenting Noteholders”) have agreed to support the Restructuring. As described in greater detail herein, the Consenting Noteholders agree to exchange their Second Lien Notes (as defined below) through the Pre-Packaged Chapter 11 Plan (which each Consenting Noteholder shall support and with respect to which each Consenting Noteholder shall vote its Claims (as defined in section 101(5) of the Bankruptcy Code) to accept the Pre-Packaged Chapter 11 Plan), for certain debt and equity securities.
Implementation of the Restructuring   

The Restructuring shall be implemented through the Chapter 11 Cases and pursuant to the Pre-Packaged Chapter 11 Plan with the support of the ad hoc committee of Second Lien Noteholders represented by Akin Gump Strauss Hauer & Feld LLP (the “Ad Hoc Committee”).

 

To effectuate the Restructuring, certain parties, including the Company and the Consenting Noteholders, shall execute a Restructuring Support Agreement (the “RSA”) consistent with the material terms set forth herein.2 This Term Sheet shall be attached to, and incorporated into, the RSA.

 

The Chapter 11 Cases shall be funded by existing cash on hand in accordance with the terms of a cash collateral order acceptable to the Ad Hoc Committee.3

 

The effective date of the Restructuring (the “Effective Date”) will be the date on which all conditions to the effectiveness of the Pre-Packaged Chapter 11 Plan have been satisfied or waived in accordance with its terms and the Pre-Packaged Chapter 11 Plan has been substantially consummated.

Current Capital Structure    The current capital structure of the Company is as follows:
  

•  Indebtedness under that certain term loan agreement, dated as of April 28, 2017 (as may be amended, supplemented, amended and restated, or otherwise modified from time to time, the “Term Loan Agreement”), among the Company, as borrower, Angelo, Gordon Energy Servicer, LLC (“AGES”), as administrative agent (in such capacity, the “Administrative Agent”), AGES, as collateral agent, Macquarie Bank Limited, as issuing bank, and the lenders from time to time party thereto, comprised of a term loan (the “First Lien Term Loan”) in an aggregate principal amount outstanding of $143,500,000 as of June 30, 2017.

 

2  The RSA shall include, among other things: (i) certain milestones to be provided by the Ad Hoc Committee and (ii) a condition that resolution of the treatment of the First Lien Term Loan (as defined below) and any asserted “make-whole” claims shall be subject to the consent of the Ad Hoc Committee.
3 

NTD: Any in-court process without the support of the First Lien Term Loan will be premised upon nonconsensual use of cash collateral or DIP financing to be provided by the Ad Hoc Committee.

 

2


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

•  Indebtedness under that certain indenture, dated as of March 31, 2016 (as may be amended, supplemented, amended and restated, or otherwise modified from time to time, the “Second Lien Notes Indenture”), by and among the Company, the guarantors named therein, and Wilmington Trust, National Association as trustee (the “Indenture Trustee”), comprised of the Company’s 1.00%/8.00% Senior Secured Second Lien Notes due 2020 (collectively, such notes, the “Second Lien Notes,” and, the holders thereof, the “Second Lien Noteholders”) in an aggregate principal amount outstanding of $587,606,000 as of June 30, 2017.

  

•  Indebtedness under that certain indenture dated as of July 14, 2014 (as amended in the First Supplemental Indenture, dated as of March 31, 2016, and as may be further amended, supplemented, amended and restated, or otherwise modified from time to time, the “2022 Notes Indenture”), by and among the Company, the guarantors named therein, and Wilmington Trust, National Association as trustee, comprised of 6.250% Senior Notes due 2022 (the “2022 Notes”) in an aggregate principal amount outstanding of $5,363,000 as of June 30, 2017.

  

•  Indebtedness under that certain indenture dated as of December 12, 2012 (as amended in the First Supplemental Indenture, dated as of March 31, 2016, and as may be further amended, supplemented, amended and restated, or otherwise modified from time to time, the “2020 Notes Indenture”), by and among the Company, the guarantors named therein, and Wilmington Trust, National Association as trustee, comprised of 8.875% Senior Notes due 2020 (the “2020 Notes” and, together with the 2022 Notes, the “Unsecured Notes”) in an aggregate principal amount outstanding of $7,333,000 as of June 30, 2017.

  

•  Equity interests in the Company, including shares of common stock (“Common Stock”) and shares of 6.0% Convertible Perpetual Preferred Stock, Series A (“Preferred Stock” and, together with Common Stock, the “Existing Equity Interests”, and the holders of the Existing Equity Interests, the “Existing Equityholders”).

  

•  Direct and indirect interests in the Company and certain of its direct and indirect subsidiaries and affiliates, other than the Existing Equity Interests (such interests, the “Intercompany Interests”).

  

•  “First Lien Term Loan Claims” shall mean any and all Claims arising under or related to the Term Loan Agreement in respect of the First Lien Term Loans.

 

3


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

•  “Second Lien Notes Claims” shall mean any and all Claims arising under or related to the Second Lien Notes Indenture in respect of the Second Lien Notes.

  

•  “Unsecured Notes Claims” shall mean any and all Claims arising under or related to: (i) the 2022 Notes Indenture in respect of the 2022 Notes and (ii) the 2020 Notes Indenture in respect of the 2020 Notes.

Treatment of Claims and Interests
Administrative, Tax, Other Priority and Other Secured Claims4    All such claims shall be paid in full in cash on the Effective Date, or in the ordinary course of business as and when due, or otherwise receive treatment consistent with the provisions of section 1129(a) of the Bankruptcy Code, in each case, as determined by the Debtors with the consent of the Ad Hoc Committee (which consent shall not be unreasonably withheld, conditioned or delayed). Administrative expense claims shall include Restructuring Expenses (as defined below).
First Lien Term Loan Claims    The Term Loan Agreement shall be reinstated and rendered unimpaired in accordance with section 1124 of the Bankruptcy Code, provided, however, that any claim for “make-whole” payments (if any) asserted under the Term Loan Agreement shall be resolved in a manner and pursuant to terms acceptable to the Ad Hoc Committee.
Second Lien Notes Claims    The Second Lien Notes Claims shall be classified as: (i) allowed secured claims in an aggregate principal amount of $[    ] (the “Second Lien Secured Claims”) and (ii) allowed unsecured deficiency claims in an aggregate principal amount of $[    ] (the “Second Lien Deficiency Claims”).
  

•  On account of the Second Lien Secured Claims, each Second Lien Noteholder shall receive (a) its pro rata share of $[    ]5 million aggregate principal amount of new [8]% senior secured second lien notes due [2022] (the “New Notes”), [with interest payable in cash], such New Notes to be issued by the Reorganized Company (as defined below) as debt securities pursuant to a new indenture, and (b) its pro rata share of [x]% of newly issued common stock (the “New Common Stock”) of the reorganized Company (the “Reorganized Company”), subject to dilution on account of the MIP Equity (as defined below) and the New Common Stock issuable in respect of the Warrants (as defined below).

 

4  NTD: Claims subject to ongoing review and diligence by Akin and Blackhill.
5 

NTD: Amount of New Notes to be issued TBD and subject to (i) ongoing review and diligence by Akin and Blackhill and (ii) negotiations between the Ad Hoc Committee and AGES on behalf of the lenders party to the Term Loan Agreement.

 

4


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

•  The Second Lien Deficiency Claims shall be classified and shall vote together with the Unsecured Notes Claims, and shall share ratably with the Unsecured Notes Claims in [y]%6 of the New Common Stock, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants.

Unsecured Notes Claims    Holders of the Unsecured Notes Claims shall share ratably with the holders of the Second Lien Deficiency Claims in [y]% of the New Common Stock, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants.7
General Unsecured Claims    On the Effective Date, the holders of allowed general unsecured claims shall be unimpaired.8
Existing Equity Interests in the Company    The Existing Equityholders will receive the following consideration in the aggregate, to be allocated in a manner acceptable to the Company: (a) an aggregate amount equal to 3% of the New Common Stock, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants; and (b) 5-year warrants for 10%9 of the New Common Stock, subject to dilution on account of the MIP Equity, with a strike price to be set at an equity value at which the Second Lien Noteholders would receive a recovery equal to par plus accrued and unpaid interest as of the date of the commencement of the Chapter 11 Cases in respect of the Second Lien Notes (the “Warrants”). The terms of the Warrants are further described in Exhibit A hereto.
Intercompany Claims    All allowed Intercompany Claims shall be adjusted, continued, or discharged to the extent determined appropriate by the Debtors, with the consent of the Ad Hoc Committee (which consent shall not be unreasonably withheld, conditioned or delayed).
Intercompany Interests    All Intercompany Interests shall be reinstated for administrative convenience, or cancelled as determined by the Debtors, with the consent of the Ad Hoc Committee (which consent shall not be unreasonably withheld, conditioned or delayed).

 

6  NTD: The aggregate amount of [x]% and [y]% shall be equal to 97% of the New Common Stock of the Reorganized Company, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants.
7  NTD: Subject to further diligence regarding whether feasible in a prepackaged plan.
8  NTD: Subject to ongoing review and diligence by Akin and Blackhill.
9 

NTD: Subject to agreement on all terms of the Warrants.

 

5


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

Other Terms
Board Members/Governance    As of the Effective Date, the existing corporate governance documents will be amended and restated or terminated, as necessary, to, among other things, set forth the rights and obligations of the parties (consistent with this Term Sheet) (collectively, the “Corporate Governance Documents”). Subject to the terms of this Term Sheet, the RSA, and the Pre-Packaged Chapter 11 Plan, the Corporate Governance Documents shall be acceptable to the Ad Hoc Committee in their sole discretion.
   The board of directors of the Reorganized Company (the “New Board”) will be composed of seven (7) directors, one of whom shall be the chief executive officer of the Company (the “CEO”), and six (6) of whom shall be designated by the Ad Hoc Committee. The Ad Hoc Committee shall agree to meet and interview upon reasonable notice any existing members of the Board of Directors who wish to be interviewed. The members of the New Board (other than the CEO) shall initially be appointed seriatim by the members of the existing board of directors (or by members of the board of directors that have been appointed by members of the existing board of directors) and otherwise composed in a manner consistent with the provisions of the Term Loan Agreement.10
Management Incentive Plan    A management incentive plan (the “MIP”) reserving up to [10]% of the New Common Stock on a fully diluted basis (the “MIP Equity”), subject to any terms and conditions established from time to time determined by the New Board, shall be adopted by the Reorganized Company as of the Effective Date; provided, that (a) 25% of the MIP Equity shall be granted on the Effective Date and consist of time-vested restricted stock units and (b) 25% of the MIP Equity shall be granted on the Effective Date and consist of time-vested options.
SEC Reporting    The Reorganized Company shall continue as a public reporting company under applicable U.S. securities laws. The Reorganized Company shall continue to file annual, quarterly and current reports in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Stock Exchange    The Company shall use commercially reasonable efforts to list the New Common Stock for trading on The NASDAQ Capital Market, the NASDAQ Global Market, the New York Stock Exchange or any other national securities exchange reasonably acceptable to the Company and the Ad Hoc Committee with such listing to be effective on the Effective Date.

 

 

10 

The Restructuring transaction and recomposition of board to be structured to prevent the occurrence of a change of control under the Term Loan Agreement.

 

6


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

Registration Rights    The Reorganized Company shall enter into a registration rights agreement with any party that on or after the Effective Date holds 5% or more of the New Common Stock. The registration rights agreement shall contain customary terms and conditions, including provisions with respect to demand rights, piggyback rights and blackout periods and shall be acceptable to the Ad Hoc Committee in their reasonable discretion.
Restructuring Fees and Expenses    The Debtors shall pay all reasonable and documented fees and out of pocket expenses of one primary counsel to the Ad Hoc Committee, Akin Gump Strauss Hauer & Feld LLP (“Akin”), one local counsel to the Ad Hoc Committee (to the extent necessary), and one financial advisor to the Ad Hoc Committee, Blackhill Partners, LLC (“Blackhill”), in each case, that are due and owing after receipt of applicable invoices, without any requirement for the filing of fee or retention applications in the Chapter 11 Cases, and in accordance with the terms of the applicable engagement letters, with any balance(s) paid on the Effective Date (collectively, the “Restructuring Expenses”).
Tax Matters    The parties will work together in good faith and will use reasonable best efforts to structure and implement the Restructuring and the transactions related thereto in a tax efficient and cost-effective manner for the Company and the Second Lien Noteholders to the extent practicable. The parties intend to structure the Restructuring to preserve favorable tax attributes to the extent practicable and not materially adverse to the Second Lien Noteholders or the Company.
Employment Agreements11    The employment agreements and severance policies, and all employment, compensation and benefit plans, policies, and programs of the Company and its direct and indirect subsidiaries and its affiliates applicable to any of its employees and retirees, that are approved by, and with such additions, deletions, and modifications as may be required by, the Ad Hoc Committee in its sole discretion (collectively, the “Specified Employee Plans”), shall be maintained, continued in full force and effect and assumed by the Company (and assigned to the Reorganized Company, if necessary) pursuant to section 365(a) of the Bankruptcy Code, either by a separate motion filed with the Bankruptcy Court or pursuant to the terms of the Pre-Packaged Chapter 11 Plan. All claims arising from the Specified Employee Plans shall be treated in accordance with the Bankruptcy Code. Any plans, programs or arrangements that are not Specified Employee Plans relating to employees, compensation, or employee benefits shall be terminated or rejected, as appropriate.
   The Ad Hoc Committee shall propp vide the Company with a listing of the Specified Employee Plans by no later than ten (10) business days prior to the filing of the Chapter 11 Cases.

 

 

11 

NTD: Subject to ongoing review and diligence by Akin and Blackhill.

 

7


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

Indemnification Obligations    [The Rex Entities’ indemnification obligations in place as of the Effective Date, whether in the bylaws, certificates of incorporation or formation, limited liability company agreements, other organizational or formation documents, board resolutions, management or indemnification agreements, employment contracts, or otherwise, for the directors and the officers that are currently employed by, or serving on the board of directors of, any of the Rex Entities, as of the date of the filing of the Chapter 11 Cases, shall be assumed pursuant to the Pre-Packaged Chapter 11 Plan and the Debtors shall maintain their current D&O coverage in place as of the Effective Date for current and former directors and officers.
   On or about the Effective Date, the Rex Entities shall obtain tail D&O insurance coverage on market terms for their current and former directors and officers.]12
Definitive Documents    This Term Sheet does not include a description of all of the terms, conditions, and other provisions that will be contained in the definitive documentation governing the Restructuring. The material documents implementing the Restructuring shall be materially consistent with this Term Sheet and the RSA, as applicable, and shall be in form and substance reasonably acceptable to each of the Company and the Ad Hoc Committee (collectively, the “Definitive Documents”); provided that, subject to the terms of this Term Sheet, the RSA, and the Pre-Packaged Chapter 11 Plan, the Corporate Governance Documents shall be determined by, and acceptable to, the Ad Hoc Committee in their sole discretion.
Governing Law and Forum    New York governing law and consent to exclusive New York jurisdiction. Notwithstanding the preceding sentence, upon the commencement of the Chapter 11 Cases, the Bankruptcy Court shall have exclusive jurisdiction over all matters arising out of or in connection with the Restructuring.
Conditions Precedent to Consummation of the Pre-Packaged Chapter 11 Plan    The Pre-Packaged Chapter 11 Plan shall contain customary conditions to effectiveness in form and substance to be agreed upon by the Rex Entities and the Ad Hoc Committee, including, without limitation:
  

•  The Pre-Packaged Chapter 11 Plan and all documentation with respect to the Pre-Packaged Chapter 11 Plan and all documents contained in any supplement thereto, including any exhibits, schedules, amendments, modifications or supplements thereto, which shall be in form and substance reasonably acceptable to the Debtors and the Ad Hoc Committee, and otherwise consistent with the terms and conditions described in this Term Sheet or the RSA;

 

 

12  NTD: Subject to ongoing review and diligence by Akin and Blackhill.

 

8


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

•  Any Corporate Governance Documents, which shall be in form and substance acceptable to the Ad Hoc Committee in their sole discretion;

  

•  The Bankruptcy Court shall have entered an order in form and substance acceptable to the Debtors and the Ad Hoc Committee approving the disclosure statement related to the Pre-Packaged Chapter 11 Plan;

  

•  The order confirming the Pre-Packaged Chapter 11 Plan, in form and substance acceptable to the Debtors and the Ad Hoc Committee and otherwise consistent with the terms and conditions described in this Term Sheet or the RSA, as applicable, shall have been entered and shall have become a final order that is not stayed;

  

•  As of the Effective Date, the aggregate amount of all allowed or projected administrative expense and priority claims shall not exceed $[    ];13 and

  

•  The Debtors shall have paid the Restructuring Expenses in full, in cash.14

Releases    The Pre-Packaged Chapter 11 Plan shall include customary releases (including third party releases) and exculpation provisions, in each case, to the fullest extent permitted by law, for the benefit of the Rex Entities, [the Administrative Agent], the Indenture Trustee, the Ad Hoc Committee, the Consenting Noteholders, and the Company’s current and former officers and directors and each of such preceding entities’ directors, officers, current and former shareholders (regardless of whether such interests are held directly or indirectly), partners, managers, officers, principals, members, employees, agents, affiliates, advisory board members, parents, subsidiaries, predecessors, successors, heirs, executors and assignees, attorneys, financial advisors, investment bankers, accountants, consultants, and other professionals or representatives, each solely in their capacities as such, subject to a carveout for any act or omission that constitutes fraud, gross negligence, or willful misconduct.

 

 

 

13  NTD: Subject to ongoing review and diligence by Akin and Blackhill.
14 

NTD: Akin to explain rationale for assuming RSA in a prepack.

 

9


JD Comments 1/24 to AGSH&F Draft (1/22/18)

Subject to FRE 408

For Settlement Purposes Only

 

Fiduciary Out    Notwithstanding anything to the contrary herein, nothing in this Term Sheet shall require the Rex Entities, or any directors or officers of any of the Rex Entities (in such person’s capacity as a director or officer), shall not be required to take any action, or to refrain from taking any action, to the extent that taking such action or refraining from taking such action is reasonably likely to constitute a breach of such person’s or entity’s fiduciary obligations to maximize recovery for all of the Rex Entities’ stakeholders, which such entity or person owes to any other person or entity under applicable law.
Rating Agency    The Company will seek and obtain a rating for the New Notes at a reasonable cost from one rating agency reasonably acceptable to the Company and the Ad Hoc Committee.

 

10


EXHIBIT A

Warrant Term Sheet15

 

Amount    10% of the New Common Stock calculated on a fully-diluted basis as of the Effective Date, subject to dilution on account of the MIP Equity.
Strike Price    Strike price to be set at an equity value at which the Second Lien Noteholders would receive a recovery equal to par plus accrued and unpaid interest as of the date of the commencement of the Chapter 11 Cases in respect of the Second Lien Notes.
Term    Warrants shall expire unless otherwise exercised on the date that is five (5) years from the Effective Date.
Anti-Dilution    Simple arithmetic anti-dilution regarding the number of shares of New Common Stock to be issued upon exercise of the Warrants, e.g., for stock splits, new issuances of common stock and reclassifications (not economic anti-dilution with respect to the strike price for subsequent stock issuances below the strike price).
Change of Control    [Unless exercised in advance, the Warrants shall terminate upon the consummation of a transaction constituting a change of control (a “Change of Control Transaction”) at a price below the strike price with no payment or recovery by the Warrant; provided, that if a Change of Control Transaction takes place during the first 36 months following the Effective Date, then the holders of Warrants shall be paid an amount equal to the fair market value of the Warrants using Black Scholes model and considering various relevant factors and determined by an independent nationally recognized expert.]16
Warrant Agent    The Warrant agent shall be the Company’s transfer agent unless otherwise agreed by the Ad Hoc Committee and the Company.
Other    Warrants to be governed by a warrant agreement covering the foregoing terms and containing such other terms as agreed by the Ad Hoc Committee and the Company.

 

15  Capitalized terms used herein but not defined shall have the meaning ascribed to such terms in the Term Sheet.
16  NTD: Compromise proposal TBD

Exhibit 99.3

AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

REX ENERGY CORPORATION

RESTRUCTURING TERM SHEET

January [], 2018

THIS NON-BINDING INDICATIVE TERM SHEET (THIS “TERM SHEET”) DESCRIBES THE MATERIAL TERMS OF PROPOSED RESTRUCTURING AND RECAPITALIZATION TRANSACTIONS (COLLECTIVELY, THE “RESTRUCTURING”) PURSUANT TO WHICH REX ENERGY CORPORATION (THE “COMPANY”) AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES AND ITS AFFILIATES (TOGETHER WITH THE COMPANY, THE “REX ENTITIES”) WILL RESTRUCTURE THEIR CAPITAL STRUCTURE THROUGH A VOLUNTARY [PRE-PACKAGED] PLAN OF REORGANIZATION (THE “PRE-PACKAGED CHAPTER 11 PLAN”) FILED IN CONNECTION WITH VOLUNTARY CASES (THE “CHAPTER 11 CASES”) COMMENCED BY CERTAIN OF THE REX ENTITIES (SUCH REX ENTITIES THAT FILE CHAPTER 11 CASES, THE “DEBTORS”) UNDER CHAPTER 11 OF TITLE 11 OF THE UNITED STATES CODE (THE “BANKRUPTCY CODE”) IN THE UNITED STATES BANKRUPTCY COURT FOR THE [VENUE]] (THE “BANKRUPTCY COURT”).1

THIS TERM SHEET DOES NOT INCLUDE A DESCRIPTION OF ALL OF THE TERMS, CONDITIONS, AND OTHER PROVISIONS THAT ARE TO BE CONTAINED IN THE PRE-PACKAGED CHAPTER 11 PLAN AND OTHER DEFINITIVE DOCUMENTATION GOVERNING THE RESTRUCTURING. SUCH DEFINITIVE DOCUMENTS SHALL SATISFY THE REQUIREMENTS OF ALL APPLICABLE SECURITIES LAWS, THE BANKRUPTCY CODE, AND THIS TERM SHEET.

THIS TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS) AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS AS TO ANY PLAN, IT BEING UNDERSTOOD THAT SUCH SOLICITATION, IF ANY, ONLY WILL BE MADE IN COMPLIANCE WITH APPLICABLE PROVISIONS OF SECURITIES, BANKRUPTCY AND/OR OTHER APPLICABLE LAWS.

THE COMPANY IS ALSO EXPLORING OUT OF COURT TRANSACTIONS WITH ITS LENDERS AND NOTHING HEREIN SHALL BE AN INDICATION THAT THE COMPANY HAS DETERMINED OR WILL DETERMINE TO SEEK RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE.

 

1  NTD: In-court process subject to resolution of the First Lien Term Loan (as defined below) acceptable to the Company and the Ad Hoc Committee (as defined below).


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

Overview

 

Restructuring Summary    The Rex Entities and certain Second Lien Noteholders (as defined below) (such holders, the “Consenting Noteholders”) have agreed to support the Restructuring. As described in greater detail herein, the Consenting Noteholders agree to exchange their Second Lien Notes (as defined below) through the Pre-Packaged Chapter 11 Plan (which each Consenting Noteholder shall support and with respect to which each Consenting Noteholder shall vote its Claims (as defined in section 101(5) of the Bankruptcy Code) to accept the Pre-Packaged Chapter 11 Plan), for certain debt and equity securities.
Implementation of the Restructuring   

The Restructuring shall be implemented through the Chapter 11 Cases and pursuant to the Pre-Packaged Chapter 11 Plan with the support of the ad hoc committee of Second Lien Noteholders represented by Akin Gump Strauss Hauer & Feld LLP (the “Ad Hoc Committee”).

 

To effectuate the Restructuring, certain parties, including the Company and the Consenting Noteholders, shall execute a Restructuring Support Agreement (the “RSA”) consistent with the material terms set forth herein.2 This Term Sheet shall be attached to, and incorporated into, the RSA.

 

The Chapter 11 Cases shall be funded by existing cash on hand in accordance with the terms of a cash collateral order acceptable to the Ad Hoc Committee. 3

 

The effective date of the Restructuring (the “Effective Date”) will be the date on which all conditions to the effectiveness of the Pre-Packaged Chapter 11 Plan have been satisfied or waived in accordance with its terms and the Pre-Packaged Chapter 11 Plan has been substantially consummated.

Current Capital Structure   

The current capital structure of the Company is as follows:

 

•  Indebtedness under that certain term loan agreement, dated as of April 28, 2017 (as may be amended, supplemented, amended and restated, or otherwise modified from time to time, the “Term Loan Agreement”), among the Company, as borrower, Angelo, Gordon Energy Servicer, LLC (“AGES”), as administrative agent (in such capacity, the “Administrative Agent”), AGES, as collateral agent, Macquarie Bank Limited, as issuing bank, and the lenders from time to time party thereto, comprised of a term loan (the “First Lien Term Loan”) in an aggregate principal amount outstanding of $143,500,000 as of June 30, 2017.

 

 

2  The RSA shall include, among other things: (i) certain milestones to be provided by the Ad Hoc Committee and (ii) a condition that resolution of the treatment of the First Lien Term Loan (as defined below) and any asserted “make-whole” claims shall be subject to the consent of the Ad Hoc Committee.
3 

NTD: Any in-court process without the support of the First Lien Term Loan will be premised upon nonconsensual use of cash collateral or DIP financing to be provided by the Ad Hoc Committee.

 

2


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

 

•  Indebtedness under that certain indenture, dated as of March 31, 2016 (as may be amended, supplemented, amended and restated, or otherwise modified from time to time, the “Second Lien Notes Indenture”), by and among the Company, the guarantors named therein, and Wilmington Trust, National Association as trustee (the “Indenture Trustee”), comprised of the Company’s 1.00%/8.00% Senior Secured Second Lien Notes due 2020 (collectively, such notes, the “Second Lien Notes,” and, the holders thereof, the “Second Lien Noteholders”) in an aggregate principal amount outstanding of $587,606,000 as of June 30, 2017.

 

•  Indebtedness under that certain indenture dated as of July 14, 2014 (as amended in the First Supplemental Indenture, dated as of March 31, 2016, and as may be further amended, supplemented, amended and restated, or otherwise modified from time to time, the “2022 Notes Indenture”), by and among the Company, the guarantors named therein, and Wilmington Trust, National Association as trustee, comprised of 6.250% Senior Notes due 2022 (the “2022 Notes”) in an aggregate principal amount outstanding of $5,363,000 as of June 30, 2017.

 

•  Indebtedness under that certain indenture dated as of December 12, 2012 (as amended in the First Supplemental Indenture, dated as of March 31, 2016, and as may be further amended, supplemented, amended and restated, or otherwise modified from time to time, the “2020 Notes Indenture”), by and among the Company, the guarantors named therein, and Wilmington Trust, National Association as trustee, comprised of 8.875% Senior Notes due 2020 (the “2020 Notes” and, together with the 2022 Notes, the “Unsecured Notes”) in an aggregate principal amount outstanding of $7,333,000 as of June 30, 2017.

 

•  Equity interests in the Company, including shares of common stock (“Common Stock”) and shares of 6.0% Convertible Perpetual Preferred Stock, Series A (“Preferred Stock” and, together with Common Stock, the “Existing Equity Interests”, and the holders of the Existing Equity Interests, the “Existing Equityholders”).

 

•  Direct and indirect interests in the Company and certain of its direct and indirect subsidiaries and affiliates, other than the Existing Equity Interests (such interests, the Intercompany Interests”).

 

•  “First Lien Term Loan Claims” shall mean any and all Claims arising under or related to the Term Loan Agreement in respect of the First Lien Term Loans.

 

3


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

•  “Second Lien Notes Claims” shall mean any and all Claims arising under or related to the Second Lien Notes Indenture in respect of the Second Lien Notes.

 

•  “Unsecured Notes Claims” shall mean any and all Claims arising under or related to: (i) the 2022 Notes Indenture in respect of the 2022 Notes and (ii) the 2020 Notes Indenture in respect of the 2020 Notes.

Treatment of Claims and Interests

Administrative, Tax,

Other Priority and

Other Secured

Claims4

   All such claims shall be paid in full in cash on the Effective Date, or in the ordinary course of business as and when due, or otherwise receive treatment consistent with the provisions of section 1129(a) of the Bankruptcy Code, in each case, as determined by the Debtors with the consent of the Ad Hoc Committee. Administrative expense claims shall include Restructuring Expenses (as defined below).

First Lien Term Loan

Claims

   The Term Loan Agreement shall be reinstated and rendered unimpaired in accordance with section 1124 of the Bankruptcy Code, provided, however, that any claim for “make-whole” payments (if any) asserted under the Term Loan Agreement shall be resolved in a manner and pursuant to terms acceptable to the Ad Hoc Committee.

Second Lien Notes

Claims

  

The Second Lien Notes Claims shall be classified as: (i) allowed secured claims in an aggregate principal amount of $[    ] (the “Second Lien Secured Claims”) and (ii) allowed unsecured deficiency claims in an aggregate principal amount of $[    ] (the “Second Lien Deficiency Claims”).

 

•  On account of the Second Lien Secured Claims, each Second Lien Noteholder shall receive (a) its pro rata share of $[    ]5 million aggregate principal amount of new [8]% senior secured second lien notes due [2022] (the “New Notes”), [with interest payable in cash], such New Notes to be issued by the Reorganized Company (as defined below) as debt securities pursuant to a new indenture, and (b) its pro rata share of [x]% of newly issued common stock (the “New Common Stock”) of the reorganized Company (the “Reorganized Company”), subject to dilution on account of the MIP Equity (as defined below) and the New Common Stock issuable in respect of the Warrants (as defined below).

 

4  NTD: Claims subject to ongoing review and diligence by Akin and Blackhill.
5 

NTD: Amount of New Notes to be issued TBD and subject to (i) ongoing review and diligence by Akin and Blackhill and (ii) negotiations between the Ad Hoc Committee and AGES on behalf of the lenders party to the Term Loan Agreement.

 

4


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

•  The Second Lien Deficiency Claims shall be classified and shall vote together with the Unsecured Notes Claims, and shall share ratably with the Unsecured Notes Claims in [y]%6 of the New Common Stock, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants.

Unsecured Notes

Claims

   Holders of the Unsecured Notes Claims shall share ratably with the holders of the Second Lien Deficiency Claims in [y]% of the New Common Stock, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants.7

General Unsecured

Claims

   On the Effective Date, the holders of allowed general unsecured claims shall be unimpaired.8

Existing Equity

Interests in the

Company

   The Existing Equityholders will receive the following consideration in the aggregate, to be allocated in a manner acceptable to the Company: (a) an aggregate amount equal to 2% of the New Common Stock, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants (the “2% Equity”); and (b) 5-year warrants for [10]%9 of the New Common Stock, subject to dilution on account of the MIP Equity, with a strike price to be set at an equity value at which the Second Lien Noteholders would receive a recovery equal to par plus accrued and unpaid interest as of the date of the commencement of the Chapter 11 Cases in respect of the Second Lien Notes (the “Warrants” and, together with the 2% Equity, the Existing Equity Consideration”). The terms of the Warrants are further described in Exhibit A hereto. For the avoidance of doubt, the Existing Equity Consideration shall, in the aggregate, be (i) shared by both the holders of the Preferred Stock and the holders of the Common Stock and (ii) allocated among the holders of the Preferred Stock and the holders of the Common Stock in a manner acceptable to the Company.
Intercompany Claims    All allowed Intercompany Claims shall be adjusted, continued, or discharged to the extent determined appropriate by the Debtors, with the consent of the Ad Hoc Committee.

Intercompany

Interests

   All Intercompany Interests shall be reinstated for administrative convenience, or cancelled as determined by the Debtors, with the consent of the Ad Hoc Committee.

 

6  NTD: The aggregate amount of [x]% and [y]% shall be equal to 98% of the New Common Stock of the Reorganized Company, subject to dilution on account of the MIP Equity and the New Common Stock issuable in respect of the Warrants.
7  NTD: Subject to further diligence regarding whether feasible in a prepackaged plan.
8  NTD: Subject to ongoing review and diligence by Akin and Blackhill.
9 

NTD: Subject to agreement on all terms of the Warrants.

 

5


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

Other Terms

Board

Members/Governance

  

As of the Effective Date, the existing corporate governance documents will be amended and restated or terminated, as necessary, to, among other things, set forth the rights and obligations of the parties (consistent with this Term Sheet) (collectively, the “Corporate Governance Documents”). Subject to the terms of this Term Sheet, the RSA, and the Pre-Packaged Chapter 11 Plan, the Corporate Governance Documents shall be acceptable to the Ad Hoc Committee in their sole discretion.

 

The board of directors of the Reorganized Company (the “New Board”) will be composed of seven (7) directors, one of whom shall be the chief executive officer of the Company (the “CEO”), and six (6) of whom shall be designated by the Ad Hoc Committee. The Ad Hoc Committee shall agree to meet and interview upon reasonable notice any existing members of the Board of Directors who wish to be interviewed. The members of the New Board (other than the CEO) shall initially be appointed seriatim by the members of the existing board of directors (or by members of the board of directors that have been appointed by members of the existing board of directors) and otherwise composed in a manner consistent with the provisions of the Term Loan Agreement.10

Management

Incentive Plan

   A management incentive plan (the “MIP”) reserving up to [10]% of the New Common Stock on a fully diluted basis (the “MIP Equity”) shall be adopted by the Reorganized Company as of the Effective Date. Awards of MIP Equity, both in regard to the type (options, restricted stock awards, etc.) and the amount of such awards, pursuant to the MIP shall be determined by the New Board after the Effective Date.
SEC Reporting    The Reorganized Company shall continue as a public reporting company under applicable U.S. securities laws. The Reorganized Company shall continue to file annual, quarterly and current reports in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Stock Exchange    The Company shall use commercially reasonable efforts to list the New Common Stock for trading on The NASDAQ Capital Market, the NASDAQ Global Market, the New York Stock Exchange or any other national securities exchange reasonably acceptable to the Company and the Ad Hoc Committee with such listing to be effective on the Effective Date.

 

10 

The Restructuring transaction and recomposition of board to be structured to prevent the occurrence of a change of control under the Term Loan Agreement.

 

6


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

Registration Rights    The Reorganized Company shall enter into a registration rights agreement with any party that on or after the Effective Date holds 5% or more of the New Notes and/or the New Common Stock. The registration rights agreement shall contain customary terms and conditions, including provisions with respect to demand rights, piggyback rights and blackout periods and shall be acceptable to the Ad Hoc Committee in their sole discretion.

Restructuring Fees

and Expenses

   The Debtors shall pay all reasonable and documented fees and out of pocket expenses of one primary counsel to the Ad Hoc Committee, Akin Gump Strauss Hauer & Feld LLP (“Akin”), one local counsel to the Ad Hoc Committee (to the extent necessary), and one financial advisor to the Ad Hoc Committee, Blackhill Partners, LLC (“Blackhill”), in each case, that are due and owing after receipt of applicable invoices, without any requirement for the filing of fee or retention applications in the Chapter 11 Cases, and in accordance with the terms of the applicable engagement letters, with any balance(s) paid on the Effective Date (collectively, the “Restructuring Expenses”).
Tax Matters    The parties will work together in good faith and will use reasonable best efforts to structure and implement the Restructuring and the transactions related thereto in a tax efficient and cost-effective manner for the Company and the Second Lien Noteholders to the extent practicable. The parties intend to structure the Restructuring to preserve favorable tax attributes to the extent practicable and not materially adverse to the Second Lien Noteholders or the Company.

 

Employment

Agreements11

   The employment agreements and severance policies, and all employment, compensation and benefit plans, policies, and programs of the Company and its direct and indirect subsidiaries and its affiliates applicable to any of its employees and retirees, that are approved by, and with such additions, deletions, and modifications as may be required by, the Ad Hoc Committee in its sole discretion (collectively, the “Specified Employee Plans”), shall be maintained, continued in full force and effect and assumed by the Company (and assigned to the Reorganized Company, if necessary) pursuant to section 365(a) of the Bankruptcy Code, either by a separate motion filed with the Bankruptcy Court or pursuant to the terms of the Pre-Packaged Chapter 11 Plan. All claims arising from the Specified Employee Plans shall be treated in accordance with the Bankruptcy Code. Any plans, programs or arrangements that are not Specified Employee Plans relating to employees, compensation, or employee benefits shall be terminated or rejected, as appropriate. For the avoidance of doubt,

 

11 

NTD: Subject to ongoing review and diligence by Akin and Blackhill.

 

7


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

  

the employment agreements and the change of control policy, executive severance policy, and any other employment, compensation or benefit plan, policy, and program of the Company that provides for enhanced payouts or entitlements or for the acceleration of vesting upon a change of control shall be modified such that the Restructuring shall not constitute a change of control thereunder.

 

Employment agreements, including such additions, deletions, and modifications thereto as may be required by the Ad Hoc Committee, shall be in form and substance acceptable to the Ad Hoc Committee in its sole discretion and shall be agreed to on or prior to the filing of the Chapter 11 Cases.

 

The Ad Hoc Committee, in its sole discretion, shall determine whether to modify, assume and/or reject employment, compensation and benefit plans, policies (including severance policies), and programs of the Company and its direct and indirect subsidiaries and its affiliates on or prior to the filing of the plan supplement to the Pre-Packaged Chapter 11 Plan.

Indemnification

Obligations

  

[The Rex Entities’ indemnification obligations in place as of the Effective Date, whether in the bylaws, certificates of incorporation or formation, limited liability company agreements, other organizational or formation documents, board resolutions, management or indemnification agreements, employment contracts, or otherwise, for the directors and the officers that are currently employed by, or serving on the board of directors of, any of the Rex Entities, as of the date of the filing of the Chapter 11 Cases shall be assumed pursuant to the Pre-Packaged Chapter 11 Plan and the Debtors shall maintain their current D&O coverage in place as of the Effective Date for current and former directors and officers.

 

On or about the Effective Date, the Rex Entities shall obtain tail D&O insurance coverage on market terms for their current and former directors and officers.]12

Definitive Documents    This Term Sheet does not include a description of all of the terms, conditions, and other provisions that will be contained in the definitive documentation governing the Restructuring. The material documents implementing the Restructuring shall be materially consistent with this Term Sheet and the RSA, as applicable, and shall be in form and substance reasonably acceptable to each of the Company and the Ad Hoc Committee (collectively, the “Definitive Documents”); provided that, subject to the terms of this Term Sheet, the RSA, and the Pre-Packaged Chapter 11 Plan, the Corporate Governance Documents shall be determined by, and acceptable to, the Ad Hoc Committee in their sole discretion.

 

12  NTD: Subject to ongoing review and diligence by Akin and Blackhill.

 

8


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

Governing Law and

Forum

   New York governing law and consent to exclusive New York jurisdiction. Notwithstanding the preceding sentence, upon the commencement of the Chapter 11 Cases, the Bankruptcy Court shall have exclusive jurisdiction over all matters arising out of or in connection with the Restructuring.

Conditions Precedent

to Consummation of

the Pre-Packaged

Chapter 11 Plan

  

The Pre-Packaged Chapter 11 Plan shall contain customary conditions to effectiveness in form and substance to be agreed upon by the Rex Entities and the Ad Hoc Committee, including, without limitation:

 

•  The Pre-Packaged Chapter 11 Plan and all documentation with respect to the Pre-Packaged Chapter 11 Plan and all documents contained in any supplement thereto, including any exhibits, schedules, amendments, modifications or supplements thereto, which shall be in form and substance acceptable to the Debtors and the Ad Hoc Committee, and otherwise consistent with the terms and conditions described in this Term Sheet or the RSA;

 

•  Any Corporate Governance Documents, which shall be in form and substance acceptable to the Ad Hoc Committee in their sole discretion;

 

•  The Bankruptcy Court shall have entered an order in form and substance acceptable to the Debtors and the Ad Hoc Committee approving the disclosure statement related to the Pre-Packaged Chapter 11 Plan;

 

•  The order confirming the Pre-Packaged Chapter 11 Plan, in form and substance acceptable to the Debtors and the Ad Hoc Committee and otherwise consistent with the terms and conditions described in this Term Sheet or the RSA, as applicable, shall have been entered and shall have become a final order that is not stayed;

 

•  As of the Effective Date, the aggregate amount of all allowed or projected administrative expense and priority claims shall not exceed $[    ];13 and

 

•  The Debtors shall have paid the Restructuring Expenses in full, in cash.

 

13 

NTD: Subject to ongoing review and diligence by Akin and Blackhill.

 

9


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

Releases    The Pre-Packaged Chapter 11 Plan shall include customary releases (including third party releases) and exculpation provisions, in each case, to the fullest extent permitted by law, for the benefit of the Rex Entities, [the Administrative Agent], the Indenture Trustee, the Ad Hoc Committee, the Consenting Noteholders, and the Company’s current and former officers and directors and each of such preceding entities’ directors, officers, current and former shareholders (regardless of whether such interests are held directly or indirectly), partners, managers, officers, principals, members, employees, agents, affiliates, advisory board members, parents, subsidiaries, predecessors, successors, heirs, executors and assignees, attorneys, financial advisors, investment bankers, accountants, consultants, and other professionals or representatives, each solely in their capacities as such, subject to a carveout for any act or omission that constitutes fraud, gross negligence, or willful misconduct.

 

Fiduciary Out    Notwithstanding anything to the contrary herein, the Rex Entities shall be entitled, at any time prior to the entry by the Bankruptcy Court of an order confirming the Pre-Packaged Chapter 11 Plan, to accept or pursue (but not to solicit or initiate of their own accord): (i) a competing plan of reorganization or other financial and/or corporate restructuring of the Rex Entities; (ii) the issuance, sale or other disposition of any equity or debt interests, or any material assets, of the Rex Entities; or (iii) a merger, consolidation, business combination, liquidation, recapitalization, any debt or equity financing or refinancing, or similar transaction involving the Rex Entities (each, an “Alternative Transaction”), in each case to the extent the board of directors of the Company determines, based on the advice of outside legal counsel and outside financial advisors, in good faith, and consistent with their fiduciary duties, that (a) such Alternative Transaction best maximizes value for the Rex Entities and their stakeholders, and (b) proceeding with the Pre-Packaged Chapter 11 Plan and Restructuring would be inconsistent with the applicable fiduciary duties of the board of directors of the Company, and provided that the Rex Entities shall have first exercised any applicable termination right in the RSA prior to the date on which the Rex Entities enter into a definitive agreement in respect of such an Alternative Transaction or make a public announcement regarding their intention to do so. The Rex Entities shall give Akin not less than three (3) business days’ prior written notice before exercising such termination right in accordance with the RSA. At all times prior to the date on which the Rex Entities enter into a definitive agreement in respect of such an Alternative Transaction or make a public announcement regarding their intention to do so, the Rex Entities shall (x) provide to Akin and Blackhill a copy of any written offer or proposal (and notice and a description of any oral offer or proposal) for such Alternative Transaction within three (3) business days of the Rex Entities’ or their advisors’ receipt of such offer or proposal and (y)

 

10


AGSH&F Draft (1/26/18)

Subject to FRE 408

For Settlement Purposes Only

 

   provide such information to Akin and Blackhill regarding such discussions (including copies of any materials provided to such parties hereunder) as necessary to keep Akin and Blackhill contemporaneously informed as to the status and substance of such discussions.
Rating Agency    The Company will seek and obtain a rating for the New Notes at a reasonable cost from one rating agency reasonably acceptable to the Company and the Ad Hoc Committee.

 

11


EXHIBIT A

Warrant Term Sheet14

 

Amount    [10]% of the New Common Stock calculated on a fully-diluted basis as of the Effective Date, subject to dilution on account of the MIP Equity.
Strike Price    Strike price to be set at an equity value at which the Second Lien Noteholders would receive a recovery equal to par plus accrued and unpaid interest as of the date of the commencement of the Chapter 11 Cases in respect of the Second Lien Notes.
Term    Warrants shall expire unless otherwise exercised on the date that is five (5) years from the Effective Date.
Anti-Dilution    Simple arithmetic anti-dilution regarding the number of shares of New Common Stock to be issued upon exercise of the Warrants, e.g., for stock splits, new issuances of common stock and reclassifications (not economic anti-dilution with respect to the strike price for subsequent stock issuances below the strike price).
Change of Control    Unless exercised in advance, the Warrants shall terminate upon the consummation of a transaction constituting a change of control (a “Change of Control Transaction”) at a price below the strike price with no payment or recovery by the Warrant; provided, that if a Change of Control Transaction takes place during the first 3 months following the Effective Date, then the holders of Warrants shall be paid an amount equal to the value of the Warrants using the Black Scholes model with factors and parameters to be agreed upon by the Company and the Ad Hoc Committee.
Warrant Agent    The Warrant agent shall be the Company’s transfer agent unless otherwise agreed by the Ad Hoc Committee and the Company.
Other    Warrants to be governed by a warrant agreement covering the foregoing terms and containing such other terms as agreed by the Ad Hoc Committee and the Company.

 

 

14  Capitalized terms used herein but not defined shall have the meaning ascribed to such terms in the Term Sheet.

Exhibit 99.4

DRAFT

SUBJECT TO FRE 408

FOR SETTLEMENT PURPOSES ONLY

 

LOGO

2L Noteholder Proposal Administrative Agent Prepared to Recommend to First Lien Group(1) Rex Choice of:         Modified Option COption 1Option 2Option 3 FeeNoneNone None $4.5MM (1.5% on $300MM facility) Delayed Draw CommitmentNA – terminated see belowNA – terminated, see belowSameApril 28, 2019 Term. Date LC DelayedApril 23, 2019 (subject to Issuing Bank’s NA – cash funded, see belowNA – cash funded, see belowSame Draw Eventconsent) No change from existing facility. CovenantsTemporary waiver if necessary to No change from existing facility SameSame accommodate $75MM draw. Amendment No morethan $125MM at OpCo No morethan 8% cash interest rate Additional PIK rate TBD Take-BackMaturity extended to 1L maturity + 6 $200MM – 8% cash coupon at OpCo SameSame Papermonths TBD Restricted Payments tests governing ability to pay cash interest Acceptable documentation/intercreditor No change from existing facility except clean up, including incorporation of LCs into leverage ratios OtherSameSame Same Need year end update on financials and reserves Subject to committee approvals Deferral Fee$2.0MM$1.5MM (0.5% on $300MM facility)$8.5MM (2.83% on $300MM facility)$10.5MM (3.5% on $300MM facility) Make- WholeAdjustment to Yield Maint. One quarter extensionNon-call lifeThree quarter extensionFour quarter extension Period Additional draw of $75MM andAdditional draw of full facility amount termination of delayed drawand termination of delayed draw OtherSameNA commitment, 1-2Q18 covenants adjustedcommitment. 1-2Q18 covenants adjusted as necessaryas necessary. (1)Assumes achieved through majority consent under 1L credit agreement. If, however, greater than majority consent, or unanimity, is required for an in-court reorganization, then delayed draw availability and/or amounts drawn under Options B and C will likely be proportionately reduced by the percentage represented by non-consenting lenders. All subject to legal and business due diligence, approvals and documentation.



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