Rex lands Shell Appalachia acreage

Marcellus deal: Rex purchase from Shell to double presence in region

Rex Energy has struck a $120 million deal with Shell for a swath of acreage in Pennsylvania and Ohio prospective for the Marcellus and Utica shales.

The sale of 207,000 net acres is the latest unconventionals divestiture for the Anglo-Dutch supermajor, which is considered to have largely struck out on US shales and has been slimming down its position.

Last year Shell had to write down some $2 billion in US shale assets as it began selling off positions in the Mississippi Lime in Kansas, the Utica shale in Ohio and the Sandwash Niobrara basins in Colorado.

It sold off its Eagle Ford position to Sanchez Energy earlier this year in a $639 million deal and is rumoured to be in talks to sell off a 50% stake in a Haynesville shale joint venture with Encana.

The latest deal is expected to close in September and is subject to customary approvals and adjustments.

For its part, Rex said the deal more than doubles its position in what it calls the Butler area and will provide opportunities for both liquids and gas development.

The US independent also announced a $125 million share sale that it said will help fund the purchase and will contribute to capital spending.

"The proximity of the Shell acreage to our Butler Operated Area, combined with our solid operating history, strong recent production results, and the attractive economics of our projects in the area made this transaction a natural fit for Rex Energy," chief executive Tom Stabley said.

"With this transaction, we can strategically expand our development programme ... which we believe will bring significant upside benefits."

Rex shares closed down about 5% at $14.38 in New York.

The area boasts about 16 million cubic feet per day of resources already producing or brought online with minimal cost, as well as estimated proven reserves of 21 billion cubic feet equivalent.

The area, also prospective for the Upper Devonian/Burkett shales, contains about 240 "liquids-rich" drilling locations expected to eventually expand to 400 through additional acquisitions and leasing, Rex said.

Nearby acreage in the Utica shale will also allow for dry gas development, the company continued.

Rex plans to devote one or two rigs to begin developing the areas starting in 2015.

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