Each one in plain English, with the numbers worked through for a shareholder.
15 Mar 2016material agreement▼ BadMajor
On March 14, 2016 Rex signed a Tenth Amendment to its bank credit agreement. It now allows up to $681 million of new second-lien notes for the exchange offer (up from $480 million), raises the mortgage requirement on oil and gas properties from 90% to 95% (100% for certain Moraine East and Warrior North properties), and caps balance-sheet cash at $15 million, with any excess used to pay down the credit facility. Rex told lenders it does not expect to meet the current-ratio covenant at March 31, 2016 and received a waiver for that quarter. Separately, the borrowing base falls from $200 million to $190 million from April 1, 2016, and any borrowings above that level are to be repaid on April 1. This is another tightening of the bank terms set in the February Ninth Amendment.
On March 1, 2016 Rex signed a joint development agreement with OhPa Drillco (a Benefit Street Partners affiliate) covering 58 wells in Moraine East and Warrior North. Drillco funds 15% of costs in Moraine East and 65% in Warrior North in exchange for matching working interests, with total consideration expected at $175 million, $37 million of it committed at closing for the first 22 wells. Rex expects about $20 million of reimbursement once the first 15 wells are flowing. The attached press release also says the exchange offer for the 8.875% 2020 and 6.250% 2022 notes was extended to March 22, 2016; tenders so far were about $137.8 million (39.38%) of the 2020 notes and $129.8 million (39.95%) of the 2022 notes, offered for up to $480 million of new 10.00% second-lien notes and 10,125,000 shares.
Nasdaq told Rex on Feb 25, 2016 that its stock had closed below $1.00 for 30 consecutive business days, breaching a listing rule. Trading is unaffected for now, and Rex has until Aug 23, 2016 to get back above $1.00 for 10 straight days, with a possible further 180 days if it moves to the Nasdaq Capital Market. Rex says it is considering options including a reverse stock split or a transfer to the Capital Market.
On Feb 3, 2016 Rex signed a Ninth Amendment cutting the credit facility borrowing base from $350 million to $200 million. It permits up to $480 million of new second-lien notes for a note exchange, requires mortgages on 90% of oil and gas properties (from 80%), and raises borrowing costs by 75 bps. The same filing gives preliminary 2015 results: production averaged 195.8 MMcfe/d (up 26.8%), revenues fell with lower prices, and Rex expects a $340-350 million impairment and a net loss to common shareholders of $365-385 million. The reduced borrowing base reverses the earlier $350 million level; the amendment also sets up the exchange offer for the 2020 and 2022 notes.
Rex signed an Eighth Amendment to its revolving credit agreement on Sept 4, 2015, and the bank group reaffirmed the $350 million borrowing base set in the Seventh Amendment. The amendment lets Rex spend up to $25 million in total on buying back its stock or senior notes, if it keeps at least $200 million of liquidity and does not use borrowed money for it. It also raises the cap on Eurodollar borrowings from six to ten and ties hedging limits to total proved reserves. Permission to buy back is not a decision to do so; the filing does not say any repurchase has been made.
Rex agreed on June 18, 2015 to sell its entire 60% stake in Water Solutions Holdings (including Keystone Clearwater Solutions) to American Industrial Water, an affiliate of American Water Works. The deal is valued at about $130 million including cash and debt, and Rex expects roughly $66 million of net proceeds after taxes, to be used to pay down the revolver and for general purposes. This completes the sale process that was open in the context (RBC advising); closing still needs Hart-Scott-Rodino antitrust clearance, and the revolver lenders waived a restriction on this type of sale on June 15.
Rex filed a registration statement (Form S-4) for an exchange offer, letting holders swap the $325 million of 6.250% senior notes due 2022 issued July 17, 2014 for identical notes registered with the SEC and freely tradable. This is the registered exchange offer for the 2022 notes that was still open in the context; the terms are the same, with no new money raised and no change in the amount of debt. The expiration date is left blank in this filing.
Rex signed a participation agreement on March 30, 2015 with ArcLight affiliate AL Marcellus Holdings under which ArcLight funds well costs for 32 designated Butler Operated Area wells in return for a 35% working interest, valued at about $67 million ($16.6 million received at closing per the press release). ArcLight's interest drops to 17.5% if return thresholds are met, and it has an option on 17 more Moraine East wells in 2016 at 20%. This follows the December 2014 search for a Moraine East partner. Rex also signed a Seventh Amendment on March 27, 2015 setting the borrowing base at $350 million (down from $400 million) and changing the senior secured debt to EBITDAX limit to 1.75x for Q4 2014 and 3.00x from March 31, 2015. The release cuts 2015 operating capital spending to $135-$145 million and 2015 production guidance to 185-195 MMcfe/d (from 196-205).
On December 16, 2014 Rex signed a Sixth Amendment to its bank credit agreement, replacing the old leverage test with a limit on net senior secured debt of 1.75 times EBITDAX through June 30, 2016, after which a total net debt limit of 4.25 times applies. The company says it expects to exit 2014 with no borrowings on the facility. The accompanying release set 2015 operating capital spending at $180-$220 million (about 44% below the 2014 midpoint), 2015 production guidance of 196-205 MMcfe/d, and said Rex has hired RBC Capital Markets to pursue a sale of its 60% stake in Keystone Clearwater Solutions and is still seeking a joint venture partner for Moraine East.
Rex closed the Shell (SWEPI) acquisition on September 9, 2014: about 208,000 gross (207,000 net) acres in western Pennsylvania and eastern Ohio, 100% working interest and operatorship, for $120 million in cash (subject to post-closing adjustments). The press release says it was funded primarily from the recent convertible perpetual preferred stock offering, so that offering evidently went ahead (size not stated here). Separately, a Fifth Amendment to the credit agreement on September 12 raised the borrowing base from $293.75 million to $400 million, pushed maturity to September 12, 2019, and removed the interest coverage ratio; the company says nothing is currently borrowed. It also plans a third Butler rig in early 2015, focused on the newly acquired Moraine East area.
Rex Energy's subsidiary signed new gas gathering, processing and liquids fractionation/marketing agreements with MarkWest for its Keystone Complex in Butler County, PA, replacing the earlier arrangements. The main term runs through November 30, 2026 (then year-to-year unless a party gives 12 months' notice), at fixed fees, with priority processing rights of up to 280 MMcf/d once Bluestone III is built and up to 405 MMcf/d once Bluestone IV is built. This continues the fixed-fee MarkWest processing structure already in place.
Rex Energy agreed on August 11, 2014 to buy about 208,000 gross (207,000 net) acres in western Pennsylvania and eastern Ohio from Shell affiliate SWEPI, LP, with a 100% working interest and operatorship, for about $120 million in cash. Closing is expected in September 2014, and either side can terminate if it has not closed by September 15, 2014. The press release says it expands the Butler Operated Area and includes about 16 MMcf/d of production; the company also announced an intended offering of convertible perpetual preferred stock via depositary shares, whose size and pricing are not in this filing and which would add a new class of equity.
Rex Energy sold $325 million of 6.250% senior unsecured notes due August 1, 2022 (upsized from the $250 million announced July 14), at 98.28% for about $318.8 million net, closing July 17, 2014. It used part of the proceeds to repay all revolver borrowings, with the rest for general corporate purposes. Interest is due Feb 1 and Aug 1 from Feb 1, 2015. Rex agreed to offer registered exchange notes within 360 days, or pay 1% extra interest. The notes rank behind the secured revolver.
Rex Energy signed a Third Amendment to its credit agreement on July 11, 2014: Royal Bank of Canada replaces KeyBank as administrative agent and issuing bank, and the dollar cap on senior debt securities is removed, leaving only the financial covenants as the limit. It also announced a planned $250 million private offering of senior notes due 2022, with proceeds to repay all revolver borrowings and for general corporate purposes, and reaffirmed 2014 guidance.
Rex Energy's bank group raised the borrowing base on its senior secured credit facility from $325 million to $375 million, and lender commitments from $215 million to $375 million, through a Second Amendment dated March 27, 2014. The amendment also lowers the pricing grid and adds two banks. This reverses the April 2013 cut in commitments to $215M; the press release attributes the increase to drilling success and reserve and production growth.
Rex Energy filed a registration statement (Form S-4) to swap up to $350 million of its 8.875% senior notes due 2020 (the $250M issued Dec 12, 2012 and the $100M issued Apr 26, 2013) for identical notes registered with the SEC. This is the exchange offer promised in the notes' registration rights; terms are otherwise unchanged and the filing shows no new money raised. The expiration date was left blank.
Rex sold an additional $100 million of its 8.875% senior notes due 2020 at 105% of face value (plus accrued interest from December 12, 2012), for net proceeds of about $102.8 million, to fund part of 2013 capital spending and for general corporate purposes. It also cut the maximum commitments under its revolver from $300 million to $215 million, effective on closing. This adds to the $250 million of notes issued in December, bringing the notes to $350 million in total, and trades some bank capacity for bond debt.
Rex replaced its senior credit facility with an amended and restated secured revolver (KeyBank as agent) maturing March 27, 2018. The borrowing base is $325 million, but lender commitments are limited to $300 million, and the facility is secured by mortgages on oil and gas properties. It keeps the 4.25 to 1.00 debt to EBITDAX limit and also requires EBITDAX to interest of at least 3.0 to 1.0. This supersedes the facility last amended in November 2012 and follows the December 2012 repayment of the revolver with note proceeds.
Rex closed a private sale of $250 million of 8.875% senior unsecured notes due December 1, 2020, with net proceeds of about $242.8 million. The filing says the money was used to repay all revolving credit borrowings, repay in full and terminate the second lien term loan, and for general corporate purposes. This completes the notes offering announced in November and removes the second lien loan from the debt structure; the new notes rank behind the secured bank debt, and Rex must offer to swap them for registered notes within about 360 days.
Rex amended its senior and second lien credit agreements (11th and 3rd amendments, effective Nov 12, 2012) so the cap on total debt to EBITDAX of 4.25 to 1.00 applies to quarters ending after December 31, 2012. It also published interim proved reserves of 612.1 Bcfe at Oct 31, 2012 (up 67% from year-end 2011, or 34% excluding ethane), a preliminary 2013 budget with 2013 production growth guided at 34%-40%, and recast its 2011 and 2010 financials into two segments (exploration and production, and field services) with no change to revenue or net loss. It also announced plans for a private offering of senior notes due 2020, which is the financing that followed in December.
Rex reported its first Ohio Utica well, the Brace #1H in Carroll County, at 1,094 Boe/d on its first day of sales and 1,008 Boe/d over five days (assuming full ethane recovery). The company says Rex has about 15,400 net acres there and plans nine more drills in 2013. It also lowered production guidance: third quarter is now 70-72 MMcfe/d (was 73-76) and full year 66-69 MMcfe/d, blaming commissioning and maintenance problems at the MarkWest-run Bluestone/Sarsen plant and its own choice to defer some Butler output to test longer shut-ins.
Rex's banks raised the senior credit facility borrowing base by $25 million, from $265 million to $290 million, which the company's press release attributes to drilling success and reserve and production growth. The second lien agreement was also amended to shorten the required hedging period from 36 to 24 months. This continues the string of borrowing base increases (from $240M in December 2011).
With the Keystone sale to a MarkWest subsidiary now closed, Rex's subsidiary R.E. Gas and Summit signed a second amendment to the gas gathering and processing agreement with Keystone. It extends the term, commits their gas in a designated area to Keystone, adds priority capacity at the Sarsen and Bluestone plants, and replaces the percent-of-proceeds fee for liquids with a fixed fee that rises over time. This resolves the pending Keystone sale and keeps Rex as a customer of the plants it no longer part-owns; the filing does not give the dollar effect.
Rex's subsidiary R.E. Gas, which holds a 28% stake in the Keystone Midstream joint venture, agreed with Stonehenge and Summit to sell Keystone to MarkWest for $512 million in cash in total (subject to working-capital and debt adjustments), shared among the holders by their ownership ratios. Closing needs approvals, repayment of Keystone's bank debt and antitrust clearance; either side may terminate if it has not closed within 90 days. Rex also raised its senior borrowing base by $10 million to $265 million, lifted its allowed midstream/infrastructure investments to $55 million cash (and the same increase in its second lien agreement), amended its bylaws, and re-elected six directors and ratified KPMG at the May 10 annual meeting, when 52,902,996 shares were outstanding (as of the March 26 record date).
Rex priced a public offering of 7,000,000 new common shares at $9.25 each (underwriters have an option for up to 1,050,000 more), expected to close February 6, 2012. The company says net proceeds of about $61.3 million will repay borrowings under its senior credit facility, which means more shares outstanding for existing holders (inference: dilution) and less bank debt.
On December 22, 2011, Rex signed a $100.0 million second lien term loan with KeyBank as agent, of which $50.0 million is initially available and up to $50.0 million more may be added on request; the initial borrowings mature March 28, 2016. Interest is the base rate or adjusted LIBOR plus a margin (LIBOR loans: 6.0% for the first year, then 7.0%). Proceeds are to fund oil and gas lease acquisitions in Ohio and Pennsylvania, repay the senior credit facility and for general purposes. Rex also amended the senior credit facility, raising its borrowing base from $240.0 million to $255.0 million and relaxing the leverage ratio for one year. This adds a layer of debt ranking behind the senior facility, and the new loan is secured by mortgages on subsidiaries' oil and gas properties.
On August 9, 2011, Rex's subsidiary R.E. Gas Development agreed to sell natural gas to BP Energy at delivery points in Pennsylvania. The minimum volume is 17,500 MMBtu per day from March 1, 2012 to December 31, 2012 and 59,500 MMBtu per day after January 1, 2013, with the term ending by October 31, 2022 at the latest. Prices are tied to Dominion index prices less marketing fees and reservation charges. Rex guaranteed its subsidiary's payment obligations up to $50.0 million.
On May 13, 2011, Rex agreed to settle a July 2009 class action by Westmoreland County, PA landowners who said 2008 leases had been signed but never paid for; Rex had denied the leases were valid. If the court approves, Rex will offer class members leases at $2,500 per acre prepaid rental for five years with a 15% royalty, put $2.5 million into a fund for class members and attorneys' fees, and pay $30,000 for administration costs. Preliminary approval was received May 16, 2011 and final approval is set for July 15, 2011, with no admission of liability. Rex expects the lease costs to come from its $175.4 million 2011 capital budget.
Rex's audit committee dismissed its auditor Malin, Bergquist & Company on March 21, 2011 and appointed KPMG LLP to audit the year ending December 31, 2011. The filing states Malin Bergquist's reports for 2009 and 2010 had no adverse or qualified opinion and there were no disagreements. It also notes Rex had earlier consulted KPMG on accounting for the Williams and Sumitomo joint ventures and for Keystone Midstream and Water Solutions Holdings. The filing is signed by Daniel J. Churay as President and CEO, which differs from Benjamin Hulburt as CEO in the earlier context (a leadership change not explained in this filing).
Rex published an operational update and a conference presentation. In the DJ Basin, the Herrington 41-26H Niobrara well had an initial rate of 202 BOEPD, while the BJB 34-14H well 'appears non-commercial' per the company; the earlier Silo State well came in at 67 BOEPD. Rex has identified higher-potential locations from 3-D seismic and is drilling a commitment well in Weld County, Colorado. In Butler County it has a third rig contracted, and Williams is continuing its drilling in Westmoreland and Clearfield. Rex reaffirmed its 2011 guidance. This continues the Niobrara programme begun in 2010 with mixed early results.
