Each one in plain English, with the numbers worked through for a shareholder.
6 Oct 2010asset acquisition disposition▲ GoodMajor
On September 30, 2010, Rex closed the Marcellus joint venture with Sumitomo's subsidiary Summit that was agreed on August 31, 2010. Rex sold about 13,000 net acres (final adjustments from the 12,900 first stated) plus a partial interest in producing wells and midstream assets, and received about $99.5 million in cash, which included about $7.6 million of leasing reimbursement and about $7.5 million of drilling reimbursement applied against the carry. The remaining drilling carry is about $51.2 million (80% of Rex's costs for further Marcellus wells in the joint areas). Summit also took 30% of Rex's Keystone Midstream interest. The CEO says $75.0 million was drawn on the senior credit facility at closing, so the proceeds leave Rex in a positive net cash position, and that the borrowing base was increased to $125 million (the CEO's statement; the filing gives no date for that increase). This resolves the pending closing.
On August 31, 2010, Rex agreed with Summit Discovery Resources II, a subsidiary of Sumitomo, to sell interests in its Pennsylvania Marcellus assets (12,900 net acres, producing wells and midstream assets) in a deal valued at about $140.4 million: $88.4 million in cash at closing and $52.0 million as a drilling carry. It covers a 15% interest in Butler County acreage, 20% of the Williams joint venture areas and 50% of about 4,600 net acres in Fayette and Centre Counties, plus stakes in wells, the Butler cryogenic plant and 30% of Rex's Keystone Midstream membership interest. Rex stays operator in Butler County, and the deal changes the Williams tax partnership (the Williams joint venture of 2009). Closing is expected in September 2010 subject to conditions; the filing text provided is truncated, so parent guaranty terms are not covered.
5 Aug 2010asset acquisition disposition● NeutralMajor
On July 30, 2010, Rex completed the Duncan purchase of undeveloped DJ Basin leases in Laramie County, Wyoming, covering about 18,375 net acres for about $18.4 million, less the $1.9 million deposit. That is slightly fewer acres than the 18,700 first expected; Rex may buy another 320 net acres if Duncan cures title defects within 90 days. The pro forma balance sheet assumes about $13.0 million of the cost is funded from the senior credit facility, taking pro forma debt from $15.0 million to $28.1 million.
On June 30, 2010, Rex agreed to buy oil and gas leases on about 26,900 gross (18,700 net) acres in the DJ Basin in Laramie County, Wyoming from Duncan Oil Partners for about $18.7 million ($1,000 per net acre), with a roughly $1.9 million deposit already paid and closing scheduled for July 30, 2010. This is a new area for the company, outside its Illinois and Appalachian operations; management's press release calls it Niobrara oil acreage and says it plans to start horizontal drilling there in July 2010.
28 May 2010material agreement termination● Neutral
On May 25, 2010, Rex told CEO Benjamin Hulburt, CFO Thomas Stabley and EVP Christopher Hulburt that their August 1, 2007 employment agreements will not be extended past their July 30, 2010 expiry. This is only a non-renewal notice, not an end to their employment, and the company says it is finalizing new agreements it expects to sign before the old ones expire.
On January 14, 2010, Rex signed an underwriting agreement with KeyBanc Capital Markets to sell 6,000,000 new common shares at $12.25 each (plus up to 900,000 more if the underwriters use their over-allotment option), expected to close January 21, 2010. The company says net proceeds are about $69.7 million, to be used for 2010 capital spending and general corporate purposes, and first to repay the $23.0 million owed on its senior credit facility (as of Dec 31, 2009), with the rest invested short-term and credit facility borrowing resumed as spending needs require. This completes the share sale prepared by the January 12 and 15 prospectus filings and adds to the share count, diluting existing holders' percentage ownership (inference from the new issue).
On December 30, 2009, Rex's subsidiaries signed a Master Crude Purchase Agreement with CountryMark Cooperative, effective January 1, 2010, replacing the existing letter agreement for crude oil sales. For 2010, CountryMark agreed to buy all crude produced from all the subsidiaries' Illinois Basin leases; the agreement runs to January 1, 2011 and renews yearly unless notice is given before October 1. Prices are not stated in the filing (redacted portions).
On December 21, 2009, Rex's subsidiary R.E. Gas Development and Stonehenge Energy Resources formed Keystone Midstream Services, a joint venture to build a gas gathering system and cryogenic processing plant in Butler County, Pennsylvania. Rex owns 40% and Stonehenge 60% and manages the venture; Rex contributed a 16.3% plant interest and an option to buy its gathering system, and the 2010 plan calls for up to $25 million of initial cash investment by the two partners. The deal can be unwound if a plant site is not secured within 150 days.
On December 17, 2009, two Rex subsidiaries agreed to settle a class action, filed in October 2006, over hydrogen sulfide released from their Illinois oil operations near Bridgeport and Petrolia. They will pay $1.9 million without admitting liability, of which the insurer will fund $1.0 million, and will plug four inactive wells. The deal takes effect only after final court approval, with a hearing set for March 26, 2010; it does not release other class members' individual claims.
On June 18, 2009 (effective May 5), Rex signed a Marcellus Shale joint venture with Williams covering about 43,672 net acres in Centre, Clearfield and Westmoreland Counties, Pennsylvania. Williams can earn 50% of Rex's working interest by paying 90% of well costs until it has invested about $74 million (about $33 million on Rex's behalf), and committed to at least ten horizontal wells, with the carry to be funded before December 31, 2011 or paid in cash. Williams reimbursed Rex about $3.6 million for past costs, Rex stays operator until December 31, 2009 and then Williams takes over, and the two will jointly own a gathering company, RW Gathering, LLC. This advances the Marcellus focus the company set out when selling the Permian assets.
On April 24, 2009, Rex signed a third amendment to its KeyBank credit facility, keeping the borrowing base at $80 million until the next review. That base had dropped from $90 million on March 24, 2009 when the Permian sale closed, as the earlier amendment foresaw. The amendment also raises borrowing costs: Eurodollar loan margins go from 1.00%-1.75% to 1.75%-2.50%, the base margin from a fixed 0.5% to 0.5%-1.25%, and the unused commitment fee from 0.25%-0.375% to 0.375%-0.5%.
30 Mar 2009asset acquisition disposition● NeutralMajor
On March 24, 2009, Rex completed the sale of its Permian Basin assets in Texas and New Mexico to Adventure Exploration Partners, as agreed in December 2008. Net cash proceeds were about $17.3 million (against the $18 million price), subject to post-closing adjustments, plus Adventure assumed certain liabilities. The filing's pro forma figures show cash rising from $7.0 million to $24.3 million and a small estimated loss on the sale of about $425,000. The company says it intends to use the proceeds for Marcellus Shale drilling and the Lawrence Field ASP flood project.
On March 9, 2009, Rex Energy I and Adventure amended the Permian Basin sale, setting the closing date at March 24, 2009 (later than the earlier February 27 target) unless they agree otherwise. At closing, the lesser of uncured title or environmental defect claims or $1 million goes into escrow and is deducted from the price paid, so Rex may receive up to $1 million less at closing. The $18.0 million price and other terms are otherwise unchanged.
Rex signed a second amendment to its KeyBank credit facility, effective December 23, 2008, keeping the $90 million borrowing base until the next review. If the Permian Basin sale to Adventure closes first, the base drops to $80 million, so the sale reduces the company's borrowing capacity by $10 million. The amendment also changes the definition of the Alternate Base Rate used to price some loans.
On December 23, 2008, Rex agreed to sell its Southwestern Region assets in the Permian Basin (Texas and New Mexico) to Adventure Exploration Partners for $18.0 million, plus assumption of certain liabilities. The company says the sale is part of a plan to focus on Marcellus Shale and the Lawrence Field in Illinois, and expects to close by February 27, 2009 (the 8-K says first quarter 2009). The sale includes about 10,000 net acres, 10.7 Bcfe of year-end 2007 proved reserves and about 1.6 MMcfe per day of production.
On April 30, 2008, Rex priced an underwritten public offering of 8.5 million shares at $20.75: 4.5 million sold by the company and 4.0 million by selling stockholders. The company expects about $87.0 million net (about $112.0 million if the 1.275 million-share over-allotment option is fully used), to fund 2008 capital spending including the Lawrence Field project in Illinois and Marcellus Shale leasing and drilling. This adds new shares for existing holders, and the company gets no money from the selling stockholders' shares.
On April 14, 2008, Rex amended its September 2007 KeyBank credit facility, raising the borrowing base from $75 million to $90 million. The amendment adds a 25 basis point fee on any future increase and allows more hedging of oil and gas production (up to 85% of expected output for the first 36 months, previously 75%).
The board adopted a pay plan for non-employee directors starting January 1, 2008: a $20,000 annual retainer, extra retainers for committee chairs, meeting fees, and a yearly option on 25,000 shares. The options vest in thirds over three years and are issued under the 2007 Long-Term Incentive Plan, so they could add to the share count over time (inference).
3 Oct 2007material agreement termination● NeutralMajor
On September 28, 2007, Rex Energy signed a new five-year credit agreement with KeyBank as lead agent, with an initial $75 million borrowing limit that could rise to $200 million. The first draw repaid and ended the $40 million credit agreement of its subsidiary Rex Energy IV, LLC, and the new loan is secured by mortgages on the Illinois and Indiana oil and gas properties.
