Sumitomo Corp. acquires more US shale gas acreage

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Sept. 1 -- Rex Energy Corp. entered into a joint venture agreement with Sumitomo Corp. subsidiary Summit Discovery Resources II LLC, to sell and transfer interests valued at $140.4 million in its Marcellus shale assets in Pennsylvania.

Sumitomo will pay $88.4 million in cash upon closing and an additional $52 million in the form of a drilling carry for the assets, which include 12,900 net acres, certain producing Marcellus shale wells, and associated midstream assets.

In addition to funding its own share of drilling obligations, Sumitomo also agreed to fund 80% of Rex Energy's remaining share of drilling and completion costs until the $52 million drilling carry is fully utilized.

In Butler County, Pa., Rex Energy said it will sell a 15% nonoperated interest in 42,200 gross (41,100 net) acres to Sumitomo for $61.6 million, or $10,000/net acre.

Rex Energy also agreed to sell 30% of its interests in 20 Marcellus shale wells within the Butler County area, including 11 wells in progress, for $19.1 million.

In addition, Rex Energy will sell 30% of its interest in Keystone Midstream Services LLC, a midstream JV with Stonehenge Energy Resources LP, and its existing refrigeration plant for $3.9 million.

In Rex Energy's Marcellus shale JV project areas operated by Williams Production Appalachia LLC, Rex Energy said it will sell 20% of its interests in 44,200 gross (22,100 net) acres for $35.9 million, or $8,115/net acre.

Additionally, Rex Energy will sell 20% of its interests in 19 Marcellus shale wells in the Williams JV areas, including five wells in progress, for $5.7 million, and 20% of its interests in the Williams JV midstream assets for $822,000.

Under the agreement, which is expected to close this month, Rex Energy also will sell 50% of its interests in 4,600 net acres in Fayette and Centre Counties for $18.5 million, or $8,115/net acre.

Second project
Sumitomo’s purchase marks the Japanese trading house's second shale gas project in the US, following its involvement since last year in development and production at a field in Texas.

Late last year, Sumitomo Corp. said it will pay an estimated ¥40-50 billion to acquire a 12.5% interest in the Fort Worth basin Barnett shale project from Carrizo Oil & Gas Inc. Sumitomo may decide later to take an additional 12.5% stake (OGJ Online, Dec. 15, 2009).

In February, Kazuyuki Onose, general manager of Sumitomo's exploration and production business department, said the Japanese firm will continue to take part in shale gas projects by sharing part of the initial costs, especially as US firms appear to be selling off assets (OGJ Online, Feb. 2, 2010).

Japanese trading companies are jumping into shale gas development on growing demand for new energy sources.

Earlier this month, Penn West Energy Trust (PWE) agreed to form a 50-50 JV with Mitsubishi Corp. to develop PWE’s shale gas assets in the Cordova Embayment area (OGJ Online, Aug. 24, 2010).

In February, reports said that Mitsui E&P USA LLC will earn a 32.5% interest in 100,000 net acres held by Anadarko Petroleum Corp. in the Marcellus shale gas play in north-central Pennsylvania for $1.4 billion (OGJ Online, Feb. 16, 2010).

Contact Eric Watkins at hippalus@yahoo.com.

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