2010-07-01-2010-07-01

To acquire 18,700 net acres in Niobrara oil fairway in DJ Basin.

Adding to its unconventional shale portfolio, independent E&P company Rex Energy Corp., State College, Pa., (Nasdaq: REXX) plans to acquire acreage in the Niobrara oil fairway in the Denver-Julesberg Basin in Colorado from an undisclosed seller for approximately $18.7 million.

The assets comprise approximately 26,900 gross acres (18,700 net) in Weld County. The properties are near Silo Field, a producing Niobrara oil field in Laramie County, Wyoming. Rex will control approximately 11,800 gross (6,700 net) prospective Niobrara shale acres in Weld County and some 48,500 gross (32,400 net) acres in Laramie County.

The company plans to begin a horizontal drilling program targeting the Niobrara shale in July.

Rex president and chief executive Benjamin Hulburt says, "Our average acreage cost in the DJ Basin is still relatively low at $600 per acre…Although this play is not yet at the stage where we can update our production guidance through the end of this year and into 2011 to account for this significant new oil asset, we believe our Niobrara position has the potential to be a very significant growth driver for the company."

The deal is expected to close by July 31.

According to KeyBanc Capital Markets senior managing director Jack Aydin, Rex Energy has "significant leverage" in the oily Niobrara play, allowing for strong increases in production, proved reserves and shareholder value through 2014. KeyBanc Capital Markets reaffirms its Buy rating and price target of $18.00 per Rex Energy share.

Aydin believes Rex will "dip into its credit facility to the tune of $20 million to $25 million" by the end of third-quarter 2010 to fund the transaction. The managing director notes that the company may also pay with upfront cash from a potential joint venture on its Butler County leasehold by year-end.

Rex Energy operates oil and gas operations in the Illinois, the Appalachian and the Rockies regions.