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Sumitomo Corp Sells JV Stake in Butler County, PA Marcellus

Assets co-owned by Rex and Sumitomo in 2010 (click for larger version)

In 2010 gigantic Japanese trading house Sumitomo Corp. bought a 30% stake (joint venture) in Rex Energy’s Marcellus drilling operation in Bulter County, PA for $150.7 million. Sumitomo wrote down much of the value for that purchase in 2015. In 2018 Rex went bankrupt and now PennEnergy Resources owns and operates the Butler assets (see Rex Energy Sells Itself to PennEnergy Resources for $600M). PennEnergy is getting a new JV partner. Yesterday Sumitomo announced the sale of their 30% share of the action.
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American Water Selling PA Frack Water Co. Keystone Clearwater

In February 2015 Rex Energy announced it would sell its Keystone Clearwater Solutions subsidiary which provides water services for shale drillers in the Marcellus/Utica (see Rex Energy Looks to Sell 28,300 Marcellus Acres in Bid to Raise $). In June 2015 American Water Works, the country’s largest publicly traded water and wastewater utility company, announced it was buying Keystone from Rex for $130 million (see American Water Announces Agreement to Acquire Keystone Clearwater Solutions). Four years later, Keystone is being sold once again.
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Dela. Riverkeeper Loses Court Case to Block Martian Drilling

It seems the door *does* swing both ways when it comes to Pennsylvania municipalities and the Act 13 lawsuit decision that allows municipalities to have a say in zoning in, or zoning out, shale drilling. In 2013 seven selfish PA towns won the right, from the PA Supreme Court, to impose their own zoning rules on oil and gas drilling (see PA Supreme Court Rules Against State/Drillers in Act 13 Case). Since that time, Big Green groups have asked the court to rule the door only swings one way–that zoning can keep shale drilling out, but never allow *more* of it. That notion has now been put to rest. The door swings both ways.
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PA Chamber Files Brief in Martian School Court Case

The Pennsylvania Chamber of Business and Industry (PA Chamber) recently filed a brief in Commonwealth Court opposing THE Delaware Riverkeeper in a case that still has us angry and baffled. The case brought by Riverkeeper is clear across the state, hundreds of miles from the Delaware River Basin where Riverkeeper supposedly operates, and attempts to force a local municipality to adopt zoning ordinances it doesn’t want to adopt. And it involves Martians.
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Rex Energy Sells Itself to PennEnergy Resources for $600M

Rex Energy, one of our favorite small drillers, has finally found a buyer for its Marcellus/Utica assets. And it’s a good home. After scheduling and rescheduling a bankruptcy auction four times in a single week, Rex canceled the auction and said it has cut a deal with PennEnergy Resources to buy the company–for $600.5 million. You may recall that Rex, heading into bankruptcy in May, owed nearly $1 billion to several creditors (see Rex Energy Owes Nearly $1B – Who They Owe & How Much). If the deal is for $600.5 million, somebody’s not going to get paid everything they’re owed. But then, that’s the nature of bankruptcy court–to decide who gets what and how much. The deal Rex/PennEnergy is subject to approval by the bankruptcy court, but we expect it will get approved. Part of the deal calls for PennEnergy to pay $1 million to Rex landowners who had sued the company claiming Rex didn’t pay them royalties. We think PennEnergy will be a good home for the Rex assets. PennEnergy launched in 2011, founded by two former Atlas Energy executives–Rich Weber and Greg Muse. The company is backed by EnCap Investments and now has 70 employees. No word on how many of Rex’s employees will come along with the deal. Rex’s acreage sits close to PennEnergy’s, hence the interest. Below the details as we have them, including Rex’s SEC filing outlining the deal…
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PA Supremes Order Rehearing for Rex Permits Near Martian School

The Martians and their allies have attacked once again. Run for the hills! This is a long-running story that’s just taken another (unfortunate) twist. A handful of anti-drilling parents from the Mars School District (“Martians”) in Butler County, PA, backed by money and legal help from Philadelphia Big Green groups THE Delaware Riverkeeper and the Clean Air Council, have filed frivolous lawsuit after frivolous lawsuit (see Martians Use Riverkeeper to Continue Court Battle Against Rex). The effort is aimed at denying landowners in Middlesex Township revenue from legally permitted drilling. The actions by these radicalized parents have cost the taxpayers of Middlesex Township over $100,000 in legal fees (we hope the taxpayers enjoying paying for this folly). Eventually most of the lawsuits were won by the good guys and at least two wells got drilled. However, in 2016 the Martians appealed a town ordinance that allows the wells to be drilled about 3/4 of a mile from the school. A panel of three western PA judges in Commonwealth Court heard arguments in the case, and in June 2017 the judges ruled against Riverkeeper and the Martians (see Dela. Riverkeeper Loses Martian Case to Stop Rex Energy Drilling). Riverkeeper, using funding from the William Penn Foundation and Heinz Endowments (among other Big Green funders) pressed on, all the way to the PA Supreme Court. Last Friday the Supremes proved they aren’t so supreme after all. In a ruling, the Supremes told Commonwealth Court to do it over again, this time considering PA’s so-called Environmental Rights Amendment as part of their thinking. In other words, do it over, and rule another way this time–that’s what the Supremes are telling the lower court to do…
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Rex Energy Settled Butler County Water Lawsuits for $159K

Beginning in 2012, MDN reported on the story of a community in western Pennsylvania (in Butler County) whose residents said that nearby drilling by Rex Energy led to contamination of their water wells (see PA Residents Weary of Fight with Rex over Water Contamination and Rex Energy Water Contamination Case Shifts Focus to Water Pipeline). Several of the families sued Rex. The PA Dept. of Environmental Protection, after an extensive investigation, said that Rex’s drilling did not cause the situation. Apparently water quality in the area was never the greatest to begin with. Rex had built a water line in the area to supply water for fracking and had expected to turn over control/ownership of that line in 2013. That water line could be used to supply fresh water to the affected homes. The debate has been: Who will pay to hook up the homes and to maintain the pipes and infrastructure required? Since Rex, according to the DEP, is not to blame for the poor water quality in the area, the company understandably doesn’t want to pay big bucks to connect and maintain the line to residences in the area. As far as we can tell, the water line never got hooked up. However, there has been a resolution of the situation, of sorts. What had been sealed court documents (unsealed because of Rex’s bankruptcy proceedings) show that in April of this year Rex settled with the suing families, paying them between $16,250 and $27,125 each–a cumulative $159,000. Rex maintains the settlement is not an indication of guilt…
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Rex Energy Owes Nearly $1B – Who They Owe & How Much

Last week Rex Energy filed for Chapter 11 bankruptcy protection (see Clock Runs Out – Rex Energy Files for Chapter 11 Bankruptcy). Right after filing, the company announced it has put up essentially all of its Marcellus/Utica assets (leases, wells, etc.), for sale, in order to pay off what it owes (see Fire Sale: Rex Energy Selling Everything to Pay Back Lenders). Which begs the question: What does the company owe? As it turns out, it’s close to $1 billion. The company, in a filing made on the first day of bankruptcy proceedings, included a list of who it owes, for what purpose, and how much–totaling $984.5 million. The biggest chunk is owed to a Delaware bank, some $617 million. However, Rex also owes money to 29 other entities, including MarkWest Energy, various oilfield services companies, taxes, and even some royalties are owed. We have the full list of the 30 entities that are owed money–detailing how much and for what purpose…
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Fire Sale: Rex Energy Selling Everything to Pay Back Lenders

Some even sadder news to share about Rex Energy. On Friday we told you that Rex had filed for Chapter 11 “voluntary” bankruptcy protection (see Clock Runs Out – Rex Energy Files for Chapter 11 Bankruptcy). After our story, Rex released a press release to announce not only are they seeking Chapter 11 protection, they are, as of now, putting all of their Marcellus/Utica assets (wells, leases, etc.) up for sale–in both Pennsylvania and Ohio. The stated reason is to “maximize their long-term value and prospects.” To find good homes for those assets with another driller, because Rex obviously doesn’t think after exiting bankruptcy the company will be doing much in the way of drilling. And they need the cash from those asset sales to pay back lenders. In the end, our “little engine that could,” could not. Notice that Rex filed for Chapter 11 (reorganization), not Chapter 7 (liquidation). The company says “drilling and production programs are operating as usual, and the Company is maintaining the necessary staffing and resources to meet its commitments to gathering and processing partners.” So, limited business as usual–until everything is sold–and then there won’t be any business. Looks to us like it’s still a liquidation–except on Rex’s terms, instead of a forced auction of assets…
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Clock Runs Out – Rex Energy Files for Chapter 11 Bankruptcy

In early April, Rex Energy, a driller focused solely on the Marcellus/Utica driller, defaulted on payments it owes to debtholders (see Rex Energy Defaults on IOUs, Can’t File Annual Report on Time). Rex told the Securities and Exchange Commission (SEC) the company could not make a semi-annual interest payment due on senior notes on April 2. Rex said in the filing that the noteholders to whom payment is due signed a temporary “forbearance” agreement that gives Rex a little breathing room, until April 16. The April 16 payment didn’t happen. Rex and the noteholders signed a second forebearance agreement giving Rex another extension, then another, then another. At least four, maybe five such extensions were granted. But in the end, Rex could not work out favorable terms. And lack of progress caused the banks that lend Rex money to call in the loans. With no money to pay those loans, Rex has no choice but to file for Chapter 11. Rex reported in an SEC 10-Q filing on Tuesday that: “An acceleration notice from the lenders of our senior term loan has been received and we lack the liquidity to pay these obligations. Given these circumstances, the Company is currently in the process of preparing to file for protection under Chapter 11 of the U.S. Bankruptcy Code which is expected to occur imminently following the filing of this Form 10-Q.” Rather ominously, the next sentence reads: “There can be no assurances that the Company will be able to reorganize its capital structure on terms acceptable to the Company, its creditors, or at all.” What does this mean for Rex’s Marcellus/Utica drilling program?…
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Dela. Riverkeeper Suffers Major Defeat in Martian Well Case

Nearly a year ago MDN reported that Big Green group THE Delaware Riverkeeper (aka Maya van Rossum) and the odious Philadelphia-based Clean Air Council (CAC) had suffered a crushing legal defeat in their attempt to interfere with shale drilling on the opposite side of the state from where the Delaware River and Philly is located (see Dela. Riverkeeper Loses Martian Case to Stop Rex Energy Drilling). A small group of anti-drilling parents from the Mars School District (whom we affectionately call “Martians”) in Butler County, PA, backed by money and legal help from Riverkeeper and CAC, filed frivolous lawsuit after frivolous lawsuit aimed at denying landowners in Middlesex Township revenue from legally permitted drilling. Even amid the back and forth lawsuits, at least two of the wells were permitted and drilled by Rex Energy, despite the bleatings of the Martians (see Martian Victory! 2 Wells Near Mars School Nearly Done Drilling). Following last year’s final word by PA Commonwealth Court, we thought that was the end of it. However, Riverkeeper and CAC tried one last, desperate attempt–by filing an appeal with the Environmental Hearing Board. The EHB is a special court set up to hear appeals of decisions made by the Dept. of Environmental Protection (DEP). Riverkeeper and CAC argued that the DEP abrogated their responsibilities under the PA Environmental Rights Amendment (ERA) to protect PA’s environment by issuing permits for Rex’s Martian wells. Last Friday the EHB ruled that DEP was well within its rights and did not, in fact, violate the ERA by allowing the Rex wells…
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Rex Energy Gets 4th Extension to Delay Paying Defaulted IOU

In early April, Rex Energy, a driller focused solely on the Marcellus/Utica driller, defaulted on payments it owes to debtholders (see Rex Energy Defaults on IOUs, Can’t File Annual Report on Time). Rex told the Securities and Exchange Commission (SEC) the company could not make a semi-annual interest payment due on senior notes on April 2. Rex said in the filing that the noteholders to whom payment is due (Angelo, Gordon & Co.) signed a temporary “forbearance” agreement that gives Rex a little breathing room, until April 16. The April 16 payment didn’t happen. Rex and Angelo signed a second forebearance agreement giving Rex another extension–until April 23–to either pay or agree to a new deal (see Rex Energy Gets 1 Extra Wk to Pay Defaulted IOU, Files Annual Report). April 23 came and went with no deal, and once again Rex and Angelo signed an agreement, the third such forbearance agreement, which gave the company until May 2 (see Rex Energy Gets 3rd Extension to Pay Defaulted IOU). May 2 came and went and (you guessed it), Rex has now signed a fourth forebearance agreement, giving the company another week–until May 9…
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Rex Energy Gets 3rd Extension to Pay Defaulted IOU

Three weeks ago Rex Energy filed a notice with the Securities and Exchange Commission to alert shareholders that the company has defaulted on an interest payment due on senior notes (see Rex Energy Defaults on IOUs, Can’t File Annual Report on Time). Rex said in the filing that the noteholders to whom payment is due (Angelo, Gordon & Co.) signed a temporary “forbearance” agreement that gives Rex a little breathing room–until April 16 to pay up. Angelo, Gordon & Co. promised not to take any action until that date. April 16 arrived without a deal, so Rex and Angelo signed a second forebearance agreement giving Rex another extension–until April 23–to either pay or agree to a new deal (see Rex Energy Gets 1 Extra Wk to Pay Defaulted IOU, Files Annual Report). April 23 came and went with no deal, and once again Rex and Angelo signed an agreement, the third such forbearance agreement, giving Rex one more week. Rex is not only having trouble paying its debt obligations, a few weeks back Rex’s stock was relegated to the penny stock Pink Sheets (see Rex Energy Stock De-Listed by Nasdaq as of April 12th). We have no inside knowledge of what’s happening behind the scenes, but we’re sure of this: There is a lot of heated discussion taking place. Rex previously floated the possibility of declaring bankruptcy. One thing’s for sure–something will have to happen soon…
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Rex Energy Gets 1 Extra Wk to Pay Defaulted IOU, Files Annual Report

Two weeks ago Rex Energy filed a notice with the Securities and Exchange Commission to alert shareholders that the company has defaulted on an interest payment due on senior notes (see Rex Energy Defaults on IOUs, Can’t File Annual Report on Time). Rex said in the filing that the noteholders to whom payment is due (Angelo, Gordon & Co.) signed a temporary “forbearance” agreement that gives Rex a little breathing room–until April 16 to pay up. Angelo, Gordon & Co. promised not to take any action until that date. In a second filing two weeks ago, Rex said they would not be able to file their annual 2017 report on time. We have updates on both filings. First, Rex has still not made the interest payment and still has not negotiated a new agreement with Angelo, Gordon & Co. However, yesterday Angelo signed a new, second forebearance agreement giving Rex one more week–until April 23–to either pay or agree to a new deal. The clock is ticking. Meanwhile, last Friday Rex filed it’s annual report for 2017. Among the revelations in the report: Rex plans to spend $78-$83 million on drilling this year, down from spending $133 million last year…
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Rex Energy Stock De-Listed by Nasdaq as of April 12th

Rex Energy stock performance last 3 mos – until it stopped trading on 4-11-18 (click for larger version)

The walls continue to close in on Rex Energy. Yesterday Rex’s stock was officially de-listed from the Nasdaq Stock Exchange. Rex’s stock can now only be bought and sold over-the-counter (OTC), sometimes referred to as the Pink Sheets. MDN told you that Nasdaq warned Rex in November that the stock would be de-listed unless stockholder equity (number of shares of stock times the share price) was boosted (see Rex Energy Once Again Threatened with NASDAQ De-listing). Last November shareholder equity was a paltry $2.5 million. That is, Rex’s “value” on paper was $2.5M. It wasn’t the first time Rex had been warned by Nasdaq. Previously Rex pulled a rabbit out of the hat and met Nasdaq’s criteria for continued listing. This time they could not, and consequently it’s now harder to find/buy/sell shares of Rex stock. As we told you just last week, Rex is heading full steam ahead toward bankruptcy. They missed an important interest payment on outstanding debt (see Rex Energy Defaults on IOUs, Can’t File Annual Report on Time). Rex has not yet filed for bankruptcy, but it appears there are very few options left…
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Rex Energy Defaults on IOUs, Can’t File Annual Report on Time

Rex Energy filed two regulatory filings with the Securities and Exchange Commission earlier this week that don’t bode well for the company. In a Form 8-K filing (a form used to notify investors of events that may be important to investors), Rex let it be known they could not make an interest payment due on senior notes, a semi-annual payment due on April 2nd. Rex said in the filing that the noteholders to whom payment is due (Angelo, Gordon & Co.) have signed a temporary “forbearance” agreement that gives Rex a little breathing room–precious little. The forbearance agreement gives Rex until April 16 to pay up. Angelo, Gordon & Co. have promised not to take any action until that date. The second filing, a Form 12b-25, says that Rex will not be able to file its annual 2017 report on time. In February we reported that it looked like, at that time, that Rex was getting ready to file for bankruptcy (see Rex Energy Preparing to File for Chapter 11 Bankruptcy?). They still haven’t filed for bankruptcy, but surely a missed interest payment and pressure from a major debtholder is not a good sign…
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