Rex has leased or farmed-in approximately 20,000 net acres in the Denver-Julesburg Basin ("DJ Basin"), which it intends to explore for oil from the Niobrara Shale. Additionally, Rex Energy provided an operational update on its Marcellus Shale activities and Illinois Basin tertiary recovery project, as well as an update to its 2010 capital budget.
The company's acreage in the DJ Basin is located in Weld County, Colorado and Laramie County, Wyoming. Rex Energy is continuing to lease additional acreage in the area, which it believes to be prospective for horizontal oil well drilling in the Niobrara formation. The company expects to begin drilling the first of two horizontal wells to test its acreage during the third quarter of 2010.
Benjamin W. Hulburt, Rex Energy's President and CEO, commented, "We began leasing in the DJ Basin for the Niobrara Shale several months ago before the recent run up in acreage costs, which enabled us to acquire our acreage at an average cost of only $215 per net acre. In addition, we have recently opened a new regional office in Denver staffed with a team of professionals with significant experience operating in the Rockies region. We are continuing to increase our acreage position in the basin and plan to spud our first test well in late June or early July. Given the initial results of recent horizontal Niobrara Shale oil wells in the basin within close proximity to our acreage, we are very pleased to be able to provide our investors with exposure to this exciting new exploration play at minimal cost. This new project area has the potential to help keep the company's historical weighting towards oil production, which is currently approximately 60% of total company production."
Rex Energy also provided an operational update on its Marcellus Shale activities. In the Marcellus Shale, the company currently has 7 gross (5.5 net) wells drilled and awaiting completion, four of which are located in Butler County, Pennsylvania and three of which are located in Westmoreland County, Pennsylvania. Rex Energy expects these wells to be completed during the third quarter of 2010. Furthermore, the company now expects Williams Appalachia, LLC, its joint venture partner, to add a second horizontal rig during the third quarter. As a result, Rex Energy has updated its forecast to add an additional 5 gross (2.5 net) horizontal Marcellus wells by the end of the year and adjusted its capital budget accordingly. The company's refrigeration plant in Butler County, Pennsylvania was put back into operation in mid May 2010 as planned, and the construction of the company's cryogenic gas processing plant in that county remains on schedule to commence operations early in the fourth quarter of this year.
Rex Energy also announced the results of a single well Alkali-Surfactant-Polymer ("ASP") recovery test within the Middagh Unit, the company's planned ASP unit. The test consisted of a chemical tracer test to validate the chemical recipe formulated by the University of Texas and to measure oil saturation in the project area before ASP injection, followed by a test of the oil saturation after ASP injection. These tests resulted in an estimated residual oil saturation of 28% before ASP injection, and residual oil saturation of 8% after ASP injection, which equates to 20% of pore volume recovered or 27% of original oil in place recovered.
Mr. Hulburt commented, "These results exceed the recoverable oil assumption used by our outside engineers, Netherland Sewell & Associates, to estimate the potential of this process in the Lawrence field by 55%. Although I would caution that the results are based on a single well test only, we were very encouraged by these results. We are continuing to prepare the Middagh Unit for ASP injection across the 15 acre initial flood area, which is expected to begin in August 2010."
Lastly, the Rex Energy Board of Directors has approved an increase in the company's 2010 capital expenditure plan from $100.1 million to $151.2 million to account for the accelerated Marcellus leasing and drilling activities and the company's new Niobrara project activities. The increase in the capital expenditure plan is expected to be allocated as follows:
For the year to date through April 30, 2010, the company has incurred approximately $47.4 in capital expenditures, leaving approximately $103.8 in remaining anticipated capital expenditures through year-end. The company anticipates funding the remaining anticipated capital expenditures through its cash balance of approximately $11.3 million, remaining Williams JV areas carry balance of $12.2 million, full $100.0 million line of credit as of April 30, 2010 and anticipated cash flows.
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