Type of paper: Research Paper

Topic: Energy, Company, Business, Commerce, Entrepreneurship, Corporation, Finance, Investment

Pages: 3

Words: 825

Published: 2021/01/02

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2.1. Strategic Alliances
In 2010, Rex Energy Corporation signed a joint venture contract with Summit Resources Limited, LLC that owned Sumitomo Corporation from Japan entirely (Williams, 2010). The agreement necessitated the sale and transfer of Rex Energy’s assets in Pennsylvania Commonwealth, 12,900 gross acres, specified functional Marcellus Shale wells, including midstream assets. Williams (2010) stipulates that the value of the whole transaction was about $140.4 million. Sumitomo was required to pay about $88.4 million cash and another $52 million in drilling carry form. Additionally, Rex Energy was to persist operating in Butler County.
In accordance with the contract, Sumitomo agreed to finance its excavation obligations share and 80 percent of Rex Energy Corporation’s remaining percentage of excavation and completion expenses (Rex Energy Corporation, 2012). The idea was to utilize the $52M excavation carry fully. Nevertheless, the joint venture agreement required Rex Energy to acquire consent from Sumitomo regarding any transfers made. The two parties anticipated to sign the contract in September 2010. Furthermore, the chief executive officer and president of Rex Energy Corporation, Mr. Benjamin Hulburt expressed his delight while announcing the strategic alliance. According to Williams (2010), the primary goal of the partnership included freeing Rex Energy from debt. The company anticipated growing its assets and maintaining a clean balance sheet when compared to other firms in the oil industry. The management believed that Rex Energy was correctly situated to flourish in the then commodity price environment because of its 91 percent capital investments in liquid gas and oil assets and zero debts.
2.2. Mergers & Acquisitions
In 2012, Rex Energy Corporation (Rexx) announced its merger with MarkWest, a MarkWest Energy Partners L.P subsidiary (Admin, 2014). The merger allowed MarkWest to acquire Rexx’s partner Keystone for $512 million. However, Rex Energy maintained a 28 percent interest in Keystone and expected $120 million net profits from that sale. The proceeds surpassed the previously declared range of $90 to $110 in joint expected proceeds from Rockie and its other assets. According to Ritenbaugh and Litvak (2014), the deal became subject to clearance and customary conditions under the Hart-Scott-Rodino Antitrust Improvements Act.
The merger helped Keystone to possess and control two cryogenic gas processing plants with a capacity of 90 MMcf/d in Butler County Pennsylvania (Rex Energy Corporation., 2012). During the merger, Rex Energy, and its silent associate, Sumitomo, held around 68, 400 gross acres in Butler region. Together with the merger, Sumitomo and Rex Energy affiliates and MarkWest decided to make another deal of processing natural gas liquid. The transaction required MarkWest to collect and manufacture gas from wells owned by Rex Energy in Butler County and the surrounding regions.
Rex Energy benefited from the merger with MarkWest and decided to extend its operations (Admin, 2014). Sadly, the land used to accommodate the corporation lacked enough land to handle all additional operations. Rex Energy Corporation engaged in a significant acquisition process with a Royal Dutch Shell, plc affiliate known as SWELP, LP. The aim was to acquire about 208,000 gross acres (207, 000 net) in Utica Shales, Upper Devonian/ Burkett, and Marcellus regions in Ohio and Pennsylvania for around $120 million. Rexx officials expected to close the deal by September 2014 (Rex Energy Corporation, 2012). The exact locations of the assets included Venango, Lawrence, Beaver, Mercer, and Armstrong in Mahoning, Columbiana, and Pennsylvania counties in Ohio. Additionally, the extra land and recent leasing would give the company’s position in Butler to about 298,000 gross acres. Rex Energy Corporation closed the acquisition deal with SWELP, LP in 9th September 2014 (Ritenbaugh and Litvak, 2014). The esteemed company has not taken part in any acquisitions or mergers since 2014.
2.3. Potential Targets to Consider
Rex Energy Corporations has been affected by the current drop in oil prices. However, the company can consider several options. For instance, the management can decide to sell some of its assets or engage in mergers and strategic alliances. However, forming strategic alliances with companies that are least struggling in the current business environment would be a great move for the survival of the company. Rex Energy should consider a potential target like Exxon Mobile Corporation. Exxon operates in the same industry as Rex Energy; it depends on shale turfs in North Dakota, Oklahoma, and Texas. The shale lands in these counties have allowed Exxon to drill huge volumes of crude gas and oil.
At the beginning of the year, Exxon announced its plans to pump oil from the United States shale lands and investment in big ventures for the new several years (Carroll, 2015). Rex Energy Corporation could benefit by forming an alliance with Exxon. Investments in modern technology, market clout, and expertise have made Exxon the leading oil manufacturer in the United States. Carroll (2015) says that the firm has been able to cut back its costs and improved effectiveness in domestic shale turfs. With Exxon’s plans to produce natural and crude gas, Rex Energy could benefit from such a deal and end the problems affecting its operations today.

References

Admin. (2014). Rex Energy Announces Significant Acquisition in its Butler Operated Area. Accessed on March 26, 2015 from http://mergerbound.com/rex-energy-announces-significant-acquisition-in-its-butler-operated-area/
Carroll, J. (2015). Exxon Looks to U.S. Shale Fields to Drive Global Growth. Accessed on March 25, 2015 from http://www.bloomberg.com/news/articles/2015-03-05/exxon-looks-to-u-s-shale-fields-to-drive-global-growth-energy
Rex Energy Corporation. (2012). Rex Energy Corporation Announces Sale of Midstream Assets and Increase in Borrowing Base. Accessed on March 26, 2015 from http://ir.rexenergycorp.com/releasedetail.cfm?releaseid=671023
Ritenbaugh, S. & Litvak, A. (2014). Rex Energy Pays Shell $120M to Expand in Pennsylvania, Ohio. Accessed on March 26, 2015 from http://powersource.post-gazette.com/powersource/companies-powersource/2014/08/12/Rex-Energy-pays-Shell-120M-to-expand-in-Pennsylvania-Ohio/stories/201408120220
Williams, J. (2010). Rex Energy Corporation Announces Marcellus Shale Joint Venture, Updated Guidance and Borrowing Base Increase. Accessed on March 26, 2015 from http://globenewswire.com/news-release/2010/08/31/428663/200482/en/Rex-Energy-Corporation-Announces-Marcellus-Shale-Joint-Venture-Updated-Guidance-and-Borrowing-Base-Increase.html

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WePapers. (2021, January, 02) Good Research Paper On Rex. Retrieved September 25, 2021, from https://www.wepapers.com/samples/good-research-paper-on-rex/
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