News Release (Sumitomo Corp.)
Sep. 01, 2010
Sumitomo Corporation
Sumitomo Corporation Participate in Marcellus Shale Gas drilling program in Pennsylvania, USA
Sumitomo Corporation (SC) has announced that it has signed a participation agreement (the Agreement) with Rex Energy Corporation (REX) to participate in the development and production of REX's Marcellus Shale Gas drilling project (the Project) in the state of Pennsylvania through our consolidated subsidiary in USA, Summit Discovery Resources II, LLC. SC's total net acreage is 22,000 acres and the total cost for development is estimated at USD 1,200 million.
[Outline of the Project (Our Portion)]
- Location： Butler County, Centre County, Fayette County and
Westmoreland County, Pennsylvania, the United States (USA)
- Production (peak)： 46bcf/year
- Development period： over 10 years from 2010 (already partially developed and producing )
- Operator ： REX and other parties
- Our working interest of the Project： about 30%.
- Acquired assets： non-operated interests in the Rex leases included in the project areas, non-operated interests in 23 existing wells operated by Rex, and interests in midstream assets.
- Net acreage: approximately 22,000 acres
- Cost for Acquisition: approximately USD 194 million
- Total Cost for development: USD 1,200 million
In this project, SC will acquire non-operated interests in the projected leases, interests in existing wells and in midstream assets which REX has on the closing date. In addition, SC and REX have agreed to form an area of mutual interest (an AMI) in Butler County, in which REX will act as leasing agent. Pursuant to the agreement, SC has agreed to pay all of the costs to lease additional net acres. This project will allow SC to participate in several strategic areas within the Marcellus Shale. In conclusion, SC will acquire the assets required for having about 30% of the working interests of the Project by paying approximately USD88 million upon closing and an additional USD106 million between the closing date and the end of December 2011.
The Project will drill more than 1,100 wells for coming 10 years. SC will bear the costs and expense s of drilling and completion of the wells attributable to SC's working interests, which are estimated to come to approximately USD1,200 million. In the South-West Pennsylvania, which we mainly focus in the Project, is one of the most developed core areas in Marcellus Shale Fields, and is expected to be highly competitive among other areas in the shale field due to the production of Natural Gas Liquids (NGL) as byproducts.
The Marcellus Shale Fields, which is the place of the Project, is the vast shale field ranging among four states in the Northeastern U.S. including Pennsylvania. It has the largest natural gas reserves in the U.S. gas fields and expected to be the most important area of natural gas supply in the country. Due to its enormous resource volume and competitive gas price supported by good access to the Northeastern U.S. and strong demand around there, it is considered to be highly attractive developing area.
REX, our partner, emerged into the development of Marcellus Shale Fields in an early stage of its rise. REX is very good partner with a good operating background in the Marcellus Shale using the most modern technology
[Significance of Sumitomo Corporation's participation]
Sumitomo Corporation entered into Barnett shale gas drilling program as the first Japanese company to participate in the shale gas business in December 2009, and the production status is good so far. We have decided to enter into this project as our second step to expand the Shale Gas business in the U.S. We expect that this project with a good partner will become a core operation for our U.S. natural gas business in a long-term.
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