PennEnergy Resources, LLC’s $600.5 Million Acquisition of All the Assets of Rex Energy Corporation

Vinson & Elkins advised PennEnergy Resources, LLC on the deal

PennEnergy Resources, LLC has agreed to acquire substantially all the assets of Rex Energy Corporation (“Rex”) for a cash purchase price of $600.5 million.

The assets acquired include cash accounts of $29.5 million held by Rex used to collateralize firm transportation contracts that will be released to PennEnergy at close.

Rex had filed for bankruptcy protection on May 18, 2018. The transaction has been approved by the United States Bankruptcy Court for the Western District of Pennsylvania. Closing is expected to occur on September 28, 2018.

On a combined basis, PennEnergy Resources will operate 329 horizontal producing shale wells. The Company will control 203,500 gross leasehold acres, primarily in the Pennsylvania counties of Butler, Beaver and Armstrong, north of Pittsburgh. Independent Petroleum Consultants, Wright & Company, Inc., estimated total combined net proved reserves of 8.5 trillion cubic feet of natural gas equivalents (“TCFE”), of which 1.7 TCFE are proved developed producing. Assuming current strip pricing, these reserve estimates had an estimated net present value using a 10% discount rate of $3.2 billion and $1.3 billion, respectively. Approximately 34% of the Company’s reserves will be derived from natural gas liquids.

With combined gross production of approximately 700 million cubic feet per day of natural gas equivalents (“Mmcfe”) and net production of 450 Mmcfe per day, the Company believes it will be the 10th largest natural gas producer in Pennsylvania and the third largest headquartered in the Commonwealth.

The V&E corporate team was led by partners David Meyer (Picture) and Bryan Loocke with assistance from senior associates Jessica Peet and Joclynn Townsend and associates Cesar Leyva, Garrick Smith, Andrew Geppert and Caroline McDonald. Also advising were partner Todd Way and senior associate Julia Pashin; partner Sean Becker; associate Kristy Fields; partner Larry Nettles; partners Matt Moran and Hill Wellford, counsel Jordan Leu and Marc Fuller and senior associate David Currie; and partner Matt Strock.

V&E also advised PennEnergy in connection with the funding of the transaction, including equity contributions from its existing owners and from its revolving line of credit from a consortium of banks co-led by Wells Fargo and JP Morgan. Pro forma for the transaction, PennEnergy will have total funded debt of approximately 2.0x EBITDA and expects to generate free cash flow immediately upon closing.

The debt financing was led by partner Guy Gribov with assistance from associate Alex Cross.

Involved fees earner: Matthew Strock – Vinson & Elkins LLP; David Meyer – Vinson & Elkins LLP; Jessica Peet – Vinson & Elkins LLP; Andrew Geppert – Vinson & Elkins LLP; Garrick Smith – Vinson & Elkins LLP; Bryan Loocke – Vinson & Elkins LLP; Joclynn Townsend – Vinson & Elkins LLP; Cesar Leyva – Vinson & Elkins LLP; Todd Way – Vinson & Elkins LLP; Julia Pashin – Vinson & Elkins LLP; Sean Becker – Vinson & Elkins LLP; Kristy Fields – Vinson & Elkins LLP; Hill Wellford – Vinson & Elkins LLP; Matthew Moran – Vinson & Elkins LLP; Jordan Leu – Vinson & Elkins LLP; Marc Fuller – Vinson & Elkins LLP; David Currie – Vinson & Elkins LLP; Larry Nettles – Vinson & Elkins LLP; Guy Gribov – Vinson & Elkins LLP; Alex Cross – Vinson & Elkins LLP;

Law Firms: Vinson & Elkins LLP;

Clients: PennEnergy Resources, LLC;

Author: Ambrogio Visconti