Replies to This Discussion

Permalink Reply by Philip Thackray on January 1, 2014 at 5:24am

Lew,

Early in 2010 Dale transfered sole ownership of the farm to Anna as he was in a home and not doing well.  So I never met Dale.  Sadly he died about a year ago.

Do you know how Anna is doing?

Phil

Permalink Reply by LewPa on January 2, 2014 at 6:47am

Phil

I don't know, haven't heard anything.

Permalink Reply by FairMktValue on December 31, 2013 at 1:58pm

Phil, replying to above post regarding Rex/MarkWest ...not sure where this one is gonna end up....

To the best of my recollection, Rex sold the plant to MarkWest, used the $$$ to concentrate on producing not processing etc. MarkWest's bread and butter.  I seem to recall that Rex retained something like a 20% interest in the deal.

If so, I would not go so far as to call it fishy but, I would question if transactions between the two regarding processing are truly "arms length". At any rate not very transparent--- maybe ya dig into SEC filings and the way small print in the annual reports you might be able to sort it out. Way over my head!

MarkWest appears to be building all the lines for Rex, probably have signed some long term minimum contracts.  From reading some of MarkWest "dog and pony wall street shows" the "customers" have been easily meeting and exceeding the minimums rather quickly.

I have no idea if after certain volumes have been met reduced pricing etc might kick in. Possible.

If so, is this reflected in leaseholder royalty calculations ??

More questions than answers.

Cheers

Permalink Reply by Philip Thackray on December 31, 2013 at 4:56pm

FMV,

I did not see that Rex retained an interest in the Mark West mid-stream.  Sumitomo bought 20% of Rex a few years back - could that be what you are thinking of?

The pipeline that went to Stebbins was done by Markwest.  I know because a possible route for that line was through the Ferguson farm and I talked to Markwest about that.

I thought that Markwest is building pipelines for Markwest.  Of course, they are subcontracted.

???

Phil

Permalink Reply by Philip Thackray on January 1, 2014 at 1:57am

 

FMV,

Press release from Markwest acquisition of Keystone Midstream (ownership explained in release):

http://investor.markwest.com/phoenix.zhtml?c=135034&p=irol-news...

From the release:

"Markwest will gather and process the rich gas and fractionate the NGLs under long-term fee-based agreements." .

It is a classical "real estate" like business model for Markwest.  They have purchased/building new pipelines and plants as capital investments.  They charge Rex "rent" to use the equipment and Markwest gets the depreciation.  No chance of lower fees sometime in the future as I read it.  Rex is just passing costs through to the landowner.  Even if Rex tried to challenge this structure it would be like telling your landlord the rent is too high because, because,... because.  The landlord would say "see if you can get a cheaper deal somewhere else" only in this case, there is no "somewhere else".

The sinister part would be if Rex was getting favorable rates for the “Rex” gas compared to the “landowner” rates.

Phil

Permalink Reply by LewPa on January 1, 2014 at 5:28am

Phil

That's also what I was wondering about, is it hard to get a no deductions clause from Rex, because then they would have to pay Markwest the costs from that landowner. Or who knows maybe they don't pay anything and it just gets divided over the rest in the unit and they're dollars ahead, which would not be cool!  It looks like the smart move would be to buy Markwest stock (MWE). Down the road if Rex gets bought out, guess who still there with the monopoly on moving the product for the new owner.  LewPa

Permalink Reply by Philip Thackray on January 1, 2014 at 6:41am

Lew,

In a “no deductions” scenario Rex would be paying that landowners fees.

You are making the case for the wisdom of the Markwest deal and the difficulties Rex is facing in a business environment that is perhaps too large for them.  Profitability better hold up (if it is even there at this point).  Rex stock IS Southern Butler County.  Pricing moves, real Estimated Ultimately Recoverable reserves, true decline curves – all of these lay down the track….  For a small player like Rex, now hostage to Markwest, the future is iffy.

Phil

Permalink Reply by LewPa on January 1, 2014 at 8:13am

Phil

At the time Rex did the deal with Markwest, I don't think they had much choice. Price on gas was down, they were in debt to the banks up to the yang, their collateral in lease value was dwindeling, and they had to continue and expand drilling to hold their lease land. Looking back on things, there is always a lot of could of, would of, and should ofs! They are trying to tread water to stay afloat until the offer comes from a bigger fish, similiar to what Phillips Exploration did.  LewPa

Permalink Reply by FairMktValue on January 1, 2014 at 2:24am

Ya Phil, maybe it was the 20% Sumitomo bought. 

Sorry I did not make it clear above about the pipelines. MarkWest does own them and as you note above rents them to Rex.

Maybe a better way to put is " It appears all Rex's pipeline connections are MarkWest."

Cheers

Permalink Reply by LewPa on January 2, 2014 at 6:58am

Phil

Why did they not come thru the Ferguson property with pipeline to the Stebbins well? Would that have not cut about a mile off the pipeline? Or did they want it on the Succop and David Rath properties for future wells? LewPa

Permalink Reply by Philip Thackray on January 2, 2014 at 7:13am

Lew,

As far as I know, both XTO and Markwest wanted to come through Ferguson's along the old Phillips pipeline in the valley, but concerns for wetlands and some protected plants (EPA stuff) stopped them.  The high ground they took was far less troublesome from a construction standpoint as well.

If they were planning for future Succop and/or Rath wells, I would have no information about that.

Regards,

Phil

Permalink Reply by Philip Thackray on January 1, 2014 at 2:39am

FMV,

I read over other Markwest press releases that had "Rex" and "parter(ship)" in them.  It looks to me like they are arrangements where Rex says they will drill wells and Markwest agrees to get a pipeline to the Rex locations, otherwise "arm's length".

From the landowner perspective Rex is not the best.

I thought Range (H and H) was in your area?  Maybe sign with them and just expect them to swap with Rex when drilling time comes.  Whatever terms you reach with Range will have to be honered by whoever takes it over.

I've long been depressed about having a Rex lease and now......

Phil

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