Sumitomo to Pay Rex Energy $140 Million for U.S. Shale Gas Venture Stake

Sumitomo Corp., Japan’s third- largest trading company, agreed to pay Rex Energy Corp. about $140 million for a 30 percent stake in a gas venture in the Marcellus Shale region in the U.S.

Sumitomo plans to invest about $1.2 billion in the project during the next ten years, it said today in a statement on the company’s website. Sumitomo’s Summit Discovery Resources II LLC unit will pay about $88.4 million in cash for the stake and a further $52 million toward drilling costs, Rex Energy said in a statement yesterday.

Japanese trading companies including Mitsubishi Corp. are increasing investments in extracting methane trapped in shale rock thousands of feet below the earth’s surface to tap demand for the cleaner-burning fuel. The latest deal is Sumitomo’s second purchase of shale gas assets in the U.S. after it paid $25 million for a 12.5 percent stake in a venture in the Barnett Shale region of Texas from Carrizo Oil & Gas Inc.

“Cash-rich Japanese trading houses are taking the opportunity to invest in shale gas projects, betting that U.S. natural gas demand will grow for a long term,” said Katsuya Takeuchi, an analyst at UBS AG in Tokyo. “The appreciation of the yen against the dollar helps reduce the cost of buying U.S. gas assets.”

The Japanese currency has strengthened about 10 percent against the U.S. dollar this year and traded at 84.48 yen at 1 p.m. in Tokyo. Sumitomo shares rose 1.6 percent to 978 yen, while the benchmark Nikkei 225 Stock Average gained 1 percent.

The Marcellus Shale project involves drilling more than 1,100 wells in an area located in Butler County, Pennsylvania, in the next decade. Gas output is expected to peak at 46 billion cubic feet a year, Sumitomo said in the statement.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Greg Chang in San Francisco at gchang1@bloomberg.net.

• Tweet
• More
  • Business Exchange
  • Buzz up!
  • Digg
• Print
• Email