Williams Cos. Inc. raised its stake in the Marcellus Shale region by signing a $74 million agreement to develop natural gas wells with another company in the area.

The "drill to earn" deal with Rex Energy Corp. commits Tulsa- based Williams to 44,000 net acres in West- moreland, Clearfield and Centre counties of Pennsylvania. Williams will incur 90 percent of drilling costs and expenses to earn its 50 percent interest in the joint venture, according to reports.

Costs will total $33 million invested on behalf of Rex Energy and $41 million for Williams' expenses. Williams has until 2011 to fulfill its funding obligations and earn its 50 percent interest.

State College, Pa.-based Rex Energy currently operates the Marcellus assets, but Williams is scheduled to take control by the end of the year.

"The initial entry of our exploration and production business into the Marcellus is an ideal growth opportunity, given our long experience in developing non-conventional natural gas reserves, such as tight sands, coal-bed methane and shale," Williams CEO Steve Malcolm said in a statement.

The Rex deal is not Williams' first foray into the Marcellus Shale. On June 1, the company closed on a joint-venture agreement with Atlas Pipeline Partners to gather natural gas from about 6,900 wells. That venture, Laurel Mountain Midstream LLC, owns 1,800 miles of gathering lines, according to reports.

The shale's production possibilities were researched extensively, a Williams official said.

"We're excited about the opportunity from a technical perspective, especially with being able to leverage our knowledge and expertise in ramping up activity in other unconventional gas plays," said Ralph Hill, who leads Williams' exploration and production unit.

The Marcellus Shale is a large formation stretching through the Appalachian basin and into Canada, according to reports. Such formations have become popular among producers due to the rise in horizontal drilling techniques, and some researchers believe the Marcellus may hold between 150 trillion and 500 trillion cubic feet of natural gas.

Williams will fund the investment through cash on hand, the company said.

Shares of Williams fell more than 6 percent Monday to $14.50 on the New York Stock Exchange.

Rod Walton 581-8457

Originally published by ROD WALTON World Staff Writer.

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