Rex Energy Corp. (NASDAQ: REXX) nearly doubled the size of its Appalachian core with the announced acquisition of about 207,000 net acres in the company's Butler Operated Area.

Rex, based in State College, Pa., will purchase the acreage from an affiliate of Royal Dutch Shell Plc (NYSE: RDS-A, RDS-B) for about $120 million in cash. The deal, announced Aug. 12, gives Rex a 100% interest in acreage prospective for the Marcellus, Upper Devonian/Burkett and Utica shales in Pennsylvania and Ohio.

Combined with recent leasing, Rex Energy's position in its Butler Operated Area increases to about 298,000 gross acres. Analysts said the price was in Rex’s favor and increases the company’s liquids rich Butler County, Pa., acreage by at least 80%.

The pricing is favorable—accounting for just the $2,000 per acre the company paid for 50,000 Butler acres, said Daniel P. Katzenberg, an analyst for Baird Equity Research.

Current production is 3 million cubic feet equivalent per day (MMcfe/d). An additional 13 MMcfe/d will be placed into sales in early 2015 with modest capex required along with an additional 13 MMcfe/d from wells drilled but not completed.

“The nominal production and modest increase in identified liquids drilling locations underscores the undeveloped nature of these assets, providing a potentially long, lucrative runway for growth,” Katzenberg said.

The purchase adds about 134 Marcellus locations and 107 Upper Devonian locations—a total of 1,266 liquids-rich drilling locations at 750-foot spacing.

Rex plans to buy assets in Armstrong, Beaver, Butler, Lawrence, Mercer and Venango counties in Pennsylvania, and Columbiana and Mahoning counties in Ohio.

Tom Stabley, Rex's CEO, said the acquisition is a milestone for the company.

“The proximity of the Shell acreage to our Butler Operated Area combined with our solid operating history, strong recent production results and the attractive economics of our projects in the area made this transaction a natural fit for Rex Energy,” he said.

“With this transaction, we can strategically expand our development program in the Butler Operated Area, which we believe will bring significant upside benefits to Rex Energy,” Stabley said.

The initial acquisition will be funded with an offering of convertible preferred shares. The company announced Aug. 12 an offering of $125 million of shares representing preferred stock. Ramping up additional capacity will require Rex to spend $85 to $125 million in capex and add horizontal and tophole rigs on new acreage in 2015, said Gordon Douthat, senior analyst for Wells Fargo Securities.

“The company indicated the potential for a [joint venture] JV or sale of noncore assets. Rex’s current partner, Sumitomo, would make sense if a JV were to be pursued,” he said.

However, Rex has options going into 2015. It currently has robust liquidity with about $320 million at the end of 2013, including $315 million of borrowing capacity and $2 million in cash, and could add a third rig in 2014 if drilling results continue to be positive, Katzenberg said.

The transaction is expected to close by September.