UPDATE 2-Rex Energy enters JV with Williams, shares down

* Rex to sell 50 pct stake in Marcellus shale to Williams

* Says Williams will invest $33 mln on Rex's behalf

* Says Williams to incur 90 pct of costs

* Rex shares down as much as 21 percent (Recasts; adds analyst comments, share movement)

June 22 (Reuters) - Shares of oil and gas company Rex Energy Co (REXX.O) fell as much as 21 percent after it announced the sale of 50 percent of its Marcellus shale properties in Pennsylvania to Williams Co Inc (WMB.N).

"Although this asset sale is in line with our valuation, it also causes REXX to lose some of its upside potential. We think the stock will respond negatively to this announcement," Capital One Southcoast analyst Pierre Conner said in a note to clients.

Rex's shares touched a low of $4.61 after market opened Monday on Nasdaq and were trading down $1.06 at $4.78 in the afternoon. They had closed at $5.84 on Friday.

Conner said State College, Pennsylvania-based Rex was losing its upside potential by selling the Marcellus acreage as future successful drilling results in the region could have boosted the stock's valuation.

The analyst said his $7 a share valuation of the company's stock had included $2.25 a share for the Marcellus and $4.75 a share for its proved reserves.

The company, which intends to enter into a joint venture with Williams to develop the fields, said the latter will invest about $33 million in the project for half of Rex's leasehold interests covering about 44,000 acres.

On the positive note, Conner said the deal would reduce Rex's 2009 capital expenditures by about 70 percent as the company had allocated about $50 million to its Marcellus properties.

"This drilling promote will offset much of that expense, which is good since its cash flows for 2009 are $20 million," he added.

"Williams must fund all of the carry prior to December 31, 2011 or make a cash payment to Rex Energy for the remaining carry amount that has not been incurred at that time," Rex said in a statement.

The company also said the costs of the project will be shared on an equal basis after Williams has invested its carry amount.

For the alerts, please double click [ID:nWNAS6820] (Reporting by Shradhha Sharma and Arup Roychoudhury in Bangalore; Editing by Anil D'Silva)