Rex Energy Corporation (NASDAQ:REXX) announced its second quarter 2015 operational and financial results.
“We remain steadfast in our strategy to navigate through the current commodity price cycle,” said Tom Stabley, President and Chief Executive Officer ofRex Energy. “We have increased production, controlled costs and are divesting non-core assets. The team at Rex is implementing measures that are resulting in improved well performance while maintaining liquidity and financial discipline.”
Second Quarter Financial Results
Operating revenue from continuing operations for the three and six months ended June 30, 2015 was $45.8 million and $99.9 million, respectively, which represents a decrease of 37% and 35% over the same periods in 2014, respectively. Commodity revenues, including settlements from derivatives, were $59.3 million and $124.0 million for the three and six months ended June 30, 2015, respectively, a decrease of 16% for each of the comparable periods of 2014. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 49% of total commodity revenues for the three months ended June 30, 2015.
Including the effects of cash settled basis differential derivatives, the company’s basis differential for its Appalachian Basin assets averaged approximately ($0.77) off the Henry Hub price of $2.64 for the three months ended June 30, 2015.
LOE from continuing operations was $30.6 million, or $1.63 Mcfe for the quarter. For the six months ended June 30, 2015, LOE was approximately$59.7 million, or $1.64 per Mcfe. Cash general and administrative expenses from continuing operations, a non-GAAP measure, were $6.5 million for the second quarter of 2015, a 44% decrease on a per unit basis as compared to the same period in 2014. For the six months ended June 30, 2015, cash G&A expenses from continuing operations were $13.2 million, a 46% decrease on per unit basis as compared to the same period in 2014.
The company incurred a non-cash impairment charge of approximately $117.8 million during the second quarter of 2015. The reduction in carrying value, which was primarily focused on the company’s non-operated dry gas Marcellus assets in Westmoreland and Clearfield Counties, Pennsylvania, is attributable to market conditions related to these properties indicating a decrease in market prices for similar assets.
Net loss attributable to common shareholders for the three months ended June 30, 2015 was $155.2 million, or $2.87 per basic share. Net loss attributable to common shareholders for the six months ended June 30, 2015 was $175.4 million, or $3.25 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended June 30, 2015 was $12.1 million, or $0.22 per share. Adjusted net loss for the six months ended June 30, 2015 was $17.8 million, or $0.33 per share.
EBITDAX from continuing operations, a non-GAAP measure, was $22.4 million for the second quarter of 2015 and $51.8 million for the six months ended June 30, 2015.
Reconciliations of adjusted net income (loss) to GAAP net income (loss) from continuing operations before income taxes, EBITDAX to GAAP net income (loss) and cash G&A to GAAP G&A for the three months and six months ended June 30, 2015, as well as a discussion of the uses of each measure, are presented in the appendix of this release.
Production Results and Price Realizations
Second quarter 2015 production volumes were 206.8 MMCfe/d, an increase of 61% over the second quarter of 2014, consisting of 131.1 MMcf/d of natural gas and 12.6 Mboe/d of oil, condensate and NGLs (including 3.2 Mboe/d of ethane). Oil, condensate and NGLs (including ethane) accounted for 37% of net production for the second quarter of 2015.
Including the effects of cash-settled derivatives, realized prices for the three months ended June 30, 2015 were $56.99 per barrel for oil and condensate, $2.53 per Mcf for natural gas, $17.61 per barrel for NGLs (C3+) and $6.62 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended June 30, 2015 were $49.28 per barrel for oil and condensate, $1.77 per Mcf for natural gas, $13.92 per barrel for NGLs (C3+) and $6.39 per barrel for ethane.
Including the effects of cash-settled derivatives, realized prices for the six months ended June 30, 2015 were $54.17 per barrel for oil and condensate,$2.72 per Mcf for natural gas, $21.75 per barrel for NGLs (C3+) and $6.72 per barrel for ethane. Before the effects of hedging, realized prices for the six months ended June 30, 2015 were $44.35 per barrel for oil and condensate, $2.11 per Mcf for natural gas, $18.45 per barrel for NGLs (C3+) and $6.46per barrel for ethane.
Second Quarter 2015 Capital Investments
For the second quarter of 2015, the company made operational capital investments of approximately $30.7 million, of which $26.8 million was used to fund Marcellus and Ohio Utica operations and $3.9 million was used to fund conventional drilling, water flood enhancement and facility upgrades in theIllinois Basin. The Marcellus and Ohio Utica capital investment funded the drilling of five gross (3.5 net) wells, fracture stimulation of eight gross (4.0 net) wells, placing four gross (2.1 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.
Investments for leasing and property acquisition were $2.6 million and capitalized interest was $1.7 million for the second quarter of 2015.
Appalachian Basin – Legacy Butler Operated Area
In the Legacy Butler Operated Area, the company drilled four gross (2.5 net) wells in the second quarter of 2015, with four gross (1.4 net) wells fracture stimulated and four gross (2.1 net) wells placed into sales. The company had 11.0 gross (5.6 net) wells drilled and awaiting completion as of June 30, 2015.
The company has placed into sales the Bloom 6H well which was drilled to a lateral length of approximately 4,600 feet and completed in 31 stages with average sand concentrations of 2,800 pounds per foot. The well produced at a 5-day sales rate, assuming full ethane recovery, of 8.3 MMcfe/d, consisting of 4.0 MMcf/d of natural gas and 717 bbls/d of NGLs and condensate.
In addition, the company has reduced its cost to drill and complete wells by approximately 4% to $5.5 million per well, assuming a 5,000 foot lateral, as compared to the previously reported $5.7 million per well at year-end 2014. The decrease in well cost is attributable to operational efficiencies and improved pricing from service providers. The company continues to focus intensely on cost control measures and expects to achieve further cost reductions and efficiencies by year-end.
Appalachian Basin – Moraine East Area
In the Moraine East Area, the company is currently drilling the fourth well on the four-well Fleeger pad. The four wells will be drilled to an average lateral length of approximately 6,000 and completed with an average sand concentration of approximately 2,300 pounds per foot. The company expects to complete the four wells in the fourth quarter of 2015 and place the pad into sales in late 2015 or early 2016, as the necessary infrastructure comes into service.
Appalachian Basin – Western Lawrence Utica
In the Western Lawrence Utica, drilling operations have been completed on the Patterson 2H, the company’s first dry gas Utica well in the region. The well was drilled to a lateral length of approximately 6,800 feet and is currently being completed. The Patterson 2H is expected to be placed into sales in late third quarter 2015.
Appalachian Basin – Moraine East Gathering and Bluestone III
In the Moraine East Area, the company anticipates the Moraine East gathering and processing system to be commissioned by the end of 2015. In addition, the company continues to anticipate the commissioning of Bluestone III in the fourth quarter of 2015. Bluestone III will add approximately 105 MMcf/d of processing capacity in the Butler Operated Area.
As of June 30, 2015, the company had approximately $6.1 million of cash and $93.0 million of its $350.0 million borrowing base outstanding under its senior secured credit facility. During July 2015, Rex Energy completed the sale of Keystone Clearwater Solutions and received reimbursement for previous pipeline expenditures for net proceeds of $72.4 million. Pro forma for the sale of Keystone Clearwater Solutions, reimbursements from previous pipeline expenditures and additional reimbursements from the company’s drilling joint venture in Moraine East, the company has approximately $8.8 million outstanding under its $350 million borrowing base.
Third Quarter and Full Year 2015 Guidance
Rex Energy is providing its guidance for the third quarter and maintaining its full year 2015 guidance ($ in millions). Third quarter production is expected to be relatively flat to second quarter production due to processing constraints at the Bluestone II facility. The company currently has an inventory of wells in the Butler Operated Area waiting to be placed into sales following the expected commissioning of Bluestone III in the fourth quarter of 2015.
|3Q2015||Full Year 2015|
|Production||197.0 – 202.0 MMcfe/d||193.0 – 203.0 MMcfe/d|
|Lease Operating Expense||$31.0 – $34.0 million||—|
|Cash G&A||$6.5 – $7.5 million||—|
|Operational Capital Expenditures(1)(2)||—||$135.0 – $145.0 million|
|(1) Land acquisition expense and capitalized interest are not included in the operational capital expenditures budget|
|(2) Continuing operations only (Original Source)|
Shares of Rex Energy closed today at $1.98, down $0.31 or 13.54%. REXX has a 1-year high of $15.62 and a 1-year low of $1.93. The stock’s 50-day moving average is $3.93 and its 200-day moving average is $4.39.
On the ratings front, Northland Securities analyst Reed Anderson reiterated a Buy rating on REXX, with a price target of $5, in a report issued on July 30. The current price target implies an upside of 156.4% from current levels. According to TipRanks.com, Anderson has a total average return of 0.3%, a 43.4% success rate, and is ranked #2379 out of 3724 analysts.
Rex Energy Corp is an independent energy company. The Company is engaged in acquisition, production, exploration and development of oil and gas with properties concentrated in the Appalachian and Illinois regions.