Rex Energy Corporation (NASDAQ:REXX) announced its first quarter 2016 operational and financial results.
First Quarter Financial Results
Operating revenues from continuing operations for the three months ended March 31, 2016 were $30.5 million, which represents a decrease of 44% as compared to the same period in 2015. Commodity revenues, including settlements from derivatives, were $43.5 million, a decrease of 33% as compared to the same period in 2015. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 46% of total commodity revenues for the three months ended March 31, 2016.
Lease operating expense (LOE) from continuing operations was $30.1 million, or $1.66 per Mcfe for the quarter, which was in line with the same period in 2015. Cash general and administrative (G&A) expenses from continuing operations, a non-GAAP measure, were $6.1 million, or $0.33 per Mcfe for the first quarter of 2016, a 12% decrease on a per unit basis as compared to the same period in 2015. Cash G&A expenses during the first quarter of 2016 included approximately $1.5 million in fees incurred related to the joint development agreement with Benefit Street Partners, LLC.
Net loss attributable to common shareholders for the three months ended March 31, 2016 was $62.2 million, or $1.11 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended March 31, 2016 was $15.4 million, or $0.27 per share.
EBITDAX from continuing operations, a non-GAAP measure, was $6.9 million for the first quarter of 2016.
Reconciliations of adjusted net income to GAAP net income, EBITDAX to GAAP net income and G&A to cash G&A for the three months ended March 31, 2016, as well as a discussion of the uses of each measure, are presented in the appendix of this release.
Production Results and Price Realizations
First quarter 2016 production volumes were approximately 200.0 MMcfe/d, an increase of 2% over the first quarter of 2015, consisting of 124.2 MMcf/d of natural gas and 12.6 Mboe/d of oil, condensate and NGLs (including 4.8 Mboe/d of ethane). Oil, condensate and NGLs (including ethane) accounted for 38% of net production during the first quarter of 2016.
Including the effects of cash-settled derivatives, realized prices for the three months ended March 31, 2016 were $36.78 per barrel for oil and condensate, $2.10 per Mcf for natural gas, $18.24 per barrel for NGLs (C3+) and $6.37 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended March 31, 2016 were $28.71 per barrel for oil and condensate, $1.37 per Mcf for natural gas, $12.20 per barrel for NGLs (C3+) and $6.04 per barrel for ethane.
First Quarter 2016 Capital Investments
For the first quarter of 2016, operational capital investments were approximately $30.6 million, which were offset by $31.8 million in joint venture reimbursements. Approximately 97% of the capital expenditures in the first quarter of 2016 were used to fund Marcellus and Ohio Utica operations. These capital investments funded the drilling of two gross (0.7 net) wells, fracture stimulation of five gross (three net) wells, placing 16.0 gross (8.1 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.
First quarter investments for leasing and property acquisitions were $2.1 million and capitalized interest was $1.9 million.
Note: Unless specifically stated otherwise in this operational update, all numbers are gross and all well results assume full ethane recovery.
Appalachian Basin – Legacy Butler Operated Area
During the first quarter of 2016, the company completed the drilling of the two-well Geyer pad. The Geyer wells were drilled to an average lateral length of approximately 4,200 feet and are expected to be placed into sales in the third quarter of 2016.
Appalachian Basin – Moraine East
In the Moraine East Area, Rex Energy fracture stimulated four gross (two net) wells and placed 12.0 gross (six net) wells into sales in conjunction with the commissioning of the Moraine East gathering and transportation system. An additional four gross (two net) wells are expected to be placed into sales during the second quarter of 2016. The company continues to be encouraged by preliminary results in Moraine East and will provide updated sales rates following the commissioning of the high pressure line, which is expected in the second quarter of 2016.
Appalachian Basin – Warrior North Prospect – Carroll County, Ohio
In the Warrior North Prospect, the company drilled two gross (0.7 net) wells, fracture stimulated one gross (one net) well and placed four gross (two net) wells into service. As of March 31, 2016 there were five gross (1.8 net) wells drilled and awaiting completion in the area.
Rex Energy placed the three-well Kiko pad into sales during the first quarter. The Kiko wells were drilled to an average lateral length of approximately 4,900 feet and completed in an average of 33 stages with average sand concentrations of 2,460 pounds per foot. The wells produced at an average 5-day sales rate per well, assuming full ethane recovery, of 1.3 MBoe/d, consisting of 2.3 MMcf/d of natural gas, 502 bbls/d of NGLs and 369 bbls/d of condensate.
In addition, the company drilled the three-well Goebeler pad with an average lateral length of approximately 7,360 feet. The wells are currently being completed and are expected to be placed into sales during the second quarter of 2016. Following the completion of the Goebeler pad, the company will begin completion operations on the two-well Perry pad.
Second Quarter and Full Year 2016 Guidance
Rex Energy is providing its guidance for the second quarter of 2016 ($ in millions). For full year 2016, the company continues to expect production growth of 5% – 10%.
|2Q2016||Full Year 2016|
|Production||203.0 – 207.0 MMcfe/d||—|
|Lease Operating Expense||$29.0 – $31.0 million||—|
|Cash G&A||$4.0 – $5.0 million||—|
|Operational Capital Expenditures(1)||—||$15.0 – $40.0 million|
(1) Land acquisition expense and capitalized interest are not included in the operational capital expenditures budget
Shares of Rex Energy are down 2% to $0.72 in after-hours trading. REXX has a 1-year high of $5.74 and a 1-year low of $0.49. The stock’s 50-day moving average is $0.96 and its 200-day moving average is $1.16.
On the ratings front, Rex Energy has been the subject of a number of recent research reports. In a report issued on March 17, KLR Group analyst John Gerdes reiterated a Hold rating on REXX, with a price target of $1.75, which represents a potential upside of 127.3% from where the stock is currently trading. Separately, on February 1, Suntrust Robinson Humphrey’s Neal Dingmann downgraded the stock to Hold .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, John Gerdes and Neal Dingmann have a total average return of 5.2% and -12.0% respectively. Gerdes has a success rate of 52.4% and is ranked #478 out of 3828 analysts, while Dingmann has a success rate of 37.3% and is ranked #3708.
Rex Energy Corp. is an independent energy company, which engages in acquisition, production, exploration and development of oil, natural gas and natural gas liquids with properties concentrated in the Appalachian and Illinois regions of the United States.