Rex Energy Corporation (NASDAQ:REXX) announced its third quarter 2016 operational and financial results.

Third Quarter Financial Results

Unless otherwise noted, results of continuing operations are presented excluding the results of the company’s Illinois Basin assets, which have been classified as discontinued operations, for all periods presented.

Operating revenue from continuing operations for the three and nine months ended September 30, 2016 was $34.0 million and $91.0 million, respectively, which represents an increase of 15% and a decrease of 18% over the same periods in 2015. Commodity revenues, including settlements from derivatives, for the three and nine months ended September 30, 2016 were $36.3 million and $123.7 million, a decrease of 19% and 18% for the same periods in 2015, respectively. Commodity revenues from condensate and natural gas liquids (NGLs), including settlements from derivatives, represented 50% of total commodity revenues for the three months ended September 30, 2016.

Lease operating expense (LOE) from continuing operations was $26.3 million, or $1.45 per Mcfe for the quarter. For the nine months ended September 30, 2016, LOE was approximately $76.0 million, or $1.42 per Mcfe. General and administrative expenses from continuing operations were $5.1 millionfor the third quarter of 2016, a 4% increase on a per unit basis as compared to the same period in 2015. Cash general and administrative expenses from continuing operations, a non-GAAP measure, were $4.1 million for the third quarter of 2016, an 18% decrease on a per unit basis as compared to the same period in 2015. For the nine months ended September 30, 2016, G&A expenses from continuing operations were $15.2 million, a 30% decrease on a per unit basis as compared to the same period in 2015. Cash G&A expenses from continuing operations were $13.2 million, a 19% decrease on a per unit basis as compared to the same period in 2015.

Net income attributable to common shareholders for the three months ended September 30, 2016 was $4.8 million, or $0.05 per basic share. Net loss attributable to common shareholders for the nine months ended September 30, 2016 was $41.4 million, or $0.57 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended September 30, 2016 was $12.3 million, or $0.14 per share. Adjusted net loss for the nine months ended September 30, 2016 was $29.7 million, or $0.41 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $4.5 million for the third quarter of 2016 and $32.0 million for the nine months endedSeptember 30, 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 and nine months ended September 30, 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

Third quarter 2016 production volumes from continuing operations were 197.8 MMcfe/d, an increase of 8% over the third quarter of 2015, consisting of 118.8 MMcf/d of natural gas and 13.2 Mboe/d of condensate and NGLs (including 6.6 Mboe/d of ethane). Condensate and NGLs (including ethane) accounted for 40% of net production for the third quarter of 2016.

Including the effects of cash-settled derivatives, realized prices for the three months ended September 30, 2016 were $1.65 per Mcf for natural gas,$39.70 per barrel for condensate, $18.15 per barrel for NGLs (C3+) and $8.15 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended September 30, 2016 were $1.54 per Mcf for natural gas, $38.82 per barrel for condensate, $16.48 per barrel for NGLs (C3+) and$7.99 per barrel for ethane. Third quarter 2016 price realizations were negatively impacted by the early termination of hedges during the second quarter of 2016.

Including the effects of cash-settled derivatives, realized prices for the nine months ended September 30, 2016 were $2.17 per Mcf for natural gas,$43.18 per barrel for condensate, $18.78 per barrel for NGLs (C3+) and $7.43 per barrel for ethane. Before the effects of hedging, realized prices for the nine months ended September 30, 2016 were $1.44 per Mcf for natural gas, $34.72 per barrel for condensate, $14.74 per barrel for NGLs (C3+) and$7.28 per barrel for ethane.

Third Quarter 2016 Capital Investments

For the third quarter of 2016, net operational capital investments were approximately $10.9 million. The company expects to be reimbursed by joint venture partners for approximately $11.8 million of previously incurred costs that were not billed until the fourth quarter. These capital investments funded the drilling of four gross (1.4 net) wells, fracture stimulation of three gross (1.8 net) wells, placing four gross (2.1 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.

Third quarter investments for leasing and property acquisitions were $0.4 million and capitalized interest was $0.3 million.

Operational Update

Appalachian Basin – Legacy Butler Operated Area

During the third quarter of 2016, the company placed into sales the two-well Geyer pad. The Geyer wells were drilled to an average lateral length of approximately 4,200 feet and were completed in an average of 24 stages. The wells produced at an average 5-day sales rate per well, assuming full ethane recovery, of 6.1 MMcfe/d, consisting of 3.8 MMcf/d of gas and 387 bbls/d of NGLs.

Appalachian Basin – Moraine East Area

In the Moraine East Area, Rex Energy drilled one gross (0.4 net) well during the third quarter of 2016. In addition, the company had six gross (2.1 net) wells awaiting completion at the end of the third quarter.

During the third quarter of 2016, the company placed the four-well Fleeger II pad into sales, consisting of three Marcellus wells and one Upper Devonian well. The Fleeger II wells were drilled to an average lateral length of approximately 7,760 feet and completed in an average of 46 stages with average sand concentrations of 2,444 pounds per foot. The three Marcellus wells produced at an average 24-hour sales rate per well, assuming full ethane recovery, of 10.4 MMcfe/d, consisting of 4.3 MMcf/d of natural gas, 851 bbls/d of NGLs and 154 bbls/d of condensate. The Upper Devonian Burkett well, the Fleeger II 3H, produced at a 24-hour sales rate of 7.0 MMcfe/d, consisting of 2.9 MMcf/d of natural gas, 557 bbls/d of NGLs and 133 bbls/d of condensate. The Fleeger II 3H has not fully dewatered and is continuing to improve as it cleans up.

The company recently completed the two-well Klever pad, which was drilled to an average lateral length of approximately 7,460 feet. The pad is expected to be placed into sales during the fourth quarter of 2016. The company also expects to complete the four-well Baird pad in the fourth quarter of 2016 and place the pad into sales in January 2016. Horizontal drilling has started on the six-well Shields pad, which is expected to have an average lateral length of approximately 7,750 feet. The Shields pad is expected to be placed into sales in the second quarter of 2017.

Appalachian Basin – Warrior North Area – Carroll County, Ohio

In the Warrior North Area, Rex Energy drilled 3.5 gross (1.2 net) wells during the third quarter of 2016. The company is currently completing the four-well Vaughn pad, which was drilled to an average lateral length of approximately 7,200 feet. The Vaughn pad is expected to be placed into sales inDecember 2016.

Appalachian Basin – Year to Date HBP / Production

Rex Energy continues to focus its development efforts in its core areas of the Appalachian Basin. The table below provides the company’s projections for assets held by production to date and by year-end 2016, with associated potential future drilling locations and exit rate estimates.

On November 1, 2016, Rex Energy began transporting 130 MMbtu/d of natural gas volumes from its Butler Operated Area to the Gulf Coast and Midwest markets. The commencement of this transportation allows the company to access premium markets in the Midwest and the Gulf Coast, including the future Freeport LNG export facilities, where the company will receive Henry Hub pricing at a minimal discount. Rex Energy expects to transport approximately 50% of its natural gas volumes to these markets. With Gulf Coast transportation in place for full-year 2017, the company expects its overall basis differential to improve by approximately 50% over its full-year 2016 basis differential.

Earlier this year, Rex Energy began selling ethane from the Butler Operated and Warrior North Areas on Mariner East out of the Marcus Hook facility. The access to international markets has resulted in the company receiving a premium to Mont. Belvieu pricing.

During the second half of 2016, the company renegotiated its condensate pricing agreements, resulting in over $5.00/bbl incremental value in condensate pricing.

Liquidity Update

During the third quarter, Rex Energy completed the sale of its Illinois Basin assets for approximately $40 million and the company’s bank group reaffirmed the$190 million borrowing base under the its senior secured credit facility.

Projections for Operations; Fourth Quarter and Full Year 2016 Guidance

The following table summarizes Rex Energy’s operational activities for full-year 2016 and projected status at year-end in each of its core operating areas:

(Original Source)

Shares of Rex Energy closed today at $0.438, down $0.004 or -0.97%. REXX has a 1-year high of $2.59 and a 1-year low of $0.37. The stock’s 50-day moving average is $0.54 and its 200-day moving average is $0.67.

On the ratings front, Stifel Nicolaus analyst Michael Scialla upgraded REXX to Hold, with a price target of $0.52, in a report issued on September 29. The current price target implies an upside of 18% from current levels. According to TipRanks.com, Scialla has a yearly average loss of 8.0%, a 39% success rate, and is ranked #3697 out of 4181 analysts.

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. It operates through the Exploration and Production and Field Services segment. The Exploration and Production segment engages in the exploration, acquisition, development and production of oil, natural gas and Liquids. The Field Services segment operates and manages water sourcing, water transfer and water disposal services, primarily in the Appalachian Basin.