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

Second 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 six months ended June 30, 2016 was $31.3 million and $57.0 million, respectively, which represents a decrease of 13% and 30% over the same periods in 2015, respectively. Commodity revenues, including settlements from derivatives, for the three and six months ended June 30, 2016 were $48.7 million and $87.5 million, a decrease of 1% and 17% for the same periods in 2015. Commodity revenues from condensate and natural gas liquids (NGLs), including settlements from derivatives, represented 37% of total commodity revenues for the three months ended June 30, 2016.

Lease operating expense (LOE) from continuing operations was $25.2 million, or $1.39 per Mcfe for the quarter. For the six months ended June 30, 2016, LOE was approximately $49.7 million, or $1.40 per Mcfe. General and administrative expenses from continuing operations were $4.8 million for the second quarter of 2016, a 35% decrease 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 $3.7 million for the second quarter of 2016, a 36% decrease on a per unit basis as compared to the same period in 2015. For the six months ended June 30, 2016, G&A expenses from continuing operations were $10.1 million, a 36% decrease on a per unit basis as compared to the same period in 2015. Cash G&A expenses from continuing operations were $9.1 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 June 30, 2016 was $16.0 million, or $0.22 per basic share. Net loss attributable to common shareholders for the six months ended June 30, 2016 was $46.2 million, or $0.72 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended June 30, 2016 was $4.8 million, or $0.07 per share. Adjusted net loss for the six months ended June 30, 2016 was $17.5 million, or $0.27 per share. During the second quarter of 2016, the company converted approximately $84.0 million in face value of its Series A 6.00% Convertible Perpetual Preferred Stock which generated approximately $72.3 million of income attributable to common shareholders.

EBITDAX from continuing operations, a non-GAAP measure, was $19.0 million for the second quarter of 2016 and $27.5 million for the six months ended June 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 six months ended June 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

Second quarter 2016 production volumes from continuing operations were 199.1 MMcfe/d, an increase of 2% over the second quarter of 2015, consisting of 124.5 MMcf/d of natural gas and 12.4 Mboe/d of condensate and NGLs (including 5.9 Mboe/d of ethane). Condensate and NGLs (including ethane) accounted for 37% of net production for the second quarter of 2016.

Including the effects of cash-settled derivatives, realized prices for the three months ended June 30, 2016 were $2.73 per Mcf for natural gas, $40.62per barrel for condensate, $19.93 per barrel for NGLs (C3+) and $7.49 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended June 30, 2016 were $1.42 per Mcf for natural gas, $37.20 per barrel for condensate, $15.49 per barrel for NGLs (C3+) and $7.49 per barrel for ethane. During the second quarter of 2016, the company liquidated a number of NGL and natural gas derivative positions which resulted in approximately $2.2 million of additional proceeds during the quarter. Excluding the effect of these liquidations, realized prices for natural gas and C3+ NGLs would have been approximately $2.37 per Mcf and $21.89 per barrel, respectively.

Including the effects of cash-settled derivatives, realized prices for the six months ended June 30, 2016 were $2.41 per Mcf for natural gas, $45.57 per barrel for condensate, $19.10 per barrel for NGLs (C3+) and $6.98 per barrel for ethane. Before the effects of hedging, realized prices for the six months ended June 30, 2016 were $1.39 per Mcf for natural gas, $31.91 per barrel for condensate, $13.87 per barrel for NGLs (C3+) and $6.84 per barrel for ethane.

Second Quarter 2016 Capital Investments

For the second quarter of 2016, net operational capital investments were approximately $23.3 million. The company expects to be reimbursed by joint venture partners for approximately $11.0 million for costs incurred during the second quarter that were not billed until the third quarter. These capital investments funded the drilling of eight gross (3.5 net) wells, fracture stimulation of four gross (1.4 net) wells, placing three gross (1.1 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.

Second quarter investments for leasing and property acquisition were $0.6 million and capitalized interest was $0.3 million.

Operational Update

Appalachian Basin – Legacy Butler Operated Area

The company has completed and recently 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 company plans to provide an update on the Geyer wells in the third quarter of 2016.

Appalachian Basin – Moraine East Area

In the Moraine East Area, Rex Energy drilled five gross (1.8 net) wells during the second quarter of 2016.  In addition, the company has five gross (1.8 net) wells awaiting completion and four gross (2.0 net) wells completed and waiting to be placed into sales. The company did not place the four-well Fleeger II pad into sales during the second quarter, as was previously expected. During the second quarter, the company experienced delays in the start-up of the Fleeger II gathering line and the commissioning of the high pressure system in Moraine East. The commissioning of the high pressure system is now expected in mid-September and the Fleeger II pad is expected to be placed into sales in mid-October.

During the second quarter of 2016, the company completed the drilling of the two-well Klever pad. The Klever wells were drilled to an average lateral length of approximately 7,460 feet and are expected to be placed into sales in the fourth quarter of 2016. The company has also completed the drilling of the four-well Baird pad with an average lateral length of approximately 7,140 feet and the pad is expected to be placed into sales in the fourth quarter of 2016. Top-hole drilling has commenced on the six-well Shields pad, which is expected to have an average lateral length of approximately 7,750 feet. Horizontal drilling will begin on the Shields pad once the horizontal drilling rig returns from the Warrior North Prospect.

At the end of the third quarter of 2016, the company expects to have HBP or HBO approximately 25,000 gross acres, which is 63% of its goal of 40,000 gross acres HBP or HBO in the Moraine East Area.

Appalachian Basin – Warrior North Area – Carroll County, Ohio

In the Warrior North Area, Rex Energy placed the three-well Goebeler pad into sales during the second quarter. The Goebeler wells were drilled to an average lateral length of approximately 7,360 feet and completed in an average of 41 stages with average sand concentrations of 2,800 pounds per foot. The wells produced at an average 24-hour sales rate per well, assuming full ethane recovery, of 2.1 MBoe/d, consisting of 3.5 MMcf/d of natural gas, 801 bbls/d of NGLs and 704 bbls/d of condensate.

The company also placed into sales the two-well Perry pad. The Perry pad was drilled to an average lateral length of approximately 6,350 feet with an average of 36 completion stages. An update on the Perry pad will be provided during the third quarter of 2016. The four-well Vaughn pad is currently being drilled with an expected average lateral length of approximately 7,200 feet, with the four well pad expected to be placed into sales in the first quarter of 2017.

Liquidity Update

As previously announced, Rex Energy entered into a purchase and sale agreement for the sale of the company’s entire interest in its Illinois Basinasset. Proceeds from the sale are expected to be approximately $40 million with the potential for additional proceeds of up to an additional $10 millionover the next three years. In addition, on July 1, 2016 the company’s bank group reaffirmed the existing $190 million borrowing base, inclusive of the sale of the Illinois Basin asset. The company recently entered into an exchange agreement with a certain holder for the exchange of $43.5 millionaggregate principal amount of the company’s 1.00%/8.00% Senior Secured Second Lien Notes due 2020 for approximately 16.8 million shares of common stock. Total cash interest savings from the exchange are approximately $11.1 million over the original life of the notes. Debt retirements in 2016 now total approximately $72.6 million with over $22.0 million in cash interest savings over the original life of the notes. The company continues to explore additional enhancements to its overall balance sheet.

Third Quarter and Full Year 2016 Guidance

Rex Energy is providing its guidance for the third quarter of 2016 ($ in millions) and updating its full year 2016 guidance. All figures are presented as net to the company. Third quarter production is expected to be down approximately 3% at the midpoint of guidance due to the delay in placing the Fleeger II pad into sales, the delay in the commissioning of the Moraine East high pressure system and the four day shut-in of the Moraine East Area related to the commissioning of the high pressure system. For full year 2016, adjusting for the sale of the Illinois Basin asset and the delay in the Fleeger II gathering line, the company expects full-year production growth of approximately 5%. In addition, with approximately 10 wells expected to be placed into sales in the fourth quarter of 2016, the company expects December 2016 exit rate year over year growth of approximately 7%, or 13.4 MMcfe/d.(Original Source)

Shares of Rex Energy are up 2.5% to $0.667 in after-hours trading. REXX has a 1-year high of $3.74 and a 1-year low of $0.49. The stock’s 50-day moving average is $0.70 and its 200-day moving average is $0.83.

On the ratings front, Wells Fargo analyst Gordon Douthat maintained a Hold rating on REXX, in a report issued on June 15. According to TipRanks.com, Douthat has a yearly average return of 15.0%, a 38.1% success rate, and is ranked #731 out of 4083 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. The Illinois Basin focuses on the implementation of enhanced oil recovery on properties as well as conventional oil production. The Appalachian Basin focuses on Marcellus Shale drilling projects. The company operates its business through two segments: Exploration & Production and Field Services. The Exploration & 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.