Rex Energy Corporation (NASDAQ:REXX) announced its first quarter 2017 financial and operational results.
First Quarter Financial Results
Operating revenue from continuing operations for the three months ended March 31, 2017 was $52.1 million, which represents an increase of 103% as compared to the same period in 2016. Commodity revenues, including settlements from derivatives, were $48.6 million, an increase of 25% as compared to the same period in 2016. Commodity revenues from natural gas liquids (NGLs) and condensate, including settlements from derivatives, represented 38% of total commodity revenues for the three months ended March 31, 2017.
Lease operating expense (LOE) from continuing operations was $28.9 million, or $1.85 per Mcfe for the quarter, a 30% increase as compared to the first quarter of 2016. The increase on a per unit basis is related to the commencement of the company’s Gulf Coast transport. The increase in transportation cost was offset by a decrease in natural gas basis differentials. General and administrative expenses from continuing operations were $4.5 million for the first quarter of 2017, a 14% decrease as compared to the same period in 2016. Cash general and administrative expenses from continuing operations, a non-GAAP measure, were $4.5 million, or $0.29 per Mcfe for the quarter, a 9% decrease on a per unit basis as compared to the same period in 2016.
Net income attributable to common shareholders for the three months ended March 31, 2017 was $2.1 million, or $0.02 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended March 31, 2017 was $5.5 million, or $0.06 per share.
EBITDAX from continuing operations, a non-GAAP measure, was $15.6 million for the first quarter of 2017, an 84% increase as compared to the first quarter of 2016 and an 18% increase compared to the fourth quarter of 2016.
Reconciliations of adjusted net income (loss) to GAAP net income, EBITDAX to GAAP net income and G&A to cash G&A for the three months ended March 31, 2017, 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 2017 production volumes from continuing operations were 173.4 MMcfe/d, consisting of 110.1 MMcf/d of natural gas, 4.7 Mbbls/d of C3+ NGLs, 5.0 Mbbls/d of ethane and 0.8 Mbbls/d of condensate. NGLs (including ethane) and condensate accounted for 36% of net production for the first quarter of 2017.
Including the effects of cash-settled derivatives, realized prices for the three months ended March 31, 2017 were $3.04 per Mcf for natural gas, $25.19 per barrel for C3+ NGLs, $9.72 per barrel for ethane and $46.14 per barrel for condensate. Before the effects of hedging, realized prices for the three months ended March 31, 2017 were $3.16 per Mcf for natural gas, $30.84 per barrel for C3+ NGLs, $9.48 per barrel for ethane and $46.07 per barrel for condensate.
First Quarter 2017 Capital Investments
For the first quarter of 2017, net operational capital investments were approximately $25.5 million. The company expects to be reimbursed by joint development partners for approximately $11.0 million of previously incurred costs that were not billed until the second quarter of 2017. Capital investments in the first quarter of 2017 funded the drilling of seven gross (3.3 net) wells, fracture stimulation of four gross (1.4 net) wells and other projects related to drilling and completing wells in the Appalachian Basin.
Legacy Butler Operated Area
The company has begun drilling the last of four wells on the Wilson pad. The four wells are expected to have an average lateral length of approximately 9,300 feet and are expected to be placed into sales in the third quarter of 2017. The four-well Wilson pad is adjacent to the two-well Geyer pad, which was drilled to an average lateral length of approximately 4,200 feet and had an average 5-day sales rate per well of approximately 7.1 MMcfe/d. Following the drilling of the last well on the Wilson pad, the drilling rig will return to Moraine East and begin drilling the two-well Frye pad, which is expected to have an average lateral length of approximately 5,400 feet.
Moraine East Area
In the Moraine East Area, the company drilled seven gross (3.3 net) wells and completed four gross (1.4 net) wells during the first quarter of 2017. In addition, the company had 12 gross (5.5 net) wells awaiting completion at the end of the first quarter.
The company has begun completing the six-well Shields pad and expects to place the six wells into sales in the third quarter of 2017. Following the completion of the Shields pad, the company will begin completing the four-well Mackrell pad, which was drilled to an average lateral length of approximately 7,600 feet.
Warrior North Area
In the Warrior North Area, the company plans to drill 12 gross (10.2 net) wells during 2017, with the average lateral length of approximately 7,000 feet. The drilling and completion activity in Warrior North will begin in the second half of 2017 and the majority of the wells are expected to be placed into sales in the beginning of 2018.
During the second quarter of 2017, Rex Energy closed on a new $300 million first lien delayed draw term loan with a lending group led by Angelo, Gordon and Co. Initial borrowings of approximately $144.0 million under the term loan were used to repay all outstanding loans and obligations under the company’s previous senior secured credit facility, pay fees and expenses associated with the term loan, and place approximately $19.3 million of cash on the balance sheet. The new facility also includes approximately $46.5 million for outstanding undrawn letters of credit. Following the repayment of outstanding borrowings on the senior secured credit facility, the company has approximately $110.0 million of additional capacity under the term loan. In addition, the term loan permits, under certain circumstances, the issuance of up to an additional $100 million in secured first lien debt.
Second Quarter and Full Year 2017 Guidance
Rex Energy is providing its guidance for the second quarter of 2017 and maintaining its guidance for full-year 2017 ($ in millions).
The increase in lease operating expenses on a per unit basis is related to the company’s Gulf Coast transportation increasing from 100 MMcf/d to 130 MMcf/d in the second quarter of 2017. The increase on a per unit basis is partially offset by the improvement in natural gas basis differentials for the same period. The company expects natural gas basis differentials, including the effects of basis hedges, to be in the range of $0.25 – $0.35 off of NYMEX for the second quarter of 2017. In addition, the company expects the four-well Baird pad in Moraine East to be placed into sales on June 1, 2017.
Shares of Rex Energy are up nearly 2% to $0.48 in after-hours trading Tuesday. REXX has a 1-year high of $0.98 and a 1-year low of $0.23. The stock’s 50-day moving average is $0.41 and its 200-day moving average is $0.51.
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.