For additional information on the Warrior Prospect, please visit the company's website at www.rexenergy.com and refer to the updated corporate presentation.
Borrowing Base Increases to
Under the terms of the credit facility, the bank group re-determines the borrowing base semi-annually utilizing the bank's estimates of reserves and future oil and gas prices. The company's next redetermination is set for January of 2012.
The bank group is comprised of
Second Quarter 2011 Production and Commodity Prices
As previously announced,
After the effects of cash settled derivatives, realized natural gas prices were
Operational Update
Unless specifically stated otherwise in this operational update, all numbers are gross.
During the month of June, Rex processed an average of 28.4 MMcf/ day of gas through its Butler County Sarsen plant. Year-to-date through
For the remainder of the year,
The corporate presentation shows that the three wells on the Talarico pad averaged 3.2 MMcfe/ day for the first 30 days of sales. Based on these increased rates and decline curve analysis from wells producing over 100 days, Rex is increasing the existing 4.4 Bcfe EUR type curve to a range of 4.4 to 5.0 Bcfe per well.
| Wells Drilled |
Wells Fracture Stimulated |
Wells Placed into Service |
Wells Awaiting Stimulation |
|
| 1Q11 Operations | 6 | 6 | 10 | 23 |
| 2Q11 Operations | 16 | 5 | 3 | 18 |
| YTD 2011 Operations | 22 | 11 | 13 | 18 |
| FY 2011 Operations | 30 | 20 | 23 | 17 |
In
Due to higher initial production rates and an increase in the producing well count,
The average gross production from
| Wells Drilled |
Wells Fracture Stimulated |
Wells Placed into Service |
Wells Awaiting Stimulation |
|
| 1Q11 Operations | 7 | 0 | 0 | 13 |
| 2Q11 Operations | 7 | 8 | 8 | 12 |
| YTD 2011 Operations | 14 | 8 | 8 | 12 |
| FY 2011 Operations | 22 | 26 | 17 | 2 |
In
"While we continue to be very encouraged by the ASP pilot performance to-date, it is still premature to estimate the eventual pore volume oil recovery of the pilot, or translate the preliminary response into tertiary recovery proved reserves. We should be in a position to comment more definitely on the proved reserve booking impact of this project during our third quarter earnings release call in November," said
Denver Julesberg (DJ — Rockies) Basin
Second Quarter Financial Results
Adjusted net income comparable to analysts' estimates, a measure that is not recognized by
EBITDAX, a non-GAAP measure, was
Lease operating expenses for the three-month period ended
Cash general and administrative expenses (G&A), which excludes the noncash expenses associated with stock based compensation was approximately
For the quarter ending
Second Quarter 2011 Capital Investments
The second quarter Marcellus drilling and operational investment of
Total drilling and operational capital investments for the
The company spent
Total midstream and gathering investments for the second quarter totaled
In the
Including non cash quarterly accruals, total second quarter capital investments were
2011 Full Year Production and Exit Rate Guidance Increase
Due to increased efficiencies in operations, higher IP rates and the addition of 35.0 MMcf/ day of pipeline capacity in
34.7 — 39.4 MMcfe/ day to 37.0 — 40.4 MMcfe/ day. Additionally, the company is increasing the 2011 exit rate from 40.7 — 48.5 MMcfe/ day to 47.0 — 53.5 MMcfe/ day.
| 3Q2011 | Full Year 2011 | |
| Production | 40.5 — 42.0 MMcfe/ day | 37.0 — 40.4 MMcfe/ day |
| Lease Operating Expense | $8.0M -- $9.0M | $31.0M -- $34.0M |
| Cash G&A | $5.3M -- $6.0M | $24.0M -- $25.0M |
| Capital Expenditures | n/a | $235.6M |
| December, 2011 Exit Rate | n/a | 47.0 — 53.5 MMcfe/ day |
2011 Capital Investment Increase
- Four additional wells to be drilled in 2011
- Increased midstream construction in
Westmoreland County - An additional 12 wells being placed into service in 2011 and the incremental capital investment associated with those wells
The company expects to fund the incremental capital primarily through its increased borrowing base, line of credit for its midstream partnership in
CEO Position
Rex's Board of Directors is continuing its search for a new CEO. The Board has engaged a recruiting firm which is reviewing both internal and external candidates. No timeline has been established for making an announcement.
Conference Call Information
Management will host a live conference call and webcast on
About
The
Forward-Looking Statements
Except for historical information, statements made in this release, including those relating to the company's plans and expectations relating to the Warrior Prospect, drilling and completion schedules, anticipated fracture stimulation activities, redetermination schedule under the credit facility, adjustments to 2011 production and exit rate guidance and estimates for lease operating and general and administrative expenses, and potential strategies for funding the increased capital budget, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements typically contain words such as "expected", "expects", "scheduled", "planned", "plans", "anticipates" and similar words. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and the company's future performance are subject to a wide range of business risks and uncertainties, and there is no assurance that these goals and projections can or will be met. A number of factors could cause actual results to differ materially from those in the forward-looking statements, including (without limitation) the following:
The company undertakes no obligation to publicly update or revise any forward-looking statements. Further information on the company's risks and uncertainties is available in the company's filings with the
The company's internal estimates of reserves may be subject to revision and may be different from estimates by the company's external reservoir engineers at year end. Although the company believes the expectations and forecasts reflected in these and other forward-looking statements are reasonable, it can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.
| REX ENERGY CORPORATION | ||
| CONSOLIDATED BALANCE SHEETS | ||
| ($ in Thousands) | ||
| June 30, | December 31, | |
| 2011 | 2010 | |
| (Unaudited) | ||
| ASSETS | ||
| Current Assets | ||
| Cash and Cash Equivalents | $ 17,343 | $ 11,008 |
| Accounts Receivable | 21,193 | 28,860 |
| Short-Term Derivative Instruments | 3,431 | 4,564 |
| Deferred Taxes | 1,761 | — |
| Inventory, Prepaid Expenses and Other | 1,088 | 1,327 |
| Total Current Assets | 44,816 | 45,759 |
| Property and Equipment (Successful Efforts Method) | ||
| Evaluated Oil and Gas Properties | 288,737 | 241,586 |
| Unevaluated Oil and Gas Properties | 102,837 | 91,574 |
| Other Property and Equipment | 42,097 | 42,226 |
| Wells and Facilities in Progress | 64,351 | 37,393 |
| Pipelines | 4,080 | 4,080 |
| Total Property and Equipment | 502,102 | 416,859 |
| Less: Accumulated Depreciation, Depletion and Amortization | (103,372) | (93,063) |
| Net Property and Equipment | 398,730 | 323,796 |
| Restricted Cash | 2,525 | 16,111 |
| Intangible Assets and Other Assets — Net | 1,368 | 1,570 |
| Equity Method Investments | 30,579 | 18,399 |
| Long-Term Derivative Instruments | 2,079 | 1,450 |
| Total Assets | $ 480,097 | $ 407,085 |
| LIABILITIES AND EQUITY | ||
| Current Liabilities | ||
| Accounts Payable | $ 52,315 | $ 49,401 |
| Accrued Expenses | 24,945 | 10,168 |
| Short-Term Derivative Instruments | 2,418 | 1,860 |
| Current Deferred Tax Liability | — | 1,908 |
| Total Current Liabilities | 79,678 | 63,337 |
| Senior Secured Line of Credit and Long-Term Debt | 70,018 | 10,120 |
| Long-Term Derivative Instruments | 2,054 | 1,517 |
| Long-Term Deferred Tax Liability | 7,102 | 5,930 |
| Other Deposits and Liabilities | 850 | 4,283 |
| Future Abandonment Costs | 18,053 | 17,222 |
| Total Liabilities | $ 177,755 | $ 102,409 |
| Commitments and Contingencies | ||
| Stockholders' Equity | ||
| Common Stock, $.001 par value per share, 100,000,000 shares authorized and 44,435,788 shares issued and outstanding on June 30, 2011 and 44,306,677 shares issued and outstanding on December 31, 2010. | 44 | 44 |
| Additional Paid-In Capital | 375,634 | 373,856 |
| Accumulated Deficit | (73,580) | (69,519) |
| Rex Energy Stockholders' Equity | 302,098 | 304,381 |
| Noncontrolling Interests | 244 | 295 |
| Total Stockholders' Equity | 302,342 | 304,676 |
| Total Liabilities and Stockholders' Equity | $ 480,097 | $ 407,085 |
| REX ENERGY CORPORATION | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Unaudited, in Thousands, Except per Share Data) | ||||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2011 | 2010 | 2011 | 2010 | |
| OPERATING REVENUE | ||||
| Oil and Natural Gas Sales | $ 28,382 | $ 15,530 | $ 51,230 | $ 32,048 |
| Other Revenue | 769 | 156 | 1,341 | 396 |
| TOTAL OPERATING REVENUES | $ 29,151 | $ 15,686 | $ 52,571 | $ 32,444 |
| OPERATING EXPENSES | ||||
| Production and Lease Operating Expenses | 8,159 | 5,791 | 15,357 | 11,711 |
| General and Administrative Expense | 8,927 | 4,573 | 15,172 | 8,735 |
| (Gain) Loss on Disposal of Assets | 441 | (10) | 458 | (7) |
| Impairment Expense | 6,496 | 577 | 11,804 | 1,148 |
| Exploration Expense | 239 | 2,311 | 3,213 | 3,446 |
| Depreciation, Depletion, Amortization and Accretion | 6,161 | 5,139 | 12,039 | 10,232 |
| Other Operating Expense | 511 | 333 | 957 | 566 |
| TOTAL OPERATING EXPENSES | $ 30,934 | $ 18,714 | $ 59,000 | $ 35,381 |
| LOSS FROM OPERATIONS | $ (1,783) | $ (3,028) | $ (6,429) | $ (3,387) |
| OTHER INCOME (EXPENSE) | ||||
| Interest Income | 3 | 16 | 10 | 51 |
| Interest Expense | (250) | (167) | (559) | (331) |
| Gain (Loss) on Derivatives, net | 7,692 | 4,261 | 614 | 8,053 |
| Other Income (Expense) | 32 | (110) | 19 | (142) |
| Gain (Loss) on Equity Method Investments | 6 | (16) | (270) | (17) |
| TOTAL OTHER INCOME (EXPENSE) | $ 7,483 | $ 3,984 | $ (186) | $ 7,614 |
| INCOME (LOSS) BEFORE INCOME TAX | 5,700 | 956 | (6,615) | 4,227 |
| Income Tax Benefit (Expense) | (2,216) | (143) | 2,496 | (1,424) |
| INCOME (LOSS) | $ 3,484 | $ 813 | $ (4,119) | $ 2,803 |
| Net Income (Loss) Attributable to Noncontrolling Interests | 44 | (64) | (58) | (120) |
| NET INCOME (LOSS) ATTRIBUTABLE TO REX ENERGY | $ 3,440 | $ 877 | $ (4,061) | $ 2,923 |
| Earnings per common share — basic and diluted: | ||||
| Basic— Net Income (Loss) Attributable to Rex Common Shareholder | $ 0.08 | $ 0.02 | $ (0.09) | $ 0.07 |
| Basic— Weighted average shares of common stock outstanding | 44,363 | 44,028 | 44,337 | 43,082 |
| Diluted — Net Income (Loss) Attributable to Rex Common Shares | $ 0.08 | $ 0.02 | $ (0.09) | $ 0.07 |
| Diluted — Weighted average shares of common stock outstanding | 44,451 | 44,117 | 44,337 | 43,188 |
| REX ENERGY CORPORATION | ||||
| CONSOLIDATED OPERATIONAL HIGHLIGHTS | ||||
| (Unaudited) | ||||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2011 | 2010 | 2011 | 2010 | |
| Oil and gas sales (in thousands): | ||||
| Oil sales | $ 16,602 | $ 12,633 | $ 32,450 | $ 25,363 |
| Natural gas sales | 9,069 | 2,745 | 14,734 | 6,366 |
| Natural gas liquid sales | 2,711 | 152 | 4,046 | 319 |
| Cash-settled derivatives: | ||||
| Crude oil | (496) | (864) | (643) | (1,698) |
| Natural gas | 1,339 | 1,208 | 2,856 | 1,807 |
| Total oil and gas sales including cash settled derivatives | $ 29,225 | $ 15,874 | $ 53,443 | $ 32,157 |
| Production during the period: | ||||
| Oil (Bbls) | 167,838 | 168,900 | 342,919 | 338,655 |
| Natural gas (Mcf) | 1,899,727 | 669,512 | 3,184,395 | 1,334,931 |
| Natural gas liquids (Bbls) | 49,675 | 4,636 | 77,008 | 9,871 |
| Total (Mcfe)a | 3,204,805 | 1,710,728 | 5,704,437 | 3,426,087 |
| Production — average per day: | ||||
| Oil (Bbls) | 1,844 | 1,856 | 1,895 | 1,871 |
| Natural gas (Mcf) | 20,876 | 7,357 | 17,593 | 7,375 |
| Natural gas liquids (Bbls) | 546 | 51 | 426 | 55 |
| Total (Mcfe)a | 35,216 | 18,799 | 31,519 | 18,929 |
| Average price per unit: | ||||
| Realized crude oil price per Bbl — as reported | $ 98.92 | $ 74.80 | $ 94.63 | $ 74.89 |
| Realized impact from cash settled derivatives per Bbl | (2.96) | (5.12) | (1.88) | (5.01) |
| Net realized price per Bbl | $ 95.96 | $ 69.68 | $ 92.75 | $ 69.88 |
| Realized natural gas price per Mcf — as reported | $ 4.77 | $ 4.10 | $ 4.63 | $ 4.77 |
| Realized impact from cash settled derivatives per Mcf | 0.71 | 1.8 | 0.9 | 1.35 |
| Net realized price per Mcf | $ 5.48 | $ 5.90 | $ 5.53 | $ 6.12 |
| Realized natural gas liquids price per Bbl — as reported | $ 54.58 | $ 32.65 | $ 52.49 | $ 32.32 |
| Realized impact from cash settled derivatives per Bbl | — | — | — | — |
| Net realized price per Bbl | $ 54.58 | $ 32.65 | $ 52.49 | $ 32.32 |
| a Natural gas is converted at the rate of one Mcf to one Mcfe. Oil and natural gas liquids are converted at a rate of one Bbl to six Mcfe | ||||
| REX ENERGY CORPORATION | |||
| OIL AND GAS DERIVATIVES — CURRENT HEDGING POSITION a | |||
| 2011 | 2012 | 2013 | |
| Oil Derivatives (Bbl) | |||
| Volume | 288,000 Bbls | 540,000 Bbls | 240,000 Bbls |
| Ceiling | $ 104.69 | $ 112.03 | $ 120.00 |
| Floor | $ 68.54 | $ 67.10 | $ 70.50 |
| Natural Gas Derivatives (Mcf) | |||
| Swap Contracts | |||
| Volume | 1,020,000 Mcf | 1,320,000 Mcf | — |
| Price | $ 4.82 | $ 5.58 | $ — |
| Collar Contracts | |||
| Volume | 960,000 Mcf | 2,400,000 Mcf | 4,080,000 Mcf |
| Ceiling | $ 6.58 | $ 6.25 | $ 6.13 |
| Floor | $ 4.91 | $ 4.88 | $ 5.00 |
| Put Contracts | |||
| Volume | 360,000 Mcf | — | — |
| Floor | $ 8.00 | $ — | $ — |
| Put Contracts with Short Puts | |||
| Volume | 360,000 Mcf | — | — |
| Floor | $ 5.00 | $ — | $ — |
| Short Put | $ 3.68 | $ — | $ — |
| Collar Contracts with Short Puts | |||
| Volume | 360,000 Mcf | 1,440,000 Mcf | 720,000 Mcf |
| Ceiling | $ 5.25 | $ 5.55 | $ 5.85 |
| Floor | $ 4.75 | $ 4.88 | $ 5.00 |
| Short Put | $ 4.00 | $ 4.00 | $ 4.00 |
| a Oil hedges settle on the WTI — NYMEX price index while all gas hedging contracts settle on the Henry Hub NYMEX price index. | |||
The following table has been added to provide clarification on the components of Gain on Derivatives, net under Other Income (Expense) on the Consolidated Statements of Operations for each of the periods presented (in thousands):
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2011 | 2010 | 2011 | 2010 | |
| Realized Gains (Losses) from Financial Derivatives: | ||||
| Crude Oil Derivatives | $ (496) | $ (864) | $ (643) | $ (1,698) |
| Natural Gas Derivatives | 1,339 | 1,208 | 2,856 | 1,807 |
| Interest Rate Derivatives | — | (195) | — | (391) |
| Total Realized Gains (Losses) from Financial Derivatives | $ 843 | $ 149 | $ 2,213 | $ (282) |
| Unrealized Gains (Losses) from Financial Derivatives: | ||||
| Crude Oil Derivatives | $ 6,127 | $ 5,418 | $ (1,122) | $ 6,527 |
| Natural Gas Derivatives | 722 | (1,510) | (477) | 1,452 |
| Interest Rate Derivatives | — | 204 | — | 356 |
| Total Unrealized Gains (Losses) from Financial Derivatives | $ 6,849 | $ 4,112 | $ (1,599) | $ 8,335 |
| Gain on Derivatives, net | $ 7,692 | $ 4,261 | $ 614 | $ 8,053 |
Non-GAAP Financial Measures
EBITDAX
"EBITDAX" means, for any defined period, the sum of net income for the period plus the following expenses, charges or income, in each case, to the extent deducted from or added to net income in the period: interest, income taxes, depreciation, depletion, amortization, accretion, unrealized losses from financial derivatives, exploration expenses, and other similar non-cash charges, minus all non-cash income (without limitation) income from unrealized financial derivatives, added to net income. EBITDAX is used as a financial measure by
EBITDAX is not a calculation based on GAAP financial measures and should not be considered as an alternative to net income (loss) in measuring the company's performance, nor used as an exclusive measure of cash flow, because it does not consider the impact of working capital growth, capital expenditures, debt principal reductions, and other sources and uses of cash, which are disclosed in the company's statements of cash flows.
To compensate for these limitations,
The following table presents a reconciliation of the company's net income (loss) to its EBITDAX for each of the periods presented ($ in thousands):
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2011 | 2010 | 2011 | 2010 | |
| Net Income (Loss) | $ 3,484 | $ 813 | $ (4,119) | $ 2,803 |
| Add Back Depletion, Depreciation, Amortization & Accretion | 6,161 | 5,139 | 12,039 | 10,232 |
| Add Back Non-Cash Compensation Expense | 557 | 521 | 1,027 | 954 |
| Add Back Interest Expense | 250 | 167 | 559 | 331 |
| Add Back Impairment Expense | 6,496 | 577 | 11,804 | 1,148 |
| Add Back Exploration Expense | 239 | 2,311 | 3,213 | 3,446 |
| Less Interest Income | (3) | (16) | (10) | (51) |
| Add Back Realized Loss on Interest Rate Derivatives | — | 195 | — | 391 |
| Add Back (Less) (Gain) Loss on Disposal of Assets | 441 | (10) | 458 | (7) |
| Add Back (Less) Unrealized Loss (Gain) from Financial Derivatives | (6,849) | (4,112) | 1,600 | (8,335 |
| Add Back (Less) Noncontrolling Interest Share of Net Loss (Income) | (44) | 64 | 58 | 120 |
| Add Back (Less) Equity Method EBITDAX | 396 | (11) | 429 | (11) |
| Add Back (Less) Income Tax Expense (Benefit) | 2,216 | 143 | (2,496) | 1,424 |
| EBITDAX | $ 13,344 | $ 5,781 | $ 24,562 | $ 12,445 |
Earnings Comparable with Analyst Estimates
"Earnings Comparable with Analyst Estimates" means, for any period, the sum of net income for the period plus the following expenses, charges or income, in each case, to the extent deducted from or added to net income in the period: deferred income taxes, unrealized losses from financial derivatives, non-cash compensation and impairment, minus all gains from unrealized financial derivatives and deferred income tax benefits, added to net income. Earnings Comparable with Analyst Estimates is used as a financial measure by
To compensate for these limitations, the company believes it is important to consider both net income determined under GAAP and Earnings Comparable with Analyst Estimates.
The following table presents a reconciliation of
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2011 | 2010 | 2011 | 2010 | |
| Income (Loss) Before Income Taxes, as reported | $ 5,700 | $ 956 | $ (6,615) | $ 4,227 |
| Add Back (Less) Unrealized Loss (Gain) from Financial Derivatives | (6,849) | (4,112) | 1,600 | (8,335) |
| Add Back Impairment of Unproved Properties | 6,496 | 577 | 11,804 | 1,148 |
| Add Back Non-Cash Compensation Expense | 557 | 521 | 1,027 | 954 |
| Add Back (Less) Loss (Gain) on Disposal of Assets | 441 | (10) | 458 | (7) |
| Add Back (Less) Loss (Income) Attributable to Noncontrolling Interests | (44) | 64 | 58 | 120 |
| Income (Loss) Before Income Taxes, adjusted | $ 6,301 | $ (2,004) | $ 8,332 | $ (1,893) |
| Less Income Taxes, adjusted a | (2,450) | 301 | (3,144) | 638 |
| Net Income Comparable to Analyst Estimates | $ 3,851 | $ (1,703) | $ 5,188 | $ (1,255) |
| Basic and Diluted Net Income Comparable to Analyst Estimates per Share | 0.09 | (0.04) | 0.12 | (0.03) |
| a Income tax adjustment represents the effect of our effective tax rate on Loss Before Income Taxes, adjusted | ||||
CONTACT:Tom Stabley Executive Vice President and Chief Financial Officer (814) 278-7215 tstabley@rexenergycorp.comBernie McClain Manager, Financial Planning & Analysis (814)278-7148 bmcclain@rexenergycorp.com www.rexenergy.com
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