Press Releases

Feb 25, 2008
Rex Energy Reports Record Fourth Quarter and Year-End 2007 Results
STATE COLLEGE, Pa.--(BUSINESS WIRE)--Feb. 25, 2008--Rex Energy Corporation (NASDAQ:REXX) today announced results for the fourth quarter and year-end 2007. Highlights include:
  • Proved reserves for year-end 2007 increased 10% to 15.9 Mmboe from 14.5 Mmboe for year-end 2006;
  • 2007 total net production volumes reached a record high of 1.0 million barrels of oil equivalent "BOE", up 31% from the same period in 2006;
  • 2007 revenues grew 46% over 2006 to $57.8 million;
  • 2007 EBITDAX grew 39% over 2006 to $25.3 million;
  • Fourth quarter 2007 average daily net production reached a record high of 2,831 BOE per day; and
  • Fourth quarter 2007 revenues reached a record high of $16.1 million.
Fourth Quarter 2007

Production in the fourth quarter of 2007 totaled 260,472 BOE, of which approximately 80% was attributable to oil. Production volumes increased approximately 2% from the same period in 2006 and 1% over the third quarter of 2007. The Company's Illinois Basin operations contributed 75% to fourth quarter production, while the Company's Appalachian Basin operations contributed 15% and the Company's southwestern region 10% to fourth quarter production.

Revenues for the fourth quarter of 2007 were $16.1 million, representing a 21% increase from revenues of $13.3 million in the fourth quarter of 2006 and an increase of approximately $1.0 million, or 7%, from the third quarter of 2007.

The company's average realized oil price in the fourth quarter 2007, before the effect of derivatives, was $86.60 per barrel ("Bbl"), up 55.6% from $55.67 per Bbl in the fourth quarter of 2006. The company's average realized natural gas price in the fourth quarter of 2007, before the effects of derivatives, was $7.06 per thousand cubic feet ("Mcf") of natural gas, an increase of 10.7% from $6.38 per Mcf of natural gas in the fourth quarter of 2006.

Total operating expenses for the fourth quarter 2007 were $16.3 million, up from $13.8 million in the fourth quarter of 2006. Production and Lease operating expenses were $6.1 million for the fourth quarter of 2007, up from $5.6 million for the same period in 2006, and up from $5.9 million in the third quarter of 2007. General and administrative expenses were $3.2 million in the fourth quarter of 2007, a decrease of approximately $367,000 from the fourth quarter of 2006.

Exploration expenses were $1.2 million for the fourth quarter of 2007, which were the result of the expense of three Indiana New Albany Shale wells which were drilled in 2006. The company did not incur any exploration expenses during the fourth quarter of 2006. Depreciation, depletion, amortization and accretion ("DD&A") expenses were $5.5 million in the fourth quarter of 2007, up from $4.4 million in the fourth quarter of 2006. Included in the fourth quarter DD&A expense was an impairment charge of approximately $642,000 due to the write-down of the company's coalmine methane project in West Virginia.

The company reported a loss before minority interests and provision for taxes of $17.5 million in the fourth quarter of 2007 compared with a net loss before minority interest and provision for taxes of $3.5 million for the fourth quarter of 2006. All of the minority interests were acquired as part of the company's initial public offering and reorganization, which closed on July 30, 2007.

Net income comparable to analyst estimates, a non-GAAP financial measure of net income which excludes deferred tax benefits, dry hole and impairment expenses, gains or losses on the sale of assets, unrealized gains or losses from financial derivatives and non-cash compensation expenses was $1.7 million, or $0.06 per fully diluted share, in the fourth quarter of 2007, an increase of $780,000 over the fourth quarter of 2006. (See the accompanying table reconciling this non-GAAP financial measure.)

EBITDAX, a non-GAAP financial measure, was $7.2 million in the fourth quarter of 2007. This represented an increase of 68% over the fourth quarter of 2006 (See the accompanying table reconciling this non-GAAP financial measure.).

Capital expenditures for drilling and development in the fourth quarter 2007 were $12.5 million, which funded the drilling or recompletion of 35 gross wells (34 net wells) and related improvements to infrastructure. Of the wells drilled or recompleted, 18 gross wells (18 net wells) are producing, 14 gross wells (13 net wells) are expected to be productive, but are awaiting completion, and 3 gross wells (3 net wells) are continuing to be evaluated to determine if the wells will be economical to produce. Additionally, the company expended $1.9 million on leasing and acquisitions during the fourth quarter of 2007.

Full Year 2007

Production for the year ended December 31, 2007 totaled 1.0 million BOE, of which approximately 80% was attributable to oil. Production volumes increased approximately 31% over 2006. The Company's Illinois Basin operations contributed 76% to 2007 production, while the Company's Appalachian Basin operations contributed 13% and the Company's southwestern region 11% to 2007 production.

Revenues in 2007 were $57.8 million, representing a 46% increase from 2006 revenues of $39.6 million.

The company's average realized oil price in 2007, before the effect of derivatives, was $68.16 per barrel ("Bbl"), up 12% from $60.92 per Bbl in 2006. The company's average realized natural gas price in 2007, before the effects of derivatives, was $6.88 per thousand cubic feet ("Mcf") of natural gas, down from $7.04 per Mcf of natural gas in 2006.

Total operating expenses in 2007 were $55.6 million, up from $32.7 million in 2006. Production and Lease operating expenses were $24.5 million in 2007, up from $15.2 million in 2006. General and administrative expenses were $8.6 million in 2007, up from $6.2 in 2006.

Exploration expenses were $2.9 million in 2007, which were the result of the expense of three Indiana New Albany Shale wells drilled during 2006 and an exploratory oil well in the company's southwestern region drilled in the first quarter of 2007. DD&A expenses, including impairment charges of $642,000, were $19.0 million in 2007, up from $10.7 million in 2006. The increase in DD&A expenses were primarily caused by the increase in the company's assets associated with acquisitions and its initial public offering.

The company reported a loss before minority interests and provision for taxes of $29.4 million in 2007 compared with net income before minority interest and provision for taxes of $5.9 million in 2006. All of the minority interests were acquired as part of the company's initial public offering and reorganization which closed on July 30, 2007.

Net income comparable to analyst estimates, a non-GAAP financial measure of net income which excludes deferred tax benefits, dry hole and impairment expenses, gains or losses on the sale of assets, unrealized gains or losses from financial derivatives and non-cash compensation expenses, was $486,000, or $0.02 per fully diluted share, in 2007, down from net income of $813,000 in 2006. (See the accompanying table reconciling this non-GAAP financial measure.)

EBITDAX, a non-GAAP financial measure, was $25.3 million in 2007, up from $18.1 million in 2006. This represented an increase of 39% over 2006 (See the accompanying table reconciling this non-GAAP financial measure.).

Capital expenditures for drilling and development in 2007 were $32.7 million, which funded the drilling or recompletion of 108 gross wells (90 net wells) and related improvements to infrastructure and facilities. Of the wells drilled or recompleted, 67 gross wells (56 net wells) are producing, 30 gross wells (29 net wells) are expected to be productive, but are awaiting completion, and 11 gross wells (5 net wells) are continuing to be evaluated to determine if the wells will be economical to produce. Additionally, the company expended $7.7 million on leasing and acquisitions during 2007.

Proved Reserves

As previously reported, estimated total proved reserves of natural gas and crude oil as of December 31, 2007 increased 10% to 15.9 Mmboe (or 95 Bcfe), as compared with 14.5 Mmboe (or 87 Bcfe) at year-end 2006. The 2007 reserves are comprised of 18.5 Bcf of natural gas and 12.8 million barrels of crude oil. Of the 15.9 Mmboe of total proved reserves, 78% are categorized as proved developed, while 22% are proved undeveloped.

The present value of future cash flows before income taxes as of December 31, 2007, discounted at 10% (SEC PV10), totaled $392.1 million, utilizing year-end pricing of $6.79 per mcf for natural gas and $92.50 per barrel of crude oil. This represents a 96% increase over the $200.3 million of present value reported at year-end 2006. These estimates are based on an independent engineering study of the company's oil and gas properties prepared by Netherland, Sewell & Associates, Inc.

Operations Update

During the fourth quarter of 2007, the company drilled 7 gross (6 net) conventional natural gas wells in the Appalachian Basin, 4 gross (4 net) wells are producing, 3 gross (2 net) wells are expected to be completed and put into production during the first quarter of 2008. The company is continuing to add acreage in areas where it believes the Marcellus Shale may be prospective and began testing certain areas of its acreage in Pennsylvania for the Marcellus Shale during the first quarter of 2008.

The company drilled or recompleted approximately 3 gross (3 net) wells in the company's southwest region during the fourth quarter of 2007. The wells were being tested at year end to determine if they would ultimately be economical to produce.

In the Illinois Basin, the company drilled or recompleted approximately 25 gross (25 net) oil wells during the fourth quarter of 2007, 14 gross (14 net) wells are producing, 11 gross (11 net) wells are expected to be completed and put into production during the first quarter of 2008.

In reference to the company's ASP (Alkali-Surfactant-Polymer) project, the company is continuing to complete the construction of its chemical injection plant and is in the process of making final preparations to begin its two pilot programs in the field. The company remains on schedule to begin chemical injections in its two ASP pilot tests during the second quarter of 2008.

Management Comments

Benjamin W. Hulburt, Rex Energy's President and CEO, commented, "2007 was a momentous year for the company. During 2007, we completed our initial public offering, reduced our debt by approximately $75 million and established a new senior credit facility. In addition, we grew our production by 31%, our revenues by 46%, our EBITDAX by 39%, and our proven reserves grew by 10% year-over-year."

Hulburt further commented, "Our balance sheet and our liquidity were strengthened significantly this year resulting in the company's debt to market capitalization falling to approximately 6%. Our $50 million of additional availability at December 31, 2007 under our revolving credit facility and our operating cash flow will be used to finance our $78 million capital investment budget in 2008."

In a final comment, Hulburt stated, "Our focus in 2008 is to commence operations on our alkali-surfactant-polymer flood pilots during the second quarter, begin testing our Appalachian properties for the Marcellus Shale during the first quarter, continue to refine our completion procedures in the New Albany Shale, continue to grow our production through our developmental projects in the Appalachian, Illinois and Permian basins and to continue to aggressively add additional acreage in our Marcellus Shale project areas."

Production & Capital Expenditure Guidance

The company is reaffirming its previous guidance for first quarter of 2008 and is providing the following update to guidance for the second quarter of 2008 based upon the information available at the time of this release. Please see the forward-looking statements cautionary statement at the end of this release for more discussion of the inherent limitations of this information.

                                                Second Quarter Ending
                                                    June 30, 2008
Production:
  Oil (Mbl)                                    205 - 220
  Gas (MMcf)                                   310 - 330
  Oil Equivalent (MBOE)                        256 - 275
  Avg. Daily Production of Oil Equivalent
   (MBOE)                                      2,815 - 3,020
  Capex Budget (in millions)                   $12 - $20


WEBCAST INFORMATION

A conference call to discuss the fourth quarter and year-end results is scheduled for 10:30 a.m. Eastern time on Monday, February 25, 2008. The conference call will be broadcast live over the Internet and a replay will be accessible on the investor relations page of the company's Web site: www.rexenergy.com. A taped replay of the conference call will be accessible by dialing 888-286-8010 (toll free) or (International) 617-801-6888 and entering passcode 11073860, from 12:30 p.m. Eastern time February 25, 2008, until 11:59 p.m. Eastern time March 3, 2008.

ABOUT REX ENERGY

Rex Energy is an independent oil and gas company operating in the Illinois Basin, the Appalachian Basin and the southwestern region of the United States. The company pursues a balanced growth strategy of exploiting its sizable inventory of lower-risk developmental drilling locations, pursuing its higher-potential exploration drilling and enhanced oil recovery projects, and actively seeking to acquire complementary oil and natural gas properties.

For more information, contact: Joseph DeSimone, director of investor relations, at (814) 278-7267 or jdesimone@rexenergycorp.com

FORWARD-LOOKING STATEMENTS

Except for historical information, statements made in this release, including those relating to significant potential, future earnings, cash flow, capital expenditures, production growth and planned number of wells, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the volatility of oil and gas prices, the costs and results of drilling and operations, the timing of production, mechanical and other inherent risks associated with oil and gas production, weather, the availability of drilling equipment, changes in interest rates, litigation, uncertainties about reserve estimates, environmental risks and the occurrence of any unanticipated acquisition opportunities. The company undertakes no obligation to publicly update or revise any forward-looking statements. Further information on risks and uncertainties is available in the company's filings with the Securities and Exchange Commission, which are incorporated by reference.

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 AND COMBINED BALANCE SHEETS
                           ($ in Thousands)

                                           Rex Energy    Predecessor
                                            Corporation    Companies
                                           Consolidated     Combined
                                          December 31,   December 31,
                                               2007           2006
                                           (unaudited)     (audited)
                                          -------------- -------------
 ASSETS
Current Assets
 Cash and Cash Equivalents                  $   1,085       $     600
 Related Party Receivable                           -               2
 Accounts Receivable                            8,805           6,884
 Short-Term Derivative Instruments                 20           1,275
 Deferred Taxes                                 4,700               -
 Inventory, Prepaid Expenses and Other          1,388             904
                                          -------------- -------------
           Total Current Assets                15,998           9,665
Property and Equipment (Successful Efforts
 Method)
 Evaluated Oil and Gas Properties             205,186         127,370
 Unevaluated Oil and Gas Properties            33,074          14,569
 Other Property and Equipment                   4,397           4,182
 Wells in Progress                              6,549           3,460
 Pipelines                                      2,194           1,765
                                          -------------- -------------
           Total Property and Equipment       251,400         151,346
 Less: Accumulated Depreciation, Depletion
  and Amortization                            (33,868)        (17,715)
                                          -------------- -------------
           Net Property and Equipment         217,532         133,631

 Other Assets - Net                               817           1,172
 Intangible Assets - Net                        1,217               -
 Long-Term Derivative Instruments                   -             143
 Goodwill                                      32,700               -
                                          -------------- -------------
Total Assets                                $ 268,264       $ 144,611
                                          ============== =============

 LIABILITIES AND EQUITY
Current Liabilities
 Accounts Payable and Accrued Expenses      $   9,814       $   8,336
 Short-Term Derivative Instruments             10,893           2,978
 Accrued Distributions                              -             102
 Current Lines of Credit                            -          37,581
 Current Portion of Long-Term Debt                 29           2,867
 Related Party Payable                              -           1,820
                                          -------------- -------------
           Total Current Liabilities           20,736          53,684

 Senior Secured Line of Credit and Long-
  Term Debt                                    27,186          44,961
 Other Loans and Notes Payable - Long-Term
  Portion                                          21             481
 Long-Term Derivative Instruments              18,843           1,698
 Participation Liability                            -           2,141
 Deferred Taxes                                30,300               -
 Other Deposits and Liabilities                   345             405
 Future Abandonment Cost                        6,396           5,269
                                          -------------- -------------
Total Liabilities                           $ 103,827       $ 108,639
Commitments and Contingencies
Minority Interests                                  -          36,589
Owners' Equity
 Common Stock, $.001 par value per share,
  100,000,000 shares authorized and
  30,794,702 shares issued and outstanding
  on December 31, 2007                             31               1
 Additional Paid-In Capital                   175,170           1,460
 Retained Earnings                            (10,640)           (581)
 Other Comprehensive (Loss)                      (124)              -
 Partner's and Member's (Deficit)                   -          (1,497)
                                          -------------- -------------
           Total Owners' Equity (Deficit)     164,437            (617)
                                          -------------- -------------
Total Liabilities, Minority Interests and
 Owners' Equity (Deficit)                   $ 268,264       $ 144,611
                                          ============== =============


                        REX ENERGY CORPORATION
          CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
     (Unaudited, $ and Shares in Thousands Except per Share Data)

                   Rex Energy                Rex Energy
                    Corporation Rex Energy    Corporation Rex Energy
                   Consolidated   Combined   Consolidated   Combined
                       and       Predecessor     and       Predecessor
                     Combined     Companies    Combined     Companies

                      Three Months Ended            Years Ended
                         December 31,              December 31,
                   ------------------------- -------------------------
                       2007         2006         2007         2006
                   ------------ ------------ ------------ ------------
OPERATING REVENUE
  Oil and Natural
   Gas Sales       $    20,244  $    13,441  $    63,525  $    43,596
  Other Revenue            109          112          452          470
  Realized
   Gain(Loss) on
   Derivatives          (4,223)        (211)      (6,198)      (4,436)
                   ------------ ------------ ------------ ------------
       TOTAL
        OPERATING
        REVENUE         16,130       13,342       57,779       39,630

OPERATING EXPENSES
  Production and
   Lease Operating
   Expenses              6,143        5,609       24,477       15,234
  General and
   Administrative
   Expense               3,182        3,549        8,587        6,212
  Accretion Expense
   on Asset
   Retirement
   Obligation              232          221          640          476
  Exploration
   Expense               1,243            -        2,948            -
  Depreciation,
   Depletion, and
   Amortization          5,529        4,400       18,982       10,747
                   ------------ ------------ ------------ ------------
       TOTAL
        OPERATING
        EXPENSES        16,329       13,779       55,634       32,669
                   ------------ ------------ ------------ ------------

       INCOME FROM
        OPERATIONS        (199)        (437)       2,145        6,961

OTHER INCOME
 (EXPENSE)
  Interest Income           12           14           15           94
  Interest Expense        (362)      (2,638)      (5,646)      (6,110)
  Gain (Loss) on
   Sale or Disposal
   of Oil and Gas
   Properties              (10)           1          185           91
  Unrealized (Loss)
   Gain on
   Derivatives         (17,155)        (481)     (26,250)       5,043
  Other Income
   (Expense)               171           88          171         (132)
                   ------------ ------------ ------------ ------------
       TOTAL OTHER
        INCOME
        (EXPENSE)      (17,344)      (3,016)     (31,525)      (1,014)

NET INCOME (LOSS)
 BEFORE MINORITY
 INTEREST AND
 PROVISION
 (BENEFIT) FOR
 TAXES                 (17,543)      (3,453)     (29,380)       5,947

MINORITY INTEREST
 SHARE OF (NET
 INCOME) LOSS                -        1,957        6,152       (2,133)
                   ------------ ------------ ------------ ------------

       NET INCOME
        (LOSS)
        BEFORE
        INCOME TAX     (17,543)      (1,496)     (23,228)       3,814
       Income Tax
        Benefit
        (Expense)        6,972            -        7,017            -
                   ------------ ------------ ------------ ------------
            NET
             INCOME
             (LOSS)$   (10,571) $    (1,496) $   (16,211) $     3,814
                   ------------ ------------ ------------ ------------

Earnings per common share for the three and five month periods ended
 December 31, 2007:
Net loss for the
 three and five
 months ended
 December 31, 2007 $   (10,571)           0  $   (10,640)           0
Basic and fully
 diluted earnings
 per share         $     (0.34)           0  $     (0.35)           0
Weighted average
 shares of common
 stock outstanding      30,795            0       30,795            0


                          REX ENERGY CORPORATION
                 CONSOLIDATED OPERATIONAL HIGHLIGHTS
                             (Unaudited)

                             Three Months Ended       Years Ended
                                December 31,          December 31,
----------------------------------------------- ----------------------
                               2007      2006       2007       2006
----------------------------------------------------------------------

Production:
Oil (Bbls)                    208,180  208,929      814,857    587,470
   Natural gas (Mcf)          313,754  283,549    1,159,999  1,109,494
      Total (BOE)(a)          260,472  256,187    1,008,190    772,386

Average daily production:
   Oil (Bbls)                   2,263    2,271        2,232      1,609
   Natural gas (Mcf)            3,410    3,082        3,178      3,040
      Total (BOE)(a)            2,831    2,785        2,762      2,116

Average sales prices:
   Oil (per Bbl)            $   86.60 $  55.67   $    68.16 $    60.92
   Natural gas (per Mcf)    $    7.06 $   6.38   $     6.88 $     7.04
      Total (per BOE)(a)    $   77.72 $  52.46   $    63.01 $    56.44
Average NYMEX prices(b)
   Oil (per Bbl)            $   90.68 $  60.21   $    72.31 $    66.21
   Natural gas (per Mcf)    $    6.97 $   6.56   $     6.83 $     7.23

(a)Natural gas is converted at the rate of six Mcf to one BOE and oil
 is converted at a rate of one Bbl to one BOE
(b)Based upon the average of bid week prompt month prices


                        REX ENERGY CORPORATION
                   REGIONAL OPERATIONAL HIGHLIGHTS
                             (Unaudited)

                               Production and Revenue by Basin
                        ----------------------------------------------
                          Three Months Ended         Years Ended
                             December 31,            December 31,
                        ----------------------  ----------------------
                           2007        2006        2007        2006
                        ----------  ----------  ----------  ----------

Appalachian
  Revenues - Natural
   Gas
($ in Thousands)       $ 1,710,000 $ 1,142,766 $ 5,724,638 $ 5,460,218
  Volumes (MCF)            228,640     167,053     786,095     707,755
  Average Price        $      7.48 $      6.84 $      7.28 $      7.71

Illinois
  Revenues - Oil
($ in Thousands)       $17,010,357 $11,113,043 $52,408,060 $33,327,602
  Volumes (BBL)            196,489     199,434     769,911     546,231
  Average Price        $     86.57 $     55.72 $     68.07 $     61.02

Southwest Region
  Revenues - Oil
($ in Thousands)       $ 1,017,010 $   518,464 $ 3,134,459 $ 2,461,892
  Volumes (BBL)             11,690       9,495      44,945      41,239
  Average Price        $     87.00 $     54.60 $     69.74 $     59.70

  Revenues - Natural
   Gas
($ in Thousands)       $   506,643 $   666,394 $ 2,257,912 $ 2,346,305
  Volumes (MCF)             85,114     116,496     373,904     401,739
  Average Price        $      5.95 $      5.72 $      6.04 $      5.84


                       REX ENERGY CORPORATION
                       OIL AND GAS DERIVATIVES
                 (Unaudited, As of December 31, 2007)

                                                   Average Derivative
    Period       Contract Type         Volume             Price
-------------- ------------------ ---------------- -------------------

     Oil
--------------

          2008       Swaps          204,000 Bbls                $65.58
          2008      Collars         369,000 Bbls        $62.33 - 80.26
          2009       Swaps          192,000 Bbls                $64.00
          2009      Collars         350,000 Bbls        $62.30 - 67.95
          2010       Swaps          180,000 Bbls                $62.20
          2010      Collars         288,000 Bbls        $60.00 - 78.25
                                  ----------------
                     Total         1,583,000 Bbls
 Natural gas
--------------

          2008      Collars         840,000 Mcf           $7.00 - 9.19
          2009      Collars         600,000 Mcf           $7.00 - 9.00
                                  ----------------
                     Total         1,440,000 Mcf

    Non-GAAP Financial Measures

    EBITDAX


"EBITDAX" means, for any period, the sum of net income for such period plus the following expenses, charges or income to the extent deducted from or added to net income in such period: interest, income taxes, depreciation, depletion, amortization, unrealized losses from financial derivatives, exploration expenses and other similar non-cash charges, minus all non-cash income, including but not limited to, income from unrealized financial derivatives, added to net income. EBITDAX, as defined above, is used as a financial measure by the company's management team and by other users of its financial statements, such as the company's commercial bank lenders, to analyze such things as:

  • The company's operating performance and return on capital in comparison to those of other companies in its industry, without regard to financial or capital structure;
  • The financial performance of the company's assets and valuation of the entity, without regard to financing methods, capital structure or historical cost basis;
  • The company's ability to generate cash sufficient to pay interest costs, support its indebtedness and make cash distributions to its stockholders; and
  • The viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
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.

The company has reported EBITDAX because it is a financial measure used by its existing commercial lenders, and because this measure is commonly reported and widely used by investors as an indicator of a company's operating performance and ability to incur and service debt. You should carefully consider the specific items included in the company's computations of EBITDAX. While the company has disclosed its EBITDAX to permit a more complete comparative analysis of its operating performance and debt servicing ability relative to other companies, you are cautioned that EBITDAX as reported by the company may not be comparable in all instances to EBITDAX as reported by other companies. EBITDAX amounts may not be fully available for management's discretionary use, due to requirements to conserve funds for capital expenditures, debt service and other commitments.

The company believes that EBITDAX assists its lenders and investors in comparing a company's performance on a consistent basis without regard to certain expenses, which can vary significantly depending upon accounting methods. Because the company may borrow money to finance its operations, interest expense is a necessary element of its costs and its ability to generate cash available for distribution. Because the company uses capital assets, depreciation and amortization are also necessary elements of its costs. Additionally, the company is required to pay federal and state taxes, which are necessary elements of its costs. Therefore, any measures that exclude these elements have material limitations.

To compensate for these limitations, the company believes it is important to consider both net income determined under GAAP and EBITDAX to evaluate its performance.

The following table presents a reconciliation of the company's net income to its EBITDAX for each of the periods presented ($ in thousands):

                                  Three Months Ended   Years Ended,
                                     December 31,      December 31,
                                  ------------------ -----------------
                                    2007      2006     2007    2006
                                  ---------  ------- -------- -------
Net Income (Loss)                  $(10,571) $(1,496)$(16,211)$ 3,814
   Add Back Depletion,
    Depreciation & Amortization       5,529    4,400   18,982  10,747
   Add Back Accretion Expense on
    Future Abandonment
    Obligations                         232      221      640     476
   Add Back Non-Cash Compensation
    Expense                             211        -      211       -
   Add Back Interest Expense            362    2,638    5,646   6,110
   Add Back Exploration Expense       1,243        -    2,948       -
   Less Interest Income                 (12)     (14)     (15)    (94)
   Add Back Unrealized Losses
    (Gains) from Financial
    Derivatives                      17,155      481   26,250  (5,043)
        Add Back Minority
         Interest Share of Net
         Income (Loss)                    -   (1,957)  (6,152)  2,133
        Add Back (Less) Income
         Tax Expense (Benefit)       (6,972)       -   (7,017)      -
                                    -------   ------  -------  ------
EBITDAX                            $  7,177  $ 4,273 $ 25,282 $18,143


EARNINGS COMPARABLE WITH ANALYST ESTIMATES

"EARNINGS COMPARABLE WITH ANALYST ESTIMATES" means, for any period, the sum of net income for such period plus the following expenses, charges or income to the extent deducted from or added to net income in such period: minority interest share of net income which were acquired as part of the company's reorganization on July 31, 2007, deferred income taxes, unrealized gains or losses from financial derivatives, minus gains from unrealized financial derivatives, minus deferred income tax benefits, added to net income. Earnings Comparable with Analyst Estimates, as defined above, is used as a financial measure by the company's management team and by other users of its financial statements, to analyze its financial performance without regard to minority interests which were all acquired as part of the company's reorganization on July 31, 2007, non-cash deferred taxes and non-cash unrealized losses or gains from oil and gas derivatives. Earnings Comparable with Analysts Estimates 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.

The company has reported Earnings Comparable with Analyst Estimates because it believes that this measure is commonly reported and widely used by investors as an indicator of a company's operating performance. You should carefully consider the specific items included in the company's computations of this measure. You are cautioned that Earnings Comparable with Analyst Estimates as reported by the company may not be comparable in all instances to that reported by other companies.

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 the company's net income to its Earnings Comparable with Analyst Estimates for each of the periods presented ($ in thousands):

                                  Three Months Ended    Years Ended
                                    December 31,       December 31,
                                 ------------------ ------------------
                                   2007      2006     2007      2006
Net Income (Loss)                $(10,571)  (1,496) $(16,211)  $3,814
Adjustment for certain non-cash
 items
    Minority Interest Share of
     Net Income (Loss)                  -    1,957    (6,152)   2,133
    Unrealized (Gain) Loss on
     Derivatives                   17,155      481    26,250   (5,043)
    Exploration and Impairment
     Expense                        1,885        -     3,590        -
    Non-cash Compensation Expense     211        -       211        -
    (Gain) Loss on Sale or
     Disposal of Assets                10       (1)     (185)     (91)
    Deferred income tax asset      (6,972)       -    (7,017)       -
                                  -------   ------  --------   ------


Net Income (Loss) Before Income
 Taxes Comparable to Analysts
 Estimates, a non-GAAP measure   $  1,718     $941  $    486     $813


CONTACT: Rex Energy Corporation
Joe DeSimone, 814-278-7129
jdesimone@rexenergycorp.com