Press Releases

Aug 04, 2015
Rex Energy Reports Second Quarter Operational and Financial Results

  • Production of 206.8 MMcfe/d, a 61% increase year-over-year
  • Reduced well cost in Legacy Butler Operated Area to $5.5 million
  • Cash G&A per Mcfe reduced by 44% year over year to $0.35 / Mcfe
  • Completed sale of Keystone Clearwater Solutions in July 2015 for net proceeds of $67 million

STATE COLLEGE, Pa., Aug. 04, 2015 (GLOBE NEWSWIRE) -- Rex Energy Corporation (Nasdaq:REXX) announced its second quarter 2015 operational and financial results.

"We remain steadfast in our strategy to navigate through the current commodity price cycle," said Tom Stabley, President and Chief Executive Officer of Rex Energy. "We have increased production, controlled costs and are divesting non-core assets. The team at Rex is implementing measures that are resulting in improved well performance while maintaining liquidity and financial discipline."

Second Quarter Financial Results

Operating revenue from continuing operations for the three and six months ended June 30, 2015 was $45.8 million and $99.9 million, respectively, which represents a decrease of 37% and 35% over the same periods in 2014, respectively. Commodity revenues, including settlements from derivatives, were $59.3 million and $124.0 million for the three and six months ended June 30, 2015, respectively, a decrease of 16% for each of the comparable periods of 2014. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 49% of total commodity revenues for the three months ended June 30, 2015.

Including the effects of cash settled basis differential derivatives, the company's basis differential for its Appalachian Basin assets averaged approximately ($0.77) off the Henry Hub price of $2.64 for the three months ended June 30, 2015.

LOE from continuing operations was $30.6 million, or $1.63 Mcfe for the quarter. For the six months ended June 30, 2015, LOE was approximately $59.7 million, or $1.64 per Mcfe. Cash general and administrative expenses from continuing operations, a non-GAAP measure, were $6.5 million for the second quarter of 2015, a 44% decrease on a per unit basis as compared to the same period in 2014. For the six months ended June 30, 2015, cash G&A expenses from continuing operations were $13.2 million, a 46% decrease on per unit basis as compared to the same period in 2014.

The company incurred a non-cash impairment charge of approximately $117.8 million during the second quarter of 2015. The reduction in carrying value, which was primarily focused on the company's non-operated dry gas Marcellus assets in Westmoreland and Clearfield Counties, Pennsylvania, is attributable to market conditions related to these properties indicating a decrease in market prices for similar assets.

Net loss attributable to common shareholders for the three months ended June 30, 2015 was $155.2 million, or $2.87 per basic share. Net loss attributable to common shareholders for the six months ended June 30, 2015 was $175.4 million, or $3.25 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended June 30, 2015 was $12.1 million, or $0.22 per share. Adjusted net loss for the six months ended June 30, 2015 was $17.8 million, or $0.33 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $22.4 million for the second quarter of 2015 and $51.8 million for the six months ended June 30, 2015.

Reconciliations of adjusted net income (loss) to GAAP net income (loss) from continuing operations before income taxes, EBITDAX to GAAP net income (loss) and cash G&A to GAAP G&A for the three months and six months ended June 30, 2015, 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 2015 production volumes were 206.8 MMCfe/d, an increase of 61% over the second quarter of 2014, consisting of 131.1 MMcf/d of natural gas and 12.6 Mboe/d of oil, condensate and NGLs (including 3.2 Mboe/d of ethane). Oil, condensate and NGLs (including ethane) accounted for 37% of net production for the second quarter of 2015.

Including the effects of cash-settled derivatives, realized prices for the three months ended June 30, 2015 were $56.99 per barrel for oil and condensate, $2.53 per Mcf for natural gas, $17.61 per barrel for NGLs (C3+) and $6.62 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended June 30, 2015 were $49.28 per barrel for oil and condensate, $1.77 per Mcf for natural gas, $13.92 per barrel for NGLs (C3+) and $6.39 per barrel for ethane.

Including the effects of cash-settled derivatives, realized prices for the six months ended June 30, 2015 were $54.17 per barrel for oil and condensate, $2.72 per Mcf for natural gas, $21.75 per barrel for NGLs (C3+) and $6.72 per barrel for ethane. Before the effects of hedging, realized prices for the six months ended June 30, 2015 were $44.35 per barrel for oil and condensate, $2.11 per Mcf for natural gas, $18.45 per barrel for NGLs (C3+) and $6.46 per barrel for ethane.

Second Quarter 2015 Capital Investments

For the second quarter of 2015, the company made operational capital investments of approximately $30.7 million, of which $26.8 million was used to fund Marcellus and Ohio Utica operations and $3.9 million was used to fund conventional drilling, water flood enhancement and facility upgrades in the Illinois Basin. The Marcellus and Ohio Utica capital investment funded the drilling of five gross (3.5 net) wells, fracture stimulation of eight gross (4.0 net) wells, placing four gross (2.1 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.

Investments for leasing and property acquisition were $2.6 million and capitalized interest was $1.7 million for the second quarter of 2015.

Operational Update

Appalachian Basin - Legacy Butler Operated Area

In the Legacy Butler Operated Area, the company drilled four gross (2.5 net) wells in the second quarter of 2015, with four gross (1.4 net) wells fracture stimulated and four gross (2.1 net) wells placed into sales. The company had 11.0 gross (5.6 net) wells drilled and awaiting completion as of June 30, 2015.

The company has placed into sales the Bloom 6H well which was drilled to a lateral length of approximately 4,600 feet and completed in 31 stages with average sand concentrations of 2,800 pounds per foot. The well produced at a 5-day sales rate, assuming full ethane recovery, of 8.3 MMcfe/d, consisting of 4.0 MMcf/d of natural gas and 717 bbls/d of NGLs and condensate.

In addition, the company has reduced its cost to drill and complete wells by approximately 4% to $5.5 million per well, assuming a 5,000 foot lateral, as compared to the previously reported $5.7 million per well at year-end 2014. The decrease in well cost is attributable to operational efficiencies and improved pricing from service providers. The company continues to focus intensely on cost control measures and expects to achieve further cost reductions and efficiencies by year-end.

Appalachian Basin - Moraine East Area

In the Moraine East Area, the company is currently drilling the fourth well on the four-well Fleeger pad. The four wells will be drilled to an average lateral length of approximately 6,000 and completed with an average sand concentration of approximately 2,300 pounds per foot. The company expects to complete the four wells in the fourth quarter of 2015 and place the pad into sales in late 2015 or early 2016, as the necessary infrastructure comes into service.

Appalachian Basin - Western Lawrence Utica

In the Western Lawrence Utica, drilling operations have been completed on the Patterson 2H, the company's first dry gas Utica well in the region. The well was drilled to a lateral length of approximately 6,800 feet and is currently being completed. The Patterson 2H is expected to be placed into sales in late third quarter 2015.

Appalachian Basin - Moraine East Gathering and Bluestone III

In the Moraine East Area, the company anticipates the Moraine East gathering and processing system to be commissioned by the end of 2015. In addition, the company continues to anticipate the commissioning of Bluestone III in the fourth quarter of 2015. Bluestone III will add approximately 105 MMcf/d of processing capacity in the Butler Operated Area.

Liquidity Update

As of June 30, 2015, the company had approximately $6.1 million of cash and $93.0 million of its $350.0 million borrowing base outstanding under its senior secured credit facility. During July 2015, Rex Energy completed the sale of Keystone Clearwater Solutions and received reimbursement for previous pipeline expenditures for net proceeds of $72.4 million. Pro forma for the sale of Keystone Clearwater Solutions, reimbursements from previous pipeline expenditures and additional reimbursements from the company's drilling joint venture in Moraine East, the company has approximately $8.8 million outstanding under its $350 million borrowing base.

Third Quarter and Full Year 2015 Guidance

Rex Energy is providing its guidance for the third quarter and maintaining its full year 2015 guidance ($ in millions). Third quarter production is expected to be relatively flat to second quarter production due to processing constraints at the Bluestone II facility. The company currently has an inventory of wells in the Butler Operated Area waiting to be placed into sales following the expected commissioning of Bluestone III in the fourth quarter of 2015.

 3Q2015Full Year 2015
Production197.0 - 202.0 MMcfe/d193.0 - 203.0 MMcfe/d
Lease Operating Expense$31.0 - $34.0 million--
Cash G&A$6.5 - $7.5 million--
Operational Capital Expenditures(1)(2)--$135.0 - $145.0 million
(1) Land acquisition expense and capitalized interest are not included in the operational capital expenditures budget  
(2) Continuing operations only

Conference Call Information

Management will host a live conference call and webcast on Wednesday, August 5, 2015 at 10:00 a.m. Eastern to review second quarter 2015 financial results and operational highlights. All financial results included in this release or discussed on the conference call are preliminary pending the completion by our independent auditors of the second quarter 2015 review. The telephone number to access the conference call is (866) 437-1772. Presentation slides containing reference materials will be available on the company's website, www.rexenergy.com, under the Investor Relations tab.

About Rex Energy Corporation

Rex Energy, headquartered in State College, Pennsylvania, is an independent oil and gas exploration and production company operating in the Appalachian and Illinois Basins within the United States. The company's strategy is to pursue its higher potential exploration drilling prospects while acquiring oil and natural gas properties complementary to its portfolio.

Forward-Looking Statements

Except for historical information, statements made in this release, including those relating to the timing and nature of development plans; drilling and completion schedules; anticipated fracture stimulation activities; expected dates for availability and infrastructure and placement of wells into sales; and our financial guidance for third quarter and full year 2015 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 may contain words such as "expected", "expects", "scheduled", "planned", "plans", "anticipates" or similar words. These statements are based on management's experience and perception of historical trends, current conditions, and anticipated future developments, as well as other factors believed to be appropriate. We believe these statements and the assumptions and estimates contained in this release are reasonable based on information that is currently available to us. However, management's assumptions and the company's future performance are subject to a wide range of business risks and uncertainties, both known and unknown, and we cannot assure that the company can or will meet the goals, expectations, and projections included in this release. Any number of factors could cause our actual results to be materially different from those expressed or implied in our forward looking statements, including (without limitation):

  • economic conditions in the United States and globally;
  • domestic and global demand for oil, NGLs and natural gas;
  • volatility in oil, NGL, and natural gas pricing;
  • new or changing government regulations, including those relating to environmental matters, permitting, or other aspects of our operations;
  • the geologic quality of the company's properties with regard to, among other things, the existence of hydrocarbons in economic quantities;
  • uncertainties inherent in the estimates of our oil and natural gas reserves;
  • our ability to increase oil and natural gas production and income through exploration and development;
  • drilling and operating risks;
  • the success of our drilling techniques in both conventional and unconventional reservoirs;
  • the success of the secondary and tertiary recovery methods we utilize or plan to employ in the future;
  • the number of potential well locations to be drilled, the cost to drill them, and the time frame within which they will be drilled;
  • the ability of contractors to timely and adequately perform their drilling, construction, well stimulation, completion and production services;
  • the availability of equipment, such as drilling rigs, and infrastructure, such as transportation, pipelines, processing and midstream services;
  • the effects of adverse weather or other natural disasters on our operations;
  • competition in the oil and gas industry in general, and specifically in our areas of operations;
  • changes in our drilling plans and related budgets;
  • the success of prospect development and property acquisition;
  • the success of our business and financial strategies, and hedging strategies;
  • conditions in the domestic and global capital and credit markets and their effect on us;
  • the adequacy and availability of capital resources, credit, and liquidity including, but not limited to, access to additional borrowing capacity; and
  • uncertainties related to the legal and regulatory environment for our industry, and our own legal proceedings and their outcome.

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 Securities and Exchange Commission.


REX ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands, Except Share and Per Share Data)
     
ASSETS June 30, 2015 (Unaudited) December 31, 2014
Current Assets    
Cash and Cash Equivalents $6,113  $17,978 
Accounts Receivable  29,863    43,936 
Taxes Receivable  19   504 
Short-Term Derivative Instruments  20,810   29,265 
Inventory, Prepaid Expenses and Other  2,102   3,403 
Assets Held for Sale  45,334   34,257 
Total Current Assets   104,241   129,343 
Property and Equipment (Successful Efforts Method)     
Evaluated Oil and Gas Properties  1,167,161   1,079,039 
Unevaluated Oil and Gas Properties  306,811   322,413 
Other Property and Equipment  47,091   46,361 
Wells and Facilities in Progress  122,398    127,655 
Pipelines  12,789   15,657 
Total Property and Equipment   1,656,250    1,591,125 
Less: Accumulated Depreciation, Depletion and Amortization  (489,041)  (366,917)
Net Property and Equipment  1,167,209   1,224,208 
Deferred Financing Costs and Other Assets - Net  16,705   17,070 
Equity Method Investments  --   17,895 
Long-Term Derivative Instruments  8,372   4,904 
Long-Term Deferred Tax Asset  5,995   8,301 
Total Assets $1,302,522  $1,401,721 
LIABILITIES AND EQUITY    
Current Liabilities    
Accounts Payable $34,701  $53,340 
Current Maturities of Long-Term Debt  725   1,176 
Accrued Liabilities   46,436   59,478 
Short-Term Derivative Instruments  2,202   421 
Current Deferred Tax Liability  5,995   8,301 
Liabilities Related to Assets Held for Sale  32,002   25,115 
Total Current Liabilities   122,061    147,831 
Long-Term Derivative Instruments  3,793    2,377 
Senior Secured Line of Credit and Long-Term Debt  93,260   251 
8.875% Senior Notes Due 2020  350,000   350,000 
6.25% Senior Notes Due 2022  325,000   325,000 
Premium on Senior Notes, Net    2,538    2,725 
Other Deposits and Liabilities  3,634   4,018 
Future Abandonment Cost  39,931   38,146  
Total Liabilities $940,217  $870,348 
     
Stockholders' Equity    
Preferred Stock, $.001 par value per share, 100,000 shares authorized and 16,100 issued and outstanding on June 30, 2015 and December 31, 2014 $ 1  $ 1 
Common Stock, $.001 par value per share, 100,000,000 shares authorized and 55,280,071 shares issued and outstanding on June 30, 2015 and 54,174,763 shares issued and outstanding on December 31, 2014  54   54 
Additional Paid-In Capital  622,738   617,826 
Accumulated Deficit  (266,145)  (90,749)
Rex Energy Stockholders' Equity   356,648   527,132 
Noncontrolling Interests  5,657   4,241 
Total Stockholders' Equity  362,305   531,373 
Total Liabilities and Owners' Equity $1,302,522  $1,401,721 



REX ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands, Except per Share Data)
    
 For the Three Months Ended 
June 30,
 For the Six Months Ended
June 30
  2015   2014   2015   2014 
OPERATING REVENUE        
Oil, Natural Gas and NGL Sales$ 45,761  $ 72,903  $ 99,872  $154,202 
Other Revenue 11   30   22   74 
TOTAL OPERATING REVENUE 45,772   72,933   99,894   154,276 
OPERATING EXPENSES        
Production and Lease Operating Expense 30,642   21,633   59,694   41,666 
General and Administrative Expense  8,480   8,329   18,131   17,891 
(Gain) Loss on Disposal of Assets (300)  222   (235)  294 
Impairment Expense 117,844   16   124,867   41 
Exploration Expense 917   1,367   1,435   3,427 
Depreciation, Depletion, Amortization and Accretion 29,538   20,356   55,664   40,079 
Other Operating Expense (Income) (70)  (56)  5,121   27 
TOTAL OPERATING EXPENSES 187,051   51,867   264,677   103,425 
INCOME (LOSS) FROM OPERATIONS (141,279)  21,066   (164,783)  50,851 
OTHER EXPENSE       
Interest Expense (12,194)  (7,357)  (24,211)  (14,290)
Gain (Loss) on Derivatives, Net (281)  (251)  16,838   (10,001)
Other Income 65   54   99   17 
Loss on Equity Method Investments (208)  (208)  (411)  (408)
TOTAL OTHER EXPENSE (12,618)  (7,762)   (7,685)  (24,682)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX (153,897)  13,304    (172,468)  26,169 
Income Tax (Expense) Benefit 524   (5,660)  616   (9,770)
INCOME (LOSS) FROM CONTINUING OPERATIONS (153,373)  7,644   (171,852)  16,399 
Income From Discontinued Operations, Net of Income Taxes 1,570   1,311   3,532   2,993 
NET INCOME (LOSS) (151,803)  8,955   (168,320)  19,392 
Net Income Attributable to Noncontrolling Interests 949   877   2,246   2,446 
NET INCOME (LOSS) ATTRIBUTABLE TO REX ENERGY (152,752)  8,078   (170,566)  16,946 
Preferred Stock Dividends 2,415      --   4,830    -- 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS$ (155,167) $  8,078  $ (175,396) $16,946
Earnings per common share:       
Basic - Net Income (Loss) From Continuing Operations Attributable to Rex Energy Common Shareholders$ (2.88) $   0.14  $ (3.27) $0.31 
Basic - Net Income From Discontinued Operations Attributable to Rex Energy Common Shareholders 0.01   0.01    0.02   0.01 
Basic - Net Income (Loss) Attributable to Rex Energy Common Shareholders$ (2.87) $   0.15  $ (3.25) $ 0.32 
Basic - Weighted Average Shares of Common Stock Outstanding 54,118   53,164   54,090   53,075 
Diluted - Net Income (Loss) From Continuing Operations Attributable to Rex Energy Common Shareholders$ (2.88) $   0.14  $ (3.27) $0.31 
Diluted - Net Income  From Discontinued Operations Attributable to Rex Energy  Common Shareholders 0.01   0.01   0.02   0.01 
Diluted - Net Income (Loss) Attributable to Rex Energy Common Shareholders$ (2.87) $   0.15  $ (3.25) $0.32 
Diluted - Weighted Average Shares of Common Stock Outstanding 54,118   53,509   54,090   53,511 



REX ENERGY CORPORATION
CONSOLIDATED OPERATIONAL HIGHLIGHTS
UNAUDITED
      
  Three Months Ending Six Months Ending
   June 30, June 30,
  2015 2014 2015 2014
Oil, Natural Gas, NGL and Ethane sales (in thousands):            
Oil and condensate sales $15,135 $ 24,555  $27,596 $ 47,861 
Natural gas sales  21,087   32,398   49,373   72,498 
Natural gas liquid sales (C3+)  7,684   15,866   19,803   33,759 
Ethane sales  1,855   84   3,099   84 
Cash-settled derivatives:            
Crude oil  2,368   (1,006)  6,113   (1,427)
Natural gas  9,067    (1,003)  14,339   (4,342)
Natural gas liquids (C3+)  2,036   43   3,539   (1,443)
Ethane  67  --  126  --
Total oil, gas, NGL and Ethane sales including cash settled derivatives $59,299 $ 70,937  $123,988 $ 146,990 
             
Production during the period:            
Oil and condensate (Bbls)  307,105   251,861   622,279   502,269 
Natural gas (Mcf)  11,926,165   8,171,627   23,429,082   15,834,994 
Natural gas liquids (C3+) (Bbls)  551,899   325,580   1,073,102   630,724 
Ethane (Bbls)  290,453   13,948   479,608    13,948 
Total (Mcfe)1  18,822,907   11,719,961   36,479,016   22,716,640 
             
Production - average per day:            
Oil and condensate (Bbls)  3,375   2,768   3,438   2,775 
Natural gas (Mcf)  131,057   89,798   129,442   87,486 
Natural gas liquids (C3+) (Bbls)  6,065   3,578   5,929   3,485 
Ethane (Bbls)  3,192   153   2,650   77 
Total (Mcfe)a  206,845   128,791   201,542    125,506 
             
Average price per unit:            
Realized crude oil price per Bbl - as reported $49.28 $ 97.50   $44.35 $ 95.29 
Realized impact from cash settled derivatives per Bbl  7.71   (3.99)  9.82   (2.84)
Net realized price per Bbl $56.99 $ 93.51  $54.17 $ 92.45 
             
Realized natural gas price per Mcf - as reported $1.77 $ 3.96  $2.11 $ 4.58 
Realized impact from cash settled derivatives per Mcf  0.76   (0.12)  0.61   (0.27)
Net realized price per Mcf $2.53 $ 3.84  $2.72 $ 4.31 
             
Realized natural gas liquids (C3+) price per Bbl - as reported $13.92 $ 48.73  $18.45 $ 53.52 
Realized impact from cash settled derivatives per Bbl  3.69   0.13    3.30   (2.29)
Net realized price per Bbl $17.61 $ 48.86  $21.75 $ 51.23 
             
Realized ethane price per Bbl - as reported $6.39 $ 6.00  $6.46 $ 6.00 
Realized impact from cash settled derivatives per Bbl  0.23   --   0.26   -- 
Net realized price per Bbl $6.62 $ 6.00  $6.72 $ 6.00 
             
LOE/Mcfe $1.63 $ 1.85  $1.64 $ 1.83 
Cash G&A/Mcfe $0.35 $ 0.62  $0.36 $ 0.67 
 
 1 Oil and natural gas liquids are converted at the rate of one barrel of oil equivalent to six Mcfe.
 
 


REX ENERGY CORPORATION
COMMODITY DERIVATIVES - HEDGE POSITION AS OF 8/1/2015
         
   2015   2016 
Oil Derivatives (Bbls)    
Collar Contracts    
Volume  125,000   60,000 
Ceiling$ 63.15 $ 63.81 
Floor$ 52.90 $ 53.75 
Collar Contracts with Short Puts    
Volume  250,000   45,000 
Ceiling$ 72.50 $ 70.00 
Floor$ 65.00 $ 65.00 
Short Put$ 50.00 $ 50.00 
Put Spread Contracts    
Volume  --   120,000 
Floor$ -- $ 65.00 
Short Put$ -- $ 50.00 
Natural Gas Derivatives (Mcf)    
Swap Contracts    
Volume 11,975,000(1)  13,200,000(2) 
Price$  3.61 $ 3.63 
Swaption Contracts    
Volume  1,250,000   -- 
Price$ 3.54 $ -- 
Put Spread    
Volume  1,950,000   2,100,000 
Floor$ 3.32  $ 3.00 
Short Put$ 2.56 $ 2.25 
Collar Contracts    
Volume  --   900,000 
Ceiling$ -- $ 4.04 
Floor$ -- $ 3.20 
Collar Contracts with Short Puts    
Volume  2,600,000   11,850,000 
Ceiling$ 4.09 $ 4.08 
Floor$ 3.44 $ 3.35 
Short Put$ 2.75 $ 2.58 
Call Contracts    
Volume   1,450,000   7,320,000 
Ceiling$ 4.01 $ 4.35 
Natural Gas Liquids (Bbls)    
Swap Contracts    
Propane (C3)    
Volume  415,000   639,000 
Price$ 26.04 $ 23.10 
Butane (C4)    
Volume  60,000   108,000 
Price$ 28.90   30.62 
Isobutane (IC4)    
Volume  27,500   60,000 
Price$ 29.57 $ 30.70 
Natural Gasoline (C5+)    
Volume  142,500   324,000 
Price$ 50.78 $ 52.79 
Ethane    
Volume  170,900   240,000 
Price$  8.40 $ 8.82 
Natural Gas Basis (Mcf)    
Swap Contracts    
Dominion Appalachia(3)    
Volume  4,230,000   12,500,000 
Price$ (0.81)$ (0.90)
(1)  Includes 3.3 Bcf of enhanced swaps
(2)  Includes 3.6 Bcf of enhanced swaps
(3)  Financial derivatives only
 


APPENDIX  

REX ENERGY CORPORATION
NON-GAAP 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, DD&A, unrealized losses from financial derivatives, non-recurring gains and losses, exploration expenses and other similar non-cash charges, minus all non-cash income, including but not limited to, income from unrealized financial derivatives and gains on asset dispositions, added to net income. EBITDAX, as defined above, is used as a financial measure by our management team and by other users of its financial statements, such as our commercial bank lenders to analyze such things as:

  • Our operating performance and return on capital in comparison to those of other companies in our industry, without regard to financial or capital structure;
  • The financial performance of our assets and valuation of the entity without regard to financing methods, capital structure or historical cost basis;
  • Our ability to generate cash sufficient to pay interest costs, support our indebtedness and make cash distributions to our 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) (the most directly comparable GAAP financial measure) in measuring our performance, nor should it be used as an exclusive measure of cash flows, 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 our consolidated statements of cash flows.

We have reported EBITDAX because it is a financial measure used by our 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 our computations of EBITDAX. While we have disclosed EBITDAX to permit a more complete comparative analysis of our operating performance and debt servicing ability relative to other companies, you are cautioned that EBITDAX as reported by us 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.

We believe that EBITDAX assists our lenders and investors in comparing our performance on a consistent basis without regard to certain expenses, which can vary significantly depending upon accounting methods. Because we may borrow money to finance our operations, interest expense is a necessary element of our costs. In addition, because we use capital assets, DD&A are also necessary elements of our costs. Finally, we are required to pay federal and state taxes, which are necessary elements of our costs. Therefore, any measures that exclude these elements have material limitations.

To compensate for these limitations, we believe it is important to consider both net income determined under GAAP and EBITDAX to evaluate our performance.

For purposes of consistency with current calculations, we have revised certain amounts relating to prior period EBITDAX. The following table presents a reconciliation of our net income to EBITDAX for each of the periods presented.


  Three Months Ended  
June 30,
 Six Months Ended
June 30,
   2015   2014   2015   2014 
Income (Loss) From Continuing Operations $ (153,373) $ 7,644  $ (171,852) $ 16,399 
          
(Gain) Loss on Derivatives, Net  281   251   (16,838)  10,001 
Cash Settlement of Derivatives  13,941   (1,457)  25,020   (6,333)
Add Back (Less) Unrealized (Gain) Loss from Financial Derivatives  14,222   (1,206)  8,182   3,668 
Add Back Non-Recurring Costs1  (248)   --   4,774    -- 
Add Back Depletion, Depreciation, Amortization and Accretion   29,538   20,356   55,664   40,079 
Add Back Non-Cash Compensation Expense  1,955   1,074   4,917   2,724 
Add Back Interest Expense  12,194   7,357   24,211   14,290 
Add Back Impairment Expense  117,844   16   124,867   41 
Add Back Exploration Expenses  917   1,367   1,435    3,427 
Add Back (Less) Loss (Gain) on Disposal of Assets  (300)  222   (235)  294 
Add Back (Less) Income Tax Expense (Benefit)  (524)  5,660   (616)  9,770 
Add Back Non-Cash Portion of Equity Method Investment  203   202   406   401 
EBITDAX From Continuing Operations $ 22,428  $ 42,692  $51,753  $91,093 
Income From Discontinued Operations, Net of Income Taxes  1,570   1,311    3,532   2,993 
Net Income Attributable to Noncontrolling Interests  (949)  (877)  (2,246)  (2,446)
Income From Discontinued Operations Attributable to Rex Energy  621   434   1,286   547 
Add Back Depletion, Depreciation, Amortization and Accretion   37   871   76   1,572 
Add Back Interest Expense  240   145   431   347 
Add Back (Less) Loss (Gain) on Disposal of Assets  (10)  7   (42)  7 
Less Non-Cash Portion of Noncontrolling Interests  (107)  (410)  (186)  (774)
Add Back Income Tax Expense  423   272   858   354 
Add EBITDAX From Discontinued Operations  $ 1,204  $ 1,319  $ 2,423  $ 2,053 
EBITDAX (Non-GAAP) $ 23,632  $ 44,011  $ 54,176  $ 93,146 
 
1Non-Recurring costs for the three and six months ended June 30, 2015 include fees incurred to terminate two drilling rig contracts earlier than their original term; the company has the option to recapture approximately 50% of the fees if the rig is utilized by the company or another party.


Adjusted Net Income

"Adjusted Net Income" means, for any period, the sum of net income (loss) from continuing operations before income taxes 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: unrealized losses from financial derivatives, non-cash compensation expense, dry hole expenses, disposals of assets, impairment and other one-time or non-recurring charges, minus all gains from unrealized financial derivatives, disposal of assets and deferred income tax benefits, added to net income. Adjusted Net Income is used as a financial measure by Rex Energy's management team and by other users of its financial statements, to analyze its financial performance without regard to non-cash deferred taxes and non-cash unrealized losses or gains from oil and gas derivatives. Adjusted Net Income 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.

Rex Energy reports Adjusted Net Income 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 computation of this measure. You are cautioned that Adjusted Net Income as reported by Rex Energy 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 Adjusted Net Income.

The following table presents a reconciliation of Rex Energy's net income from continuing operations to its adjusted net income for each of the periods presented ($ in thousands):

 For the Three Months Ended For the Six Months Ended
 June 30, June 30,
   2015   2014    2015   2014 
Income (Loss) From Continuing Operations Before Income Taxes, as reported$ (153,897)$ 13,304  $ (172,468)$ 26,169 
(Gain) Loss on Derivatives, Net  281   251    (16,838)  10,001 
Cash Settlement of Derivatives   13,941   (1,457)   25,020   (6,333)
Add Back (Less) Unrealized (Gain) Loss from Financial Derivatives  14,222   (1,206)   8,182   3,668 
Add Back Non-Recurring Costs(1)  (248)  --    4,774   -- 
Add Back Impairment Expense   117,844   16    124,867   41 
Add Back Dry Hole Expense  288   --    289   86 
Add Back Non-Cash Compensation Expense  1,955   1,074     4,917   2,724 
Add Back (Less) (Gain) Loss on Disposal of Assets  (300)  222    (235)  294 
Income (Loss) Before Income Taxes, adjusted$ (20,136)$ 13,410  $ (29,674)$ 32,982 
Less Income Tax (Expense) Benefit, adjusted(2)  8,054   (5,364)   11,870   (13,193)
Adjusted Net Income (Loss)$ (12,082)$ 8,046  $ (17,804)$ 19,789 
          
Basic - Adjusted Net Income Per Share$ (0.22)$ 0.15  $ (0.33)$ 0.37 
Basic - Weighted Average Shares of Common Stock Outstanding  54,118   53,164    54,090   53,075 
 
1Non-Recurring costs for the three and six months ended June 30, 2015 include fees incurred to terminate two drilling rig contracts earlier than their original term; the company has the option to recapture approximately 50% of the fees if the rig is utilized by the company or another party.
2Assumes an effective tax rate of 40%.


Cash General and Administrative Expenses

Cash General and Administrative Expenses (Cash G&A) is the difference between GAAP G&A and non-Cash G&A, which is primarily comprised of non-cash compensation expense. Rex Energy has reported Cash G&A because it believes that this measure is commonly reported and widely used by management and investors as an indicator of overhead efficiency without regard to non-cash expenditures, such as stock compensation. Cash G&A is not a calculation based on GAAP financial measures and should not be considered as an alternative to GAAP G&A in measuring the company's performance. You should carefully consider the specific items included in the company's computation of this measure. You are cautioned that Cash G&A as reported by Rex Energy 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 Cash G&A and GAAP G&A. The following table presents a reconciliation of Rex Energy's GAAP G&A to its Cash G&A for each of the periods presented (in thousands):


 Three Months Ended
June 30,
 Six Months Ended
June 30,
  2015    2014   2015   2014 
GAAP G&A$8,480  $8,329  $18,131  $17,891 
Non-Cash Compensation Expense (1,955)  (1,074)  (4,917)  (2,724)
Cash G&A$6,525  $7,255  $13,214  $15,167 


Pro Forma Borrowing under Senior Credit Facility

Pro forma borrowing under the company's senior secured credit facility presents information about availability of its borrowing base pro forma for certain events that occurred after the close of the second quarter. The company believes it is important to consider the pro forma borrowings under the senior credit facility. The following table presents a reconciliation of Rex Energy's borrowings under its senior credit facility as of June 30, 2015 to its pro forma borrowings under its senior credit facility of the period presented (in thousands):


 Three Month Ended
June 30, 2015
Senior Secured Credit Facility$93,000
Less Net Proceeds from KCS Sale67,444
Less Reimbursements from Previous Pipeline Expenditures4,948
Less Reimbursements from Moraine East Joint Venture 11,760
Pro Forma Senior Secured Credit Facility$9,792

 

For more information contact:



Investor Relations

(814) 278-7130

InvestorRelations@rexenergycorp.com

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Source: Rex Energy Corporation

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