August 8, 2017

Rex Energy Reports Second Quarter 2017 Financial and Operational Results

  • New BP Energy Company marketing arrangement enhances C3+ pricing structure and stabilizes cash flows on a quarter-to-quarter basis
  • New marketing arrangement allows Rex to reduce outstanding letters of credit by $14.1 million, creating additional liquidity
  • Sale of water line in Warrior North adds ~$8.0 million of liquidity
  • 2017 and 2018 natural gas hedged basis differentials now expected to be ($0.35) - ($0.45)
  • Twelve Moraine East wells scheduled to be placed into sales in third quarter 2017

                                                                                                                          
STATE COLLEGE, Pa., Aug. 08, 2017 (GLOBE NEWSWIRE) -- Rex Energy Corporation (Nasdaq:REXX) today announced its second quarter 2017 financial and operational results.

Financial Update

Marketing Agreement with BP Energy Company

The company recently entered into a comprehensive marketing arrangement with BP Energy Company, an indirect wholly-owned subsidiary of BP plc (NYSE:BP), pursuant to which BP Energy Company will market the majority of Rex's liquid C3+ products stream, and provide credit support on behalf of Rex Energy. The arrangement also enhances several of the company's existing marketing initiatives in the Butler and Warrior North operating areas.

Beginning January 1, 2018, BP Energy Company will purchase the majority of the company's C3+ products stream for an extended term. The pricing structure compares favorably to actual 2016 and projected 2017 prices. The new pricing structure will help to mitigate the historical fluctuations between summer and winter pricing and stabilize the company's quarterly cash flows. As part of the new marketing arrangement, Rex Energy has reduced outstanding letters of credit by approximately $14.1 million, immediately increasing liquidity on the company's $300 million delayed draw term loan facility. Also, as part of the broader marketing initiatives, BP Energy Company will market a portion of Rex Energy's Warrior North gas at an improved differential to the current Dom South pricing.

"I'm very excited to expand our existing relationship with BP," said Tom Stabley, Rex Energy's President and Chief Executive Officer. "The relationship we have developed and grown with BP over the past several years has been a major key to Rex Energy's success. This is another testament to the confidence placed in the company's reserves and development capabilities. I look forward to this new, deeper relationship, and to continuing to expand it in the years to come."

Sale of Salineville Waterline

In July, the company sold its Salineville, OH waterline and related assets to Keystone Clearwater Services (KCS) for a total consideration of approximately $8.0 million. The Salineville waterline provided water for completions in the Warrior North area. In connection with the sale of the waterline, Rex Energy entered into a lease agreement with KCS to secure water services for future completions in the Warrior North area.

Warrior North Area Condensate

Rex Energy has entered into a new term condensate agreement with Marathon Petroleum Corporation pursuant to which the company will receive an improved condensate differential on all of its production in the Warrior North Area beginning September 1, 2017.

Improving Natural Gas Basis Differentials

During the first half of 2017, the company's realized natural gas prices improved due to tightening differentials in the northeast markets and the full realization of its Gulf Coast transport contracts. The unhedged realized natural gas price for the first half of 2017 was $2.94 and the natural gas basis differential was ($0.24) off of NYMEX.  As a result, the company expects its full-year 2017 natural gas basis differential, including the effects of basis hedging, to improve to ($0.35) - ($0.45) off of NYMEX as compared to the previous estimate of ($0.58) - ($0.68) off of NYMEX.

Second Quarter Financial Results

Operating revenue from continuing operations for the three and six months ended June 30, 2017 was $47.5 million and $99.5 million, respectively, which represents an increase of 52% and 75% over the same periods in 2016. Commodity revenues, including settlements from derivatives, for the three and six months ended June 30, 2017 were $45.4 million and $94.0 million, respectively, a decrease of 7% and an increase of 7% from the same periods in 2016. Commodity revenues from natural gas liquids (NGLs) and condensate, including settlements from derivatives, represented 39% of total commodity revenues for the three months ended June 30, 2017.

Lease operating expense (LOE) from continuing operations was $29.4 million, or $1.82 per Mcfe for the quarter. For the six months ended June 30, 2017, LOE was approximately $58.3 million, or $1.84 per Mcfe. General and administrative (G&A) expenses from continuing operations were $4.3 million for the second quarter of 2017, or $0.27 per Mcfe. For the six months ended June 30, 2017, G&A expenses from continuing operations were $8.8 million, or $0.28 per Mcfe. Cash G&A expenses from continuing operations (a non-GAAP measure) for the three months ended June 30, 2017 were $3.8 million, or $0.23 per Mcfe, a 16% increase on a per unit basis as compared to the same period in 2016. For the six months ended June 30, 2017, cash G&A expenses from continuing operations (a non-GAAP measure) were $8.3 million, or $0.26 per Mcfe, consistent on a per unit basis when compared to the same period in 2016.

Net loss attributable to common shareholders for the three months ended June 30, 2017 was $10.2 million, or $1.03 per basic share. Net loss attributable to common shareholders for the six months ended June 30, 2017 was $8.1 million, or $0.83 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended June 30, 2017 was $9.2 million, or $0.93 per share. Adjusted net loss for the six months ended June 30, 2017 was $14.7 million, or $1.50 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $12.4 million for the second quarter of 2017 and $28.0 million for the six months ended June 30, 2017.

Reconciliations of adjusted net loss to GAAP net loss, EBITDAX to GAAP net loss and G&A to cash G&A for the three and six months ended June 30, 2017, as well as a discussion of the uses of each measure, are presented in the appendix of this release.

Production Results and Price Realizations

Second quarter 2017 production volumes from continuing operations were 177.1 MMcfe/d, consisting of 108.7 MMcf/d of natural gas, 4.8 Mbbls/d of C3+ NGLs, 5.8 Mbbls/d of ethane and 0.8 Mbbls/d of condensate. NGLs (including ethane) and condensate accounted for 39% of net production for the second quarter of 2017. Second quarter production was constrained during the quarter due to unplanned maintenance downtime in the company's midstream services. The unplanned maintenance downtime adversely effected production during the second quarter by approximately 3.5 MMcfe/d.

Including the effects of cash-settled derivatives, realized prices for the three months ended June 30, 2017 were $2.78 per Mcf for natural gas, $21.62 per barrel for C3+ NGLs, $9.93 per barrel for ethane and $44.35 per barrel for condensate. Before the effects of hedging, realized prices for the three months ended June 30, 2017 were $2.94 per Mcf for natural gas, $23.03 per barrel for C3+ NGLs, $9.96 per barrel for ethane and $42.35 per barrel for condensate.

Including the effects of cash-settled derivatives, realized prices for the six months ended June 30, 2017 were $2.91 per Mcf for natural gas, $23.37 per barrel for C3+ NGLs, $9.84 per barrel for ethane and $45.26 per barrel for condensate. Before the effects of hedging, realized prices for the six months ended June 30, 2017 were $3.05 per Mcf for natural gas, $26.86 per barrel for C3+ NGLs, $9.74 per barrel for ethane and $44.25 per barrel for condensate.

Second Quarter 2017 Capital Investments

For the second quarter of 2017, net operational capital investments were approximately $29.1 million. The company expects to be reimbursed by joint development partners for approximately $13.4 million of previously incurred costs that were not billed until the third quarter of 2017. Capital investments in the second quarter of 2017 funded the drilling of six gross (4.8 net) wells, fracture stimulation of six gross (3.1 net) wells and other projects related to drilling and completing wells in the Appalachian Basin. Net operated capital expenditures for the full-year 2017 are still expected to be within the range of the company's previously issued guidance of $115.0 million - $130.0 million.

Operational Update

Moraine East Area

In the Moraine East Area, the company drilled two gross (two net) wells, completed six gross (3.1 net) wells and placed into sales four gross (1.4 net) wells in the second quarter of 2017. In addition, the company had nine gross (4.9) net wells awaiting completion at the end of the second quarter.

The company has begun initial sales from its six-well Shields pad. The six wells were drilled to an average lateral length of approximately 8,800 feet and completed in an average of 49 stages. In addition, the company has completed two of the Shields wells with engineered spacing designs as compared to its standard spacing design. The company expects to provide an update on the performance of the pad in the coming weeks.

The company recently finished completing the four wells on the Mackrell pad, which were drilled to an average lateral length of 7,630 feet. The wells are expected to be placed into sales in early September 2017 as scheduled. Lastly, the company recently finished drilling the two-wells on the Frye pad, which were drilled to an average lateral length of approximately 6,300 feet. The two-well Frye pad is currently being completed and is expected to be placed into sales in the third quarter of 2017.

The twelve wells discussed above are all on the eastern side of the Moraine East Area and will be the final delineation of the field.  The company now expects to place additional compression for the Moraine East Area into service in early January 2018, a delay compared to previous estimates of early fourth quarter service, which, in turn, will defer peak production from the area until January 2018.

Legacy Butler Operated Area

In the Legacy Butler Operated Area, the company has begun completing the four-well Wilson pad. The four wells were drilled to an average lateral length of approximately 9,300 feet and are expected to be placed into sales in the fourth quarter of 2017.

Warrior North Area

In the Warrior North Area, the company has finished drilling the three-well Jenkins pad. The three wells were drilled to an average lateral length of approximately 6,500 feet and in an average of 13.2 drilling days, the best average the company has achieved in the Warrior North Area. The three wells are expected to be completed at the end of the fourth quarter of 2017.

Third Quarter and Full Year 2017 Guidance

Rex Energy is providing guidance for the third quarter of 2017 and adjusted full-year 2017. Full-year 2017 production guidance has been reduced to 180.0 - 190.0 MMcfe/d due to midstream restrictions and delays in placing the Vaughn and Baird pads into sales in the first half of 2017. The company still expects to achieve its year-end 2017 exit rate production growth rate guidance of 15% - 20% upon the commissioning of its fourth compressor in the Moraine East Area, which is scheduled for January 5, 2018. This will allow the company to remain on target to meet its full-year 2018 production guidance of 255.0 - 265.0 MMcfe/d.  

 3Q2017Full Year 2017
Production171.0 - 181.0 MMcfe/d 180.0 - 190.0 MMcfe/d 
LOE ($/Mcfe)$1.80 - $1.90$1.70 - $1.80
Cash G&A ($/Mcfe)$0.22 - $0.27$0.20 - $0.25
Operational Capital Expenditures(1) --$115.0 - $125.0 MMcfe/d
(1) Land acquisition expense and capitalized interest are not included in the operational capital expenditures budget

Conference Call Information
Management will host a live conference call and webcast on Wednesday, August 9, 2017 at 10:00 a.m. Eastern to review second quarter 2017 financial results and operational highlights. The telephone number to access the conference call is (866) 437-1772.

About Rex Energy Corporation

Headquartered in State College, Pennsylvania, Rex Energy is an independent oil and gas exploration and production company with its core operations in the Appalachian Basin. 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, all 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 placement of wells into sales; and our financial guidance for third quarter and full year 2017 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, and 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;
  • 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;
  • the success of our business, operational,  financial, and hedging strategies;
  • new or changing government regulations, including those relating to environmental matters, permitting, or other aspects of our operations;
  • the geologic quality of our 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 and completion techniques in unconventional reservoirs;
  • 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; and
  • uncertainties related to the legal and regulatory environment for our industry, and our own legal proceedings and their outcome.

We undertake no obligation to publicly update or revise any forward-looking statements. Further information on the company's risks and uncertainties is available in our filings with the Securities and Exchange Commission and we strongly encourage investors to review those filings.



REX ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands, Except Share and Per Share Data)
    
ASSETSJune 30, 2017
(Unaudited)
 December 31, 2016
Current Assets   
Cash and Cash Equivalents$12,855  $3,697 
Accounts Receivable23,762  25,448 
Taxes Receivable48  211 
Short-Term Derivative Instruments7,317  1,873 
Inventory, Prepaid Expenses and Other2,002  2,546 
Total Current Assets45,984  33,775 
Property and Equipment (Successful Efforts Method)   
Evaluated Oil and Gas Properties977,665  1,053,461 
Unevaluated Oil and Gas Properties205,691  215,794 
Other Property and Equipment22,309  21,401 
Wells and Facilities in Progress59,807  21,964 
Pipelines21,289  18,029 
Total Property and Equipment1,286,761  1,330,649 
Less: Accumulated Depreciation , Depletion and Amortization(434,483) (475,205)
Net Property and Equipment852,278  855,444 
Other Assets2,488  2,492 
Long-Term Derivative Instruments4,820  2,212 
Total Assets$905,570  $893,923 
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts Payable$46,235  $40,712 
Current Maturities of Long-Term Debt834  764 
Accrued Liabilities32,791  37,207 
Short-Term Derivative Instruments 6,563  25,025 
Total Current Liabilities86,423  103,708  
Long-Term Derivative Instruments9,450  7,227 
Senior Secured Line of Credit and Long-Term Debt, Net of Issuance Costs --  113,785 
Term Loans, Net136,163  -- 
Senior Notes, Net648,820  638,161 
Other Long-Term Debt3,627  3,409 
Other Deposits and Liabilities7,731  8,671 
Future Abandonment Cost9,658  8,736 
Total Liabilities$901,872  $883,697 
    
Stockholder Equity   
Preferred Stock, $.001 par value per share, 100,000 shares authorized and 3,987 issued and outstanding on June 30, 2017 and December 31, 2016$1  $1 
Common Stock, $.001 par value per share, 100,000,000 shares authorized and 9,952,861 shares issued and outstanding on June 30, 2017 and 9,787,146 shares issued and outstanding on December 31, 201610  10 
Additional Paid-In Capital651,659  650,669 
Accumulated Deficit(647,972) (640,454)
Total Stockholders' Equity3,698  10,226 
Total Liabilities and Owners' Equity$905,570  $893,923 




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,
 2017   2016  2017  2016 
OPERATING REVENUE       
  Natural Gas, NGL and Condensate Sales$47,457  $31,271  $99,522  $56,944 
  Other Operating Revenue5  (6) 11  7 
  TOTAL OPERATING REVENUE47,462  31,265  99,533  56,951 
OPERATING EXPENSES       
  Production and Lease Operating Expense29,374  25,221  58,308   49,672 
  General and Administrative Expense4,294  4,837  8,828  10,121 
  Gain on Disposal of Assets(124) (4,307) (1,959) (4,295)
  Impairment Expense3,032  25,139  4,577  35,780 
  Exploration Expense99  803  319  1,738 
  Depreciation, Depletion, Amortization and Accretion15,501  14,750  30,969  31,262 
  Other Operating Expense(98) 704  (118) 1,030 
  TOTAL OPERATING EXPENSES52,078  67,147  100,924  125,308 
  LOSS FROM OPERATIONS(4,616) (35,882) (1,391) (68,357)
OTHER EXPENSE (EXPENSE)       
  Interest Expense(12,122) (11,439) (21,266) (24,469)
  Gain (Loss) on Derivatives, Net10,386  (29,169) 18,766   (25,120)
  Other Income20  12  (7) 12 
  Debt Exchange Expense--  (533) --  (9,014)
  Gain on Extinguishment of Debt(3,271) 23,707  (3,022) 23,707 
  TOTAL OTHER INCOME (EXPENSE)(4,987) (17,422) (5,529) (34,884)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX(9,603) (53,304) (6,920) (103,241)
  Income Tax Benefit--  393  --  (2,321)
NET LOSS FROM CONTINUING OPERATIONS(9,603) (52,911) (6,920) (105,562)
Loss From Discontinued Operations, Net of Income Taxes--  (1,683)  --  (9,173)
NET LOSS(9,603)  (54,594) (6,920) (114,735)
Preferred Stock Dividends(598) (1,723) (1,196) (3,828)
Effect of Preferred Stock Conversion --  72,316  --  72,316 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS$(10,201) $15,999  $(8,116) $(46,247)
Earnings per common share:       
  Basic - Net Income (Loss) From Continuing Operations Attributable to Rex Energy Common Shareholders$(1.03) $2.45  $(0.83) $(5.79)
  Basic - Net Loss From Discontinued Operations Attributable to Rex Energy Common Shareholders--  (0.23) --  (1.43 )
  Basic - Net Income (Loss) Attributable to Rex Energy Common Shareholders$(1.0\3) $2.22  $(0.83) $(7.22)
  Basic - Weighted Average Shares of Common Stock Outstanding9,881  7,180  9,825  6,404 
  Diluted - Net Income (Loss) From Continuing Operations Attributable to Rex Energy Common Shareholders$(1.03) $2.45  $(0.83) $(5.79)
  Diluted - Net Loss From Discontinued Operations Attributable to Rex Energy  Common Shareholders--  (0.23) --  (1.43)
  Diluted - Net Income (Loss) Attributable to Rex Energy Common Shareholders $(1.03) $2.22  $(0.83) $(7.22)
  Diluted - Weighted Average Shares of Common Stock Outstanding9,881  7,180  9,825  6,404 




REX ENERGY CORPORATION
CONSOLIDATED OPERATIONAL HIGHLIGHTS
     
  Three Months Ending Six Months Ending
  June 30, June 30,
  2017  2016 2017  2016
Oil, Natural Gas, NGL and Ethane sales (in thousands):            
  Natural gas sales $29,097  $16,044 $60,442  $31,560
  Condensate sales  2,993   3,369  6,414   4,902
  Natural gas liquids (C3+) sales  10,119   7,867  23,127   13,843
  Ethane sales  5,247   3,991  9,540   6,639
  Cash-settled derivatives:            
  Natural gas  (1,594)  14,857  (2,766)  23,080
  Condensate  141   310  146   2,098
  Natural gas liquids (C3+)  (616)  2,255  (3,001)  5,211
  Ethane  (12)  --  96   144
Total oil, gas, NGL and Ethane sales including cash settled derivatives $45,375  $48,693 $93,998   $87,477
             
Production during the period:            
  Natural gas (Mcf)  9,889,888    11,327,101  19,801,630   22,631,620
  Condensate (Bbls)  70,687   90,565  144,927   153,628
  Natural gas liquids (C3+) (Bbls)  439,441   507,990  861,146   997,744
  Ethane (Bbls)  526,893   532,928  979,580   971,140
  Total (Mcfe)1   16,112,014   18,115,999  31,715,548   35,366,692
             
Production - average per day:            
  Natural gas (Mcf)  108,680   124,474  109,401   124,350
  Condensate (Bbls)  777   995  801   844
  Natural gas liquids (C3+) (Bbls)  4,829   5,582  4,758   5,482
  Ethane (Bbls)  5,790   5,856  5,412   5,336
  Total (Mcfe)1  177,055   199,077  175,224   194,322
             
Average price per unit:            
Realized natural gas price per Mcf - as reported $2.94  $1.42 $3.05  $1.39
Realized impact from cash settled derivatives per Mcf  (0.16)  1.31  (0.14)  1.02
Net realized price per Mcf $2.78  $2.73 $2.91  $2.41
             
Realized condensate price per Bbl - as reported $42.35  $37.20 $44.25  $ 31.91
Realized impact from cash settled derivatives per Bbl2  2.00   3.42  1.01   13.66
Net realized price per Bbl $44.35  $40.62 $45.26  $45.57
              
Realized natural gas liquids (C3+) price per Bbl - as reported  $23.03  $15.49 $26.86  $ 13.87
Realized impact from cash settled derivatives per Bbl  (1.41)  4.44  (3.49)  5.23
Net realized price per Bbl $21.62   $19.93 $23.37  $19.10
             
Realized ethane price per Bbl - as reported $9.96  $7.49 $9.74  $6.84
Realized impact from cash settled derivatives per Bbl  0.03   --  0.10   0.14
Net realized price per Bbl $9.93  $7.49 $9.84  $6.98
             
LOE/Mcfe $1.82  $1.39 $1.84  $1.40
Cash G&A/Mcfe $0.24  $0.20 $0.26  $0.26
1 Oil and natural gas liquids are converted at the rate of one barrel of oil equivalent to six Mcfe.
2 Includes the effect of derivatives not classified as discontinued operations. When including the effect of Illinois Basin production, derivatives realized increased prices by 1.15/bbl and $6.73/bbl for the three and six month periods ended June 30, 2017 and 2016.
 
 



REX ENERGY CORPORATION 
COMMODITY DERIVATIVES - HEDGE POSITION AS OF 8/8/2017 
  
  2017  2018 
Oil Derivatives (Bbls)    
Swap Contracts    
Volume 25,000  60,000 
Price$54.00 $54.00 
Collar Contracts    
Volume --  18,000 
Ceiling$-- $60.00 
Floor$-- $53.00 
Collar Contracts with Short Puts    
Volume 65,000  66,000 
Ceiling$61.35 $61.55 
Floor$49.23 $51.59 
Short Put$39.62 $42.50 
Natural Gas Derivatives (Mcf)    
Swap Contracts    
Volume 6,330,000  15,335,000 
Price$3.03 $3.10 
Swaption Contracts    
Volume 1,000,000  -- 
Price$3.33 $-- 
Put Spreads    
Volume --  -- 
Floor$-- $-- 
Short Put$-- $-- 
Collar Contracts    
Volume 900,000  450,000 
Ceiling$3.32 $3.65 
Floor$2.72 $3.20 
Collar Contracts with Short Puts    
Volume 7,170,000  8,775,000 
Ceiling$3.87 $3.58 
Floor$2.98 $2.89 
Short Put$2.29 $2.30 
Call Contracts    
Volume 3,505,220  16,489,900 
Ceiling$4.51 $4.64 
 Natural Gas Liquids (Bbls)    
Swap Contracts    
Propane (C3)    
Volume 405,000  630,000 
Price$23.30 $25.62 
Butane (C4)    
Volume 100,000  186,000 
Price$28.54 $32.94 
Isobutane (IC4)    
Volume 53,000  102,000 
Price$29.55 $33.62 
Natural Gasoline (C5+)    
Volume 140,000  207,072 
Price$48.43 $49.42 
Ethane    
Volume 375,000  750,000 
Price$10.58 $13.02 
Natural Gas Basis (Mcf)    
Swap Contracts    
Dominion Appalachia    
Volume 7,471,000  18,980,000 
Price$ (0.78)$(0.81)
Texas Gas Zone 1    
Volume 6,120,000  14,600,000 
Price$(0.13)$(0.13)
NYMEX Heating Oil (Gal)    
Swap Contracts    
Volume --  -- 
Price$-- $-- 

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,
  2017   2016  2017  2016 
Net Loss From Continuing Operations $(9,603) $(52,911) $(6,920) $(105,562)
  Add Back Non-Recurring Costs1 3,349  (23,174) 3,459  (14,694)
  Add Back Depletion, Depreciation, Amortization and Accretion 15,501  14,750  30,969  31,262 
  Add Back Non-Cash Compensation Expense 511  1,164  571  1,016 
  Add Back Interest Expense 12,123  11,439  21,271  24,469 
  Add Back Impairment Expense 3,032  25,139  4,577  35,780 
  Add Back Exploration Expenses 99  803  319  1,738 
  Less Gain on Disposal of Assets (124) (4,307) (1,959) (4,295)
  Less (Gain) Loss on Financial Derivatives (10,386) 29,169  (18,766) 25,120 
  Add Back (Less) Cash Settlement of Derivatives (2,082) 17,345  (5,525) 30,340 
  Less Income Tax Benefit --  (393) --  2,321 
EBITDAX From Continuing Operations $12,420   $19,024 $27,996 $27,495 
Net Loss From Discontinued Operations $--  $(1,683)$-- $(9,173)
  Add Back Depletion, Depreciation, Amortization and Accretion --  2,186  --  5,083 
  Add Back Non-Cash Compensation Expense --  139  --  259 
  Add Back Interest Expense --  1  --  3 
  Add Back Impairment Expense --  --  --  3,543 
  Add Back Exploration Expense --  85  --  143 
  Less Gain on Disposal of Assets --  (2) --  (43)
  Add Back (Less) Income Tax Expense (Benefit) --  120  --  (502)
  Add EBITDAX From Discontinued Operations $--  $846  $--  $(687)
EBITDAX (Non-GAAP) $12,420  $19,870  $27,996  $26,808 
 
1 For the three and six months ended June 30, 2017, includes a net $0.1 million of advisory services related to joint venture drilling programs, and $3.3 million in loss on extinguishment of debt. For the six months ended June 30, 2017, includes a net $0.4 million of advisory services related to joint venture drilling programs, and $3.0 million in loss on the extinguishment of debt. For the three months ended June 30, 2016, includes approximately $23.7 million in gains on extinguishment of debt and $0.5 million in debt exchange expenses. For the six months ended June 30, 2016, includes approximately $23.7 million in gain on extinguishment of debt and $9.0 million in debt exchange expenses.
 

Adjusted Net Loss

"Adjusted Net Loss" 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 Loss 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 Loss 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 Loss 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 loss for each of the periods presented ($ in thousands):

 For the Three Months Ended For the Six Months Ended
 June 30, June 30,
  2017  2016   2017   2016 
Loss From Continuing Operations Before Income Taxes, as reported$(9,603)$(53,304) $(6,920)$(103,241)
    (Gain) Loss on Derivatives, Net (10,386) 29,169   (18,766) 25,120 
    Cash Settlement of Derivatives (2,082) 17,345   (5,525) 30,340 
  Add Back (Gain) Loss from Financial Derivatives (12,,468) 46,514   (24,291) 55,460 
  Add Back Non-Recurring Costs 1 3,349  (23,174)  3,459  (14,694)
  Add Back Impairment Expense 3,032  25,139   4,577  35,780 
  Add Back Dry Hole Expense 2  2   13  845 
  Add Back Non-Cash Compensation Expense 511  1,164   571  1,016 
Less Gain on Disposal of Assets (124) (4,307)  (1,959) (4,295)
  Loss From Continuing Operations Before Income Taxes, adjusted$(15,301)$(7,966) $(24,550)$(29,129)
  Less Income Tax Benefit, adjusted2 6,120  3,186    9,820  11,652 
Adjusted Net Loss From Continuing Operations$(9,181)$(4,780) $(14,730)$(17,477)
          
Basic - Adjusted Net Loss Per Share$(0.93)$(0.67) $(1.50)$(2.72)
Basic - Weighted Average Shares of Common Stock Outstanding 9,881  7,180   9,825  6,404 
1 For the three and nine months ended June 30, 2017, includes a net $0.1 million of advisory services related to joint venture drilling programs, and $3.3 million in loss on extinguishment of debt. For the six months ended June 30, 2017, includes a net $0.4 million of advisory services related to joint venture drilling programs, and $3.0 million in loss on the extinguishment of debt. For the three months ended June 30, 2016, includes approximately $23.7 million in gains on extinguishment of debt and $0.5 million in debt exchange expenses. For the six months ended June 30, 2016, includes approximately $23.7 million in gain on extinguishment of debt and $9.0 million in debt exchange expenses.
2 Assumes 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,
 2017 2016 2017 2016
GAAP G&A$4,294 $4,837 $8,828 $10,121
Non-Cash Compensation Expense514 1,164 574 1,016
Cash G&A$3,780 $3,673 $8,254 $9,105

 

For more information contact:



Investor Relations

(814) 278-7130

InvestorRelations@rexenergycorp.com

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Source: Rex Energy Corporation

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