STATE COLLEGE, Pa., July 30, 2009 (GLOBE NEWSWIRE) -- Rex Energy Corporation ("Rex Energy") (Nasdaq:REXX) today announced second quarter of 2009 results. Production averaged 2,595 BOEs per day, which was 78% oil and 22% natural gas. Realized gas prices after adjustment for cash settled derivatives were $6.45 per mcf, versus $9.95 per mcf in the prior year quarter. Realized oil prices after adjustment for cash settled derivatives were $60.05 per bbl, versus $81.27 per bbl in the prior year quarter. As a result, oil and gas sales including cash settled derivatives declined 28% to $13.1 million. EBITDAX, a non-GAAP measure, declined 51% to $4.1 million. The company recorded a loss for the quarter of $9.4 million, or $0.26 per share. Adjusting for certain non-cash items, net loss comparable to analyst estimates was $2.6 million, or $0.07 per share.
Benjamin W. Hulburt, Rex Energy's President and CEO, commented, "While the financial results for the quarter were impacted by the lower commodity prices, we achieved several significant milestones during the quarter. Our natural gas production reached an all time high, up 17% from the prior year quarter. We entered into a joint venture with Williams Production Company, LLC and Williams Production Appalachia, LLC regarding two of our Marcellus Shale project areas that will significantly reduce our capital expenditures for the next two years. This will allow us to accelerate the development of our acreage while simultaneously maintaining a conservative balance sheet. We also continued to make great strides in controlling costs, reducing our production and lease operating expenses by 21% from the same period in 2008. We successfully drilled, completed and put into production our first Marcellus Shale horizontal well in Butler County, Pennsylvania with encouraging results. We completed the acquisition of approximately 6,500 net acres in Butler County in the immediate area of our horizontal well and processing facility. We very recently drilled and completed our second horizontal well, and have commenced drilling the third. Finally, on July 29, 2009, the Commonwealth of Pennsylvania issued the final air permit for our gas processing plant in Butler County. As a result, we are now in the process of final inspections and commencing start-up of the plant."
Natural gas production increased 17% over the prior year quarter, despite significant production curtailments experienced during the current quarter. The company's second quarter natural gas production was adversely affected due to ongoing pipeline maintenance on third party lines serving Rex Energy's field in Westmoreland County. The company estimates that this curtailment resulted in a decrease in natural gas production by 15% to 20%. Although the company expects to experience additional curtailment related to line maintenance during a portion of the third quarter, the curtailment has subsided for the time being. With the first horizontal well in line, Rex Energy's natural gas production has increased to an all time high. The company currently has four gross (three net) vertical Marcellus Shale wells shut-in pending the activation of the its natural gas processing plant in Butler County, PA which is expected to occur in August 2009. Furthermore, Rex Energy anticipates putting its first horizontal well in Westmoreland County into production during August 2009. Oil production in the second quarter declined 3% from the prior year quarter as the company did not have any rigs active during the current quarter in its Illinois Basin. Rex Energy plans to commence a shallow oil well development program of 10 to 15 wells during the third quarter of 2009.
Capital expenditures in the second quarter of 2009 were $18.2 million. The company spent 62% of capital dollars, or $11.3 million, on exploration and developmental activities of which $500,000 was for its tertiary recovery projects in the Illinois Basin. Leasing and acquisitions comprised the remaining 38%, or $6.9 million, of the company's capital spending during the quarter, which is mostly attributable to the $4.2 million acquisition of a 50% interest from its joint venture partner in certain oil and gas leases covering lands in Butler County, Pennsylvania.
The company currently holds approximately 81,000 gross (70,000 net) acres in the Marcellus Shale fairway. In the event that Williams, Rex Energy's joint venture partner in two of its project areas, fulfills their drilling carry commitment under the terms of the exploration agreement, Rex Energy's net acreage will be reduced to approximately 48,000 net acres. The company is continuing to lease additional acreage in each of its operating areas.
In a final comment, Mr. Hulburt stated, "We have now completed two horizontal Marcellus Shale wells -- the first in Butler County and the second in Westmoreland County. The Butler County horizontal well was drilled to a depth of approximately 5,500 feet with a lateral extension of 1,800 feet. The well was put into production during June 2009 and has produced at an average rate of approximately 2.4 Mmcfe per day over the last thirty days, with no detectable decline in production since being put into line. We are continuing to monitor the well's performance, but to date are encouraged by what appears to be a shallower decline than we initially anticipated. In Westmoreland County, the well was drilled to a depth of approximately 8,200 feet with a lateral extension of 2,000 feet. The well was fracture stimulated on July 20, 2009 and is currently undergoing flow testing. The company has commenced drilling its third horizontal well, also in Westmoreland County, and plans to continue drilling an additional 3 horizontal wells in that county before moving the rig to central Pennsylvania in the fourth quarter."
(EBITDAX and Earnings/Loss Comparable to Analyst Estimates are non-GAAP financial measures. Please see the accompanying definitions and tables for the reconciliation of each of these non-GAAP measures. The company has classified all first quarter 2009 and prior period amounts related to its operations in the Southwestern Region as discontinued operations due to the sale of these assets during the first quarter of 2009. Please see the accompanying table for the reconciliation of the reported GAAP amounts to the amounts that would have been reported if Southwestern Region operations were included in continuing operations.)
About Rex Energy Corporation
Rex Energy Corporation is an independent oil and gas company operating in the Illinois Basin and the Appalachian Basin of the United States. The company has pursued a balanced growth strategy of exploiting its sizable inventory of lower risk developmental drilling locations, pursuing its higher potential exploration drilling prospects and actively seeking to acquire complementary oil and natural gas properties.
The Rex Energy logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5489
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, adverse economic conditions in the United States and globally; the difficult and adverse conditions in the domestic and global capital and credit markets; domestic and global demand for oil and natural gas; sustained or further declines in the prices the company receives for oil and natural gas adversely affecting operating results and cash flow; the effects of government regulation, permitting and other legal requirements; the quality of Rex Energy's properties with regard to, among other things, the existence of reserves in economic quantities; uncertainties about the estimates of the company's oil and natural gas reserves; the company's ability to increase production and oil and natural gas income through exploration and development; Rex Energy's ability to successfully apply horizontal drilling techniques and tertiary recovery methods; the number of well locations to be drilled, the cost to drill and the time frame within which they will be drilled; drilling and operating risks; the availability of equipment, such as drilling rigs and transportation pipelines; changes in the company's drilling plans and related budgets; and the adequacy of capital resources and liquidity including, but not limited to, access to additional borrowing capacity. 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 BALANCE SHEETS
($ in Thousands, Except per Share Amounts)
June 30, 2009
(unaudited) December 31, 2008
----------------- -----------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 2,414 $ 7,046
Accounts Receivable 6,786 5,840
Related Party Receivable 506 --
Short-Term Derivative
Instruments 2,666 8,153
Current Deferred Tax Asset 948 --
Inventory, Prepaid Expenses
and Other 798 3,068
----------------- -----------------
Total Current Assets 14,118 24,107
Property and Equipment
(Successful Efforts Method)
Evaluated Oil and Gas
Properties 196,977 185,108
Unevaluated Oil and Gas
Properties 77,076 65,564
Other Property and Equipment 19,912 19,388
Wells and Facilities in
Progress 31,225 29,629
Pipelines 5,155 3,457
----------------- -----------------
Total Property and
Equipment 330,345 303,146
Less: Accumulated
Depreciation, Depletion and
Amortization (64,859) (53,288)
----------------- -----------------
Net Property and
Equipment 265,486 249,858
Assets Held for Sale -- 18,852
Intangible Assets and Other
Assets- Net 1,480 1,628
Investment in RW Gathering 506 --
Long-Term Derivative
Instruments 2,706 7,561
----------------- -----------------
Total Assets $ 284,296 $ 302,006
================= =================
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $ 5,552 $ 7,180
Accrued Expenses 4,751 7,388
Short-Term Derivative
Instruments 3,116 --
Current Deferred Tax
Liability -- 2,785
----------------- -----------------
Total Current Liabilities 13,419 17,353
Senior Secured Line of
Credit and Long-Term Debt 15,000 15,000
Long-Term Derivative
Instruments 2,783 1,476
Long-Term Deferred Tax
Liability 8,971 11,995
Other Deposits and
Liabilities 5,767 7,322
Liabilities Related to
Assets Held for Sale -- 1,838
Future Abandonment Cost 15,941 15,174
----------------- -----------------
Total Liabilities $ 61,881 $ 70,158
Commitments and Contingencies
Owners' Equity
Common Stock, $.001 par
value per share,
100,000,000 shares
authorized and 36,844,312
shares issued and
outstanding on June 30, 2009
and 36,569,712 shares
issued and outstanding on
December 31, 2008 37 37
Additional Paid-In Capital 292,161 291,133
Accumulated Deficit (69,783) (59,322)
----------------- -----------------
Total Owners' Equity 222,415 231,848
----------------- -----------------
Total Liabilities and Owners'
Equity $ 284,296 $ 302,006
================= =================
REX ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, $ and Shares in Thousands, Except per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
OPERATING REVENUE
Oil and Natural Gas Sales $ 11,516 $ 28,874 $ 20,314 $ 45,490
Other Revenue 25 31 57 63
--------- --------- --------- ---------
TOTAL OPERATING REVENUE 11,541 25,905 20,371 45,553
OPERATING EXPENSES
Production and Lease
Operating Expenses 5,236 6,632 10,390 12,778
General and Administrative
Expense 4,392 3,917 8,143 7,124
(Gain) Loss on Disposal of
Assets (28) 194 400 151
Exploration Expense of Oil
and Gas Properties (247) 982 835 1,281
Depreciation, Depletion,
Amortization and
Accretion 6,581 4,879 12,752 9,651
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 15,934 16,604 35,520 30,985
--------- --------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS (4,393) 9,301 (12,149) 14,568
OTHER INCOME (EXPENSE)
Interest Income 1 176 2 183
Interest Expense (379) (299) (774) (735)
Loss on Derivatives, Net (10,520) (73,640) (4,876) (89,920)
Other Income (Expense) 13 14 (32) 19
--------- --------- --------- ---------
TOTAL OTHER INCOME
(EXPENSE) (10,885) (73,749) (5,680) (90,453)
NET LOSS FROM CONTINUING
OPERATIONS INCOME TAXES (15,278) (64,448) (17,829) (75,885)
Income Tax Benefit 5,841 26,061 7,045 30,687
--------- --------- --------- ---------
NET LOSS FROM CONTINUING
OPERATIONS (9,437) (38,387) (10,784) (45,198)
Income from Discontinued
Operations, Net of Income
Taxes -- 426 323 64
--------- --------- --------- ---------
NET LOSS $ (9,437) $(37,961) $(10,461) $(45,134)
--------- --------- --------- ---------
Earnings per common share :
Basic and Diluted - loss
from continuing operations $ (0.26) $ (1.12) $ (0.29) $ (1.39)
Basic and Diluted - income
from discontinued
operations -- 0.01 0.01 --
--------- --------- --------- ---------
Basic and Diluted - net loss $ (0.26) $ (1.11) $ (0.28) $ (1.39)
Basic and Diluted - weighted
average shares of common
stock outstanding 36,846 34,349 36,789 32,572
REX ENERGY CORPORATION
CONSOLIDATED OPERATIONAL HIGHLIGHTS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Oil and gas sales
(in thousands):
Oil sales 10,310 22,821 17,530 40,325
Gas sales 1,206 3,053 2,784 5,165
Cash-settled derivatives
Crude oil(a) 720 (7,417) 3,983 (10,691)
Natural gas 824 (366) 1,333 (374)
--------- --------- --------- ---------
Total oil and gas sales
including cash settled
derivatives 13,060 18,061 25,630 34,425
Production during the
period:
Oil (Bbls) 183,695 189,551 364,878 377,908
Natural gas (Mcf) 314,777 270,037 621,408 513,588
--------- --------- --------- ---------
Total (BOE)(a) 236,158 234,557 468,446 463,506
Production - average per
day:
Oil (Bbls) 2,019 2,083 2,016 2,076
Natural gas (Mcf) 3,459 2,967 3,433 2,822
--------- --------- --------- ---------
Total (BOE)(b) 2,595 2,578 2,588 2,547
Average price per unit:
Realized crude oil price
per barrel - as reported $ 56.12 $ 120.40 $ 48.04 $ 106.71
Realized impact from cash
settled derivatives per
barrel 3.93 (39.13) 10.92 (28.29)
--------- --------- --------- ---------
Net realized price per
barrel $ 60.05 $ 81.27 $ 58.96 $ 78.42
Realized natural gas price
per Mcf - as reported $ 3.83 $ 11.31 $ 4.48 $ 10.06
Realized impact from cash
settled derivatives
per Mcf 2.62 (1.36) 2.15 (0.73)
--------- --------- --------- ---------
Net realized price
per Mcf $ 6.45 $ 9.95 $ 6.63 $ 9.33
(a) Excludes $4.6 million for the early redemption of certain oil
derivatives associated with 2011 redeemed in the first quarter
of 2009
(b) 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
REX ENERGY CORPORATION
OIL AND GAS DERIVATIVES
(Unaudited)
% of Current Average Average
Year Volume Production Floor Ceiling
------------ ------------ ------------ ------------ ------------
Oil
---
July - Dec
'09 300 MBbls 84% $ 63.78 $ 76.44
2010 588 MBbls 85% $ 62.71 $ 79.31
2011 156 MBbls 24% $ 65.00 $ 100.50
Natural Gas
-----------
July - Dec
'09 660 Mmcf 90% $ 6.73 $ 8.47
2010 1.32 Bcf 100% $ 7.14 $ 9.63
2011 1.08 Bcf 91% $ 7.33 $ 12.29
2012 360 Mmcf 34% $ 6.00 $ 7.38
Non-GAAP Financial Measures
EBITDAX
"EBITDAX", for any defined 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, accretion, 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 Rex Energy's management team and by other users of its financial statements, such as the company's commercial bank lenders, to analyze such things as:
* Rex Energy'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;
* Rex Energy'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 or 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.
Rex Energy 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 Rex Energy 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 by fully available for management's discretionary use, due to requirements to conserve funds for capital expenditures, debt service and other commitments.
Rex Energy 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 ability to generate cash available for distribution. Because Rex Energy 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, Rex Energy believes it is important to consider both net income (loss) determined under GAAP and EBITDAX to evaluate its performance.
The following table presents a reconciliation of the company's net (loss) from continuing operations to its EBITDAX from continuing operations for each of the periods presented ($ in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2009 2008 2009 2008
-------- -------- -------- --------
Net Loss From Continuing
Operations $ (9,437) $(38,387) $(10,784) $(45,198)
Add Back Depletion,
Depreciation,
Amortization &
Accretion 6,581 4,879 12,752 9,651
Add Back Non-Cash
Compensation Expense 621 736 1,096 1,104
Add Back Interest Expense 379 299 774 735
Add Back (Less) Exploration (247) 982 835 1,281
Less Interest Income (1) (176) (2) (183)
Add Back (Gains) Losses
on Disposal of Assets (28) 194 400 151
Add Back Unrealized Losses
from Financial Derivatives 12,064 65,857 14,764 78,856
Less Income Tax Benefit (5,841) (26,061) (7,045) (30,687)
-------- -------- -------- --------
EBITDAX From Continuing
Operations $ 4,091 $ 8,323 $ 12,790 $ 15,710
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: 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 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. Earnings Comparable with Analyst 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.
Rex Energy 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 computation of this measure. You are cautioned that Earning Comparable with Analyst Estimates as report 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 Earnings Comparable with Analyst Estimates.
The following table presents a reconciliation of Rex Energy's net (loss) from continuing operations to its Earnings Comparable with Analyst Estimates for each of the periods presented ($ in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
2009 2008 2009 2008
-------- ------------------- --------
Net Loss From Continuing
Operations $ (9,437) $(38,387) $(10,784) $(45,198)
Adjustment for certain
non-cash items:
Unrealized Losses on
Derivatives 12,064 65,857 14,764 78,856
Dry Hole Expense -- 1 -- 2
Non-cash Compensation
Expense 621 736 1,096 1,104
(Gain) Loss on Sale or
Disposal of Assets (28) 194 400 151
Income Tax Benefit (5,841) (26,061) (7,045) (30,687)
-------- -------- -------- --------
Net Income (Loss) From
Continuing Operations
Before Income Taxes
Comparable to Analysts
Estimates $ (2,621) $ 2,340 $ (1,569) $ 4,228
Discontinued Operations
On March 24, 2009, Rex Energy completed the previously announced divestiture of Southwestern Region operations, predominately located in the Permian Basin in the states of Texas and New Mexico. The company received net cash proceeds of approximately $17.3 million, which may be adjusted by certain post-closing adjustments, plus the assumption of certain liabilities, based on an effective date of October 1, 2008.
Pursuant to accounting rules for discontinued operations, these assets were classified as Assets Held for Sale on the Consolidated Balance Sheet as of December 31, 2008, and results of operations are reflected in discontinued operations in the Consolidated Statements of Operations. At March 31, 2009, Rex Energy recorded a loss on sale of assets of approximately $425,000 in the Consolidated Statement of Operations. Summarized financial information for discontinued operations is set forth below ($ in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2009 2008 2009 2008
------- ------- ------- -------
Revenues:
Oil and Gas Sales $ -- $ 2,122 $ 193 $ 4,107
Other Revenue -- 111 -- 193
------- ------- ------- -------
Total Operating Revenue -- 2,233 193 4,300
------- ------- ------- -------
Costs and Expenses:
Production and Lease
Operating Expense -- 617 237 1,139
General and Administrative
Expense -- 207 (97) 473
Exploration Expense of Oil
and Gas Properties -- (13) -- 1,121
Depreciation, Depletion,
Amortization and Accretion -- 709 -- 1,420
(Gain) Loss on Sale of Oil
and Gas Properties -- -- -- 41
Unrealized Loss from
Derivatives -- -- (558) --
Other Income -- (1) -- (2)
------- ------- ------- -------
Total Costs and Expenses -- 1,519 (418) 4,192
------- ------- ------- -------
Income from Discontinued
Operations Before Income
Taxes -- 714 611 108
Income Tax Expense -- 288 288 44
------- ------- ------- -------
Income From Discontinued
Operations, net of taxes $ -- $ 426 $ 323 $ 64
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