Market Overview

Rex Energy Reports Third Quarter 2017 Financial and Operational Results

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STATE COLLEGE, Pa., Nov. 14, 2017 (GLOBE NEWSWIRE) -- Rex Energy Corporation (NASDAQ:REXX) today announced its third quarter 2017 financial and operational results.

  • In Butler Legacy, placed four-well Wilson pad into sales; initial 24-hour average sales rate per well of ~10.9 MMcfe/d
  • In Moraine East, the two-well Frye pad produced at an average 30-day sales rate per well of 8.5 MMcfe/d with 56% liquids
  • Production volumes from the third quarter of 2017 were 182.0 MMcfe/d, including 38% from liquids
  • Fourth quarter 2017 production expected to increase 10% sequentially, at midpoint of guidance
  • Realized C3+ NGL pricing, before cash-settled derivatives, improved to $29.62/bbl in 3Q17 vs. $16.48/bbl in the prior year quarter and was 61% of NYMEX
  • Realized natural gas basis differential including the impact of basis hedges improved to $(0.27)/mcf compared to $(1.15) last year, a 77% improvement
  • LOE per Mcfe to improve 5% - 10% in 4Q17 vs. 3Q17
  • Commodity revenues, including cash-settled derivatives, increased 29% during the third quarter of 2017, year-over-year

"The third quarter of 2017 was a very busy quarter for Rex Energy, as we are nearing an inflection point for our projected production and EBITDAX growth going into 4Q17," said Tom Stabley, President and Chief Executive Officer. "During the quarter, we saw full utilization of our Gulf Coast transportation and improved liquids pricing, leading to strong realizations for both natural gas and C3+ production streams, a trend we see continuing. Finally, with the continued high level of operational activity during the fourth quarter, we anticipate that production in our Butler Operated Area will continue to grow and allow us to reach our targeted exit rates."

Operational Update

Legacy Butler Operated Area

In the Legacy Butler Operated Area, the company placed into sales the four-well Wilson pad. The four wells were drilled to an average lateral length of approximately 9,300 feet and were completed in an average of 51 stages. The four wells produced at an initial 24-hour average sales rate per well, assuming full ethane recovery, of 10.9 MMcfe/d, consisting of 6.6 MMcf/d of natural gas and 721 bbls/d of NGLs. The four wells have a lower BTU rate than other areas of the Legacy Butler Operated Area, but the timing of these wells being placed into sales and the extended lateral lengths are expected to yield strong returns in the current natural gas price environment.

Moraine East Area

In the Moraine East Area, the company drilled four gross (four net) wells, completed six gross (3.4 net) wells and placed into sales twelve gross (6.5 net) wells in the third quarter of 2017. In addition, the company had seven gross (5.5 net) wells awaiting completion at the end of the third quarter.

As previously reported, the company placed the two-well Frye pad into sales during the third quarter. The two wells produced at an average 24-hour sales rate per well, assuming full ethane recovery, of 9.4 MMcfe/d. The two wells have gone on to produce at an average 30-day sales rate per well of 8.5 MMcfe/d, consisting of 3.7 MMcf/d of natural gas, 747 bbls/d of NGLs and 48 bbls/d of condensate. The two Frye wells, completed using the company's optimized completion design, continue their strong performance to date. Comparing the two Frye wells to their expected type curve, both wells are currently outperforming their respective type curves.

The company finished completing the three-well Manuel pad, which was drilled to an average lateral length of approximately 6,750 feet and completed in an average of 41 stages. The three wells are expected to be placed into sales in early December 2017.

Warrior North Area

In the Warrior North Area, the company has begun completing the three-well Jenkins pad. The three wells were drilled to an average lateral length of approximately 6,500 feet. The wells are expected to be completed at the end of the fourth quarter of 2017 and placed into sales in January 2018. The three existing wells on the Jenkins pad, which account for approximately 2.6 MMcfe/d of production, will be shut in during the completion and initial flow back of the three new Jenkins wells.

In addition, the company began drilling the seven-well Goebeler pad and is currently drilling the fifth of seven wells on the pad. The seven wells are expected to be drilled to an average lateral length of approximately 7,500 feet and placed into sales in the second quarter of 2018.

The combination of the three-well Jenkins pad and seven-well Goebeler pad will be the primary driver for the company's expected 2018 condensate growth rate of 150% - 175%.

Third Quarter Financial Results

Commodity revenues, including settlements from derivatives, for the three and nine months ended September 30, 2017 were $46.6 million and $140.6 million, respectively, which represents an increase of 29% and 14% over the same periods in 2016. Commodity revenues from natural gas liquids (NGLs) and condensate, including settlements from derivatives, represented 41% of total commodity revenues for the three months ended September 30, 2017.

Lease operating expense (LOE) from continuing operations was $30.6 million, or $1.83 per Mcfe for the third quarter. For the nine months ended September 30, 2017, LOE was approximately $88.9 million, or $1.83 per Mcfe. General and administrative (G&A) expenses from continuing operations were $4.6 million for the third quarter of 2017, or $0.28 per Mcfe. For the nine months ended September 30, 2017, G&A expenses from continuing operations were $13.4 million, or $0.28 per Mcfe. Cash G&A expenses from continuing operations (a non-GAAP measure) for the three months ended September 30, 2017 were $4.2 million, or $0.25 per Mcfe. For the nine months ended September 30, 2017, cash G&A expenses from continuing operations (a non-GAAP measure) were $12.5 million, or $0.26 per Mcfe. The company expects substantial reductions, on a per unit basis, for LOE in the fourth quarter of 2017.

Net loss attributable to common shareholders for the three months ended September 30, 2017 was $47.1 million, or $4.76 per basic share. Net loss attributable to common shareholders for the nine months ended September 30, 2017 was $55.2 million, or $5.60 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended September 30, 2017 was $9.9 million, or $1.00 per share. Adjusted net loss for the nine months ended September 30, 2017 was $24.6 million, or $2.50 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $11.9 million for the third quarter of 2017 and $39.9 million for the nine months ended September 30, 2017, representing increases of 163% and 25% over the same periods in 2016, respectively.

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 nine months ended September 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

Third quarter 2017 production volumes from continuing operations were 182.0 MMcfe/d, consisting of 112.0 MMcf/d of natural gas, 5.1 Mbbls/d of C3+ NGLs, 6.0 Mbbls/d of ethane and 0.7 Mbbls/d of condensate. NGLs (including ethane) and condensate accounted for 38% of net production for the third quarter of 2017. The company exceeded production guidance through strong operating efficiencies which allowed for earlier turn inline dates for the Shields and Mackrell pads in the Moraine East Area.

Including the effects of cash-settled derivatives, realized prices for the three months ended September 30, 2017 were $2.66 per Mcf for natural gas, $23.44 per barrel for C3+ NGLs, $10.14 per barrel for ethane and $44.47 per barrel for condensate. Before the effects of hedging, realized prices for the three months ended September 30, 2017 were $2.52 per Mcf for natural gas, $29.62 per barrel for C3+ NGLs, $10.28 per barrel for ethane and $42.00 per barrel for condensate.

Including the effects of cash-settled derivatives, realized prices for the nine months ended September 30, 2017 were $2.83 per Mcf for natural gas, $23.40 per barrel for C3+ NGLs, $9.95 per barrel for ethane and $45.02 per barrel for condensate. Before the effects of hedging, realized prices for the nine months ended September 30, 2017 were $2.87 per Mcf for natural gas, $27.82 per barrel for C3+ NGLs, $9.93 per barrel for ethane and $43.58 per barrel for condensate.

Third Quarter 2017 Capital Investments

For the third quarter of 2017, net operational capital investments were approximately $25.1 million. The company expects to be reimbursed by joint development partners for approximately $5.9 million of previously incurred costs that were not billed until the fourth quarter of 2017. Capital investments in the third quarter of 2017 funded the drilling of seven gross (seven net) wells, fracture stimulation of six gross (3.4 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.

Liquidity Update

As of September 30, 2017, the company had approximately $3.2 million of cash on hand and outstanding borrowings under its term loan credit agreement of approximately $155.5 million with an additional $32.2 of undrawn letters of credit outstanding. As of September 30, 2017, the company had approximately $112.3 million of undrawn availability under its term loan credit agreement.

Fourth Quarter and Full Year 2017 Guidance

Rex Energy is providing guidance for the fourth quarter of 2017 and maintaining its full-year 2017 guidance ($ in millions). The company's fourth quarter 2017 production guidance accounts for the approximately 2.6 MMcfe/d of production shut-in due to the completion and initial flowback of the three-well Jenkins pad in Warrior North. In addition, the company is maintaining 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.

  4Q2017 Full Year 2017
Production 195.0 – 205.0 MMcfe/d 180.0 – 190.0 MMcfe/d
LOE ($/Mcfe) $1.65 - $1.75 $1.70 - $1.80
Cash G&A ($/Mcfe) $0.21 - $0.26 $0.20 - $0.25
Operational Capital
Expenditures(1)
-- $115.0 - $130.0 MM
(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, November 15, 2017 at 10:00 a.m. Eastern to review third 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 fourth 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 supply and demand for oil, NGLs, and natural gas;
  • realized prices for oil, natural gas and NGLs and volatility of those prices;
  • the adequacy and availability of capital resources, credit and liquidity, including, but not limited to, access to additional borrowing capacity and our inability to generate sufficient cash flow from operations to fund our capital expenditures and meet working capital needs;
  • our ability to comply with restrictions imposed by our term loan credit agreement, secured and unsecured indentures, and other existing and future financing arrangements;
  • our ability to service our outstanding indebtedness;
  • impairments of our natural gas, NGL and condensate asset values due to declines in commodity prices;
  • conditions in the domestic and global capital and credit markets and their effect on us;
  • new or changing government regulations, including those relating to environmental matters, permitting or other aspects of our operations;
  • the willingness and ability of the Organization of Petroleum Exporting Countries to set and maintain oil price and production controls;
  • 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 natural gas, NGL and condensate reserves;
  • our ability to increase natural gas, NGL and condensate production and income through exploration and development;
  • drilling and operating risks;
  • counterparty credit 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, 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 acquisitions;
  • the success of our business and financial strategies, and hedging strategies;
  • uncertainties related to the legal and regulatory environment for our industry and our own legal proceedings and their outcome; and
  • our ability to maintain the listing of our securities on the NASDAQ Capital Market or any other exchange on which our securities trade

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.

For more information contact:

Investor Relations
(814) 278-7130
InvestorRelations@rexenergycorp.com


REX ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands, Except Share and Per Share Data)
 
ASSETS September 30, 2017
(Unaudited)
  December 31, 2016
Current Assets      
Cash and Cash Equivalents $ 3,234     $ 3,697  
Accounts Receivable 25,167     25,448  
Taxes Receivable 48     211  
Short-Term Derivative Instruments 3,904     1,873  
Inventory, Prepaid Expenses and Other 3,524     2,546  
Total Current Assets 35,877     33,775  
Property and Equipment (Successful Efforts Method)      
Evaluated Oil and Gas Properties 1,022,857     1,053,461  
Unevaluated Oil and Gas Properties 201,331     215,794  
Other Property and Equipment 22,100     21,401  
Wells and Facilities in Progress 46,814     21,964  
Pipelines 16,803     18,029  
Total Property and Equipment 1,309,905     1,330,649  
Less: Accumulated Depreciation , Depletion and Amortization (452,882 )   (475,205 )
Net Property and Equipment 857,023     855,444  
Other Assets 2,475     2,492  
Long-Term Derivative Instruments 1,465     2,212  
Total Assets $ 896,840     $ 893,923  
LIABILITIES AND EQUITY      
Current Liabilities    
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