Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )
 November 9, 2015 - 4:01 PM EST
Print Email Article Font Down Font Up Charts

Rex Energy Reports Third Quarter Operational and Financial Results

  • Production of 194.3 MMcfe/d, a 15% increase year-over-year
  • Drilled all planned 2015 wells in the Moraine East Area
  • Placed Patterson 2H into sales, the company’s first dry gas Utica well in the Western Lawrence Utica

STATE COLLEGE, Pa., Nov. 09, 2015 (GLOBE NEWSWIRE) -- Rex Energy Corporation (Nasdaq:REXX) announced its third quarter 2015 operational and financial results.

Commenting on the quarter, Tom Stabley, Rex Energy’s President and CEO, said, “We have continued to improve our drilling operations by lowering costs and increasing work efficiencies. The average well cost for a 5,000 foot lateral in Butler is now down to $5.2 million. Our average drilling rate for the last eight wells was 595 feet per day, as compared to a rate of 402 feet per day for the first nine wells in 2015, an improvement of 48%. With the exceptional performance of our operations team combined with well performance, and the nature of our rock in Butler County, we have been able to increase our overall reserves profile. Cost containment and operational efficiencies are positioning us to weather the low commodity price environment.”

Third Quarter Financial Results

Operating revenue from continuing operations for the three and nine months ended September 30, 2015 was $37.6 million and $137.5 million, respectively, which represents a decrease of 49% and 40% from the same periods in 2014, respectively. Commodity revenues, including settlements from derivatives, were $52.6 million and $176.6 million for the three and nine months ended September 30, 2015, a decrease of 31% and 21% respectively from the comparable periods in 2014. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 48% of total commodity revenues for the three months ended September 30, 2015.

Including the effects of cash settled basis hedges, the company’s basis differential for its Appalachian Basin assets averaged approximately ($0.82) off the average Henry Hub price of $2.77 for the three months ended September 30, 2015.

LOE from continuing operations was $30.6 million, or $1.71 per Mcfe for the quarter. For the nine months ended September 30, 2015, LOE was approximately $90.3 million, or $1.66 per Mcfe. Cash general and administrative (“G&A”) expenses from continuing operations, a non-GAAP measure, were $5.5 million for the third quarter of 2015, a 39% decrease on a per unit basis as compared to the same period in 2014. For the nine months ended September 30, 2015, cash G&A expenses from continuing operations were $18.7 million, a 43% decrease on per unit basis as compared to the same period in 2014.

The company incurred a non-cash impairment charge of approximately $139.8 million during the third quarter of 2015. The reduction in carrying value, which was primarily focused in the company’s Warrior North assets in Carroll County, Ohio and its conventional oil assets in the Illinois Basin, is attributable to the continued depression of current and estimated future commodity prices.

Net loss attributable to common shareholders for the three months ended September 30, 2015 was $97.1 million, or $1.80 per basic share. Net loss attributable to common shareholders for the nine months ended September 30, 2015 was $272.5 million, or $5.07 per basic share. Adjusted net loss, a non-GAAP measure, for the three months ended September 30, 2015 was $13.9 million, or $0.26 per share. Adjusted net loss for the nine months ended September 30, 2015 was $31.7 million, or $0.59 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $16.4 million for the third quarter of 2015 and $68.2 million for the nine months ended September 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 nine months ended September 30, 2015, as well as a discussion of the uses of each measure, are presented in the appendix of this release.

Production and Price Realizations

Third quarter 2015 production volumes were 194.3 MMcfe/d, an increase of 15% over the third quarter of 2014, consisting of 116.6 MMcf/d of natural gas and 12.9 Mboe/d of oil, condensate and NGLs (including 4.6 Mboe/d of ethane). Oil, condensate and NGLs (including ethane) accounted for 40% of net production for the third quarter of 2015.

Including the effects of cash-settled derivatives, realized prices for the three months ended September 30, 2015 were $50.03 per barrel for oil and condensate, $2.57 per Mcf for natural gas, $16.99 per barrel for NGLs (C3+) and $7.33 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended September 30, 2015 were $40.01 per barrel for oil and condensate, $1.74 per Mcf for natural gas, $10.17 per barrel for NGLs (C3+) and $7.22 per barrel for ethane.

Including the effects of cash-settled derivatives, realized prices for the nine months ended September 30, 2015 were $52.92 per barrel for oil and condensate, $2.67 per Mcf for natural gas, $20.25 per barrel for NGLs (C3+) and $7.01 per barrel for ethane. Before the effects of hedging, realized prices for the nine months ended September 30, 2015 were $43.04 per barrel for oil and condensate, $1.99 per Mcf for natural gas, $15.83 per barrel for NGLs (C3+) and $6.82 per barrel for ethane.

Third Quarter 2015 Capital Investments

For the third quarter of 2015, the company made operational capital investments of approximately $37.1 million, of which $33.5 million was used to fund Marcellus and Ohio Utica operations and $3.6 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 10.0 gross (6.9 net) wells, fracture stimulation of 11.0 gross (5.6 net) wells, placing nine gross (3.8 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.

Investments for leasing and property acquisition were $5.0 million and capitalized interest was $2.0 million for the third quarter of 2015.

Operational Update

Appalachian Basin – Butler Operated Area

In the Butler Operated Area, the company drilled 9.0 gross (5.9 net) wells in the third quarter of 2015, with 10.0 gross (4.6 net) wells fracture stimulated and eight gross (2.8 net) wells placed into sales. The company had 11.0 gross (7.3 net) wells drilled and awaiting completion as of September 30, 2015.

Appalachian Basin – Moraine East Area

In the Moraine East Area, the company has completed drilling the four-well Fleeger 2 pad. The four wells were drilled to an average lateral length of approximately 6,500 feet, are expected to be completed in the fourth quarter of 2015 and placed 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, the company has placed into sales the Patterson 2H well, which was drilled to a lateral length of approximately 6,700 feet and completed in 45 stages with average sand concentrations of 2,365 pounds per foot. The well produced at a 24-hour sales rate of 11.4 MMcfe/d.

Liquidity Update

As of September 30, 2015, the company had approximately $3.2 million of cash and $69.0 million of its $350.0 million borrowing base outstanding under its senior secured credit facility. During the third quarter of 2015, the company completed the sale of Keystone Clearwater Solutions and received reimbursement for previous pipeline expenditures in Moraine East for combined net proceeds of $71.1 million.

Fourth Quarter and Full Year 2015 Guidance

Rex Energy is providing its guidance for the fourth quarter and maintaining its full year 2015 guidance ($ in millions). Fourth quarter production is expected to be down approximately 4% at the midpoint of guidance due to the Bluestone processing facility being shut down for six days during the quarter to allow for the commissioning of the Bluestone III processing facility and the shut-in of the six-well Grunder pad in order for the company to drill the Grunder North 6H from the existing pad. The cumulative effect of these two factors is expected to impact production by approximately 8.0 MMcfe/d. Adjusting for these two factors at the midpoint of the company’s guidance, estimated production during the quarter would be flat as compared to the third quarter of 2015.

In addition, the company is increasing its full year 2015 operational capital expenditure budget to approximately $160 million. The increase in the budget is due to the company’s decision to drill three additional wells and to add three wells to its completion schedule to take advantage of increased operational efficiencies and accelerate the HBP program.

 4Q2015Full Year 2015
Production183.0 - 191.0 MMcfe/d193.0 - 203.0 MMcfe/d
Lease Operating Expense$30.0 - $33.0 million--
Cash G&A$6.3 - $7.3 million--
Operational Capital Expenditures(1)(2) --~ $160 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 Tuesday, November 10, 2015 at 10:00 a.m. Eastern to review third quarter 2015 financial results and operational highlights. The telephone number to access the conference call is (866) 437-1772.

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 fourth 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;
  • 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;
  • 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; 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)
  
ASSETSSeptember 30, 2015 (Unaudited)December 31, 2014
Current Assets  
Cash and Cash Equivalents$3,150 $17,978 
Accounts Receivable 29,138  43,936 
Taxes Receivable 19  504 
Short-Term Derivative Instruments 29,194  29,265 
Inventory, Prepaid Expenses and Other 2,169  3,403 
Assets Held for Sale --  34,257 
Total Current Assets 63,670  129,343 
Property and Equipment (Successful Efforts Method)  
Evaluated Oil and Gas Properties  1,202,256  1,079,039 
Unevaluated Oil and Gas Properties 288,800  322,413 
Other Property and Equipment 45,930  46,361 
Wells and Facilities in Progress 125,153  127,655 
Pipelines 14,275  15,657 
Total Property and Equipment 1,676,414  1,591,125 
Less: Accumulated Depreciation, Depletion and Amortization (631,977) (366,917)
Net Property and Equipment 1,044,437  1,224,208 
Deferred Financing Costs and Other Assets - Net 16,271  17,070 
Equity Method Investments --  17,895 
Long-Term Derivative Instruments 11,749  4,904 
Long-Term Deferred Tax Asset 10,648  8,301 
Total Assets$1,146,775 $1,401,721 
LIABILITIES AND EQUITY  
Current Liabilities  
Accounts Payable$29,551 $53,340 
Current Maturities of Long-Term Debt 668  1,176 
Accrued Liabilities 51,964  59,478 
Short-Term Derivative Instruments 763  421 
Current Deferred Tax Liability 10,648  8,301 
Liabilities Related to Assets Held for Sale --  25,115 
Total Current Liabilities 93,594  147,831 
Long-Term Derivative Instruments 3,425  2,377 
Senior Secured Line of Credit and Long-Term Debt 69,132  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 2,442  2,725 
Other Deposits and Liabilities 3,372  4,018 
Future Abandonment Cost 40,745  38,146 
Total Liabilities$887,710 $870,348 
   
Stockholders’ Equity  
Preferred Stock, $.001 par value per share, 100,000 shares authorized and 16,100 issued and outstanding on September 30, 2015 and December 31, 2014$1 $1 
Common Stock, $.001 par value per share, 100,000,000 shares authorized and 54,975,151 shares issued and outstanding on September 30, 2015 and 54,174,763 shares issued and outstanding on December 31, 2014 54  54 
Additional Paid-In Capital 622,245  617,826 
Accumulated Deficit (363,235) (90,749)
Rex Energy Stockholders’ Equity 259,065  527,132 
Noncontrolling Interests --  4,241 
Total Stockholders’ Equity 259,065  531,373 
Total Liabilities and Owners’ Equity$1,146,775 $1,401,721 
 


REX ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands, Except per Share Data)
  
 For the Three Months Ended For the Nine Months Ended 
 September 30,September 30,
  2015  2014  2015  2014 
OPERATING REVENUE    
Oil, Natural Gas and NGL Sales$37,565 $73,448 $137,437 $227,650 
Other Revenue 8  18  30  92 
TOTAL OPERATING REVENUE 37,573  73,466  137,467  227,742 
OPERATING EXPENSES    
Production and Lease Operating Expense 30,616  27,674  90,310  69,338 
General and Administrative Expense 5,376  9,288  23,507  27,179 
(Gain) Loss on Disposal of Assets (230) 174  (465) 468 
Impairment Expense 139,810  --  264,677  41 
Exploration Expense 807  1,462  2,242  4,890 
Depreciation, Depletion, Amortization and Accretion 27,124  26,375  82,788  66,454 
Other Operating Expense (Income) 183  (24 5,304  3 
TOTAL OPERATING EXPENSES 203,686  64,949  468,363  168,373 
INCOME (LOSS) FROM OPERATIONS (166,113) 8,517  (330,896) 59,369 
OTHER EXPENSE    
Interest Expense (11,886) (10,946) (36,097) (25,236)
Gain on Derivatives, Net 28,649  12,316  45,487  2,315 
Other Income 20  3  119  20 
Loss on Equity Method Investments --  (202) (411) (610)
TOTAL OTHER INCOME (EXPENSE) 16,783  1,171  9,098  (23,511)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX (149,330) 9,688  (321,798) 35,858 
Income Tax (Expense) Benefit 20,037  (4,069) 20,653  (13,839)
INCOME (LOSS) FROM CONTINUING OPERATIONS (129,293) 5,619  (301,145) 22,019 
Income From Discontinued Operations, Net of Income Taxes 34,617  970  38,149  3,963 
NET INCOME (LOSS) (94,676) 6,589  (262,996) 25,982 
Net Income (Loss) Attributable to Noncontrolling Interests (1) 895  2,245  3,340 
NET INCOME (LOSS) ATTRIBUTABLE TO REX ENERGY (94,675) 5,694  (265,241) 22,642 
Preferred Stock Dividends 2,415  --  7,245  -- 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS$(97,090)$5,694 $(272,486)$22,642 
Earnings per common share:    
Basic – Net Income (Loss) From Continuing Operations Attributable to Rex Energy Common Shareholders$(2.44)$0.11 $(5.74)$0.41 
Basic – Net Income From Discontinued Operations Attributable to Rex Energy Common Shareholders 0.64  0.00  0.67  0.01 
Basic – Net Income (Loss) Attributable to Rex Energy Common Shareholders$(1.80)$0.11 $(5.07)$0.42 
Basic – Weighted Average Shares of Common Stock Outstanding 53,936  53,214  53,748  53,493 
Diluted – Net Income (Loss) From Continuing Operations Attributable to Rex Energy Common Shareholders$(2.44)$0.10 $(5.74)$0.40 
Diluted – Net Income  From Discontinued Operations Attributable to Rex Energy  Common Shareholders 0.64  0.00  0.67  0.01 
Diluted – Net Income (Loss) Attributable to Rex Energy Common Shareholders$(1.80)$0.10 $(5.07)$0.41 
Diluted – Weighted Average Shares of Common Stock Outstanding 53,936  57,991  53,748  55,254 

 

REX ENERGY CORPORATION
CONSOLIDATED OPERATIONAL HIGHLIGHTS
UNAUDITED
     
  Three Months Ending Nine Months Ending
  September 30, September 30,
  2015 2014 2015 2014
Oil, Natural Gas, NGL and Ethane sales (in thousands):            
Oil and condensate sales $10,754 $ 27,547  $38,350 $ 75,407 
Natural gas sales  18,684   24,883   68,057   97,381 
Natural gas liquid sales (C3+)  5,069   19,136   24,872   52,895 
Ethane sales  3,058   1,883   6,158   1,967 
Cash-settled derivatives:            
Crude oil  2,694   (194)  8,806   (1,622)
Natural gas  8,911   2,798   23,250   (1,544)
Natural gas liquids (C3+)  3,399   399   6,939   (1,044)
Ethane  47   --   172   -- 
Total oil, gas, NGL and Ethane sales including cash settled derivatives $52,616 $ 76,452  $176,604 $ 223,440 
             
Production during the period:            
Oil and condensate (Bbls)  268,775   306,088   891,054   808,357 
Natural gas (Mcf)  10,731,248   9,846,693   34,160,329   25,681,687 
Natural gas liquids (C3+) (Bbls)  498,256   411,655   1,571,358   1,042,378 
Ethane (Bbls)  423,478   242,557   903,086   256,505 
Total (Mcfe)1  17,874,302   15,608,493   54,353,317   38,325,127 
             
Production – average per day:            
Oil and condensate (Bbls)  2,921   3,327   3,264   2,961 
Natural gas (Mcf)  116,644   107,029   125,129   94,072 
Natural gas liquids (C3+) (Bbls)  5,416   4,475   5,756   3,818 
Ethane (Bbls)  4,603   2,636   3,308   940 
Total (Mcfe)a  194,286   169,658   199,096   140,385 
             
Average price per unit:            
Realized crude oil price per Bbl – as reported $40.01 $ 90.00  $43.04 $ 93.28 
Realized impact from cash settled derivatives per Bbl  10.02   (0.64)  9.88   (2.01)
Net realized price per Bbl $50.03 $ 89.36  $52.92 $ 91.28 
             
Realized natural gas price per Mcf – as reported $1.74 $ 2.53  $1.99 $ 3.79 
Realized impact from cash settled derivatives per Mcf  0.83   0.28   0.68   (0.06)
Net realized price per Mcf $2.57 $ 2.81  $2.67 $ 3.73 
             
Realized natural gas liquids (C3+) price per Bbl – as reported $10.17 $ 46.49  $15.83 $ 50.74 
Realized impact from cash settled derivatives per Bbl  6.82   0.96   4.42   (1.00)
Net realized price per Bbl $16.99 $ 47.45  $20.25 $ 49.74 
             
Realized ethane price per Bbl – as reported $7.22 $ 7.76  $6.82 $ 7.67 
Realized impact from cash settled derivatives per Bbl  0.11  --  0.19  --
Net realized price per Bbl $7.33 $ 7.76  $7.01 $ 7.67 
             
LOE/Mcfe $1.71 $ 1.77  $1.66 $ 1.81 
Cash G&A/Mcfe $0.31 $ 0.50  $0.34 $ 0.60 
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 11/9/2015
         
   2015   2016 
Oil Derivatives (Bbls)    
Collar Contracts    
Volume  50,000   60,000 
Ceiling$ 63.15 $ 63.81 
Floor$ 52.90 $ 53.75 
Collar Contracts with Short Puts    
Volume  100,000   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 3,500,000(1) 13,200,000(2)
Price$ 3.82 $ 3.63 
Swaption Contracts    
Volume  200,000   1,200,000 
Price$ 3.50 $ 3.15 
Put Spread        
Volume  --   2,100,000 
Floor$ -- $ 3.00 
Short Put$ -- $ 2.25 
Collar Contracts        
Volume  --   3,900,000 
Ceiling$ -- $ 3.32 
Floor$ -- $ 2.82 
Collar Contracts with Short Puts    
Volume  2,000,000   19,170,000 
Ceiling$ 4.35 $ 3.99 
Floor$ 3.59 $ 3.22 
Short Put$ 2.90 $ 2.51 
Call Contracts        
Volume  400,000   -- 
Ceiling$ 4.40 $ -- 
Natural Gas Liquids (Bbls)    
Swap Contracts    
Propane (C3)    
Volume  166,000   639,000 
Price$ 26.04 $ 23.10 
Butane (C4)    
Volume  24,000   108,000 
Price$ 28.90 $ 30.62 
Isobutane (IC4)    
Volume  11,000   60,000 
Price$ 29.57 $ 30.70 
Natural Gasoline (C5+)    
Volume  57,000   324,000 
Price$ 50.78 $ 52.79 
Ethane    
Volume  68,300   240,000 
Price$ 8.40 $ 8.82 
Natural Gas Basis (Mcf)    
Swap Contracts    
Dominion Appalachia(3)    
Volume  1,320,000   16,630,000 
Price$ (0.83)$ (0.94)
(1)  Includes 1.3 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 EndedNine Months Ended
 September 30,September 30,
  2015  2014  2015  2014 
Income (Loss) From Continuing Operations$(129,293)$5,619 $(301,145)$22,019 
     
Gain on Derivatives, Net (28,649) (12,316) (45,487) (2,315)
Cash Settlement of Derivatives 15,082  3,002  40,102  (3,331)
Less Gain from Financial Derivatives (13,567) (9,314) (5,385) (5,646)
Add Back Non-Recurring Costs1 --  --  4,774  -- 
Add Back Depletion, Depreciation, Amortization and Accretion 27,124  26,375  82,788  66,454 
Add Back (Less) Non-Cash Compensation Expense (Income) (83) 1,521  4,834  4,245 
Add Back Interest Expense 11,886  10,946  36,097  25,236 
Add Back Impairment Expense 139,810  --  264,677  41 
Add Back Exploration Expenses 807  1,462  2,242  4,890 
Add Back (Less) Loss (Gain) on Disposal of Assets (230) 174  (465) 468 
Add Back (Less) Income Tax Expense (Benefit) (20,037) 4,069  (20,653) 13,839 
Add Back Non-Cash Portion of Equity Method Investment --  201  406  603 
EBITDAX From Continuing Operations$16,417 $41,053 $68,170 $132,149 
Income From Discontinued Operations, Net of Income Taxes 34,617  970  38,149  3,963 
Net (Income) Loss Attributable to Noncontrolling Interests 1  (895) (2,245) (3,340)
Income From Discontinued Operations Attributable to Rex Energy 34,618  75  35,904  623 
Add Back Depletion, Depreciation, Amortization and Accretion 2  989  78  2,560 
Add Back Interest Expense 56  134  487  482 
Less Gain on Disposal of Assets2 (57,013) (91) (57,055) (84)
Less Non-Cash Portion of Noncontrolling Interests (23) (410) (209) (1,184)
Add Back Income Tax Expense 22,452  400  23,310  754 
Add EBITDAX From Discontinued Operations$92 $1,097 $2,515 $3,151 
EBITDAX (Non-GAAP)$16,509 $42,150 $70,685 $135,300 
1 Non-Recurring costs for the nine months ended September 30, 2015 are due to net fees incurred to terminate two drilling rig contracts earlier than their original term.
2 Gain on disposal included in EBITDAX from Discontinued Operations for the three and nine months ended September 30, 2015, includes approximately $57.0 million in gains recognized on the sale of Water Solutions Holdings, LLC.

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 Nine Months Ended
 September 30, September 30,
   2015   2014    2015   2014 
Income (Loss) From Continuing Operations Before Income Taxes, as reported$ (149,330)$ 9,688  $ (321,798)$ 35,858 
(Gain) on Derivatives, Net  (28,649)  (12,316)   (45,487)  (2,315)
Cash Settlement of Derivatives  15,082   3,002    40,102   (3,331)
Less Gains from Financial Derivatives  (13,567)  (9,314)   (5,385)  (5,646)
Add Back Non-Recurring Costs1  --   --    4,774   -- 
Add Back Impairment Expense  139,810   --    264,677   41 
Add Back Dry Hole Expense  179   159    468   311 
Add Back (Less) Non-Cash Compensation Expense (Income)  (83)  1,521    4,834   4,245 
Add Back (Less) (Gain) Loss on Disposal of Assets  (230)  174    (465)  468 
Income (Loss) Before Income Taxes, adjusted$ (23,221)$ 2,228  $ (52,895)$ 35,277 
Less Income Tax (Expense) Benefit, adjusted2  9,288   (891)   21,158   (14,111)
Adjusted Net Income (Loss)$ (13,933)$ 1,337  $ (31,737)$ 21,166 
          
Basic – Adjusted Net Income (Loss) Per Share$ (0.26)$ 0.03  $ (0.59)$ 0.40 
Basic – Weighted Average Shares of Common Stock Outstanding         


1 Non-Recurring costs for the nine months ended September 30, 2015 are due to net fees incurred to terminate to drilling rig contracts earlier than their original term
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
September 30,
 Nine Months Ended
September 30,
 2015 2014
 2015
 2014
GAAP G&A$5,376 $9,288 $23,507 $27,179
Non-Cash Compensation Expense83   (1,521)  (4,834)   (4,245)
Cash G&A$5,459 $7,767 $18,673 $22,934

 

For more information contact:

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

Primary Logo


Source: GlobeNewswire (November 9, 2015 - 4:01 PM EST)

News by QuoteMedia
www.quotemedia.com