Exhibit 99.1
Rex Energy Announces Fourth Quarter 2010 Production Increased 32% Over Fourth Quarter 2009
| | • | | 2010 production increased 26% over 2009, and natural gas production increased 104% over 2009. |
| | • | | Fourth quarter 2010 EBITDAX (defined below) increased 82% over fourth quarter 2009. |
| | • | | Fourth quarter 2010 production revenue, including cash settled derivatives, increased 27% compared to fourth quarter 2009. |
STATE COLLEGE, Pa., February 15, 2011 (GLOBE NEWSWIRE)—Rex Energy Corporation (Nasdaq:REXX) today announced financial and operational results for the fourth quarter and full year of 2010.
Fourth Quarter Operational and Financial Results
Total production during fourth quarter 2010 averaged 22.8 MMcfe per day, of which 51% was attributable to oil, 47% to natural gas and 2% to NGLs. Fourth quarter production represented a 32% increase over fourth quarter 2009, including a 102% increase in natural gas production. The increase in natural gas production was primarily attributable to gas sales through the Sarsen cryogenic gas processing plant (the Sarsen Plant) in Butler County, Pennsylvania, which was commissioned during the fourth quarter.
“We are pleased with our 61% reserve growth at year end 2010 compared to the prior year and the beginning of operations at the Sarsen gas processing plant,” said Dan Churay, President and Chief Executive Officer of the company. “We look forward to increasing production to plant capacity as soon as possible and aggressively executing our development plans in 2011.”
Rex Energy reported a fourth quarter 2010 net loss of approximately $6.5 million, or $0.15 per share. EBITDAX, a non-GAAP measure, was $8.1 million for fourth quarter 2010, up 82% compared to fourth quarter of 2009. The increase in EBITDAX was attributable to a higher oil price environment as well as higher natural gas production volumes. As used in this release, “EBITDAX” means income (loss) from continuing operations, before interest, income tax, depreciation, depletion, amortization, impairment and the other items that the table below outlines. EBITDAX is not a measure that United States generally accepted accounting principles (GAAP) recognizes. A full reconciliation between EBITDAX and GAAP net income (loss) from continuing operations is presented below.
Loss from continuing operations before income taxes for the fourth quarter 2010 was $10.5 million. Adjusted net loss comparable to analysts’ estimates, a non-GAAP measure, was $0.7 million, or $0.02 per share. As used in this release, “adjusted net loss comparable to analysts’ estimates” means net income (loss) from continuing operations comparable to analyst estimates. Adjusted net loss comparable to analysts’ estimates is not a measure that GAAP recognizes. A full reconciliation between adjusted net loss comparable to analysts’ estimates and GAAP net income (loss) from continuing operations before income taxes is presented below.
Operating revenue, including the effects of cash settled derivatives was $19.7 million for the fourth quarter 2010, an increase of $4.7 million over the same period in 2009.
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Realized natural gas prices, after the effects of cash settled derivatives, declined by 5% to $5.88 per Mcf, and realized oil prices, after the effects of cash settled derivatives, increased by 10% to $72.94 per Bbl, in each case, when compared to fourth quarter 2009.
Lease operating expenses were $6.5 million, up $0.4 million in fourth quarter 2010 compared to the same period in 2009, primarily due to the company placing additional wells in service and additional processing costs for the Sarsen Plant. Lease operating expenses in the fourth quarter of 2010 were $30.26 per barrel in the Illinois Basin and $1.07 per Mcfe in the Appalachian Basin.
General and administrative expenses (G&A) were $4.2 million, down $0.7 million quarter-over-quarter due to a decrease in 2010 legal fees.
Impairment expense was $5.3 million, up $4.5 million compared to fourth quarter 2009. The company recognized impairment expense in fourth quarter of 2010 related to a cost recovery analysis of two test wells that the company drilled in Clearfield County, Pennsylvania in 2008.
Fourth quarter 2010 exploration expense was $2.3 million, up $1.4 million compared to fourth quarter 2009. The increase during 2010 was predominantly due to additional seismic services and geophysical evaluations that the company obtained in the Denver-Julesburg Basin (DJ Basin).
Depreciation, depletion, amortization and accretion (DD&A) for the fourth quarter 2010 was $6.6 million during the fourth quarter of 2010. This represents a decrease of $0.2 million when compared to fourth quarter in 2009 which was primarily attributable to sale of an interest in certain Marcellus Shale wells, acreage and equipment as a part of the formation of the company’s joint venture with Sumitomo Corporation.
Capital expenditures were $32.6 million for the fourth quarter 2010, representing a $10.2 million increase when compared to previous issued guidance. The variance was primarily due to one additional well that the company drilled and completed in the DJ Basin, acreage acquisitions in the DJ Basin and additional capital expenses in the Illinois Basin.
2010 Operational and Financial Results
| | • | | 2010 exit rate increased 38% to 24.9 Mcfe/day compared to the 2009 exit rate. |
| | • | | EBITDAX increased 17% year-over-year to $26.3 million. |
| | • | | Including cash settled derivatives, full year 2010 production revenue increased 25% compared to full year 2009. |
Fiscal Year-End 2010 Financial Results
Total production averaged 20.3 MMcfe per day for the fiscal year ended December 31, 2010, of which 56% was attributable to oil, 42% to natural gas and 2% to NGLs. This represents a 26% increase year-over-year, including a 104% increase in natural gas production. The increase in natural gas production was primarily attributable to gas sales through the Sarsen Plant in Butler County, Pennsylvania, which was commissioned during the fourth quarter.
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For the fiscal year ending December 31, 2010, Rex Energy reported net income of $6.0 million, or $0.14 per basic and fully diluted share. EBITDAX, a non GAAP measure, was $26.3 million for the fiscal year end 2010, which represented a 17% increase year-over-year. The increase in full year 2010 EBITDAX was attributable to a higher oil price environment as well as higher natural gas production volumes. A full reconciliation between EBITDAX and GAAP net income (loss) from continuing operations is presented below.
Income from continuing operations before income taxes for the full year 2010 was $9.9 million. Adjusted net loss comparable to analysts’ estimates for 2010, a non-GAAP measure, was $1.5 million, or $0.03 per share. A full reconciliation between adjusted net loss comparable to analysts’ estimates and GAAP net income (loss) from continuing operations before income taxes is presented below.
Operating revenue, including cash settled derivatives, grew 18% in 2010 to $69.6 million compared to 2009.
The average realized natural gas, price after hedging, was $5.97 for 2010 compared to $6.41 for 2009, and the average realized price, after hedging, for oil was $70.44 in 2010 compared to $61.82 for 2009.
Lease operating expenses for 2010 were $24.7 million, an increase of $2.5 million year-over-year. The increase was due to additional wells placed into service and additional processing costs for the Sarsen Plant. Lease operating expenses were $30.46 per barrel for the Illinois Basin, and $1.11 per Mcfe in the Appalachian Basin.
Year-over-year, G&A increased $2.1 million to $17.9 million in 2010. Increased costs were attributable to expenses in connection with our Denver, Colorado office, which opened during the first quarter of 2010 in addition to increased head counts across the entire company.
Rex Energy recognized a gain on sale of assets in the amount of $16.4 million for 2010. The gain was primarily attributable to a $16.0 million gain recorded in connection with the sale of an interest in certain Marcellus Shale wells, acreage and equipment as a part of the formation of the company’s joint venture with Sumitomo Corporation.
Impairment expense increased $7.2 million to $8.9 million in 2010, most of which was recognized in the fourth quarter. This impairment was related to a cost recovery analysis of two test wells that the company drilled in Clearfield County, Pennsylvania.
Exploration expenses were $5.2 million for 2010, up $3.2 million from 2009. The increase during 2010 was predominantly due to additional seismic services and geophysical evaluations that the company obtained in the DJ Basin.
DD&A was $21.8 million in 2010, down $3.4 million compared to 2009 due to the sale of an interest in certain Marcellus Shale wells, acreage and equipment as a part of the formation of the company’s joint venture with Sumitomo Corporation.
Including midstream joint venture investments and a $21.0 million reimbursement from Sumitomo Corporation for certain year-to-date capital expenses, capital expenditures for 2010 were approximately $143.0 million, $13.0 million over previously provided guidance. The variance was due to one additional Niobrara well that the company drilled and completed in the DJ Basin, acreage acquisitions in the DJ Basin and additional capital expenses incurred in the Illinois Basin.
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First Quarter 2011 and Fiscal Year 2011 Guidance
Rex Energy reaffirms its previously published guidance as outlined in the table below.
| | | | | | | | |
| | | 1Q2011 | | | Full Year 2011 | |
Production | | | 25.8-27.3 MMcfe/day | | | | 34.7-39.4 MMcfe/day | |
Lease Operating Expense | | $ | 6.7M - $7.2M | | | $ | 32.0M - $37.0M | |
Cash G&A | | $ | 4.9M - $5.3M | | | $ | 20.0M - $21.0M | |
Capital Expenditures | | $ | 20.4M | | | $ | 148.8M | |
December, 2011 Exit Rate | | | | | | | 40.7-48.5 Mmcfe/day | |
Conference Call Information
Management will host a conference call and webcast on Wednesday, February 16, 2011 at 11:00 a.m. EST to review the 2010 financial results and operational highlights. The conference call and webcast will be live and available on the company’s website at www.rexenergy.com under the Investor Relations tab.
Upcoming Conference Schedule
Management will be participating in the IPAA OGIS Conference in New York on April 11th thru the 13th. The exact presentation time and date has not been established but will be announced at a later date. The company’s presentation at the conference will be available via webcast. A copy of the corporate presentation will also be available on April 8, 2011 on the Rex Energy website, www.rexenergy.com.
About Rex Energy Corporation
Rex Energy is headquartered in State College, Pennsylvania and is an independent oil and gas company operating in the Appalachian, Illinois and Denver-Julesburg 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 complimentary to its portfolio.
* * * * *
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 (as well as the timing of rig operations, natural gas processing plant commissioning and operations, fracture stimulation activities and the completion of wells and the expected dates that wells are producing hydrocarbons that are sold), 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. These forward-looking statements are indicated by words such as “expected”, “expects”, “anticipates” and similar words. 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 (without limitation) the following:
| | • | | 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; |
| | • | | the effects of government regulation, permitting and other legal requirements; |
| | • | | the geologic quality of the company’s properties with regard to, among other things, the existence of hydrocarbons in economic quantities; |
| | • | | uncertainties about the estimates of the company’s oil and natural gas reserves; |
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| | • | | the company’s ability to increase production and oil and natural gas income through exploration and development; |
| | • | | the company’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; |
| | • | | the effects of adverse weather on operations; |
| | • | | drilling and operating risks; |
| | • | | 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 transportation pipelines; |
| | • | | changes in the company’s drilling plans and related budgets; |
| | • | | the adequacy of capital resources and liquidity including (without limitation) access to additional borrowing capacity; and |
| | • | | uncertainties associated with our legal proceedings and the 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.
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.
* * * * *
For more information, contact:
Tom Stabley
Executive Vice President and Chief Financial Officer
(814) 278-7215
tstabley@rexenergycorp.com
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REX ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands)
| | | | | | | | |
| | | December, 2010
(unaudited) | | | December 31, 2009 | |
ASSETS | | | | | | | | |
Current Assets | | | | | | | | |
Cash and Cash Equivalents | | $ | 11,008 | | | $ | 5,582 | |
Accounts Receivable | | | 28,860 | | | | 14,333 | |
Short-Term Derivative Instruments | | | 4,564 | | | | 2,124 | |
Deferred Taxes | | | — | | | | 2,827 | |
Inventory, Prepaid Expenses and Other | | | 1,327 | | | | 1,111 | |
| | | | | | | | |
Total Current Assets | | | 45,759 | | | | 25,977 | |
Property and Equipment (Successful Efforts Method) | | | | | | | | |
Evaluated Oil and Gas Properties | | | 241,586 | | | | 206,676 | |
Unevaluated Oil and Gas Properties | | | 91,574 | | | | 80,218 | |
Other Property and Equipment | | | 42,226 | | | | 25,082 | |
Wells and Facilities in Progress | | | 36,310 | | | | 34,086 | |
Pipelines | | | 4,080 | | | | 5,167 | |
| | | | | | | | |
Total Property and Equipment | | | 415,776 | | | | 351,229 | |
Less: Accumulated Depreciation, Depletion and Amortization | | | (93,063 | ) | | | (75,968 | ) |
| | | | | | | | |
Net Property and Equipment | | | 322,713 | | | | 275,261 | |
Restricted Cash | | | 16,111 | | | | 25 | |
Other Assets—Net | | | 176 | | | | 101 | |
Intangible Assets—Net | | | 1,394 | | | | 1,073 | |
Investment in Keystone Midstream Services | | | 11,995 | | | | — | |
Investment in RW Gathering | | | 6,404 | | | | 840 | |
Long-Term Derivative Instruments | | | 1,450 | | | | 1,673 | |
| | | | | | | | |
Total Assets | | $ | 406,002 | | | $ | 304,950 | |
| | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | |
Current Liabilities | | | | | | | | |
Accounts Payable | | $ | 49,401 | | | $ | 16,386 | |
Accrued Expenses | | | 9,085 | | | | 9,333 | |
Short-Term Derivative Instruments | | | 1,860 | | | | 6,692 | |
Current Deferred Tax Liability | | | 1,908 | | | | — | |
| | | | | | | | |
Total Current Liabilities | | | 62,254 | | | | 32,411 | |
Senior Secured Line of Credit and Long-Term Debt | | | 10,120 | | | | 23,049 | |
Long-Term Derivative Instruments | | | 1,517 | | | | 426 | |
Long-Term Deferred Tax Liability | | | 5,930 | | | | 6,894 | |
Other Deposits and Liabilities | | | 4,283 | | | | 5,830 | |
Future Abandonment Costs | | | 17,222 | | | | 16,143 | |
| | | | | | | | |
Total Liabilities | | $ | 101,326 | | | $ | 84,753 | |
Commitments and Contingencies | | | | | | | | |
Owners’ Equity | | | | | | | | |
Common Stock, $.001 par value per share, 100,000,000 shares authorized and 44,306,677 shares issued and outstanding on December 31, 2010 and 36,817,812 shares issued and outstanding on December 31, 2009. | | | 44 | | | | 37 | |
Additional Paid-In Capital | | | 373,856 | | | | 292,372 | |
Accumulated Deficit | | | (69,519 | ) | | | (75,555 | ) |
| | | | | | | | |
Rex Energy Owners’ Equity | | | 304,381 | | | | 216,854 | |
Noncontrolling Interests | | | 295 | | | | 3,343 | |
| | | | | | | | |
Total Owners’ Equity | | | 304,676 | | | | 220,197 | |
| | | | | | | | |
Total Liabilities and Owners’ Equity | | $ | 406,002 | | | $ | 304,950 | |
| | | | | | | | |
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REX ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ and Shares in Thousands, Except per Share Data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2010
(Unaudited) | | | 2009 | | | 2010
(Unaudited) | | | 2009 | |
OPERATING REVENUE | | | | | | | | | | | | | | | | |
Oil and Natural Gas Sales | | $ | 18,757 | | | $ | 15,208 | | | $ | 67,224 | | | $ | 48,534 | |
Other Revenue | | | 705 | | | | 57 | | | | 1,539 | | | | 157 | |
| | | | | | | | | | | | | | | | |
TOTAL OPERATING REVENUE | | $ | 19,462 | | | $ | 15,265 | | | $ | 68,763 | | | $ | 48,691 | |
| | | | |
OPERATING EXPENSES | | | | | | | | | | | | | | | | |
Production and Lease Operating Expense | | | 6,474 | | | | 6,107 | | | | 24,656 | | | | 22,157 | |
General and Administrative Expense | | | 4,173 | | | | 4,916 | | | | 17,923 | | | | 15,858 | |
(Gain) Loss on Disposal of Assets | | | 98 | | | | 10 | | | | (16,395 | ) | | | 427 | |
Impairment Expense | | | 5,296 | | | | 760 | | | | 8,863 | | | | 1,625 | |
Exploration Expense | | | 2,270 | | | | 876 | | | | 5,242 | | | | 2,080 | |
Depreciation, Depletion, Amortization and Accretion | | | 6,595 | | | | 6,782 | | | | 21,806 | | | | 25,205 | |
Other Operating Expense | | | 480 | | | | — | | | | 1,341 | | | | — | |
| | | | | | | | | | | | | | | | |
TOTAL OPERATING EXPENSES | | $ | 25,386 | | | $ | 19,451 | | | $ | 63,436 | | | $ | 67,352 | |
| | | | | | | | | | | | | | | | |
GAIN (LOSS) FROM OPERATIONS | | $ | (5,924 | ) | | $ | (4,186 | ) | | $ | 5,327 | | | $ | (18,661 | ) |
| | | | |
OTHER INCOME (EXPENSE) | | | | | | | | | | | | | | | | |
Interest Income | | | 12 | | | | 4 | | | | 68 | | | | 7 | |
Interest Expense | | | (310 | ) | | | (221 | ) | | | (1,071 | ) | | | (833 | ) |
Gain (Loss) on Derivatives, net | | | (3,985 | ) | | | (3,060 | ) | | | 6,055 | | | | (7,913 | ) |
Other Expense | | | (153 | ) | | | (132 | ) | | | (321 | ) | | | (161 | ) |
Loss on Equity Method Investments | | | (158 | ) | | | — | | | | (200 | ) | | | (9 | ) |
| | | | | | | | | | | | | | | | |
TOTAL OTHER INCOME (EXPENSE) | | $ | (4,594 | ) | | $ | (3,409 | ) | | $ | 4,531 | | | $ | (8,909 | ) |
| | | | |
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX | | | (10,518 | ) | | | (7,595 | ) | | | 9,858 | | | | (27,570 | ) |
Income Tax Benefit (Expense) | | | 3,959 | | | | 2,998 | | | | (4,075 | ) | | | 11,002 | |
| | | | | | | | | | | | | | | | |
INCOME (LOSS) FROM CONTINUING OPERATIONS | | $ | (6,559 | ) | | $ | (4,597 | ) | | $ | 5,783 | | | $ | (16,568 | ) |
Income from Discontinued Operations, Net of Income Taxes | | | — | | | | — | | | | — | | | | 323 | |
| | | | | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | (6,559 | ) | | $ | (4,597 | ) | | $ | 5,783 | | | $ | (16,245 | ) |
Net Loss Attributable to Noncontrolling Interests | | | (45 | ) | | | (12 | ) | | | (253 | ) | | | (12 | ) |
| | | | | | | | | | | | | | | | |
NET INCOME (LOSS) ATTRIBUTABLE TO REX ENERGY | | $ | (6,514 | ) | | $ | (4,585 | ) | | $ | 6,036 | | | $ | (16,233 | ) |
| | | | | | | | | | | | | | | | |
Earnings per common share–basic and diluted: | | | | | | | | | | | | | | | | |
Basic—income (loss) from continuing operations attributable to Rex common stockholders | | $ | (0.15 | ) | | $ | (0.12 | ) | | $ | 0.14 | | | $ | (0.45 | ) |
Basic—income from discontinued operations attributable to Rex common stockholders | | | — | | | | — | | | | — | | | | 0.01 | |
| | | | | | | | | | | | | | | | |
Basic—income (loss) attributable to Rex common stockholders | | $ | (0.15 | ) | | $ | (0.12 | ) | | $ | 0.14 | | | $ | (0.44 | ) |
Basic—weighted average shares of common stock outstanding | | | 43,447 | | | | 36,818 | | | | 43,558 | | | | 36,806 | |
Diluted—income (loss) from continuing operations attributable to Rex common stockholders | | $ | (0.15 | ) | | $ | (0.12 | ) | | $ | 0.14 | | | $ | (0.45 | ) |
Diluted—income from discontinued operations attributable to Rex common stockholders | | | — | | | | — | | | | — | | | | 0.01 | |
| | | | | | | | | | | | | | | | |
Diluted—income (loss) attributable to Rex common stockholders | | $ | (0.15 | ) | | $ | (0.12 | ) | | $ | 0.14 | | | $ | (0.44 | ) |
Diluted—weighted average shares of common stock outstanding | | | 43,447 | | | | 36,818 | | | | 43,670 | | | | 36,806 | |
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REX ENERGY CORPORATION
CONSOLIDATED OPERATIONAL HIGHLIGHTS
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2010
(Unaudited) | | | 2009 | | | 2010
(Unaudited) | | | 2009 | |
Oil and gas sales (in thousands): | | | | | | | | | | | | | | | | |
Oil sales | | $ | 14,446 | | | $ | 12,848 | | | $ | 52,576 | | | $ | 41,881 | |
Natural gas sales | | | 3,946 | | | | 2,202 | | | | 13,789 | | | | 6,460 | |
Natural gas liquid sales | | | 366 | | | | 158 | | | | 859 | | | | 193 | |
Cash-settled derivatives: | | | | | | | | | | | | | | | | |
Crude oil a | | | (1,532 | ) | | | (1,052 | ) | | | (3,861 | ) | | | 2,626 | |
Natural gas | | | 1,810 | | | | 793 | | | | 4,667 | | | | 3,216 | |
| | | | | | | | | | | | | | | | |
Total oil and gas sales including cash settled derivatives | | $ | 19,036 | | | $ | 14,949 | | | $ | 68,030 | | | $ | 54,376 | |
| | | | |
Production during the period: | | | | | | | | | | | | | | | | |
Oil (Bbls) | | | 177,049 | | | | 177,543 | | | | 691,573 | | | | 720,010 | |
Natural gas (Mcf) | | | 979,512 | | | | 484,090 | | | | 3,088,598 | | | | 1,510,500 | |
Natural gas liquids (Bbls) | | | 8,615 | | | | 5,904 | | | | 25,559 | | | | 7,750 | |
| | | | | | | | | | | | | | | | |
Total (Mcfe)b | | | 2,093,496 | | | | 1,584,772 | | | | 7,391,390 | | | | 5,877,060 | |
| | | | |
Production–average per day: | | | | | | | | | | | | | | | | |
Oil (Bbls) | | | 1,924 | | | | 1,930 | | | | 1,895 | | | | 1,973 | |
Natural gas (Mcf) | | | 10,647 | | | | 5,262 | | | | 8,462 | | | | 4,138 | |
Natural gas liquids (Bbls) | | | 94 | | | | 64 | | | | 70 | | | | 21 | |
| | | | | | | | | | | | | | | | |
Total (Mcfe)b | | | 22,755 | | | | 17,226 | | | | 20,250 | | | | 16,102 | |
| | | | |
Average price per unit: | | | | | | | | | | | | | | | | |
Realized crude oil price per Bbl–as reported | | $ | $81.59 | | | $ | $72.37 | | | $ | $76.02 | | | $ | $58.17 | |
Realized impact from cash settled derivatives per Bbl | | ($ | 8.65 | ) | | ($ | 5.93 | ) | | ($ | 5.58 | ) | | $ | 3.65 | |
| | | | | | | | | | | | | | | | |
Net realized price per Bbl | | $ | $72.94 | | | $ | $66.44 | | | $ | $70.44 | | | $ | $61.82 | |
| | | | |
Realized natural gas price per Mcf–as reported | | $ | $4.03 | | | $ | $4.55 | | | $ | $4.46 | | | $ | $4.28 | |
Realized impact from cash settled derivatives per Mcf | | $ | 1.85 | | | $ | 1.64 | | | $ | 1.51 | | | $ | 2.13 | |
| | | | | | | | | | | | | | | | |
Net realized price per Mcf | | $ | $5.88 | | | $ | $6.19 | | | $ | $5.97 | | | $ | $6.41 | |
| | | | |
Realized natural gas liquids price per Bbl–as reported | | $ | 42.48 | | | $ | 26.76 | | | $ | 33.61 | | | $ | 24.90 | |
Realized impact from cash settled derivatives per Bbl | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net realized price per Bbl | | $ | 42.48 | | | $ | 26.76 | | | $ | 33.61 | | | $ | 24.90 | |
| a | Excludes $4.6 million for the early settlement of certain oil derivatives associated with 2011 redeemed in the first quarter of 2009. |
| b | Natural gas is converted at the rate of one Mcf to one Mcfe. Oil and natural gas liquids are converted at a rate of one Bbl to six Mcfe. |
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REX ENERGY CORPORATION
OIL AND GAS DERIVATIVES – CURRENT HEDGING POSITIONa
| | | | | | | | |
| | | 2011 | | | 2012 | |
Oil Derivatives (Bbl) | | | | | | | | |
Swap Contracts | | | | | | | | |
Volume | | | — | | | | — | |
Price | | | — | | | | — | |
Collar Contracts | | | | | | | | |
Volume | | | 576,000 | | | | 540,000 | |
Ceiling | | $ | 104.69 | | | $ | 112.03 | |
Floor | | $ | 68.54 | | | $ | 67.10 | |
Collar Contracts with Short Puts | | | | | | | | |
Volume | | | — | | | | — | |
Ceiling | | | — | | | | — | |
Floor | | | — | | | | — | |
Short Put | | | — | | | | — | |
Natural Gas Derivatives (Mcf) | | | | | | | | |
Swap Contracts | | | | | | | | |
Volume | | | 1,160,000 | | | | 1,320,000 | |
Price | | $ | 5.04 | | | $ | 5.58 | |
Collar Contracts | | | | | | | | |
Volume | | | 1,320,000 | | | | 1,320,000 | |
Ceiling | | $ | 7.18 | | | $ | 7.07 | |
Floor | | $ | 5.18 | | | $ | 5.09 | |
Put Contracts | | | | | | | | |
Volume | | | 720,000 | | | | — | |
Floor | | | 8.00 | | | | — | |
Put Contracts with Short Puts | | | | | | | | |
Volume | | | 720,000 | | | | — | |
Floor | | | 5.00 | | | | — | |
Short Put | | | 3.68 | | | | — | |
Collar Contracts with Short Puts | | | | | | | | |
Volume | | | 660,000 | | | | 720,000 | |
Ceiling | | | 5.25 | | | | 5.25 | |
Floor | | $ | 4.75 | | | | 4.75 | |
Short Put | | $ | 4.00 | | | | 4.00 | |
| a | Hedging position includes December 31, 2010 position and two additional hedges added in January, 2011. |
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The following table has been added to provide clarification on the components of Gain (Loss) on Derivatives, net under Other Income (Expense) on the Consolidated Statements of Operations for each of the periods presented (in thousands):
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Realized Gains (Losses) from Financial Derivatives: | | | | | | | | | | | | | | | | |
Crude Oil Derivatives | | $ | (1,532 | ) | | $ | (1,052 | ) | | $ | (3,861 | ) | | $ | 7,198 | |
Natural Gas Derivatives | | | 1,810 | | | | 793 | | | | 4,667 | | | | 3,216 | |
Interest Rate Derivatives | | | (123 | ) | | | (203 | ) | | | (711 | ) | | | (769 | ) |
| | | | | | | | | | | | | | | | |
Total Realized Gains (Losses) from Financial Derivatives | | $ | 155 | | | $ | (462 | ) | | $ | 95 | | | $ | 9,645 | |
Unrealized Gains (Losses) from Financial Derivatives: | | | | | | | | | | | | | | | | |
Crude Oil Derivatives | | $ | (2,528 | ) | | $ | (3,344 | ) | | $ | 2,963 | | | $ | (18,445 | ) |
Natural Gas Derivatives | | | (1,784 | ) | | | 592 | | | | 2,286 | | | | 427 | |
Interest Rate Derivatives | | | 172 | | | | 154 | | | | 711 | | | | 460 | |
| | | | | | | | | | | | | | | | |
Total Unrealized Gains (Losses) from Financial Derivatives | | $ | (4,140 | ) | | $ | (2,598 | ) | | $ | 5,960 | | | $ | (17,558 | ) |
| | | | | | | | | | | | | | | | |
Gain (Loss) on Derivatives, net | | $ | (3,985 | ) | | $ | (3,060 | ) | | $ | 6,055 | | | $ | (7,913 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP Financial Measures
EBITDAX
“EBITDAX” means, for any defined period, the sum of net income 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: 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 (without limitation) income from unrealized financial derivatives, added to net income. EBITDAX 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
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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
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Net Income (Loss) From Continuing Operations | | $ | (6,559 | ) | | $ | (4,597 | ) | | $ | 5,783 | | | $ | (16,568 | ) |
Add Back Depletion, Depreciation, Amortization & Accretion | | | 6,595 | | | | 6,782 | | | | 21,806 | | | | 25,205 | |
Add Back (Less) Non-Cash Compensation Expense (Income) | | | (254 | ) | | | 589 | | | | 914 | | | | 1,557 | |
Add Back Interest Expense | | | 310 | | | | 221 | | | | 1,071 | | | | 833 | |
Add Back Impairment Expense | | | 5,296 | | | | 760 | | | | 8,863 | | | | 1,625 | |
Add Back Exploration Expense | | | 2,270 | | | | 876 | | | | 5,242 | | | | 2,080 | |
Less Interest Income | | | (12 | ) | | | (4 | ) | | | (68 | ) | | | (7 | ) |
Add Back Realized Loss on Interest Rate Derivatives | | | 123 | | | | 203 | | | | 710 | | | | 769 | |
Add Back (Less) Loss (Gain) on Disposal of Assets | | | 98 | | | | 10 | | | | (16,395 | ) | | | 427 | |
Add Back (Less) Unrealized Loss (Gain) from Financial Derivatives | | | 4,140 | | | | 2,598 | | | | (5,960 | ) | | | 22,130 | |
Less Proceeds From Early Settlement of Oil Derivatives | | | — | | | | — | | | | — | | | | (4,572 | ) |
Add Back Noncontrolling Interest Share of Net Loss | | | 45 | | | | 12 | | | | 253 | | | | 12 | |
Add Back (Less) Income Tax Expense (Benefit) | | | (3,959 | ) | | | (2,998 | ) | | | 4,075 | | | | (11,002 | ) |
| | | | | | | | | | | | | | | | |
EBITDAX From Continuing Operations | | $ | 8,093 | | | $ | 4,452 | | | $ | 26,294 | | | $ | 22,489 | |
| | | | | | | | | | | | | | | | |
Earnings Comparable with Analyst Estimates
“Earnings Comparable with Analyst Estimates” means, for any period, the sum of net income 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: deferred income taxes, unrealized losses from financial derivatives, non-cash compensation and impairment, minus all gains from unrealized financial derivatives and deferred income tax benefits, added to net income. Earnings Comparable with Analyst Estimates 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
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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 Earnings Comparable with Analyst Estimates 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 Earnings Comparable with Analyst Estimates.
The following table presents a reconciliation of Rex Energy’s net income (loss) from continuing operations to its Earnings Comparable with Analyst Estimates for each of the periods presented ($ in thousands):
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Income (Loss) From Continuing Operations Before Income Taxes, as reported | | $ | (10,518 | ) | | $ | (7,595 | ) | | $ | 9,858 | | | $ | (27,570 | ) |
Add Back (Less) Unrealized Loss (Gain) from Financial Derivatives | | | 4,140 | | | | 2,598 | | | | (5,960 | ) | | | 17,558 | |
Add Back Impairment Expense | | | 5,296 | | | | 760 | | | | 8,863 | | | | 1,625 | |
Add Back (Less) Non-Cash Compensation Expense (Income) | | | (254 | ) | | | 589 | | | | 914 | | | | 1,557 | |
Add Back (Less) Loss (Gain) on Disposal of Assets | | | 98 | | | | 10 | | | | (16,395 | ) | | | 427 | |
Add Back Loss Attributable to Noncontrolling Interests | | | 45 | | | | 12 | | | | 253 | | | | 12 | |
| | | | | | | | | | | | | | | | |
Income (Loss) From Continuing Operations Before Income Taxes, adjusted | | $ | (1,193 | ) | | $ | (3,626 | ) | | $ | (2,467 | ) | | $ | (6,391 | ) |
Less Income Taxes, adjusteda | | | 451 | | | | 1,433 | | | | 993 | | | | 2,554 | |
| | | | | | | | | | | | | | | | |
Net Income (loss) From Continuing Operations Comparable to Analyst Estimates | | $ | (742 | ) | | $ | (2,193 | ) | | $ | (1,474 | ) | | $ | (3,847 | ) |
| | | | | | | | | | | | | | | | |
Basic and Diluted Net Income (loss) Comparable to Analyst Estimates per Shareb | | | (0.02 | ) | | | (0.06 | ) | | | (0.03 | ) | | | (0.10 | ) |
| a | Income tax adjustment represents the effect of our effective tax rate on Loss From Continuing Operations Before Income Taxes, adjusted. |
| b | Basic and diluted weighted average shares outstanding were 43,447 and 43,5588 respectively for fourth quarter and fiscal year end 2010. |
Discontinued Operations
On March 24, 2009, Rex Energy completed the divestiture of its Southwestern Region operations, predominately located in the Permian Basin in Texas and New Mexico. The company received net cash proceeds of approximately $17.3 million, 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 as discontinued operations in the Consolidated Statements of Operations. At March 31, 2009, Rex Energy recorded a loss on sale of assets of approximately $0.4 million in the Consolidated Statement of Operations. Summarized financial information for discontinued operations is set forth below ($ in thousands, except per share data):
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| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Revenues: | | | | | | | | | | | | | | | | |
Oil and Gas Sales | | $ | — | | | $ | — | | | $ | — | | | $ | 193 | |
Other Revenue | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Total Operating Revenue | | | — | | | | — | | | | — | | | | 193 | |
| | | | | | | | | | | | | | | | |
Costs and Expenses: | | | | | | | | | | | | | | | | |
Production and Lease Operating Expense | | | — | | | | — | | | | — | | | | 237 | |
General and Administrative Income | | | — | | | | — | | | | — | | | | (97 | ) |
Gain Loss on Derivatives, net | | | — | | | | — | | | | — | | | | (558 | ) |
| | | | | | | | | | | | | | | | |
Total Costs and Expenses | | | — | | | | — | | | | — | | | | (418 | ) |
| | | | | | | | | | | | | | | | |
Income from Discontinued Operations Before Income Taxes | | | — | | | | — | | | | — | | | | 611 | |
Income Tax Expense | | | — | | | | — | | | | — | | | | (288 | ) |
| | | | | | | | | | | | | | | | |
Income From Discontinued Operations, net of taxes | | $ | — | | | $ | — | | | $ | — | | | $ | 323 | |
| | | | | | | | | | | | | | | | |
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