Exhibit 99.1
Rex Energy Reports Third Quarter 2014 Operational and Financial Results
| • | Record quarterly production of 169.7 MMcfe/d represents a 72% year-over-year increase over the third quarter of 2013 |
| • | Improved well-level economics in the Butler Operated Area demonstrates continued operational success |
| • | Placed the Reno 1H into sales at an average 5-day sales rate of 10.6 MMcfe/d, the highest rate on a per lateral foot basis of any well drilled in the Butler Operated Area |
| • | Five-well Ferree pad, the second test of stacked Upper Devonian Burkett/Marcellus laterals, produced into sales at an average 5-day rate per well of 8.3 MMcfe/d from an average lateral length of 5,500’ |
| • | Over $480 million of liquidity as of September 30, 2014; pursuing a strategic partner for the development of liquids-rich Moraine East area |
STATE COLLEGE, Pa., November 4, 2014 (GLOBE NEWSWIRE) – Rex Energy Corporation (Nasdaq: REXX) announced its third quarter 2014 operational and financial results.
Third Quarter Financial Results
Operating revenue from continuing operations for the three and nine months ended September 30, 2014 was $86.5 million and $269.2 million, respectively, which represents an increase of 37% and 62% over the same periods in 2013, respectively. Commodity revenues, including settlements from derivatives, were $76.5 million and $223.4 million for the three and nine months ended September 30, 2014, respectively, an increase of 30% and 43%, over the comparable periods of 2013. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 64% and 57% of total commodity revenues for the three and nine months ended September 30, 2014.
Including the effects of cash settled basis differential derivatives, the company’s basis differential for its Appalachian Basin assets averaged approximately ($1.34) off the Henry Hub price of $4.06 for the three months ended September 30, 2014 and approximately ($0.65) off the Henry Hub price of $4.55 for the nine months ended September 30, 2014.
Net income from continuing operations attributable to common shareholders for the three months ended September 30, 2014 was $5.7 million, or $0.11 per basic share. Net income from continuing operations attributable to common shareholders for the nine months ended September 30, 2014 was $22.6 million, or $0.42 per basic share. Adjusted net income, a non-GAAP measure, for the three months ended September 30, 2014 was $1.6 million, or $0.03 per share. Adjusted net income for the nine months ended September 30, 2014 was $21.9 million, or $0.41 per share.
EBITDAX from continuing operations, a non-GAAP measure, was $42.2 million for the third quarter of 2014 and $135.3 million for the nine months ended September 30, 2014. This was an increase of 21% over the third quarter of 2013 and an increase of 44% over the first nine months of 2013. Reconciliations of adjusted net income to GAAP net income and EBITDAX to GAAP net income for the three months and nine months ended September 30, 2014, as well as a discussion of the uses of each measure, are presented in the appendix of this release.
Production Update
Third quarter 2014 production volumes were 169.7 MMcfe/d, an increase of 72% over the third quarter of 2013 and 32% over the second quarter of 2014, consisting of 107.0 MMcf/d of natural gas and 10.4 Mboe/d of oil and NGLs (including 2.6 Mboe/d of ethane). Oil and NGLs (including ethane) accounted for 37% of net production during the third quarter and increased by 61% over the second quarter of 2014.
Including the effects of cash-settled derivatives, realized prices for the three months ended September 30, 2014 were $89.36 per barrel for oil and condensate, $2.81 per Mcf for natural gas, $47.45 per barrel for NGLs (C3+) and $7.76 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended September 30, 2014 were $90.00 per barrel for oil and condensate, $2.53 Mcf for natural gas, $46.49 per barrel for NGLs (C3+) and $7.76 per barrel for ethane.
Including the effects of cash-settled derivatives, realized prices for the nine months ended September 30, 2014 were $91.28 per barrel for oil and condensate, $3.73 per Mcf for natural gas, $49.74 per barrel for NGLs (C3+) and $7.67 per barrel for ethane. Before the effects of hedging, realized prices for the nine months ended September 30, 2014 were $93.28 per barrel for oil and condensate, $3.79 per Mcf for natural gas, $50.74 per barrel for NGLs (C3+) and $7.67 per barrel for ethane.
Third Quarter 2014 Capital Investments
For the third quarter of 2014, the company made operational capital investments of approximately $98.2 million, of which $88.3 million was used to fund Marcellus and Ohio Utica operations and $9.9 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 16.0 gross (11.2 net) wells, fracture stimulation of 13.0 gross (9.1 net) wells, placing 20.0 gross (16.7 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin.
In addition to operational capital investments, the company closed on its previously announced Appalachian Basin acquisition from SWEPI, LP, a Royal Dutch Shell affiliate, for $120.6 million. Investments for leasing and property acquisition were $21.4 million and capitalized interest was $1.9 million for the third quarter of 2014. Capital expenditures by the company’s water service subsidiary, Keystone Clearwater Services, were $3.9 million for the third quarter of 2014.
Well Level Economics / Type Curve Update
The company has updated its well-level economics for the Butler Operated Area. In the Butler Operated Area, the company has adjusted its well-level economics to reflect its increased average lateral length, strong well performance, reduced cycle times and adjustments in expected realized prices. In summary, the rate of return assuming a $4.00 Henry Hub natural gas index price has increased from 26% to 47% in the Butler Operated Area. The updated results, as well as a comparison to the previous results, are included on slide 20 of the company’s updated November corporate presentation. The company’s corporate presentation can be found at www.rexenergy.com
Operational Update
Note: Unless specifically stated otherwise in this operational update, all numbers are gross and all well results assume full ethane recovery.
Appalachian Basin – Butler Operated Area
In the Butler Operated Area, the company drilled 12.0 gross (8.4 net) wells in the third quarter of 2014, with 13.0 gross (9.1 net) wells fracture stimulated and 11.0 gross (7.7 net) wells placed into sales. The company had 9.0 gross (6.3 net) wells drilled and awaiting completion as of September 30, 2014.
During the third quarter of 2014, the company placed the Reno 1H into sales. The Reno 1H was drilled with a lateral length of approximately 4,150 feet and completed in 28 completion stages on a 24/64” choke. The Reno 1H produced at an average 5-day sales rate of approximately 10.6 MMcfe/d with 38% liquids (assuming full ethane recovery). On a per lateral foot basis, the Reno 1H achieved the highest production rate to date of all Rex Energy wells drilled in the company’s Butler Operated Area.
The company placed the five-well Ferree pad, the company’s second test of a stacked Upper Devonian Burkett/Marcellus pad, into sales. The five wells on the pad were drilled with an average lateral length of approximately 5,500 feet and completed in an average of 33 completion stages. The five wells produced at an average 5-day sales rate per well of approximately 8.3 MMcfe/d with 55% liquids (assuming full ethane recovery). Preliminary analysis does not indicate any communication between the Upper Devonian Burkett formation and the Marcellus formation. The company will continue to monitor the effects of the stacked laterals and will provide further data in the future.
Appalachian Basin – Warrior North Prospect – Carroll County, Ohio
In the Warrior North Prospect, the company placed nine gross (9.0 net) wells into service in the third quarter of 2014.
As previously announced, the company placed into sales the six-well Grunder pad and the three-well Jenkins pad. The six-well Grunder pad produced at an average 5-day sales rate per well of approximately 1.2 Mboe/d on a 18/64” choke and went on to produce at an average 30-day sales rate per well of approximately 0.9 Mboe/d, comprised of 1.6 MMcf/d of natural gas, 288 bbls/d of condensate and 331 bbls/d of NGLs (assuming ethane recovery), on a 17/64” choke. The three-well Jenkins pad produced at an average 5-day sales rate per well of approximately 1.6 Mboe/d on a 18/64” choke and went on to produce at an average 30-day sales rate per well of approximately 1.3 Mboe/d, comprised of 2.3 MMcf/d of natural gas, 484 bbls/d of condensate and 463 bbls/d of NGLs (assuming ethane recovery), on a 16/64” choke. Of particular note, the company has continued to conservatively manage the choke size of the six-well Grunder pad and three-well Jenkins pad under a restricted choke program to maximize liquids production.
Appalachian Basin – Warrior South Prospect – Guernsey, Noble & Belmont Counties
In the Warrior South Prospect, the company has finished drilling operations on the six-well J. Hall pad, located in Guernsey County, OH. The six wells were drilled with an average lateral length of approximately 5,400 feet and are testing 650 foot spacing between the laterals on the pad. The six wells are currently undergoing completion operations and are expected to be placed into sales near the end of 2014.
Liquidity Update
During the third quarter of 2014, Rex Energy completed an offering of 1.61 million depository shares, each representing a 1/100th interest in a share of 6.0% convertible perpetual preferred stock, Series A, with a liquidation preference of $10,000 per share (the “Series A Convertible Preferred Stock”). The net proceeds of approximately $155.0 million, after deducting the initial purchasers’ discount and offering expenses, were used to fund the company’s Appalachian Basin acquisition from SWEPI, LP, an affiliate of Royal Dutch Shell plc, and for general corporate purposes (including capital expenditures).
In addition, during the third quarter of 2014, the company increased the borrowing base under its senior secured credit facility by 36% from $293.75 million to $400 million. As of September 30, 2014, the company had $87.6 million of cash and no outstanding borrowings under its revolving credit facility.
The company is continuing to evaluate a number of options to enhance its already strong liquidity position. As previously announced, the company continues to pursue a strategic partner to support the development of the liquids-rich Moraine East acreage acquired during the third quarter of 2014 from SWEPI, LP. The company expects to provide an update on its progress regarding this potential transaction in late 2014 or early 2015. In addition, Rex Energy is continuing to evaluate monetization opportunities for its 60% ownership in Keystone Clearwater Solutions and certain specific non-core assets in the Illinois Basin to provide additional liquidity in order to develop its Appalachian assets.
Fourth Quarter and Full Year 2014 Guidance
Rex Energy is providing its guidance for the third quarter and updating its full year 2014 guidance ($ in millions):
| 4Q2014 | Full Year 2014 | |||
Production | 179.0 - 185.0 MMcfe/d | 150.0 - 152.0 MMcfe/d | ||
Lease Operating Expense | $31.0 - $34.0 | $93.0��- $98.0 | ||
Cash G&A | $9.0 - $10.0 | $35.0 - $38.0 | ||
Operational Capital Expenditures(1) | — | $350.0 - $365.0 |
| (1) | Land acquisition expense, Appalachian Basin acquisition from SWEPI, LP, capitalized interest and Keystone Clearwater Solutions are not included in the operational capital expenditures budget |
Preliminary 2015 Capital Expenditure and Production Growth Plan
The company is announcing its preliminary capital expenditure and production growth plan for 2015. Given current commodity prices, the company expects 2015 capital expenditures to be approximately $325 - $375 million. Assuming this range of capital expenditures, the company expects average daily production in 2015 to grow by approximately 30% - 40% from the midpoint of the company’s 2014 average daily production guidance. The company plans to announce official 2015 guidance in December 2014.
Conference Call Information
Management will host a live conference call and webcast on Wednesday, November 5, 2014 at 10:00 a.m. Eastern to review third quarter financial results and operational highlights. All financial results included in this release or discussed on the conference call are preliminary pending the completion of the review by our independent auditors. The telephone number to access the conference call is (866) 437-1772. Presentation slides containing reference materials for the call and webcast will be available on the company’s website,www.rexenergy.com, under the Investor Relations tab. The replay of the event and reference materials will be available on the company’s website through December 5, 2014.
About Rex Energy Corporation
Rex Energy is headquartered in State College, Pennsylvania and is an independent oil and gas exploration and production company operating in the Appalachian Basin 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 Marcellus, Upper Devonian, and Utica shale development plans; drilling and completion schedules; anticipated fracture stimulation activities; expected dates for placement of wells into sales; plans for testing spacing, pad designs, and other aspects of our resource potential, and timing and availability of test results; and current plans for strategic initiatives 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; |
| • | 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; |
| • | 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; 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.
* * * * *
For more information, please contact:
Mark Aydin
Manager, Investor Relations
(814) 278-7249
maydin@rexenergy.com
REX ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands, Except Share and Per Share Data)
| September 30, 2014 (Unaudited) | December 31, 2013 | |||||||
| ASSETS | ||||||||
Current Assets | ||||||||
Cash and Cash Equivalents | $ | 87,622 | $ | 1,900 | ||||
Accounts Receivable | 53,393 | 38,863 | ||||||
Taxes Receivable | 504 | 5,189 | ||||||
Short-Term Derivative Instruments | 7,257 | 5,668 | ||||||
Current Deferred Tax Asset | 2,837 | 3,451 | ||||||
Inventory, Prepaid Expenses and Other | 3,245 | 2,207 | ||||||
|
|
|
| |||||
Total Current Assets | 154,858 | 57,278 | ||||||
Property and Equipment (Successful Efforts Method) | ||||||||
Evaluated Oil and Gas Properties | 1,012,467 | 749,680 | ||||||
Unevaluated Oil and Gas Properties | 334,461 | 189,385 | ||||||
Other Property and Equipment | 83,645 | 70,115 | ||||||
Wells and Facilities in Progress | 116,979 | 76,545 | ||||||
Pipelines | 15,875 | 7,678 | ||||||
|
|
|
| |||||
Total Property and Equipment | 1,563,427 | 1,093,403 | ||||||
Less: Accumulated Depreciation, Depletion and Amortization | (255,471 | ) | (190,521 | ) | ||||
|
|
|
| |||||
Net Property and Equipment | 1,307,956 | 902,882 | ||||||
Deferred Financing Costs and Other Assets - Net | 17,586 | 11,993 | ||||||
Equity Method Investments | 18,098 | 18,708 | ||||||
Long-Term Derivative Instruments | 430 | 535 | ||||||
|
|
|
| |||||
Total Assets | $ | 1,498,928 | $ | 991,396 | ||||
|
|
|
| |||||
| LIABILITIES AND EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts Payable | $ | 56,569 | $ | 31,103 | ||||
Current Maturities of Long-Term Debt | 8,248 | 6,743 | ||||||
Accrued Liabilities | 70,835 | 54,450 | ||||||
Short-Term Derivative Instruments | 1,321 | 4,663 | ||||||
|
|
|
| |||||
Total Current Liabilities | 136,973 | 96,959 | ||||||
8.875% Notes Due 2020 | 350,000 | 350,000 | ||||||
6.25% Senior Notes Due 2022 | 325,000 | — | ||||||
Premium on Senior Notes, Net | 2,816 | 3,078 | ||||||
Senior Secured Line of Credit and Long-Term Debt | 6,385 | 62,191 | ||||||
Long-Term Derivative Instruments | 945 | 1,765 | ||||||
Long-Term Deferred Tax Liability | 43,414 | 29,446 | ||||||
Other Deposits and Liabilities | 4,303 | 4,992 | ||||||
Future Abandonment Cost | 27,434 | 26,040 | ||||||
|
|
|
| |||||
Total Liabilities | $ | 897,270 | $ | 574,471 | ||||
Stockholders’ Equity | ||||||||
Preferred Stock, $.001 par value per share, 100,000 shares authorized and 16,100 issued and outstanding on September 30, 2014 and 0 shares issued outstanding on December 31, 2013 | $ | 1 | $ | — | ||||
Common Stock, $.001 par value per share, 100,000,000 shares authorized and 54,116,652 shares issued and outstanding on September 30, 2014 and 54,186,490 shares issued and outstanding on December 31, 2013 | 54 | 54 | ||||||
Additional Paid-In Capital | 616,384 | 456,554 | ||||||
Accumulated Deficit | (19,083 | ) | (41,725 | ) | ||||
|
|
|
| |||||
Rex Energy Stockholders’ Equity | 597,356 | 414,883 | ||||||
Noncontrolling Interests | 4,302 | 2,042 | ||||||
|
|
|
| |||||
Total Stockholders’ Equity | 601,658 | 416,925 | ||||||
|
|
|
| |||||
Total Liabilities and Owners’ Equity | $ | 1,498,928 | $ | 991,396 | ||||
|
|
|
| |||||
REX ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands, Except per Share Data)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
OPERATING REVENUE | ||||||||||||||||
Oil, Natural Gas and NGL Sales | $ | 73,448 | $ | 58,063 | $ | 227,650 | $ | 150,447 | ||||||||
Field Services Revenue | 13,070 | 4,847 | 41,462 | 15,193 | ||||||||||||
Other Revenue | 18 | 64 | 92 | 164 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TOTAL OPERATING REVENUE | 86,536 | 62,974 | 269,204 | 165,804 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Production and Lease Operating Expense | 27,657 | 17,203 | 69,303 | 43,695 | ||||||||||||
General and Administrative Expense | 10,409 | 8,826 | 30,039 | 24,404 | ||||||||||||
Loss on Disposal of Assets | 84 | 140 | 385 | 1,632 | ||||||||||||
Impairment Expense | 1 | 2,244 | 41 | 2,414 | ||||||||||||
Exploration Expense | 1,462 | 3,242 | 4,890 | 7,511 | ||||||||||||
Depreciation, Depletion, Amortization and Accretion | 27,364 | 16,267 | 69,014 | 40,367 | ||||||||||||
Field Services Operating Expense | 9,547 | 3,652 | 30,912 | 10,354 | ||||||||||||
Other Operating Expense (Income) | (24 | ) | 19 | 3 | 910 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
TOTAL OPERATING EXPENSES | 76,500 | 51,593 | 204,587 | 131,287 | ||||||||||||
INCOME FROM OPERATIONS | 10,036 | 11,381 | 64,617 | 34,517 | ||||||||||||
OTHER EXPENSE | ||||||||||||||||
Interest Expense | (11,080 | ) | (6,181 | ) | (25,718 | ) | (16,013 | ) | ||||||||
Gain (Loss) on Derivatives, Net | 12,316 | (4,624 | ) | 2,315 | (1,423 | ) | ||||||||||
Other Income (Expense) | (12 | ) | (30 | ) | (30 | ) | 2,041 | |||||||||
Loss on Equity Method Investments | (202 | ) | (207 | ) | (610 | ) | (569 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
TOTAL OTHER INCOME (EXPENSE) | 1,022 | (11,042 | ) | (24,043 | ) | (15,964 | ) | |||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX | 11,058 | 339 | 40,574 | 18,553 | ||||||||||||
Income Tax (Expense) Benefit | (4,469 | ) | 1,493 | (14,592 | ) | (5,622 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
INCOME FROM CONTINUING OPERATIONS | 6,589 | 1,832 | 25,982 | 12,931 | ||||||||||||
Income From Discontinued Operations, Net of Income Taxes | — | — | — | 460 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET INCOME | 6,589 | 1,832 | 25,982 | 13,391 | ||||||||||||
Net Income Attributable to Noncontrolling Interests | 895 | 258 | 3,340 | 912 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET INCOME ATTRIBUTABLE TO REX ENERGY | $ | 5,694 | $ | 1,574 | $ | 22,642 | $ | 12,479 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings per common share: | ||||||||||||||||
Basic – Net Income From Continuing Operations Attributable to Rex Energy Common Shareholders | $ | 0.11 | $ | 0.03 | $ | 0.42 | $ | 0.23 | ||||||||
Basic – Net Income From Discontinued Operations Attributable to Rex Energy Common Shareholders | 0.00 | 0.00 | 0.00 | 0.01 | ||||||||||||
Basic – Net Income Attributable to Rex Energy Common Shareholders | $ | 0.11 | $ | 0.03 | $ | 0.42 | $ | 0.24 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Basic – Weighted Average Shares of Common Stock Outstanding | 53,214 | 52,626 | 53,493 | 52,560 | ||||||||||||
Diluted – Net Income From Continuing Operations Attributable to Rex Energy Common Shareholders | $ | 0.10 | $ | 0.03 | $ | 0.41 | $ | 0.23 | ||||||||
Diluted – Net Income From Discontinued Operations Attributable to Rex Energy Common Shareholders | 0.00 | 0.00 | 0.00 | 0.01 | ||||||||||||
Diluted – Net Income Attributable to Rex Energy Common Shareholders | $ | 0.10 | $ | 0.03 | $ | 0.41 | $ | 0.24 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted – Weighted Average Shares of Common Stock Outstanding | 57,991 | 53,293 | 55,254 | 53,124 | ||||||||||||
REX ENERGY CORPORATION
CONSOLIDATED OPERATIONAL HIGHLIGHTS
UNAUDITED
| Three Months Ending | Nine Months Ending | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
Oil, Natural Gas, NGL and Ethane sales (in thousands): | ||||||||||||||||
Oil and condensate sales | $ | 27,547 | $ | 25,843 | $ | 75,407 | $ | 63,629 | ||||||||
Natural gas sales | 24,883 | 21,427 | 97,381 | 61,742 | ||||||||||||
Natural gas liquid sales (C3+) | 19,136 | 10,793 | 52,895 | 25,076 | ||||||||||||
Ethane sales | 1,883 | — | 1,967 | — | ||||||||||||
Cash-settled derivatives: | ||||||||||||||||
Crude oil | (194 | ) | (2,404 | ) | (1,622 | ) | (2,737 | ) | ||||||||
Natural gas | 2,798 | 3,227 | (1,544 | ) | 7,831 | |||||||||||
Natural gas liquids (C3+) | 399 | (82 | ) | (1,044 | ) | 446 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total oil, gas, NGL and Ethane sales including cash settled derivatives | $ | 76,452 | $ | 58,804 | $ | 223,440 | $ | 155,987 | ||||||||
Production during the period: | ||||||||||||||||
Oil and condensate (Bbls) | 306,088 | 252,426 | 808,357 | 664,257 | ||||||||||||
Natural gas (Mcf) | 9,846,693 | 6,169,918 | 25,681,687 | 16,413,517 | ||||||||||||
Natural gas liquids (C3+) (Bbls) | 411,655 | 233,350 | 1,042,378 | 549,559 | ||||||||||||
Ethane (Bbls) | 242,557 | — | 256,505 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total (Mcfe)a | 15,608,493 | 9,084,574 | 38,325,127 | 23,696,413 | ||||||||||||
Production – average per day: | ||||||||||||||||
Oil and condensate (Bbls) | 3,327 | 2,744 | 2,961 | 2,433 | ||||||||||||
Natural gas (Mcf) | 107,029 | 67,064 | 94,072 | 60,123 | ||||||||||||
Natural gas liquids (C3+) (Bbls) | 4,475 | 2,536 | 3,818 | 2,013 | ||||||||||||
Ethane (Bbls) | 2,636 | — | 940 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total (Mcfe)a | 169,658 | 98,745 | 140,385 | 86,799 | ||||||||||||
Average price per unit: | ||||||||||||||||
Realized crude oil price per Bbl – as reported | $ | 90.00 | $ | 102.38 | $ | 93.28 | $ | 95.79 | ||||||||
Realized impact from cash settled derivatives per Bbl | (0.64 | ) | (9.52 | ) | (2.00 | ) | (4.12 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized price per Bbl | $ | 89.36 | $ | 92.86 | $ | 91.28 | $ | 91,67 | ||||||||
Realized natural gas price per Mcf – as reported | $ | 2.53 | $ | 3.47 | $ | 3.79 | $ | 3.76 | ||||||||
Realized impact from cash settled derivatives per Mcf | 0.28 | 0.52 | (0.06 | ) | 0.48 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized price per Mcf | $ | 2.81 | $ | 3.99 | $ | 3.73 | $ | 4.24 | ||||||||
Realized natural gas liquids (C3+) price per Bbl – as reported | $ | 46.49 | $ | 46.25 | $ | 50.74 | $ | 45.63 | ||||||||
Realized impact from cash settled derivatives per Bbl | 0.96 | (0.35 | ) | (1.00 | ) | 0.81 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized price per Bbl | $ | 47.45 | $ | 45.90 | $ | 49.74 | $ | 46.44 | ||||||||
Realized ethane price per Bbl – as reported | $ | 7.76 | $ | — | $ | 7.67 | $ | — | ||||||||
Realized impact from cash settled derivatives per Bbl | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized price per Bbl | $ | 7.76 | $ | — | $ | 7.67 | $ | — | ||||||||
LOE/Mcfe | $ | 1.77 | $ | 1.89 | $ | 1.81 | $ | 1.84 | ||||||||
Cash G&A/Mcfe | $ | 0.57 | $ | 0.82 | $ | 0.67 | $ | 0.87 | ||||||||
| a | 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 10/27/2014
| 2014 | 2015 | |||||||
Oil Derivatives (Bbls) | ||||||||
Swap Contracts | ||||||||
Volume | 90,000 | (1) | 30,000 | (2) | ||||
Price | $ | 97.72 | $ | 95.76 | ||||
Collar Contracts | ||||||||
Volume | 15,000 | — | ||||||
Ceiling | $ | 97.65 | $ | — | ||||
Floor | $ | 90.00 | $ | — | ||||
Collar Contracts with Short Puts | ||||||||
Volume | 90,000 | 120,000 | ||||||
Ceiling | $ | 103.39 | $ | 100.44 | ||||
Floor | $ | 88.98 | $ | 89.06 | ||||
Short Put | $ | 77.92 | $ | 78.75 | ||||
Put / Put Spread Contracts | ||||||||
Volume | 42,000 | 90,000 | ||||||
Floor | $ | 90.00 | $ | 91.67 | ||||
Short Put | $ | 75.00 | $ | 77.18 | ||||
Natural Gas Derivatives (Mcf) | ||||||||
Swap Contracts | ||||||||
Volume | 2,010,000 | (3) | 4,800,000 | (4) | ||||
Price | $ | 4.02 | $ | 4.13 | ||||
Swaption Contracts | ||||||||
Volume | 600,000 | — | ||||||
Price | $ | 4.45 | $ | — | ||||
Collar Contracts | ||||||||
Volume | 450,000 | — | ||||||
Ceiling | $ | 4.43 | $ | — | ||||
Floor | $ | 3.51 | $ | — | ||||
Collar Contracts with Short Puts | ||||||||
Volume | 4,050,000 | 12,900,000 | ||||||
Ceiling | $ | 4.69 | $ | 4.61 | ||||
Floor | $ | 4.19 | $ | 4.16 | ||||
Short Put | $ | 3.55 | $ | 3.63 | ||||
Call Contracts | ||||||||
Volume | 450,000 | 2,400,000 | ||||||
Ceiling | $ | 5.00 | $ | 4.40 | ||||
Natural Gas Liquids (Bbls) | ||||||||
Swap Contracts | ||||||||
Propane (C3) | ||||||||
Volume | 171,000 | 258,000 | ||||||
Price | $ | 45.36 | $ | 44.52 | ||||
Butane (C4) | ||||||||
Volume | 15,000 | — | ||||||
Price | $ | 55.65 | $ | — | ||||
Isobutane (IC4) | ||||||||
Volume | 15,000 | — | ||||||
Price | $ | 56.28 | $ | — | ||||
Natural Gasoline (C5+) | ||||||||
Volume | 60,000 | — | ||||||
Price | $ | 89.46 | $ | — | ||||
Natural Gas Basis (Mcf) | ||||||||
Swap Contracts | ||||||||
Dominion Appalachia | ||||||||
Volume | 1,500,000 | 1,200,000 | ||||||
Price | $ | (0.37 | ) | $ | (0.56 | ) | ||
| (1) | Includes 90,000 Bbls of enhanced swaps |
| (2) | Includes 30,000 Bbls of call-protected swaps |
| (3) | Includes 900,000 Mcf of enhanced swaps |
| (4) | Includes 3,600,000 Mcf of enhanced swaps |
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 ($ in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
Net Income From Continuing Operations | $ | 6,589 | $ | 1,832 | $ | 25,982 | $ | 12,931 | ||||||||
Net Income Attributable to Noncontrolling Interests | (895 | ) | (258 | ) | (3,340 | ) | (912 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income From Continuing Operations Attributable to Rex Energy | $ | 5,694 | $ | 1,574 | $ | 22,642 | $ | 12,019 | ||||||||
(Gain) Loss on Derivatives, Net | (12,316 | ) | 4,624 | (2,315 | ) | 1,423 | ||||||||||
Realized Gain (Loss) on Derivatives | 3,002 | 741 | (3,331 | ) | 5,540 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Add Back (Less) Unrealized (Gain) Loss from Financial Derivatives | (9,314 | ) | 5,365 | (5,646 | ) | 6,963 | ||||||||||
Add Back Depletion, Depreciation, Amortization and Accretion | 27,364 | 16,267 | 69,014 | 40,367 | ||||||||||||
Add Back Non-Cash Compensation Expense | 1,521 | 1,365 | 4,245 | 3,788 | ||||||||||||
Add Back Interest Expense | 11,080 | 6,181 | 25,718 | 16,013 | ||||||||||||
Add Back Impairment Expense | 1 | 2,244 | 41 | 2,414 | ||||||||||||
Add Back Exploration Expenses | 1,462 | 3,242 | 4,890 | 7,511 | ||||||||||||
Add Back (Less) Loss (Gain) on Disposal of Assets(1) | 84 | 140 | 385 | (620 | ) | |||||||||||
Less Non-Cash Portion of Noncontrolling Interests | (410 | ) | (198 | ) | (1,184 | ) | (404 | ) | ||||||||
Add Back (Less) Income Tax Expense (Benefit) | 4,469 | (1,493 | ) | 14,592 | 5,622 | |||||||||||
Add Back Non-Cash Portion of Equity Method Investment | 201 | 195 | 603 | 555 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDAX From Continuing Operations | $ | 42,152 | $ | 34,882 | $ | 135,300 | $ | 94,228 | ||||||||
Income From Discontinued Operations | — | — | — | 460 | ||||||||||||
Add Back Exploration Expenses | — | — | — | 97 | ||||||||||||
Less Gain on Disposal of Assets | — | — | — | (969 | ) | |||||||||||
Add Back Income Tax Expense | — | — | — | 313 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Add EBITDAX From Discontinued Operations | $ | — | $ | — | $ | — | $ | (99 | ) | |||||||
EBITDAX (Non-GAAP) | $ | 42,152 | $ | 34,882 | $ | 135,300 | $ | 94,129 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (1) | Includes gain on sale of Keystone Midstream Services, LLC of approximately $2.3 million for the nine months ended September 30, 2013 |
Adjusted Net Income
“Adjusted Net Income” means, for any period, the sum of net income for the period plus the following expenses, charges or income, in each case, to the extent deducted from or added to net income in the period: unrealized losses from financial derivatives, non-cash compensation expense, dry hole expenses, disposals of assets, impairment and other one-time or non-recurring charges, minus all gains from unrealized financial derivatives, disposal of assets and deferred income tax benefits, added to net income. Adjusted Net Income is used as a financial measure by Rex Energy’s management team and by other users of its financial statements, to analyze its financial performance without regard to non-cash deferred taxes and non-cash unrealized losses or gains from oil and gas derivatives. Adjusted Net Income is not a calculation based on GAAP financial measures and should not be considered as an alternative to net income (loss) in measuring the company’s performance.
Rex Energy reports Adjusted Net Income because it believes that this measure is commonly reported and widely used by investors as an indicator of a company’s operating performance. You should carefully consider the specific items included in the company’s computation of this measure. You are cautioned that Adjusted Net Income as reported by Rex Energy may not be comparable in all instances to that reported by other companies.
To compensate for these limitations, the company believes it is important to consider both net income determined under GAAP and Adjusted Net Income.
The following table presents a reconciliation of Rex Energy’s net income from continuing operations to its adjusted net income for each of the periods presented ($ in thousands):
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
Income From Continuing Operations Before Income Taxes, as reported | $ | 11,058 | $ | 339 | $ | 40,574 | $ | 18,553 | ||||||||
(Gain) Loss on Derivatives, Net | (12,316 | ) | 4,624 | (2,315 | ) | 1,423 | ||||||||||
Realized Gain (Loss) on Derivatives | 3,002 | 741 | (3,331 | ) | 5,540 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Add Back (Less) Unrealized (Gain) Loss from Financial Derivatives | (9,314 | ) | 5,365 | (5,646 | ) | 6,963 | ||||||||||
Add Back Impairment Expense | 1 | 2,244 | 41 | 2,414 | ||||||||||||
Add Back Dry Hole Expense | 159 | — | 311 | 497 | ||||||||||||
Add Back Non-Cash Compensation Expense | 1,521 | 1,365 | 4,245 | 3,788 | ||||||||||||
Add Back (Less) (Gain) Loss on Disposal of Assets(1) | 84 | 140 | 385 | (620 | ) | |||||||||||
Less Income Attributable to Noncontrolling Interests | (895 | ) | (258 | ) | (3,340 | ) | (912 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income Before Income Taxes, adjusted | $ | 2,614 | $ | 9,195 | $ | 36,570 | $ | 30,683 | ||||||||
Less Income Taxes, adjusted(2) | 1,046 | 3,678 | 14,628 | 12,273 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted Net Income | $ | 1,568 | $ | 5,517 | $ | 21,942 | $ | 18,410 | ||||||||
Basic – Adjusted Net Income Per Share | $ | 0.03 | $ | 0.10 | $ | 0.41 | $ | 0.35 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Basic – Weighted Average Shares of Common Stock Outstanding | 53,214 | 52,626 | 53,493 | 52,560 | ||||||||||||
| (1) | Includes gain on sale of Keystone Midstream Services, LLC of approximately $2.3 million for the nine months ended September 30, 2013 |
| (2) | Assumes 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, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
GAAP G&A | $ | 10,409 | $ | 8,826 | $ | 30,039 | $ | 24,404 | ||||||||
Non-Cash Compensation Expense | (1,521 | ) | (1,365 | ) | (4,245 | ) | (3,788 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cash G&A | $ | 8,888 | $ | 7,461 | $ | 25,794 | $ | 20,616 | ||||||||