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Rex Energy Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2012 12:17PM
Rex Energy Corp. (REXX) filed Quarterly Report for the period ended 2012-03-31. Rex Energy Corp has a market cap of $537 million; its shares were traded at around $11.21 with a P/E ratio of 26.7 and P/S ratio of 4.7.
Highlight of Business Operations:In addition to the drilling carry obligation, we are required to meet drilling commitments, the first of which is to drill three wells to test the Utica Shale formation and complete one of these wells no later than November 15, 2012, for a total estimated commitment of $8.2 million (the Initial Drilling Commitment). Amounts incurred toward the attainment of the drilling commitments are credited towards the drilling carry obligation. Subsequently, we are to commence the drilling of at least three Utica Shale wells by November 15 of each year until the carry obligation has been satisfied, with credits given to additional wells drilled beyond the annual commitment. We currently estimate the commitment for each well drilled and completed for our working interest and that of MFC to be approximately $6.5 million. Upon the fulfillment of the Initial Drilling Commitment, we have until the earlier of (i) six months from the first date of sales and (ii) June 15, 2013 to terminate the agreement. Should we not comply with the drilling commitments or terminate the agreement outside of the aforementioned termination parameters, we would be responsible for payment of the remaining drilling carry obligation at that time.
Operating revenue for the three months ended March 31, 2012 increased 46.2% when compared to the same period in 2011. The increase in revenue was primarily due to higher production relative to the Appalachian Basin where we continue to have drilling success with Marcellus and Utica Shale operations. We increased our producing unconventional well count in the Appalachian Basin by 58.0 gross wells from March 31, 2011 to March 31, 2012, resulting in an increase in production in the region of 210%. Our production in the Illinois Basin was flat when compared to the first quarter of 2011. Aggressive maintenance and repair programs and the success of our tertiary recovery pilot helped offset the natural 4%-6% production decline of our Illinois Basin properties. The effect of increased production on our operating revenue was partially offset by a decline in natural gas prices. The average sales price per Mcf during the three-month period ended March 31, 2012 was $2.74, compared to $4.41 during the comparable period of 2011.
EBITDAX (Non-GAAP) from continuing operations increased approximately $9.9 million to $21.5 million for the three-month period ended March 31, 2012 as compared to the same period in 2011. The increase in EBITDAX can be primarily attributed to higher natural gas production and higher average sales prices for oil, resulting in increased operating revenues. These increases were partially offset by an increase in operating expenses, particularly the retroactive portion of the Pennsylvania Impact Fee. See Non-GAAP Financial Measures for our reconciliation of EBITDAX to net income.
Our general and administrative expenses include fees for well operating services, marketing, non-field level employee compensation and related benefits, office and lease expenses, insurance costs and professional fees, as well as other costs and expenses not directly related to field operations. Our management continually evaluates the level of our general and administrative expenses in relation to our production because these expenses have a direct impact on our profitability. G&A expenses per Mcfe decreased to approximately $0.98 for the three-month period ended March 31, 2012, respectively, as compared to $2.29 for the same period in 2011. As we continue to develop our non-proved properties, we believe this metric will continue to decrease on a per unit basis.
Average realized price received for oil and gas during the first quarter of 2012, after the effect of derivative activities, was $6.39 per Mcfe, a decrease of 33.9%, or $3.27 per Mcfe, from the same quarter in 2011. This decrease was primarily due to a higher percentage of sales of natural gas when compared to our sales mix during the first quarter of 2011 coupled with a decline in the market price for natural gas. The average price for oil and condensate, after the effect of derivative activities, increased 9.1%, or $8.21 per barrel, to $98.07 per barrel. The average price for natural gas, after the effect of derivative activities, decreased 33.5%, or $1.88 per Mcf, to $3.72 per Mcf. Our derivative activities effectively increased net realized price by $0.69 per Mcfe in the first quarter of 2012 and $0.55 per Mcfe in the first quarter of 2011.
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