Rex Energy Corporation is an independent oil and gas company operating in the Illinois Basin the Appalachian Basin and the southwestern region of the United States. The Company pursues a balanced growth strategy of exploiting its sizable inventory of lower-risk developmental drilling locations pursuing its higher-potential exploration drilling and enhanced oil recovery projects and actively seeking to acquire complementary oil and natural gas properties. Rex Energy Corp. has a market cap of $189.8 million; its shares were traded at around $5.15 with and P/S ratio of 2.8.
Highlight of Business Operations:Operating revenue increased 4.7% for the first quarter of 2009 over the same period in 2008. This increase is primarily due to realized gains on derivative activity of approximately $4.6 million, which was due to the early redemption of certain oil hedges relating to production in 2011. Also contributing to the increase in revenue was higher production in the first quarter of 2009 when compared to the first quarter of 2008, an increase of approximately 1.3%, or 3,001 BOE. These increases were partially offset by significantly lower commodity prices when compared to the first quarter of 2008. Average sales price per BOE in the first quarter of 2009 was $37.88 as compared to $85.69 in the first quarter of 2008, a decrease of $47.81 per BOE, or 55.8%.
General and administrative expenses for the first quarter of 2009 increased approximately $545,000, or 17.0%, to $3.8 million from the same period in 2008. These expenses have increased year-over-year primarily due to wages and benefits, which is attributable to an increase in the number of employees when compared to the same period in the prior year. Also contributing to the increase are non-cash compensation expenses, which totaled $475,000 during the first quarter of 2009, an increase of $108,000, or 29.3%, when compared to the first quarter of 2008.
Interest expense, net of interest income, for the three months ended March 31, 2009 was approximately $395,000 as compared to $429,000 for the same period in 2008. The decrease of $34,000 was primarily due to the decrease in the average balance of our long-term debt, lines of credit, and other loans and notes payable.
Net income tax (benefit) decreased by approximately $3.4 million in the first quarter of 2009 to $1.2 million as compared to $4.6 million for the same period in 2008. The decrease was primarily due to the decrease in the loss from continuing operations before taxes. This decrease was partially offset by an increase in the effective tax rate when compared to 2008. The increased effective tax rate can be attributed to state income taxes and the true-up of year-end deferred assets and liabilities.
Net cash provided (used in) by financing activities decreased by approximately $21.0 million, or 191%, from the first three months of 2008 to cash used of $10.0 million in the first three months of 2009. The decrease is due to the net repayment of long-term borrowings during the first quarter of 2009 of approximately $10.0 million compared with net proceeds from long-term borrowings of approximately $11.0 million in the first quarter of 2008.
For the three-month period ended March 31, 2009, the net realized gain on oil and natural gas derivatives was approximately $8.3 million as compared to a net realized loss of approximately $3.3 million for the comparable period in 2008. Included in the net realized gain in 2009 are cash settlements of approximately $4.6 million which resulted from the early settlement of certain oil hedges related to production in 2011. These gains and losses are reported as net realized gain (loss) on derivatives in our Consolidated Statements of Operations.
Read the The complete ReportREXX is in the portfolios of PRIMECAP Management, John Keeley of Keeley Fund Management.