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Rex Energy Corp. Reports Operating Results (10-Q)

August 03, 2009 | About:

Rex Energy Corp. (REXX) filed Quarterly Report for the period ended 2009-06-30.

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 $233.3 million; its shares were traded at around $6.33 with and P/S ratio of 3.4.

Highlight of Business Operations:

Operating revenue for the three and six month periods ended June 30, 2009 decreased 55.4% and 55.5%, respectively, when compared to the same periods in 2008. These decreases are primarily due to lower oil and gas prices when compared to 2008. The average sales price per BOE during the three and six month periods ended June 30, 2009 was $48.76 and $43.36, respectively, as compared to $110.31 and $98.14 during the comparable periods of 2008. Partially offsetting the decrease in commodity prices was an increase in total production. Total production for the three and six month periods ended June 30, 2009 increased approximately 0.7% and 1.1%, respectively, when compared to the same periods in 2008.

EBITDAX decreased approximately $4.2 million to $4.1 million for the three-month period ended June 30, 2009 as compared to the same period in 2008. The decrease in EBITDAX can be primarily attributed to lower commodity prices and increased G&A expenses, partially offset by lower production and lease operating expenses. EBITDAX decreased approximately $2.9 million to $12.8 million for the six-month period ended June 30, 2009 as compared to the same period in 2008. The decrease in EBITDAX can be primarily attributed to lower commodity prices and increased G&A expenses, partially offset by lower production and lease operating expenses as well as the early settlement of certain oil derivatives relating to 2011.

Average realized price received for oil and gas during the second quarter of 2009 was $55.30 per BOE, a decrease of 28.3%, or $21.83 per BOE, from the same quarter in 2008. The average price for oil, after the effect of derivative activities, decreased 26.1%, or $21.22 per barrel, to $60.05 per barrel. The average price for natural gas, after the effect of derivative activities, decreased 35.2%, or $3.50 per Mcf, to $6.45 per Mcf. Our derivative activities effectively increased net realized price by $6.54 per BOE in the second quarter of 2009 and decreased net realized prices by $33.18 per BOE in the second quarter of 2008.

DD&A expenses for the three months ended June 30, 2009 increased approximately $1.7 million, or 24.9%, from $4.9 million for the same period in 2008. This increase is primarily attributable to the decrease in our proved reserves as of December 31, 2008. We calculate our depletion on a units-of-production basis, which accelerated in relation to our lower proved reserves base. Also contributing to the increase was the amortization of undeveloped acreage during the second quarter of 2009, which totaled $419,000 compared to $0 in the second quarter of 2008.

Interest expense, net of interest income, for the three months ended June 30, 2009 was approximately $378,000 as compared to $123,000 for the same period in 2008. The increase of $255,000 was primarily due to the decrease in the amount of cash on hand, for which we receive interest income, as well as depressed interest rates when compared to last year. Also contributing to the increase was a higher average balance of long-term debt, lines of credit, and other loans and notes payable.

Net income tax benefit decreased by approximately $20.2 million in the three months ended June 30, 2009 to $5.8 million as compared to $26.1 million for the same period in 2008. The decrease was primarily due to the decrease in the loss from continuing operations before taxes which was primarily attributable to a reduction in the losses incurred on derivatives.

Read the The complete ReportREXX is in the portfolios of PRIMECAP Management.

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