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

November 06, 2009 | About:
10qk

10qk

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Rex Energy Corp. (REXX) filed Quarterly Report for the period ended 2009-09-30.

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 $319.8 million; its shares were traded at around $8.68 with and P/S ratio of 4.6.

Highlight of Business Operations:

Operating revenue for the three and nine month periods ended September 30, 2009 decreased 48.4% and 52.8%, respectively, when compared to the same periods in 2008. These decreases are primarily due to lower oil and gas prices and lower oil production when compared to 2008, which was partially offset by an increase in natural gas production. The average sales price per BOE during the three and nine month periods ended September 30, 2009 was $52.69 and $46.58, respectively, as compared to $105.95 and $100.79 during the comparable periods of 2008. Partially offsetting the decrease in commodity prices was an increase in natural gas production. Total production for the three and nine month periods ended September 30, 2009 increased approximately 3.5% and 1.9%, respectively, when compared to the same periods in 2008.

Operating expenses decreased $8.1 million, or 34.5%, for the third quarter of 2009 as compared to the same period in 2008 and decreased $6.6 million, or 12.1%, for the first nine months of 2009 as compared to the same period in 2008. Operating expenses are primarily comprised of: production expenses; G&A expenses; exploration expenses; gains and losses on the disposal of assets; impairment expense; and DD&A expenses. The decrease in operating expenses during the three months ended September 30, 2009 can be primarily attributable to a loss sustained from the sale of our New Albany Shale assets in the Illinois Basin during 2008 of approximately $6.3 million. Also contributing to the decrease in operating expenses were lower production and lease operating expenses, a decrease in G&A expenses and a decrease in exploration expenses. These reductions in operating expenses were partially offset by increases in impairment expense and DD&A. The increase in impairment expense is attributable to the impairment of capitalized costs related to our unproved properties in accordance with FASB ASC 932. The increase in our DD&A expenses can be primarily explained by the downward revision in the estimated lives of our proved reserves at December 31, 2008. We calculate our depletion on a units-of-production basis, which accelerated in relation to our lower proved reserves base. The decrease in operating expenses for the first nine months of 2009 as compared to the same period in 2008 was primarily due to the loss recognized in relation to the sale of our New Albany Shale assets in the Illinois Basin during 2008, which was partially offset by reductions in production and lease operating expenses.

EBITDAX decreased approximately $2.4 million to $5.2 million for the three-month period ended September 30, 2009 as compared to the same period in 2008. The decrease in EBITDAX can be primarily attributed to lower commodity prices, partially offset by lower production and lease operating expenses. EBITDAX decreased approximately $5.3 million to $18.0 million for the nine-month period ended September 30, 2009 as compared to the same period in 2008. The decrease in EBITDAX can be primarily attributed to lower commodity prices, partially offset by lower production and lease operating expenses as well as the early settlement of certain oil derivatives relating to 2011.

Loss on disposal of assets for the three months ended September 30, 2009 was a loss of approximately $17,000 as compared to a loss of $6.3 million for the same period in 2008. During the third quarter of 2008, we sold our New Albany Shale acreage holdings in areas of the Illinois Basin, which resulted in a loss of approximately $6.3 million. We, from time to time, sell or dispose of property and equipment in the normal course of business and recognize a gain or loss based on the price received for those assets compared to the book carrying value at the time of sale or disposal.

Exploration expense of oil and gas properties for the third quarter of 2009 decreased approximately $0.7 million from an expense of $1.1 million for the same period in 2008. These expenses are primarily associated with seismic data acquisitions and related activities, reservoir characterization and geologic modeling activities, and oil and gas lease delay rental payments. Expenses during the third quarter of 2008 were higher than the current quarter primarily due to geological modeling activities associated with our ASP project in the Illinois Basin, as well as seismic data acquisitions and related activities associated with our Marcellus Shale program in the Appalachian Basin.

Interest expense, net of interest income, for the three months ended September 30, 2009 was approximately $0.2 million as compared to $0.1 million for the same period in 2008. The increase of $135,000 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.

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

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