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Ohio Utica Shale

Rex Energy provides updates on Pennsylvania, Ohio drilling

By Bob Downing Published: April 30, 2014

From Rex Energy:

Rex Energy Reports First Quarter 2014 Operational and Financial Results

 

  • Record quarterly production of 122.2 MMcfe/d, exceeds high-end of production guidance by 4%
  • Average daily production from oil and NGLs reached a record level of 6.2 MBoe/d, a 9% increase over the fourth quarter of 2013
  • First quarter EBITDAX reached $49.1 million, highest level in company history and a 21% increase over the fourth quarter of 2013
  • Currently drilling the five-well Ferree pad, the company's second Upper Devonian Burkett/Marcellus stacked lateral pad to date
  • Completed drilling the three-well Shipley pad with an average lateral length of ~ 7,000 feet, longest average lateral length in the Butler Operated Area
  • Increasing lateral lengths in Butler Operated Area; more than 50% of laterals drilled in 2014 expected to exceed 5,000 feet

STATE COLLEGE, Pa., April 29, 2014 (GLOBE NEWSWIRE) -- Rex Energy Corporation (Nasdaq:REXX) today announced its first quarter 2014 operational and financial results.

First Quarter Financial Results

Operating revenues from continuing operations for the three months ended March 31, 2014 were $96.6 million, which represents an increase of 104% over the same period in 2013. Commodity revenues, including settlements from derivatives, were $76.1 million, an increase of 71% over the comparable period in 2013. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 52% of total commodity revenues for the three months ended March 31, 2014.

Lease operating expenses (LOE) from continuing operations were $20.0 million, or $1.82 per Mcfe for the quarter, an 8% decrease on a per unit basis compared to the same period in 2013. Cash general and administrative (G&A) expenses, a non-GAAP measure, were $8.7 million for the three months ended March 31, 2014, which represents an 18% decrease on a per unit basis as compared to the same period in 2013.

Net income from continuing operations attributable to common shareholders for the three months ended March 31, 2014 was $8.9 million, or $0.17 per basic share. Adjusted net income, a non-GAAP measure, for the three months ended March 31, 2014 was $11.9 million, or $0.22 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $49.1 million for the first quarter, an increase of 88% over the first quarter of 2013 and 21% over the fourth quarter of 2013. Reconciliations of cash G&A expenses to GAAP G&A expenses, adjusted net income to GAAP net income, and EBITDAX to GAAP net income for the three months ended March 31, 2014, as well as a discussion of the uses of each measure, are presented in the appendix attached to this release.

Production Update

First quarter 2014 production volumes were 122.2 MMcfe/d, an increase of 11% over the fourth quarter of 2013 and 62% over the first quarter of 2013, consisting of 85.1 MMcf/d of natural gas and 6.2 Mboe/d of oil and NGLs. Oil and NGLs accounted for 30% of net production during the first quarter and increased by 9% over the fourth quarter of 2013. First quarter 2014 production of 122.2 MMcfe/d exceeded the high-end of the company's previously announced guidance range of 115.0 - 118.0 MMcfe/d by 4%.

Including the effects of cash-settled derivatives, realized prices for the three months ended March 31, 2014 were $91.39 per barrel for oil and condensate, $4.79 per Mcf for natural gas and $53.77 per barrel for NGLs. Before the effects of hedging, realized prices for the three months ended March 31, 2014 were $93.07 per barrel for oil and condensate, $5.23 per Mcf for natural gas and $58.64 per barrel for NGLs. During the quarter ended March 31, 2014, the company's natural gas price realizations were positively impacted by strong demand at the company's primary sales locations, which resulted in premium short-term pricing. Contributing to the strong NGL price realizations was the effect of strong propane prices during the first quarter of 2014. Propane price realizations, before the effects of hedging, were $1.37 per gallon, which represents an increase of 15% as compared to the fourth quarter of 2013.

First Quarter 2014 Capital Investments

For the first quarter 2014, the company made operational capital investments of approximately $93.3 million, of which $82.1 million was used to fund Marcellus and Ohio Utica operations and $11.2 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 ten gross (7.9 net) wells, fracture stimulation of 22.0 gross (15.3 net) wells, placing nine gross (6.5 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin. Of the 22.0 gross wells that were completed in the first quarter, the company had 11.0 gross wells resting at the end of the quarter in the Butler Operated Area awaiting commissioning of the Bluestone II facility. The Illinois Basin capital investment funded the drilling of one gross (1.0 net) well, fracture stimulation of 13 gross (13.0 net) wells and placing 13 gross (13.0 net) wells into sales and other projects related to drilling and completing wells.

In addition to operational and capital investments, investments for leasing and property acquisitions were $13.0 million and capitalized interest was $1.7 million for the first quarter of 2014. Investments in the company's water service subsidiary, Keystone Clearwater Solutions, were $2.6 million for the first quarter of 2014.

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, Pennsylvania

In the Butler Operated Area, the company drilled five gross (3.5 net) wells in the first quarter of 2014, with 14.0 gross (9.8 net) wells fracture stimulated and four gross (2.8 net) wells placed into service. The company had two gross (1.4 net) wells drilled and awaiting completion as of March 31, 2014.

The company has completed the three-well Schilling pad and the wells have been shut-in for a 30-day resting period. The three wells were drilled with an average lateral length of approximately 5,800 feet and completed with an average of 29 completion stages. The company expects to place the three-well Schilling pad into sales in the second quarter of 2014.

The company has also completed the drilling of the three-well Shipley pad. The wells were drilled with an average lateral length of approximately 7,000 feet. In addition, the company tested 600 foot spacing between the laterals on this pad. The Shipley pad, in addition to the Baillie Trust pad, is expected to provide additional confirmation of the company's resource potential in its Butler Operated Area.

During the first quarter, the company began drilling operations on the five-well Ferree pad, the first of two planned stacked Upper Devonian Burkett/Marcellus pads in 2014. The company is currently drilling the third of five wells on the pad and expects to complete the drilling of the five wells and begin completion operations in the second quarter of 2014. The second planned test, the six-well Michael pad, will test multiple stacked Upper Devonian Burkett/Marcellus laterals.

As previously announced, the company completed the six-well Baillie Trust pad, the company's first test of vertically stacked Upper Devonian Burkett/Marcellus wells, during the fourth quarter of 2013. The company's continued analysis indicates that, while some transfer of energy occurred between the Upper Devonian Burkett and Marcellus, the production profiles of the wells preliminarily indicate that the Upper Devonian Burkett and Marcellus can be developed as two separate reservoirs. Additionally, production results thus far indicate that 600 foot down spacing has not significantly impacted the production profiles of the wells.

 

Total Operated Area - Butler County, PA
  Wells Drilled Wells Fracture Stimulated Wells Placed Into Sales Wells Awaiting Completion
FY 2014 Forecast 40 - 45 35 - 38 35 - 38 16 - 18

Butler Operated Area - Midstream Capacity

The company expects the Bluestone II facility will be commissioned in mid-May of 2014, adding an incremental 120 MMcf/d of processing capacity in the Butler Operated Area (of which 100 MMcf/d is dedicated to Rex Energy). The company currently expects to place 10 - 15 wells into sales in the second quarter of 2014 in its Butler Operated Area due to the additional processing capacity at the Bluestone II facility.

Appalachian Basin - Warrior North Prospect, Carroll County, Ohio

In the Warrior North Prospect, the company drilled four gross (4.0 net) wells in the first quarter, with four gross (3.9 net) wells fracture stimulated and three gross (2.9 net) wells placed into service. The company had six gross (6.0 net) wells awaiting completion as of March 31, 2014.

The company has completed drilling and completion operations on the six-well Grunder pad, located in Carroll County, Ohio, and is currently resting the wells prior to placing them into sales. The six wells were drilled to an average total measured depth of approximately 12,905 feet with an average lateral length of approximately 4,800 feet. In addition, the company tested 500 foot spacing between laterals on one of the six wells. The remaining wells on the Grunder pad were drilled with approximately 600 feet between the laterals. The six wells are expected to be placed into sales in mid-2014 following their 60-day resting period.

As previously reported, the company placed into sales the three-well Ocel pad during the first quarter. The three wells produced at an average five-day sales rate of 1,472 Boe/d and went on to produce at a 30-day sales rate of 1,128 Boe/d. During the 30-day sales period, the wells produced with an average casing pressure of 1,643 psi on a 22/64 inch choke.

Appalachian Basin - Warrior South Prospect, Guernsey, Noble & Belmont Counties, Ohio

In the Warrior South Prospect, the company expects to begin drilling operations on the six-well J. Hall pad, located in Guernsey County, in the second quarter of 2014. The six-wells on the J. Hall pad are expected to be drilled with an average lateral length of approximately 5,400 feet and are testing approximately 650 foot spacing between the laterals on the pad. The six-well J. Hall pad is expected to be completed in the fourth quarter of 2014 and placed into sales near the end of 2014.

 

Total Operated Area - Ohio Utica Shale
  Wells Drilled Wells Fracture Stimulated Wells Placed Into Sales Wells Awaiting Completion
FY 2014 Forecast 12 18 12 -- 18 0

Appalachian Basin - Westmoreland, Clearfield and Centre Counties, Pennsylvania

In the company's non-operated area in Westmoreland County, Pennsylvania, where WPX Energy (WPX) serves as the operator, WPX drilled one well, completed four wells and placed two wells into sales during the first quarter of 2014. As of March 31, 2014, WPX had two wells awaiting completion. Following the completion of the four-well Gera pad, WPX will have no inventory of wells actively awaiting completion.

In the company's non-operated Westmoreland, Clearfield and Centre counties, Pennsylvania, the combined average production for a recent 5-day period was 56.6 MMcf/d.

 

Total Non-Operated Area - Westmoreland, Clearfield and Centre Counties, PA
  Wells Drilled Wells Fracture Stimulated Wells Placed Into Sales Wells Awaiting Completion
FY 2014 Forecast 1 6 6 0
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