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Ohio Utica Shale

Rex Energy reports on record-high quarterly production

By Bob Downing Published: August 6, 2014

From Rex Energy:

 

  • Record quarterly production of 128.8 MMcfe/d, represents a 50% year-over-year increase
  • Average daily production from oil and NGLs reached a record level of 6.5 MBoe/d, a 5% increase over the first quarter of 2014
  • Year-to-date EBITDAX of $93.1 million, a 57% year-over-year increase
  • Recently completed the five-well Ferree pad, the company's second Upper Devonian Burkett/Marcellus stacked lateral pad
  • Six-well Grunder pad and three-well Jenkins pad in the Warrior North Prospect expected to be placed into sales in August 2014

STATE COLLEGE, Pa., Aug. 5, 2014 (GLOBE NEWSWIRE) -- Rex Energy Corporation (Nasdaq:REXX) announced its second quarter 2014 operational and financial results.

Second Quarter Financial Results

Operating revenues from continuing operations for the three and six months ended June 30, 2014 were $86.0 million and $182.7 million, respectively, which represents an increase of 55% and 78% over the same periods in 2013, respectively. Commodity revenues, including settlements from derivatives, were $70.9 million and $147.0 million for the three and six months ended June 30, 2014, respectively, an increase of 35% and 51%, over the comparable periods of 2013. Commodity revenues from oil and natural gas liquids (NGLs), including settlements from derivatives, represented 56% and 54% of total commodity revenues for the three and six months ended June 30, 2014.

Including the effects of cash-settled basis differential derivatives, the company's basis differential for its Appalachian Basin assets averaged approximately ($0.62) off the Henry Hub price of $4.67 for the three months ended June 30, 2014 and approximately ($0.16) off the Henry Hub price of $4.80 for the six months ended June 30, 2014.

Lease operating expense (LOE) from continuing operations was $21.6 million, or $1.84 per Mcfe for the quarter. For the six months ended June 30, 2014, LOE was approximately $41.6 million, or $1.83 per Mcfe.

Cash general and administrative (G&A) expenses from continuing operations, a non-GAAP measure, were $8.2 million for the three months ended June 30, 2014, which represents a 18% decrease on a per unit basis as compared to the same period in 2013. For the six months ended June 30, 2014, cash G&A expenses from continuing operations were $16.9 million, a 17% decrease on 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 June 30, 2014 was $8.1 million, or $0.15 per basic share. Net income from continuing operations attributable to common shareholders for the six months ended June 30, 2014 was $16.9 million, or $0.32 per basic share. Adjusted net income, a non-GAAP measure, for the three months ended June 30, 2014 was $8.5 million, or $0.16 per share. Adjusted net income for the six months ended June 30, 2014 was $20.3 million, or $0.38 per share.

EBITDAX from continuing operations, a non-GAAP measure, was $44.0 million for the second quarter and $93.1 million for the first six months of 2014. This was an increase of 32% over the second quarter of 2013 and an increase of 57% over the first six months 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 and six months ended June 30, 2014, as well as a discussion of the uses of each measure, are presented in the appendix of this release.

Production Update

Second quarter 2014 production volumes were 128.8 MMcfe/d, an increase of 50% over the second quarter of 2013 and 5% over the first quarter of 2014, consisting of 89.8 MMcf/d of natural gas and 6.5 Mboe/d of oil and NGLs (including ethane). Oil and NGLs (including ethane) accounted for 30% of net production during the second quarter and increased by 5% over the first quarter of 2014.

Including the effects of cash-settled derivatives, realized prices for the three months ended June 30, 2014 were $93.51 per barrel for oil and condensate, $3.84 per Mcf for natural gas, $48.86 per barrel for NGLs (C3+) and $6.00 per barrel for ethane. Before the effects of hedging, realized prices for the three months ended June 30, 2014 were $97.50 per barrel for oil and condensate, $3.96 per Mcf for natural gas, $48.73 per barrel for NGLs (C3+) and $6.00 per barrel for ethane.

Realized prices, including the effects of cash-settled derivatives, for the six months ended June 30, 2014 were $92.45 per barrel for oil and condensate, $4.31 per Mcf for natural gas, $51.23 per barrel for NGLs (C3+) and $6.00 per barrel for ethane. Before the effects of hedging, realized prices for the six months ended June 30, 2014 were $95.29 per barrel for oil and condensate, $4.58 per Mcf for natural gas, $53.52 per barrel for NGLs (C3+) and $6.00 per barrel for ethane.

Second Quarter 2014 Capital Investments

For the second quarter of 2014, the company made operational capital investments of approximately $89.0 million, of which $78.3 million was used to fund Marcellus and Ohio Utica operations and $10.7 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 14.0 gross (10.5 net) wells, fracture stimulation of 13.0 gross (10.9 net) wells, placing 14.0 gross (8.6 net) wells into sales and other projects related to drilling and completing wells in the Appalachian Basin. The Illinois Basin capital investment funded the drilling of one gross (1.0 net) wells, fracture stimulation of nine gross (9.0 net) wells and placing nine gross (9.0 net) wells into sales and other projects related to drilling and completing wells.

In addition to operational and capital investments, investment for leasing and property acquisitions were $20.3 million and capitalized interest was $1.7 million for the second quarter of 2014. Capital expenditures by the company's water service subsidiary, Keystone Clearwater Solutions, were $2.4 million for the second 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

In the Butler Operated Area, the company drilled 11.0 gross (7.7 net) wells in the second quarter of 2014, with three gross (2.1 net) wells fracture stimulated and 10.0 gross (7.0 net) wells placed into sales. The company had 10.0 gross (7.0 net) wells drilled and awaiting completion as of June 30, 2014.

During the second quarter of 2014, the company finished drilling and completion operations on the five-well Ferree pad. The five-well Ferree pad is the first of two planned stacked Upper Devonian Burkett/Marcellus pads in 2014. The five wells were drilled with an average lateral length of approximately 5,500 feet. The company expects to place the five Ferree wells, along with the Reno 1H well, into sales in the third quarter of 2014.

The company has finished drilling and completion operations on the two-well Dorsch pad in the Butler Operated Area. The two wells on the Dorsch pad were drilled to an average lateral length of approximately 5,600 feet and completed in an average of 37 completion stages. The two-well Dorsch pad is expected to be placed into sales in the third quarter of 2014.

 

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

Appalachian Basin - Warrior North Prospect - Carroll County, Ohio

In the Warrior North Prospect, the company drilled two gross (2.0 net) wells in the second quarter, with eight gross (8.0 net) wells fracture stimulated and three gross (3.0 net) wells placed into service.

The company has finished drilling and completion operations on the six-well Grunder pad and the wells are expected to be placed into sales in the third quarter of 2014. The six wells were drilled with an average lateral length of approximately 4,800 feet and completed with an average of 24 completion stages. In addition, the company tested 500 foot spacing between laterals on one of the six wells. The remaining wells were drilled with approximately 600 feet between the laterals. The company expects to place the wells into sales during the August 2014.

The company has also finished drilling and completion operations on the three-well Jenkins pad. The three wells were drilled with an average lateral length of approximately 5,350 feet and completed with an average of 33 completion stages. The wells are expected to be placed into sales in August 2014 following their 60-day resting period.

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

In the Warrior South Prospect, the company is currently drilling the third well of the six-well J. Hall pad, located in Guernsey County, OH. 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 or in early 2015.

 

Ohio Utica Warrior Prospects - Operated Area
    Wells Fracture Wells Placed Into Wells Awaiting
  Wells Drilled Stimulated Sales 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 completed two wells and placed four wells into sales during the second quarter of 2014.

In the company's non-operated Westmoreland, Clearfield and Centre counties, Pennsylvania, the combined gross average production for a recent 5-day period was 61.0 MMcfe/d.

 

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

Water Service Subsidiary

The company's water service subsidiary, Keystone Clearwater Solutions, continues to expands its position as a premier water solutions provider in the Appalachian Basin. For the six months ended June 30, 2014, Keystone Clearwater Solutions generated approximately $38.6 million of revenue and approximately $8.0 million of EBITDAX (before inter-segment eliminations). For the remainder of 2014, Keystone Clearwater Solutions has budgeted approximately $5.0 million in capital expenditures to support its continued growth. Rex Energy holds a 60% membership interest in Keystone Clearwater Solutions.

Liquidity Update

During the third quarter of 2014, Rex Energy completed an offering of $325 million in aggregate principal amount of 6.25% senior notes ("Senior Notes") due 2022 in a private placement. The Senior Notes were issued at an issue price of 100% of the aggregate principal amount of the Senior Notes. The net proceeds of approximately $318.8 million, after deducting the initial purchasers' discount and estimated offering expenses, were used to repay all borrowings outstanding under the company's revolving credit facility. As of June 30, 2014, the company had approximately $6.0 million of cash and $200 million of outstanding borrowings under its revolving credit facility. Currently, the company has no outstanding borrowings under its revolving credit facility.

Third Quarter and Full Year 2014 Guidance

Rex Energy is providing its guidance for the third quarter and updating its full year 2014 guidance ($ in millions):

 

  3Q2014 Full Year 2014
Production 159.0 - 165.0 MMcfe/d 146.0 - 150.0 MMcfe/d
Lease Operating Expense $24.5 - $26.5 $93.0 - $98.0
Cash G&A $8.5 - $10.0 $35.0 - $38.0
Operational Capital Expenditures(1) -- $350.0 - $365.0
(1) Land acquisition expense, capitalized interest and Keystone Clearwater Solutions are not included in the operational capital expenditures budget

Conference Call Information

Management will host a live conference call and webcast on Wednesday, August 6, 2014 at 10:00 a.m. Eastern to review second quarter financial results and operational highlights. All financial results included in this release or discussed on the conference call are preliminary pending the completion of the review by our independent auditors. The telephone number to access the conference call is (866) 437-1772. Presentation slides containing reference materials for the call and webcast will be available on the company's website, www.rexenergy.com, under the Investor Relations tab. The replay of the event and reference materials will be available on the company's website through September 6, 2014.

About Rex Energy Corporation

Rex Energy is headquartered in State College, Pennsylvania and is an independent oil and gas exploration and production company operating in the Appalachian Basin and Illinois Basins within the United States. The company's strategy is to pursue its higher potential exploration drilling prospects while acquiring oil and natural gas properties complementary to its portfolio.

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