Rex Energy CEO Discusses Q3 2010 Results - Earnings Call Transcript
Rex Energy Corporation (
)
Q3 2010 Earnings Call
November 2, 2010 10:00 am ET
Executives
Lance Shaner - Chairman, Interim President and CEO
Tom Stabley - Executive Vice President, Chief Financial Officer
Patrick McKinney - Executive Vice President, Chief Operating Officer
Analysts
Ron Mills - Johnson Rice
Jeff Hayden - Rodman & Renshaw
Derrick Whitfield - Canaccord Genuity
Leo Mariani - RBC Capital Markets
Mike Scialla - Stifel Nicolaus
Marshall Carver - Capital One Southcoast
Jack Aydin - KeyBanc Capital Markets
Brian Lively - Tudor, Pickering, Holt & Co
Jason Wangler - Wunderlich Securities
Presentation
Operator
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Rex Energy Corporation Q2 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to your Rex Energy third quarter 2010 conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this is being recorded. I would now like to introduce Mr. Lance P. Shaner, Rex Energy Chairman and Interim President and CEO. Mr. Shaner, you may begin.
Lance Shaner
Thank you, Moderator. Good morning and thank for joining us on our call to discuss financial and operational results from the third quarter 2010. As a reminder, we issued our earnings press release last evening and posted the conference call slides on rexenergy.com.
I'll start the call this morning on slide 3, with some key takeaways from the quarter. First, our production in the third quarter was in line with our guidance and represented an increase of 26% over the third quarter of 2009. Our production during the first nine months of 2010 was also up 23% over the same period in 2009. This is predominantly a result of our team's successful Marcellus Shale drilling operations and is a trend we fully intend on continuing.
Taking a look at our oil and gas revenue, we were up 22% in the third quarter over the same period in 2009 and up 24% in the first nine months 2010 over the nine months of 2009. At the same time, our lease operating expenses were up only 14% and 13% respectively, which demonstrates our continued commitment to improving our per-unit operating expenses as we continue to grow our production and revenue.
As a result, our EBITDAX in the third quarter grew 10% over the same period in 2009 and 35% over the first nine months of 2009. Operational highlights to report include the commissioning of the Sarsen Plant in Butler County, Pennsylvania. The Slavek trust number 3HIP rate of 3.1 of gross million cubic feet per day in Westmoreland County and in Butler County the Shannon number 1H initial flow rate of 2 million gross cubic feet equivalent per day was only 5% of load recovered.
Lastly, I'm extremely pleased to welcome Daniel J Churay into his new role at the company as President and CEO. Dan has served as a director of Rex Energy since 2007 and has 20 years of experience dealing with the oil and gas industry. In addition to his capital markets knowledge Dan has held leadership positions with Fortune 500 companies and for the past eight years has served as executive vice president, general council and secretary of WRC Worldwide Incorporated.
He will spend the next 30 days transitioning out of his current role at WRC and meeting with Rex Energy employees, investors and stakeholders. Dan will begin his full-time service as President and CEO of Rex Energy on December 1, 2010. I'll now turn the call over to Tom Stabley, Executive Vice President and Chief Financial Officer, to review a few of the financial results.
Tom Stabley
Thank you, Lance. I'll begin on slide 4 which provides more detail on our changes in production mix and realized prices for the quarter and year-to-date. Our average daily production during the third quarter 2010 increased for all three of our production mix components. The company's overall third quarter average daily production increased 8% from the second quarter of 2010 to 20.3 million cubic feet equivalent per day, which was in line with our previously issued guidance.
Due to the effect of cash settled derivatives, the company's effective realized price of oil and natural gas decreased 1% in the third quarter compared to the second quarter.
Continuing on slide 5, the total operating revenue, including the effects of cash settled oil and gas derivatives in the third quarter 2010 increased 8% from the second quarter 2010. Looking at our expenses, there are a few items to review.
Cash G&A expenses were $4.8 million in the quarter, which was slightly higher than our guidance. The increase is primarily due to legal expenses relating to the Sumitomo joint venture. Our gain on sale of assets net of impairment was $14.1 million and also attributed to the gain recognized on the Sumitomo joint venture transaction.
Lastly, we recognized exploration income rather than expense in the third quarter due to reimbursements we received from Sumitomo at the closing for seismic expenses incurred to date in the joint venture areas.
Earnings comparable to analyst estimates were approximately $400,000 or $0.01 per share. Our EBITDAX, a non-GAAP measure decreased 1.7% over the second quarter of 2010 to $5.7 million but on a per share basis remained $0.13 per share.
As you can see on slide 6, we have continued to aggressively hedge our production to protect our future cash flow. In the second quarter we took advantage of a particularly low dip in natural gas prices and bought back the price ceilings on most of our 2010 and 2011 natural gas derivative contracts at a minimal cost. We have since layered in several fixed price swap contracts to increase the volume under contract.
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