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Rex Energy (REXX) Announces Financial Plans for Two Years

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U.S. oil and gas provider, Rex Energy Corporation  recently declared its 2017–2018 financial and operational plans and also reported its financial update. This two year plan is a clear strategy of the company to drive the production, reduce debt and enhance its cash flow.

The capital budget for both the years will be paid by cash from operations and asset sales. The company plans to reduce its debt /EBITDA ratio by 50% toward the end of 2018 by boosting production along with strengthening basis differentials and price realizations.

Financial and Operational Plan For 2017

The company plans to incur a capital expenditure of around $70–$80 million in 2017, of which 80% will be allocated for the development of the Marcellus and Upper Devonian Burkett shales in the Moraine East and Legacy Butler Operated Areas. The rest 20% will be directed toward the development of the Utica Shale in the Warrior North Area. The company would run a drilling rig in the Butler operated areas and plans to bore 21 wells, complete 26 wells and sell 23 wells.

Average daily production is expected to be around 194–204 million cubic feet equivalent per day (MMcfe/d), depicting 5–10% year-over-year (y-o-y) growth. Liquid production is estimated to account for 38% of the total output.

Rex Energy plans to sell around 50% of natural gas volumes to the gulf coast.

Financial and Operational Plan For 2018

The capital expenditure for 2018 is estimated to be around $20–$40 million, which would be used for the development of the Marcellus and Upper Devonian shales in the Moraine East and Legacy Butler Operated Areas. The company would run a drilling rig in the Butler operated areas and plans to bore four wells, complete six wells and sell nine wells.

Average daily production is expected to be around 223–233 MMcfe/d, indicating 15–20% y-o-y growth. Next year, liquid production will account for 45% of the total output. The company plans to sell around 50% of natural gas volumes to the gulf coast.

Financial Update

Joint development partner of Rex Energy, Benefit Street Partners, has increased its capital commitment by around $16 million for 2017 development program. This allegiance, along with the proceeds from the Warrior South sales, will provide Rex Energy enough liquidity to execute its two-year plan smoothly.

The company has recently included BP Energy Co., which is subsidiary of BP plc (BP - Free Report) in its senior secured credit facility. This tie up is likely to amplify the hedge portfolio of the company.

Zacks Rank & Key Picks

An independent oil and gas finder with assets concentrated  in  the  Appalachian  and  Illinois  basins, Rex Energy currently carries a Zacks Ranks #3 (Hold).The company has significantly outperformed the Zacks categorized Oil and Gas-U.S. Exploration & Production market over the prior three months. During the aforesaid period, Rex Energy shares improved almost 30% while the broader industry gained around 2%.

Better-ranked players in the industryinclude Bellatrix Exploration Ltd. and Global Partners L.P. (GLP - Free Report) . Both these companies sport a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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