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Oil/Gas Downturn Squeezing Rex Energy's Liquidity

In a series of U.S. Securities and Exchange Commission (SEC) filings made since February, Rex Energy Corp. disclosed the toll that the prolonged commodities downturn has had on the company's financial strength.

Late last month, Rex received notice from Nasdaq that it was not in compliance with listing standards because the company's common stock had failed to maintain a minimum closing price of $1/share for 30 consecutive business days. The market gave Rex six months to regain compliance, which would require the company's stock to close at or above the $1 threshold for 10 consecutive business days.

So far, it appears Rex's stock is on track to meet that requirement, trading above $1/share since March 3. The company added that if it failed to regain compliance, it could possibly switch to the Nasdaq Capital Market, the exchange's small cap market.

Meanwhile, the company's $350 million credit facility has been lowered twice since February. Rex entered a restated agreement with a $200 million base last month and completed its semi-annual redetermination earlier this month, which again lowered the credit facility to $190 million, effective April 1.

In the latest SEC filing, Rex said it informed the banks that it could breach its lending agreement by exceeding its debt ratio at the end of this quarter. The company, however, was able to negotiate a waiver with its lenders to avoid such an event at the end of the first quarter.

As of Feb. 1, the company said its debt totaled $835.3 million, including outstanding borrowings under its credit facility of $158 million and another $41 million of undrawn letters of credit. The company is expected to pay any outstanding borrowings in excess of the new credit facility by April 1. Rex had $25.9 million in cash as of Feb. 1 and said it expects to receive another $38.5 million in the first half of this year for its joint ventures with an affiliate of Benefit Street Partners (BSP) LLC and ArcLight Capital Partners LLC.

The company announced the deal with BSP earlier this month (see Shale DailyMarch 2). The JV would help Rex develop wells in Ohio's Utica Shale and Pennsylvania's Marcellus Shale. It entered the ArcLight JV last year (see Shale Daily, March 31, 2015). The agreements would net Rex up to $242 million over time. But it has also given up significant working interest in 90 wells for the payments.

Rex has 190,100 net acres in the Appalachian Basin, where it primarily operates in Western Pennsylvania and Eastern Ohio. It has another 79,700 net acres in the Illinois Basin. Those assets have been idled and are being marketed.

At the end of 3Q2015, CEO Thomas Stabley said the company was "exploring a variety of structural financial instruments" to fund its operations this year (see Shale Daily, Nov. 11, 2015). In February, the company announced an exchange offer for some of its senior notes that has since been extended twice.

The company reported its year-end operational results late Tuesday and did not schedule a conference call with financial analysts to discuss them. Instead, Rex said management would provide an update on those operations and its financial initiatives at the end of the first quarter.

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