Rex Energy Corp. finished the fourth quarter within guidance but saw its production remain flat both sequentially and year/year as it works to finish drilling to hold core acreage in Ohio and Western Pennsylvania ahead of plans for growth over the next two years.
Rex produced 194.9 MMcfe/d in the fourth quarter, up 12% from the year-ago period, but flat when compared to 3Q2016 production of 197.8 MMcfe/d. Liquids accounted for 38% of fourth quarter volumes.The company guided for 194-200 MMcfe/d for the period. Third quarter and fourth quarter volumes declined from 2Q2016 production of 199.1 MMcfe/d.
The company has focused for much of the last year on drilling to hold acreage in its Moraine East and Warrior North areas. Rex acquired its Moraine East assets in a larger 2014 deal with an affiliate of Royal Dutch Shell plc for $120 million. The properties sit to the north of Rex's core legacy acreage in Butler County, PA. CEO Tom Stabley told financial analysts at the end of 3Q2016 that as the company continues to work on gathering infrastructure in the Moraine East there would likely be a break in completion activities in 1Q2017, pushing most turn inlines to the second half of the year.
For full-year 2016, Rex produced 195.3 MMcfe/d, which was flat with 2015 production of 195.8 MMcfe/d. The company divested its Illinois Basin assets late last year. More recently, it sold Utica Shale assets in Southeast Ohio in a deal that closed this month and wouldn't have affected year/year production results in 2016. The company released a plan earlier this month to reduce leverage and increase earnings on production growth and more favorable hedges over the next two years. That plan would also partly rely on more asset sales to generate cash.
Rex's realized prices firmed in the fourth quarter. It began moving half of its natural gas production in Western Pennsylvania to premium markets on the Gulf Coast and in the Midwest in November. That's expected to improve differentials this year and next, but Rex has already started realizing an impact from Gulf Coast exposure with realizations 50 cents below the New York Mercantile Exchange price in November and December. The company's all-in price for the fourth quarter, including hedges, was $2.42/Mcfe, up from the $2.34/Mcfe it realized in 4Q2015.
Rex recently placed into sales its two-well Klever pad in the Moraine East at an average five-day sales rate per well of 10.4 MMcfe/d. The company is also completing the four-well Baird pad in the area, which is expected to be placed into sales at the end of the first quarter. It's finishing drilling the six-well Shields pad there as well. The Shields, Rex said, is expected to be placed into sales in 3Q2017.