Rex Energy Corp. said Wednesday it would continue to hunker down for the remainder of the year and throughout 2016, with a program geared toward protecting its narrowing asset pool by drilling wells on acreage that can be held by production (HBP) after posting quarterly losses.

While oil and natural gas volumes were held back by processing and gathering constraints, increasing by 5% sequentially in the second quarter, the company said its conservative strategy would still likely allow it to grow production by 10-15% year-over-year in 2016.

“The No. 1 focus of the company,” said CEO Tom Stabley, is to HBP acreage in Western Pennsylvania and Eastern Ohio.

Since the end of last year and the slide in prices, Rex has been increasingly narrowing its operations focus. Management said during a second quarter earnings call Wednesday it remains focused on selling 80,800 net acres in the Illinois Basin (see Shale Daily, April 20). It is also actively marketing its Warrior South prospect in Ohio’s Noble, Belmont and Guernsey counties, where it has said there’s little room to grow (see Shale Daily, May 6).

The Illinois Basin, where the company spent $3.9 million last quarter, produces about 1,900 b/d of oil but Rex took a $132.6 million writedown on the assets in the fourth quarter. Impairments continued during the second quarter with a $117.8 million charge for Pennsylvania land in Westmoreland and Clearfield counties. That land and acreage in Centre County, PA, is also up for sale.

If the asset sales are completed, primary operations would be in Carroll County, OH, and Butler County, PA, with unproved reserves in Pennsylvania’s Armstrong, Beaver, Lawrence, Mercer and Venango counties, and Ohio’s Columbiana and Mahoning counties (see Shale Daily, August 13, 2014). A chunk of that acquisition from a unit of Royal Dutch Shell plc, 24,000 net acres in Butler County, PA’s Moraine East area, is to have a one-rig program through 2016, Stabley said. Management added that it would continue to seek other joint venture partners for its remaining assets; it completed one with ArcLight Capital Partners LLC earlier this year in Butler County (see Shale Daily, March 31).

While the company waits for a 400 MMcf/d natural gas gathering system in the Moraine East to be completed and another plant to go online at the Bluestone Processing Facility in Butler County, production is expected to remain flat in the third quarter (see Shale Daily, June 4).

Rex produced 206.8 MMcfe/d in the second quarter, up from 128.8 MMcfe/d in the year-ago period. About 37% of production consisted of oil, condensate and natural gas liquids (NGL), compared with 30% in 2Q2014. Rex produced 196.2 MMcfe/d in 1Q2015.

With next year’s capital budget expected to be $95-145 million and with acreage to protect, Rex plans to drill about 25-30 gross wells in 2016, down from the 50 in 2014 and flat compared to 32 gross wells planned this year. With its processing and gathering constraints, Stabley said the company would likely exit the year with 12-15 wells backlogged that are waiting on completions and sales.

Including hedges, Rex’s realized prices were $56.99/bbl oil, $2.53/Mcf gas and $17.61/bbl NGLs, compared with 2Q2014’s $93.55/bbl oil, $3.84/Mcf gas and $48.66/bbl NGLs.

Revenue declined from a year ago to $45.8 million from $72.9 million and from $54.1 million in the first quarter.

Rex plans to reduce its per-well costs in the Marcellus and Upper Devonian shales from the current level of $5.5 million to $5.2 million by the end of the year on greater efficiencies and lower service costs. Higher price tags could still come in Western Pennsylvania, though, where the company has finished drilling its first Utica Shale well in Lawrence County. The Patterson 2H was drilled to a depth of 6,800 feet, and plans to place the well into sales by the end of this quarter. Chesapeake Energy Corp. and Hilcorp Energy Co. each have wells to the north and south of Rex’s position, where it’s drilling the Patterson on a former Shell pad with existing Utica wells.

“The difference with those wells and when you look at Rex is where we landed the lateral; what we’ve learned over the last several years; the higher sand concentration, and even some other things we’re going to do a little bit different in the completion,” Stabley said. “We really feel like if we can build — and we think we can off the results in that area — then the economics [in Lawrence County] could be similar to what we’re seeing in our core Butler area. From Rex’s perspective, we really wanted to get in and drill this to show what the possibilities are in this area for additional expansion of our dry gas program.”

The company has about 50 MMcf/d of firm capacity in Lawrence County, with better pricing than points farther east in Pennsylvania, Stabley said of the company’s realized prices and how the region could tie-in with efforts to earn more for its oil and gas.

“We are acutely focused on managing our hedge book for 2015. We have over 92% of our [gas] production hedged at an average floor price of $3.55/Mcf,” he said. “For 2016, we currently have 61% of our gas production hedged at $3.45/Mcf. We are actively working to increase this position and fully expect to get that percentage in 2016 similar to what we have in 2015.

The company reported a net loss of $155.2 million (minus $2.87/share) in the second quarter, compared with profits of $8 million (15 cents) in 2Q2014, and a loss of $20.2 million (minus 38 cents) in 1Q2015.