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Rex Energy Prices Upsized $325M Senior Notes Due 2022

Nilanjan Choudhury

State College, PA-based Rex Energy Corp. (REXX) announced the pricing of its $325 million aggregate principal amount of 6.25% senior notes due 2022 at a price of 100% of par. The company increased the offering size from the previously announced $250 million principal amount. The closing of the offering is expected to occur on Jul 17, 2014, subject to certain customary conditions.

The energy explorer plans to use the net proceeds from this offering – approximately $318.8 million after the initial purchasers’ discount and estimated offering expenses – to pay back in full the outstanding borrowings under its revolving credit facility as well as for corporate purposes.

Rex Energy, which went public in 2007, is a publicly traded exploration and production company engaged in the acquisition, finding and development of oil and gas properties in the U.S. The company’s operations are concentrated primarily in the liquids-rich acreage of the Appalachian and Illinois regions.

Having done a stellar job at raising volumes and reserves, analysts are predicting strong earnings growth for Rex Energy over the next couple of years. The 2014 Zacks Consensus Estimate is 85 cents, representing 143% earnings per share growth over 2013. Next year’s average forecast is $1.33, corresponding with 56% growth. Moreover, Rex Energy continues to employ a conservative financial policy and a proactive hedging program.

However, as is the case with other exploration and production firms, Rex Energy’s results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company’s revenues, earnings and cash flow.

As a result, Rex Energy currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

However, some better-ranked domestic upstream energy stocks include Swift Energy Co. (SFY), Midstates Petroleum Company Inc. (MPO) and WPX Energy Inc. (WPX). All the firms hold a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on WPX
Read the Full Research Report on REXX
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Read the Full Research Report on SFY

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