Rex Energy posts some insightful info

Rex came out with a press release that offered some interested numbers and gave a good feel for the health of the industry and where they're headed in 2014. The link is enclosed but heres some samples from the article:

"Total production in 2013 grew by approx 38% over 2012",

"2014 production from liquids expected to increase by approx 16% as compared to 2013",

"For the full year 2013, realized prices prior to the effects of hedging were $95.12 per barrel for oil and condensate, $3.71 for natural gas and $48.66 per barrel for NGLs."

Heres to an exciting 2014!

http://www.marketwatch.com/story/rex-energy-announces-57-expected-p...

 

 

 

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Permalink Reply by The Hiker on January 15, 2014 at 11:02am

Do landowners share in the increased $ due to hedging programs?   Seems fair that they would....

Permalink Reply by The Hiker on January 15, 2014 at 11:24am

Maybe someone who understands the mechanism of the hedge can comment.   I thought the reason for a hedge was to lock in a sale price.   If the future date comes and the hedged price is lower than the "spot" price, do you consider the difference between the two a "loss"?   I don't.  Like them, I would rather lock in certainty than gamble on the price going up....and I think that's the reason they all hedge their production.   But the question is, how does the landowner get paid?   Market price or hedged price?  

Any experts out there?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 16, 2014 at 3:55am

That's a tremendously complicated set of questions.  The landowner gets paid the sales price and obviously any deductions or market enhancement that is in the lease will alter that.  Hedging involves short selling future production at a set contract price.  On the delivery date the company sells the commodity at the agreed upon price, regardless of the spot market.  So let's say Rex is selling their oil from the Anderson wells to The Hiker Oil Company.  They agree to sell it to you at $95/bbl.  On the delivery date the price is $92/bbl.  You, CEO of The Hiker Oil Company, have effectively "lost" $3/bbl, though it's likely you have your own hedges in place.  The landowner gets paid based on Rex's sale price to you.  This is why CHK got mauled in 2012.  All of their positions were out of hedge and they were subject to the open market.  I've researched a lot of energy companies and Rex has some of the best commodities hedgers I've ever seen.  

Permalink Reply by The Hiker on January 16, 2014 at 12:12pm

Thanks.  That's the only process that makes any sense.  In the example you give, landowners Charles and Dennis would receive their royalties from REX based on the $95/bbl price.   

Looking at Antero's presentations, it appears they also have a pretty good hedging team.  Yes?

Permalink Reply by Charles Randolph on January 15, 2014 at 12:06pm

The commodity markets are open to the public. Why suggest a ride on the coattails of the O&G companies ? You want a piece of the commodity action ? Step up to the plate, Hiker !!

Permalink Reply by The Hiker on January 15, 2014 at 2:07pm

lol...Nah, I'll let the pros do the heavy lifting.   Hedging is deeper into the financial world than I'll ever want to be.    Swaps, derivatives, "basis"... Egads....

I ask again:  What price is used to pay the landowner?

Permalink Reply by Jimmy Wilson on January 16, 2014 at 12:35am

Guys.... the most important take away from the article was the fact that the production from J Anderson spread in sales since June hasn't budged an inch, production still the same unassisted..... so huge ! Little more potential insight into choked condensate window economics... very positive for anyone within that window.

The EUR's on those wells could be much greater than what I had anticipated making the per acre values dramatically higher.

Permalink Reply by The Hiker on January 16, 2014 at 2:51am

Can you give me the link to the Initial Production report for these wells?   The earliest mention of the J. Anderson wells that I've found is in the Q2 Aug 6 news release.   It says the wells have been completed and the rig has moved off the pad, but no IP's.  I can't find any reports of production in June.   I'm sure I've missed it.  Thanks.

http://www.marketwatch.com/story/rex-energy-reports-second-quarter-...

Permalink Reply by Jimmy Wilson on January 16, 2014 at 3:26am

I mis- read that Hiker, my bad bud.... I stand corrected... August.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 16, 2014 at 3:46am

The numbers didn't change because the choke was manipulated.  It was initially 18/64 and then it was opened up to 20/64.  Once they have capacity for takeaway--they're running at 54% right now due to MWE being glacially slow--they'll keep opening up the choke and allow for a more consistent flow, which will increase the decline.  

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 16, 2014 at 3:56am

Charles, want to know how to make a small fortune?  Start with a large one and then enter into commodities trading.

Permalink Reply by Charles Randolph on January 16, 2014 at 12:20pm

Which reminds me of the farmer who won the lottery, Marcus. When asked what he was going to do with the vast winnings replied, "I'm going to keep farming until its all gone !! "

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