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Summary

  • The company managed to beat 2Q consensus on the top and bottom lines.
  • We still have a long-term bull thesis on the company given its tech innovation.
  • We didn’t see the weakness in the recent quarter coming, but note that production is still strong.

Rex Energy (NASDAQ:REXX) managed to post 2Q earnings of $0.16 a share (versus consensus of $0.15) and revenues marginally beat consensus coming in at $86 million. Shares are up 7% over the last month on earnings and increased 2014 production expectations. Rex Energy expects production to up 26% q/q or 64% y/y.

The company posted record quarterly production for 2Q, coming in at 128.8 MMcfe/d -- a 50% y/y increase. Shares are down 26% since we first covered the stock back in August of last year. We are encouraged by the company's technology, as we noted,

Enter the "Super Frac." Rex's new hydraulic fracture design, called "Super Frac" has the ability to expand EUR (estimated ultimate recovery) of each well in their Marcellus play from 5.3 Bcfe to an impressive 9.7 Bcfe. That is an 80% increase in recoverable resources with a meager 25% increase in cost per well ($5.3 million to $6.5 million).

This is still a long-term play. Shares trade at just 20x forward earnings (its PEG ratio is just 0.5).

Source: Update: Rex Energy Earnings