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Analyst: Rex is down, but not out

How do you know when a company is on its deathbed? Could it be when its stock prices take an 80 percent hit in the course of a year?

According to the Pittsburgh Business Times, this isn’t the case for Marcellus-centric natural gas driller Rex Energy. Despite the company’s share prices dropping from $21 per share in May 2014 to $3.12 when the stock closed Tuesday, Dallas Salazar, an analyst for Austin-based CapGainr has good news for the company:

“Rex is going to be just fine.”

Salazar, a Seeking Alpha blogger who regularly writes about Rex Energy, went as far as to call the company one of the most “attractive stocks in a stressed industry.”

Rex stock prices are low, but so are other companies’: Consol Energy Inc. is down 50 percent, and Range Resources is down 40 percent since May. Salazar contends that Rex will benefit from its “various options” in the energy market.

Rex Energy officials wouldn’t comment on Salazar’s statements, but it has already sealed a cool $67 million by selling its brine water service company, Water Solutions Holdings. A partnership with ArcLight Capital Partners allowed Rex Energy to cut the construction cost of 32 wells by $60 million.

“They can do a thousand different things to push off bankruptcy,” Salazar wrote. “This isn’t Armageddon.”

Leo Mariani, an RBC Capital Markets analyst who covers Rex echoed Salazar’s optimism for the company.

“I don’t see any risk of bankruptcy or financial distress [at Rex]; this is a company that’s pretty solid,” he said. “Commodities have taken a beating, whether it’s gas, NGLs, or oil. To the extent that we don’t see an increase in those prices over the next few years, it’s going to be a difficult business environment for all of these companies, not just Rex.”

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