Stifel Downgrades Rexx As Its Financial Risk Doesn't Warrant A Hold

Courtesy of Benzinga.

• Rex Energy Corporation (NASDAQ: REXX) shares have lost 73 percent year-to-date, and are currently trading close to the lower end of their 52-week range of $1.36 – $8.21.
• Stifel’s Michael S. Scialla downgraded the rating on the company from Hold to Sell, while establishing a price target of $0.75.
• The company does not seem to have sufficient funds to cover interest expenses in 2016, Scialla noted.

The downgrade in rating follows a reduction in the oil and natural gas price forecasts for 4Q15 and 2016, analyst Michael Scialla said. He commented that although Rex Energy’s shares have plummeted over the past 12 months, “the financial risk does not warrant a Hold rating in our view.”

Scialla explained that the company’s liquidity was at $284mn, with $3mn in cash and $281mn available on a $350mn credit facility, at the end of the quarter. The sale of Keystone Clearwater Solutions in 3Q added $71.1mn to this estimate.

Although Rex Energy exited the quarter with enough liquidity to fund a projected $74mn outspend in 2016, the company “will have very little cushion to cover interest expenses next year, by our estimates,” the analyst commented.

“The stock is currently valued at a 23% premium to our small-cap peer group based on EV/2016 EBITDA,” Scialla added.

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