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Sunday, October 10, 2010

Rex Energy Corp

On August 31, Rex Energy Corporation (REXX) announced the following:

“Rex Energy will sell and transfer interests in its Marcellus Shale assets located in the Commonwealth of Pennsylvania, in a transaction valued at approximately $140.4 million. Under the transaction, Sumitomo will pay approximately $88.4 million in cash upon closing and an additional $52.0 million in the form of a drilling carry. “

REXX also presented us with the announcement that its present value of future cash flows before income taxes and asset retirement obligations (PV-10) grew approximately 87% to $357.2 million,.from the December 31, 2009, estimated of $190.5 million.

The market liked the transaction and announcement to the tune of a 10.2% increase in the stock price; also the volume that day was six times REXX average daily volume.

REXX share price kept climbing closing at 13.01 last Friday, which is an additional 15% rise since the August 31 close. In 29 trading days REXX climbed from 10.26 to 13.01, a 27% increase. That makes us wonder if REXX price appreciation is done for now, or if the high volume and price climbing is just the ignition to future gains.

REXX on balance volume climbed above the 50 day ma after August 31.

Since July 19 the SP500 has gained an 8.77%, in the same period energy stocks represented by the XLE Etf climbed 12.62% making energy one of the leading sectors of the market. REXX appreciated 25% since July 19.

What is not to like about REXX ?

The Nasdaq website reports almost 6 million REXX short shares, with a 11 days to cover ratio and a 18% of the float shorted, Big short sellers are very refined, informed and researched people, could they be wrong?

From Feb 2 to Aug 30 REXX short interest went from 3,018,696 to 4,385,470, an increase of more than 1,300,000 shares. In the same lapse the average price of REXX declined from 14 to 10 giving the short sellers great benefits.

But an interesting situation is developing since August 30, REXX short interest continued increasing to a Nasdaq-reported 5,985,076 short interest at Sep 15. At the same time the average price for REXX had gone from 10.90 to 12.70, more than 1 million short sales are losing money as of last Friday.

We will soon know the September 30 short interest, REXX is set to report on November 3, we have until then to speculate.

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From the Dominican Republic - Swing Trader Speculator - Civil Engineer/Project Manager - sternloinaz@gmail.com