Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Rexx Energy declined as much as 10% today after the company reported a larger than expected loss of ($1.35) per share. However, the company was able to regain most of those losses after investors dug into the numbers and realized much of the loss was associated with a $132 million non-cash asset impairment charge.
Continue Reading Below
So What: Analyst estimates for the quarter had Rexx's quarter coming in at ($0.08) per share, so that big miss was a bit of a sticker shock. However, this is one of those classic cases of Wall Street overreacting without looking deeper into the numbers. If the $132 million asset writedown is accounted for, then the company would have posted a profit for the quarter. The writedown was associated with a small oil posiiton in the Illinois Basin, a position that is becoming a smaller and smaller part of the company's total production portfolio as it focuses on the Marcellus and Utica shales.
Now What: Don't let today's dip fool you into thinking that anything drastic has changed at Rexx Energy. Asset writedowns like this are going to happen since they are related to oil prices, but that doesn't mean those resources have gone away entirely. There are still some questions about whether the company can become cash flow positive and not rely as much on debt to fund its drilling program, but that has been the story at Rexx for a while and today's news doesn't materially change that, despite Wall Street sending its shares on a ride today.
The article Why Shares of Rexx Energy Hit The Skids for a Moment Today originally appeared on Fool.com.
Tyler Crowe has no position in any stocks mentioned.You can follow him at Fool.com under the handle TMFDirtyBird, onGoogle +,or on Twitter:@TylerCroweFool. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.