Rex Energy Corp. is working with financial adviser Perella Weinberg Partners and law firm Jones Day to address almost $750 million of debt, according to sources familiar with the matter. The company has been seeking to improve liquidity amid a prolonged period of depressed commodity prices that has impacted the value of its reserves and crimped the cash flow necessary to fund development.

The State College, Penn.-based exploration and production company said in August that it was pursuing or considering liquidity-improving actions which included debt for debt and debt for equity swaps, joint venture opportunities, asset sales, and restructuring either in- or out of court.

In April, the Appalachia-focused oil and gas company, which sold all of its Illinois Basin assets and operations in 2016, refinanced its previous first-lien credit agreement with a $300 million term loan provided by an Angelo Gordon-led group. The facility, maturing in April 2021 and paying interest of Libor+ 8.75%, consists of a $143.5 million term loan facility and, a $156.5 million delayed draw term loan facility which includes a letter of credit.

The company and Jones Day did not immediately respond to requests for comment on the mandates. Perella Weinberg declined to comment.

Last year the company exchanged $324 million of 2020 notes and $309.1 million 2022 notes into $634 million of new 1%/8% second-lien 2020 notes and 8.4 million of common shares. Jones Day advised the company on the the debt swap and the new term loan refinancing.

The company had $143.5 million of borrowings under its April 2020 term loan at the end of June, with $587.6 million of second-lien senior notes maturing in 2020. It had $7.3 million of 8.875% 2020 notes and $5.4 million 6.25% 2022 notes outstanding.

The second-lien notes have two semi-annual coupon payments due April 1 and Oct. 1 that began Oct. 1 last year. The bonds bear interest of 1% for the first three semi-annual payments, and 8% afterwards.

The company had $12.9 million of cash at the end of June. It burned through about $9.6 million of cash from operations during the second quarter, more than 80% smaller than a year earlier.  

Rex’s capital structure is pictured below:
 

The company’s EBITDAX dropped 37.5% to $12.4 million in the second quarter from a year earlier even as operating revenue soared more than 50% to $47.5 million.

The term loan agreement requires Rex Energy to maintain a maximum net senior secured debt to EBITDAX ratio of 3.25x, a minimum EBITDAX to interest expense of 1x increasing to 1.3x for the quarter ending on and after March 31, 2018, and a minimum PDP coverage ratio of 1.65x.

The company’s net senior secured debt to EBITDAX came in at 2.33x at the end of June. Rex Energy said in August that it expected to be in compliance with all required debt covenants for at least 12 months following the filing of its quarterly filing.

The 1%/8% second-lien 2020 notes traded at 50.125 on Sept. 27, the 8.875% 2020 notes traded at 39 on Sept. 25, and the 6.25% 2022 notes traded at 35 on Sept. 20, according to TRACE.

The company’s stock dropped to a low of $2.14 last month, and fell about 6% to $2.43 Friday as of 11:33 a.m. ET from Thursday’s close.