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Cimarex Reports Second Quarter 2017 Results

DENVER, Aug. 8, 2017 /PRNewswire/ -- 

  • Second Quarter Production up 9% sequentially; Oil Production up 11% sequentially
  • Successful Wolfcamp Downspacing test in the Delaware Basin
    • 16 wells per section in Reeves County Upper Wolfcamp
  • E&D Capital unchanged for 2017; Production guidance raised slightly

Cimarex Energy Co. (NYSE: XEC) today reported second quarter 2017 net income of $97.3 million, or $1.02 per share compared to a net loss of $214.4 million, or $2.31 per share, in the same period a year ago.  Second quarter adjusted net income (non-GAAP) was $101.0 million, or $1.06 per share, compared to second quarter 2016 adjusted income (non-GAAP) of $20.9 million, or $0.22 per share1.  Net cash provided by operating activities was $255.3 million in the second quarter of 2017 compared to $132.4 million a year ago.  Adjusted cash flow from operations (non-GAAP) was $278.8 million in the second quarter of 2017 compared to $146.9 million in the second quarter a year ago1

Total company production came in above the high end of our guidance averaging 1,156 million cubic feet equivalent (MMcfe) per day (192.7 thousand barrels oil equivalent (MBoe) per day) during the second quarter.  This was a 19 percent increase over second quarter 2016 and a nine percent increase sequentially.  Oil production averaged 57,871 barrels per day, an 11 percent increase sequentially. 

Commodity prices improved significantly from a year ago and had a positive impact on Cimarex's financial results for the quarter.  Realized oil prices averaged $44.14 per barrel versus $40.07 per barrel in the second quarter of 2016, an increase of 10 percent.  Realized natural gas prices averaged $2.82 per thousand cubic feet (Mcf), up 55 percent from the second quarter 2016 average of $1.82 per Mcf. NGL prices averaged $18.24 per barrel, up 31 percent from the $13.93 per barrel received in the same period one year ago (see table of Average Realized Price by Region below).

Cimarex invested $296 million in exploration and development (E&D) during the second quarter, of which $219 million is attributable to drilling and completion activities.  This brings year-to-date E&D expenditures to $602 million.  Second quarter investments were funded with cash flow from operations and cash on hand.  Total debt at June 30, 2017, consisted of $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $520 million.  Debt was 39 percent of total capitalization2

2017 Outlook

Cimarex is maintaining its estimated full-year exploration and development capital investment of $1.1 – 1.2 billion for 2017.  Estimated capital investment is allocated 62 percent to the Permian and 37 percent to the Mid-Continent.   Daily production for 2017 is estimated to average 1,120 – 1,140 MMcfe (186.7 – 190.0 Mboe), up slightly from previous guidance.  Oil volumes are expected to grow 24-29 percent year-over-year.  Third quarter output is expected to average 1,100 – 1,140 MMcfe (183.3-190.0 Mboe) per day, down slightly from second quarter volumes.  A pick up in well completions late in the third quarter is expected to drive production higher in the fourth quarter.   Oil production is anticipated to grow 30-35 percent in fourth quarter 2017 versus fourth quarter 2016.

Expenses per Mcfe of production for the remainder of 2017 are estimated to be:




Production expense

$0.60 -  0.70


Transportation, processing and other expense

  0.50  -  0.60


DD&A and ARO accretion

  1.05  -  1.15


General and administrative expense

  0.20  -  0.25


Taxes other than income (% of oil and gas revenue)

   4.5  -  5.5%

Operations Update

Cimarex invested $296 million in exploration and development during the second quarter, 53 percent in the Permian Basin and 45 percent in the Mid-Continent.  Cimarex completed 51 gross (18 net) wells during the quarter.  At June 30, 2017, 98 gross (29 net) wells were waiting on completion.  Cimarex is currently operating 14 drilling rigs.

WELLS BROUGHT ON PRODUCTION BY REGION

















For the Three Months Ended



For the Six Months Ended




June 30,



June 30,




2017



2016



2017



2016


Gross wells













Permian Basin


11



13



36



20


Mid-Continent


40



21



85



36




51



34



121



56


Net wells













Permian Basin


10



9



26



12


Mid-Continent


8



5



18



7




18



14



44



19

Permian Region

Production from the Permian Basin averaged 644.7 MMcfe per day in the second quarter, a 27 percent increase from second quarter 2016 and up 12 percent sequentially. Oil volumes represent 43 percent of the region's total production.  Natural gas production increased nine percent and NGL production was up 16 percent, sequentially. 

Of note, Cimarex completed a successful four-well downspacing project testing 16 wells per section in the Upper Wolfcamp.  Located in Reeves County, the Pagoda State project was brought on production in late April.  The four 10,000-foot lateral wells had an average peak 30-day initial production of 1,922 BOE per day of which 956 barrels per day (50 percent) is oil.  Please see our latest presentation (posted at www.cimarex.com) for more detail.

Cimarex brought 11 gross (10 net) wells on production in the Permian region during the second quarter.  There were 27 gross (13 net) wells waiting on completion on June 30.  Cimarex currently operates eight rigs in the Permian region.

Mid-Continent

Production from the Mid-Continent averaged 509 MMcfe per day for the second quarter, up ten percent versus second quarter 2016. Sequentially, crude oil volumes were up eight percent, natural gas production grew four percent and NGL volumes increased seven percent.

During the second quarter, Cimarex completed and brought on production 40 gross (8 net) wells in the Mid-Continent.  At the end of the quarter, 71 gross (16 net) wells were waiting on completion. Cimarex is currently operating six rigs in the region.

In addition to its continued delineation in the Meramec play, the company recently began completion of an increased density pilot in the Woodford formation.  The project consists of eight wells that are testing both 16 and 20 Woodford wells per section.  Results from this test are expected in the second half of 2017 and will help determine well spacing in upcoming Woodford developments.

Production by Region

Cimarex's average daily production and commodity price by region are summarized below:

DAILY PRODUCTION BY REGION
















For the Three Months Ended


For the Six Months Ended





June 30,


June 30,





2017


2016


2017


2016

Permian Basin









Gas (MMcf)

219.8


181.2


210.4


177.4


Oil (Bbls)

45,828


35,338


43,446


35,944


NGL (Bbls)

24,996


19,219


23,319


16,639


Total Equivalent (Mmcfe)


644.7


508.5


611.0


492.9


Total Equivalent (Boe)


107,457


84,757


101,832


82,150












Mid-Continent









Gas (MMcf)

295.4


279.1


290.2


288.7


Oil (Bbls)

11,893


8,933


11,475


9,093


NGL (Bbls)

23,693


21,716


22,926


22,432


Total Equivalent (Mmcfe)


509.0


463.0


496.6


477.9


Total Equivalent (Boe)


84,819


77,166


82,768


79,642












Total Company









Gas (MMcf)

516.7


461.9


502.0


467.4


Oil (Bbls)

57,871


44,424


55,042


45,267


NGL (Bbls)

48,731


40,961


46,281


39,112


Total Equivalent (Mmcfe)


1,156.3


974.2


1,110.0


973.7


Total Equivalent (Boe)

192,719


162,368


184,990


162,279













































AVERAGE REALIZED PRICE BY REGION
















For the Three Months Ended


For the Six Months Ended





June 30,


June 30,





2017


2016


2017


2016

Permian Basin









Gas ($ per Mcf)


2.77


1.88


2.83


1.92


Oil ($ per Bbl)

44.15


40.26


45.94


34.14


NGL ($ per Bbl)


16.65


11.94


17.38


10.25












Mid-Continent









Gas ($ per Mcf)


2.85


1.79


2.97


1.85


Oil ($ per Bbl)

44.10


39.28


45.39


33.07


NGL ($ per Bbl)


19.90


15.70


21.16


13.27












Total Company









Gas ($ per Mcf)


2.82


1.82


2.91


1.87


Oil ($ per Bbl)

44.14


40.07


45.82


33.94


NGL ($ per Bbl)


18.24


13.93


19.26


11.98

Other

The following table summarizes the company's current open hedge positions:




3Q17

4Q17

1Q18

2Q18

3Q18

Gas

PEPL(3)








Volume (MMBtu/d)


129,891

110,000

80,000

50,000

20,000


Wtd Avg Floor


$    2.59

$    2.67

$  2.66

$  2.52

$  2.45


Wtd Avg Ceiling


$    3.09

$    3.10

$  3.08

$  2.94

$  2.65










El Paso Perm(3)








Volume (MMBtu/d)


89,891

80,000

60,000

40,000

20,000


Wtd Avg Floor


$    2.60

$    2.64

$  2.62

$  2.43

$  2.35


Wtd Avg Ceiling


$    3.07

$    3.04

$  3.00

$  2.79

$  2.55









Oil:

WTI(4)








Volume (Bbl/d)


23,978

21,000

16,000

10,000

6,000


Wtd Avg Floor


$  45.86

$  46.29

$ 46.69

$ 46.30

$ 43.83


Wtd Avg Ceiling


$  55.88

$  56.64

$ 57.34

$ 56.27

$ 54.48

Conference call and webcast

Cimarex will host a conference call tomorrow at 11:00 a.m. EDT (9:00 a.m. MDT). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To join the live, interactive call, please dial 866-367-3053 ten minutes before the scheduled start time (callers in Canada dial 855-669-9657 and international callers dial 412-902-4216). 

A replay will be available on the company's website. 

Investor Presentation

For more details on Cimarex's second quarter 2017 results, please refer to the company's investor presentation available at www.cimarex.com.

About Cimarex Energy 

Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production company with principal operations in the Mid-Continent and Permian Basin areas of the U.S.

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the "2017 Outlook" contains projections for certain 2017 operational and financial metrics.  These forward-looking statements are based on management's judgment as of the date of this press release and include certain risks and uncertainties.  Please refer to the company's Annual Report on Form 10-K/A for the year ended December 31, 2016, filed with the SEC, and other filings including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, for a list of certain risk factors that may affect these forward-looking statements.

Actual results may differ materially from company projections and other forward-looking statements and can be affected by a variety of factors outside the control of the company including among other things: oil, NGL and natural gas price levels and volatility; higher than expected costs and expenses, including the availability and cost of services and materials; compliance with environmental and other regulations; risks associated with operating in one major geographic area; environmental liabilities; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; declines in the values of our oil and gas properties resulting in impairments; the potential for production decline rates to be greater than expected; performance of acquired properties and newly drilled wells; costs and availability of third party facilities for gathering, processing, refining and transportation; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions and disposal of produced water; unexpected future capital expenditures; economic and competitive conditions; the availability and cost of capital; the ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested; changes in estimates of proved reserves; derivative and hedging activities; the success of the company's risk management activities; title to properties; litigation; the ability to complete property sales or other transactions; the effectiveness of controls over financial reporting; and other factors discussed in the company's reports filed with the SEC. Cimarex Energy Co. encourages readers to consider the risks and uncertainties associated with projections and other forward-looking statements. In addition, the company assumes no obligation to publicly revise or update any forward-looking statements based on future events or circumstances.

                                                                                                         

1

Adjusted net income and adjusted cash flow from operations are non-GAAP financial measures.  See below for reconciliations of the related GAAP amounts.

2

Debt to total capitalization is calculated by dividing long-term debt ($1.5 billion) by long-term debt ($1.5 billion) plus stockholders' equity ($2.3 billion). 

3

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index and El Paso Perm is El Paso Permian Basin index both as quoted in Platt's Inside FERC.

4

WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

 

RECONCILIATION OF ADJUSTED NET INCOME (LOSS) AND ADJUSTED EARNINGS (LOSS) PER SHARE


The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings (loss) per share (non-GAAP) for the periods indicated.




 

For the Three Months Ended


 

For the Six Months Ended



June 30,


June 30,




2017



2016



2017



2016




(in thousands, except per share data)














Net income (loss)

$

97,262


$

(214,454)


$

228,234


$

(445,913)


Impairment of oil and gas properties




333,291





652,077


Mark-to-market (gain) loss on open derivative positions


(22,166)



37,095



(72,087)



41,735


Loss on early extinguishment of debt


28,169





28,169




Tax impact


(2,257)



(134,983)



16,469



(252,897)

Adjusted net income (loss)

$

101,008


$

20,949


$

200,785


$

(4,998)

Diluted earnings (loss) per share*

$

1.02


$

(2.31)


$

2.40


$

(4.79)

Adjusted diluted earnings (loss) per share*

$

1.06


$

0.22


$

2.11


$

(0.05)














Diluted shares attributable to common stockholders and participating securities


95,179



95,045



95,172



93,075


Adjusted net income (loss) and adjusted diluted earnings (loss) per share excludes the noted items because management believes these items affect the comparability of operating results. The company discloses these non-GAAP financial measures as a useful adjunct to GAAP earnings because:




a) Management uses adjusted net income (loss) to evaluate the company's operating performance between periods and to compare the company's performance to other oil and gas exploration and production companies.















b) Adjusted net income (loss) is more comparable to earnings estimates provided by research analysts.














*

Earnings (loss) per share are based on actual figures rather than the rounded figures presented.

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS


The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net cash provided by operating activities to adjusted cash flows from operations (non-GAAP) for the periods indicated.



 

For the Three Months Ended


 

For the Six Months Ended



June 30,


June 30,




2017



2016



2017



2016




(in thousands)

Net cash provided by operating activities

$

255,286


$

132,381


$

504,800


$

217,786


Change in operating assets and liabilities


23,507



14,483



39,827



10,669

Adjusted cash flow from operations

$

278,793


$

146,864


$

544,627


$

228,455














Management uses the non-GAAP financial measure of adjusted cash flow from operations as a means of measuring our ability to fund our capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of net cash provided by operating activities.  Management believes this non-GAAP financial measure provides useful information to investors for the same reason, and that it is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

 

OIL AND GAS CAPITALIZED EXPENDITURES

















For the Three Months Ended



For the Six Months Ended




June 30,



June 30,




2017



2016



2017



2016




(in thousands)


Acquisitions:













Proved

$

250


$


$

250


$

3,324


Unproved


792





3,825



10,568


Net purchase price adjustments


5



34



10



(2,928)




1,047



34



4,085



10,964















Exploration and development:













Land and seismic


33,302



17,474



110,487



28,636


Exploration and development


262,575



138,686



491,042



285,708




295,877



156,160



601,529



314,344















Sale proceeds:













Proved


(2,000)





(2,000)



(12,500)


Unproved


(2,305)



(16)



(7,271)



(16)


Net purchase price adjustments


43



357



108



(114)




(4,262)



341



(9,163)



(12,630)
















$

292,662


$

156,535


$

596,451


$

312,678

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited)



























For the Three Months Ended



For the Six Months Ended









June 30,



June 30,









2017



2016



2017



2016


























(in thousands, except per share data)



















Revenues:













Oil sales

$

232,453


$

162,005


$

456,519


$

279,578


Gas sales


132,474



76,615



264,419



159,223


NGL sales


80,886



51,939



161,312



85,291


Gas gathering and other, net


10,639



8,314



21,378



15,381









456,452



298,873



903,628



539,473

Costs and expenses:













Impairment of oil and gas properties




333,291





652,077


Depreciation, depletion, amortization, and accretion


108,844



103,836



206,280



216,770


Production


62,578



57,213



124,999



127,915


Transportation, processing, and other operating


58,624



44,436



113,647



90,879


Gas gathering and other


8,647



7,492



17,074



15,572


Taxes other than income


17,477



14,066



38,790



27,905


General and administrative


19,762



21,424



37,796



35,321


Stock compensation


6,293



7,490



12,581



13,018


(Gain) loss on derivative instruments, net


(22,509)



33,236



(66,370)



32,808


Other operating expense, net


266



24



882



114









259,982



622,508



485,679



1,212,379



















Operating income (loss)


196,470



(323,635)



417,949



(672,906)



















Other (income) and expense:













Interest expense 


20,095



20,824



41,147



41,629


Capitalized interest


(5,442)



(5,633)



(12,083)



(10,537)


Loss on early extinguishment of debt


28,169





28,169




Other, net


(2,231)



(2,011)



(4,441)



(3,661)



















Income (loss) before income tax


155,879



(336,815)



365,157



(700,337)

Income tax expense (benefit)


58,617



(122,361)



136,923



(254,424)



















Net income (loss)

$

97,262


$

(214,454)


$

228,234


$

(445,913)



















Earnings (loss) per share to common stockholders:































Basic 

$

1.02


$

(2.31)


$

2.40


$

(4.79)


Diluted

$

1.02


$

(2.31)


$

2.40


$

(4.79)



















Dividends declared per share

$

0.08


$

0.08


$

0.16


$

0.16



















Shares attributable to common stockholders:













Unrestricted common shares outstanding


93,402



93,075



93,396



93,075


Diluted common shares


93,435



93,075



93,431



93,075



















Shares attributable to common stockholders and participating securities:













Basic shares outstanding


95,146



N/A*



95,137



N/A*


Fully diluted shares 


95,179



N/A*



95,172



N/A*



















Comprehensive income (loss):













Net income (loss)

$

97,262


$

(214,454)


$

228,234


$

(445,913)


Other comprehensive income:














Change in fair value of investments, net of tax 


224



195



626



280


Total comprehensive income (loss)

$

97,486


$

(214,259)


$

228,860


$

(445,633)























































*

Due to the net loss in the period ended June 30, 2016, shares of 94,996, which include participating securities, are not considered in the loss per share calculations.

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)
























For the Three Months Ended



For the Six Months Ended







June 30,



June 30,








2017



2016



2017



2016







(in thousands)


















Cash flows from operating activities:













Net income (loss)

$

97,262


$

(214,454)


$

228,234


$

(445,913)


Adjustments to reconcile net income (loss) to net cash














provided by operating activities:















Impairment of oil and gas properties




333,291





652,077




Depreciation, depletion, amortization, and accretion


108,844



103,836



206,280



216,770




Deferred income taxes


58,617



(122,361)



136,929



(254,424)




Stock compensation


6,293



7,490



12,581



13,018




(Gain) loss on derivative instruments, net


(22,509)



33,236



(66,370)



32,808




Settlements on derivative instruments


343



3,859



(5,717)



8,927




Loss on early extinguishment of debt


28,169





28,169






Changes in non-current assets and liabilities


57



685



1,076



2,548




Other, net


1,717



1,282



3,445



2,644


Changes in operating assets and liabilities:















Receivables


(16,483)



(37,474)



(61,145)



(4,327)




Other current assets


(8,139)



5,346



(11,104)



17,328




Accounts payable and other current liabilities


1,115



17,645



32,422



(23,670)






Net cash provided by operating activities


255,286



132,381



504,800



217,786

Cash flows from investing activities:













Oil and gas expenditures


(270,331)



(148,663)



(582,172)



(325,058)


Sales of oil and gas assets


4,262



(341)



9,163



12,630


Sales of other assets


349



136



394



224


Other capital expenditures


(10,127)



(8,297)



(18,209)



(17,774)






Net cash used by investing activities


(275,847)



(157,165)



(590,824)



(329,978)

Cash flows from financing activities:













Borrowings of long-term debt


748,110





748,110




Repayments of long-term debt


(750,000)





(750,000)




Call premium, financing, and underwriting fees


(29,009)





(29,035)



(1)


Dividends paid


(7,576)



(7,551)



(15,153)



(22,655)


Employee withholding taxes paid upon the net














settlement of equity-classified stock awards


(277)



(3,737)



(1,215)



(4,082)


Proceeds from exercise of stock options and other




1,172



36



1,287






Net cash used by financing activities


(38,752)



(10,116)



(47,257)



(25,451)

Net change in cash and cash equivalents


(59,313)



(34,900)



(133,281)



(137,643)

Cash and cash equivalents at beginning of period


578,908



676,639



652,876



779,382

Cash and cash equivalents at end of period

$

519,595


$

641,739


$

519,595


$

641,739

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




June 30,


December 31,


2017


2016

Assets


(in thousands, except share data)

Current assets:







Cash and cash equivalents

$

519,595


$

652,876


Receivables, net of allowance


335,543



274,597


Oil and gas well equipment and supplies


45,486



33,342


Derivative instruments


19,803




Other current assets


7,449



8,489



Total current assets


927,876



969,304

Oil and gas properties at cost, using the full cost method of accounting:







Proved properties


16,769,915



16,225,495


Unproved properties and properties under development,








not being amortized


535,779



478,277





17,305,694



16,703,772


Less – accumulated depreciation, depletion, amortization, and impairment


(14,530,251)



(14,349,505)



Net oil and gas properties


2,775,443



2,354,267

Fixed assets, net of accumulated depreciation


206,114



205,465

Goodwill


620,232



620,232

Derivative instruments


442



Deferred income taxes




55,835

Other assets


32,873



32,621




$

4,562,980


$

4,237,724

Liabilities and Stockholders' Equity






Current liabilities:







Accounts payable

$

87,833


$

74,486


Accrued liabilities


295,347



278,781


Derivative instruments


98



49,370


Revenue payable


142,943



119,715



Total current liabilities


526,221



522,352

Long-term debt:







Principal


1,500,000



1,500,000


Less – unamortized debt issuance costs and discount


(13,903)



(12,061)



Long-term debt, net


1,486,097



1,487,939

Deferred income taxes


48,322



Other liabilities 


190,585



184,444



Total liabilities


2,251,225



2,194,735

Commitments and contingencies






Stockholders' equity:







Preferred stock, $0.01 par value, 15,000,000 shares








authorized, no shares issued





Common stock, $0.01 par value, 200,000,000 shares authorized,








95,341,554 and 95,123,525 shares issued, respectively


953



951


Additional paid-in capital


2,774,597



2,763,452


Retained earnings (accumulated deficit)


(465,366)



(722,359)


Accumulated other comprehensive income


1,571



945



Total stockholders' equity


2,311,755



2,042,989




$

4,562,980


$

4,237,724

 

 

View original content:http://www.prnewswire.com/news-releases/cimarex-reports-second-quarter-2017-results-300501507.html

SOURCE Cimarex Energy Co.

Cimarex Energy Co., Karen Acierno, 303-285-4957, www.cimarex.com

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