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Cimarex Reports Third Quarter 2017 Results
- Daily Production averaged 1,143 MMcfe (190.5 MBOE)
- 4Q17 oil production expected to grow 32 - 37% from 4Q16 levels
- Full-year 2017 production guidance raised to 1,134 - 1,147 MMcfe; up 5% from original forecast made in February
- 2017 E&D capital expected to be $1.2bn
- Woodford results in Lone Rock area released

DENVER, Nov. 7, 2017 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2017 net income of $91.4 million, or $0.96 per share, compared to a net loss of $10.7 million, or $0.12 per share, in the same period a year ago.  Third quarter adjusted net income (non-GAAP) was $103.6 million, or $1.09 per share, compared to third quarter 2016 adjusted net income (non-GAAP) of $50.3 million, or $0.53 per share.1  Net cash provided by operating activities was $251.0 million in the third quarter of 2017 compared to $223.0 million in the same period a year ago.  Adjusted cash flow from operations (non-GAAP) was $283.9 million in the third quarter of 2017 compared to $181.9 million in the third quarter a year ago1

Cimarex Energy Co. (PRNewsFoto/Cimarex Energy Co.) (PRNewsfoto/Cimarex Energy Co.)

Total company production for the quarter came in slightly above the high end of our forecast, averaging 1,143 million cubic feet equivalent (MMcfe) per day (190.5 thousand barrels of oil equivalent (MBoe) per day).  Oil production averaged 56,687 barrels per day, in line with the company's estimate.  Natural gas production exceeded previous estimates due to timing of completions in our Woodford downspacing pilot.

Realized oil prices averaged $44.38 per barrel versus $40.54 per barrel in the third quarter of 2016.  Realized natural gas prices averaged $2.65 per thousand cubic feet (Mcf) versus the third quarter 2016 average of $2.66 per Mcf.  NGL prices were up 53 percent and averaged $21.63 per barrel from the $14.14 per barrel received in the same period of 2016 (see table of Average Realized Price by Region below).

Cimarex invested $335 million in exploration and development (E&D) during the third quarter, of which $280 million is attributable to drilling and completion activities.  This brings year-to-date E&D expenditures to $937 million.  Third quarter investments were funded with cash flow from operations and cash on hand.  Total debt at September 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 $423 million.  Debt was 38 percent of total capitalization2

2017 Outlook
Fourth quarter 2017 production volumes are expected to average 1,175 - 1,225 MMcfe (195.8 - 204.2 Mboe) per day, up 3 – 7 percent from third quarter volumes, as a result of the increase in well completions late in the third quarter.  Oil production is expected to grow 32 - 37 percent in fourth quarter 2017 versus fourth quarter 2016.  Total daily production volumes for full year 2017 are now estimated to average 1,134 – 1,147 MMcfe (189.0 – 191.2 Mboe), up 18 percent from 2016 levels at the midpoint.  Since giving 2017 production guidance in February, Cimarex has increased its midpoint 2017 daily production forecast by five percent.

Cimarex estimates full-year E&D capital investment will be approximately $1.2 billion, compared to its previous forecast of $1.1 – 1.2 billion.  This capital investment is allocated 61 percent to the Permian and 37 percent to the Mid-Continent.  

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)

   5.0  -  5.5%

Operations Update
Cimarex invested $335 million in E&D during the third quarter, 60 percent in the Permian Basin and 39 percent in the Mid-Continent.  Cimarex completed 77 gross (30 net) wells during the quarter.  At September 30, 131 gross (32 net) wells were waiting on completion.  Cimarex currently is operating 14 drilling rigs.

WELLS COMPLETED BY REGION













For the Three Months Ended



For the Nine Months Ended


September 30,



September 30,


2017



2016



2017



2016

Gross wells











Permian Basin

29



17



65



37

Mid-Continent

48



25



133



61


77



42



198



98

Net wells











Permian Basin

16



10



42



22

Mid-Continent

14



7



32



14


30



17



74



36

Permian Region
Production from the Permian region averaged 628.2 MMcfe per day in the third quarter, a 21 percent increase from third quarter 2016. Oil volumes averaged 43,735 barrels per day and represented 42 percent of the region's total equivalent production.

Cimarex completed 29 gross (16 net) wells in the Permian region during the third quarter.  There were 42 gross (16 net) wells waiting on completion at September 30.  Cimarex currently operates nine rigs in the Permian region.

Mid-Continent
Production from the Mid-Continent averaged 512.7 MMcfe per day for the third quarter, up 20 percent versus third quarter 2016. Sequentially, crude oil volumes were up eight percent.

During the third quarter, Cimarex completed 48 gross (14 net) wells in the Mid-Continent region.  At the end of the quarter, 89 gross (16 net) wells were waiting on completion.  Cimarex currently is operating five rigs in the region.

Of note, Cimarex is announcing drilling results from several Woodford shale wells in its Lone Rock area.  These wells were brought on production over the past several quarters and show some of the best returns the company has seen to date in the Woodford shale.  Cimarex has approximately 16,000 net acres in the Lone Rock area and has completed seven wells in 2017 including the Hines Federal #1H, the company's best well to date in the area.  The Hines had 30-day average peak production of 15.2 MMcfe per day (40% oil, 23% NGL, 37% gas).  Additional drilling, including a downspacing test, is underway.  

Also during the third quarter, Cimarex began producing from eight Woodford shale wells drilled as part of an increased density pilot.  The project tested both 16- and 20-well spacing per section.  Preliminary results show no significant difference in well performance between the two spacing tests, indicating that Woodford wells can be drilled closer together in future infill projects than they have been historically.  More information is available in our most recent corporate presentation, which is available on our website at www.cimarex.com.

 Production by Region

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

DAILY PRODUCTION BY REGION




For the Three Months Ended


For the Nine Months Ended



September 30,


September 30,



2017


2016


2017


2016

Permian Basin









Gas (MMcf)

217.9


178.4


212.9


177.7


Oil (Bbls)

43,735


35,930


43,544


35,939


NGL (Bbls)

24,659


20,549


23,771


17,952


Total Equivalent (Mmcfe)

628.2


517.2


616.8


501.1


Total Equivalent (Boe)

104,703


86,212


102,798


83,508










Mid-Continent









Gas (MMcf)

296.8


266.7


292.4


281.3


Oil (Bbls)

12,846


8,486


11,937


8,889


NGL (Bbls)

23,142


18,194


22,999


21,009


Total Equivalent (Mmcfe)

512.7


426.8


502.1


460.7


Total Equivalent (Boe)

85,451


71,130


83,676


76,784










Total Company









Gas (MMcf)

515.9


446.7


506.7


460.5


Oil (Bbls)

56,687


44,532


55,596


45,020


NGL (Bbls)

47,840


38,786


46,806


39,002


Total Equivalent (Mmcfe)

1,143.1


946.6


1,121.1


964.6


Total Equivalent (Boe)

190,518


157,768


186,858


160,765





































AVERAGE REALIZED PRICE BY REGION












For the Three Months Ended


For the Nine Months Ended



September 30,


September 30,



2017


2016


2017


2016

Permian Basin









Gas ($ per Mcf)

2.70


2.69


2.78


2.18


Oil ($ per Bbl)

44.14


40.65


45.33


36.32


NGL ($ per Bbl)

20.58


12.49


18.50


11.11










Mid-Continent









Gas ($ per Mcf)

2.61


2.63


2.85


2.10


Oil ($ per Bbl)

45.21


40.07


45.33


35.31


NGL ($ per Bbl)

22.75


16.00


21.70


14.07










Total Company









Gas ($ per Mcf)

2.65


2.66


2.82


2.13


Oil ($ per Bbl)

44.38


40.54


45.33


36.13


NGL ($ per Bbl)

21.63


14.14


20.07


12.70

Other

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



4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

Gas Collars:

PEPL(3)









Volume (MMBtu/d)

120,000

120,000

90,000

60,000

30,000

20,000

20,000


Wtd Avg Floor

2.65

2.58

2.48

2.43

2.43

2.40

2.40


Wtd Avg Ceiling

3.07

2.94

2.82

2.66

2.64

2.64

2.64











El Paso Perm(3)









Volume (MMBtu/d)

80,000

80,000

60,000

40,000

20,000

10,000

10,000


Wtd Avg Floor

2.64

2.55

2.40

2.35

2.35

2.30

2.30


Wtd Avg Ceiling

3.04

2.88

2.69

2.52

2.50

2.42

2.42










Oil Collars:

WTI(4)









Volume (Bbl/d)

21,000

28,000

22,000

18,000

12,000

6,000

6,000


Wtd Avg Floor

46.29

47.25

47.23

46.61

48.00

48.00

48.00


Wtd Avg Ceiling

56.64

56.15

55.35

54.55

54.58

55.21

55.21










Oil Basis Swaps:

WTI Midland(5)









Volume (Bbl/d)

5,000

13,000

13,000

13,000

8,000

5,000

5,000


Weighted Avg Differential(6)

0.94

0.72

0.72

0.72

0.58

0.47

0.47










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 third 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 ($2.4 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.



5

Index price on basis swaps is WTI Midland as quoted by Argus Americas Crude.



6

Index price on basis swaps is WTI NYMEX less the weighted average differential shown in table.

 


RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EARNINGS 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 and adjusted earnings per share (non-GAAP) for the periods indicated.





For the Three Months Ended



For the Nine Months Ended




September 30,



September 30,




2017



2016



2017



2016




(in thousands, except per share data)














Net income (loss)

$

91,399


$

(10,673)


$

319,633


$

(456,586)


Impairment of oil and gas properties




105,593





757,670


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


19,085



(8,967)



(53,003)



32,769


Loss on early extinguishment of debt






28,169




Tax impact


(6,851)



(35,612)



9,213



(288,108)

Adjusted net income

$

103,633


$

50,341


$

304,012


$

45,745

Diluted earnings (loss) per share*

$

0.96


$

(0.12)


$

3.36


$

(4.90)

Adjusted diluted earnings per share*

$

1.09


$

0.53


$

3.19


$

0.48














Diluted shares attributable to common stockholders and participating securities













95,320



95,018



95,222



95,018


Adjusted net income and adjusted diluted earnings 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 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 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 Nine Months Ended




September 30,



September 30,



2017


2016


2017


2016



(in thousands)

Net cash provided by operating activities

$

251,005


$

223,002


$

755,805


$

440,788


Change in operating assets and liabilities


32,901



(41,059)



72,728



(30,390)

Adjusted cash flow from operations

$

283,906


$

181,943


$

828,533


$

410,398















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 Nine Months Ended



September 30,



September 30,



2017



2016



2017



2016



(in thousands)

Acquisitions:












Proved

$


$


$

260


$

2,618

Unproved


438



3,200



4,263



11,546



438



3,200



4,523



14,164













Exploration and development:












Land and seismic


12,872



16,974



123,359



45,610

Exploration and development


322,651



157,571



813,693



443,279



335,523



174,545



937,052



488,889













Sale proceeds:












Proved


1,807



(376)



(85)



(12,605)

Unproved


(780)



(9,207)



(8,051)



(9,608)



1,027



(9,583)



(8,136)



(22,213)














$

336,988


$

168,162


$

933,439


$

480,840

 

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



















For the Three Months Ended



For the Nine Months Ended





September 30,



September 30,





2017



2016



2017



2016


















(in thousands, except per share data)















Revenues:













Oil sales

$

231,441


$

166,079


$

687,960


$

445,657


Gas sales


125,707



109,278



390,126



268,501


NGL sales


95,191



50,464



256,503



135,755


Gas gathering and other, net


11,342



9,896



32,720



25,277





463,681



335,717



1,367,309



875,190

Costs and expenses:













Impairment of oil and gas properties




105,593





757,670


Depreciation, depletion, amortization, and accretion


112,893



92,310



319,173



309,080


Production


65,410



52,976



190,409



180,891


Transportation, processing, and other operating


58,387



48,706



172,034



139,585


Gas gathering and other


8,856



7,905



25,930



23,477


Taxes other than income


24,314



15,974



63,104



43,879


General and administrative


21,039



20,118



58,835



55,439


Stock compensation


7,038



5,764



19,619



18,782


(Gain) loss on derivative instruments, net


16,109



(9,758)



(50,261)



23,050


Other operating expense, net


95



179



977



293





314,141



339,767



799,820



1,552,146















Operating income (loss)


149,540



(4,050)



567,489



(676,956)















Other (income) and expense:













Interest expense 


16,838



20,931



57,985



62,560


Capitalized interest


(5,373)



(5,421)



(17,456)



(15,958)


Loss on early extinguishment of debt






28,169




Other, net


(4,563)



(3,828)



(9,004)



(7,489)















Income (loss) before income tax


142,638



(15,732)



507,795



(716,069)

Income tax expense (benefit)


51,239



(5,059)



188,162



(259,483)















Net income (loss)

$

91,399


$

(10,673)


$

319,633


$

(456,586)















Earnings (loss) per share to common stockholders:



























Basic 

$

0.96


$

(0.12)


$

3.36


$

(4.90)


Diluted

$

0.96


$

(0.12)


$

3.36


$

(4.90)















Dividends declared per share

$

0.08


$

0.08


$

0.24


$

0.24















Shares attributable to common stockholders:













Unrestricted common shares outstanding


93,501



93,221



93,431



93,221


Diluted common shares


93,531



93,221



93,465



93,221















Shares attributable to common stockholders and participating securities:













Basic shares outstanding


95,290



N/A*



95,188



N/A*


Fully diluted shares 


95,320



N/A*



95,222



N/A*















Comprehensive income (loss):













Net income (loss)

$

91,399


$

(10,673)


$

319,633


$

(456,586)


Other comprehensive income:














Change in fair value of investments, net of tax 


234



287



860



567


Total comprehensive income (loss)

$

91,633


$

(10,386)


$

320,493


$

(456,019)















*

Due to the net loss in the period ended September 30, 2016, shares of 94,973, 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 Nine Months Ended







September 30,



September 30,








2017



2016



2017



2016







(in thousands)


















Cash flows from operating activities:













Net income (loss)

$

91,399


$

(10,673)


$

319,633


$

(456,586)


Adjustments to reconcile net income (loss) to net cash














provided by operating activities:















Impairment of oil and gas properties




105,593





757,670




Depreciation, depletion, amortization, and accretion


112,893



92,310



319,173



309,080




Deferred income taxes


51,239



(3,944)



188,168



(258,368)




Stock compensation


7,038



5,764



19,619



18,782




(Gain) loss on derivative instruments, net


16,109



(9,758)



(50,261)



23,050




Settlements on derivative instruments


2,975



791



(2,742)



9,718




Loss on early extinguishment of debt






28,169






Changes in non-current assets and liabilities


1,068



1,573



2,144



4,121




Other, net


1,185



287



4,630



2,931


Changes in operating assets and liabilities:















Receivables


(67,776)



2,604



(128,921)



(1,723)




Other current assets


(8,268)



5,706



(19,372)



23,034




Accounts payable and other current liabilities


43,143



32,749



75,565



9,079






Net cash provided by operating activities


251,005



223,002



755,805



440,788

Cash flows from investing activities:













Oil and gas capital expenditures


(319,777)



(160,056)



(901,949)



(485,114)


Sales of oil and gas assets


(1,027)



6,383



8,136



19,013


Sales of other assets


116



5,494



510



5,718


Other capital expenditures


(13,123)



(6,239)



(31,332)



(24,013)






Net cash used by investing activities


(333,811)



(154,418)



(924,635)



(484,396)

Cash flows from financing activities:













Borrowings of long-term debt






748,110




Repayments of long-term debt






(750,000)




Call premium, financing, and underwriting fees


(159)





(29,194)



(1)


Dividends paid


(7,590)



(7,588)



(22,743)



(30,243)


Employee withholding taxes paid upon the net settlement of equity-classified stock awards














(6,422)



(7,375)



(7,637)



(11,457)


Proceeds from exercise of stock options


190



3,336



226



4,623






Net cash used by financing activities


(13,981)



(11,627)



(61,238)



(37,078)

Net change in cash and cash equivalents


(96,787)



56,957



(230,068)



(80,686)

Cash and cash equivalents at beginning of period


519,595



641,739



652,876



779,382

Cash and cash equivalents at end of period

$

422,808


$

698,696


$

422,808


$

698,696

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


September 30,


December 31,


2017


2016

Assets


(in thousands, except share data)

Current assets:








Cash and cash equivalents

$

422,808


$

652,876


Receivables, net of allowance


403,197



274,597


Oil and gas well equipment and supplies


54,545



33,342


Derivative instruments


6,924




Other current assets


6,658



8,489



Total current assets


894,132



969,304

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







Proved properties


17,071,532



16,225,495


Unproved properties and properties under development,








not being amortized


572,651



478,277









17,644,183



16,703,772


Less – accumulated depreciation, depletion, amortization, and impairment


(14,629,884)



(14,349,505)



Net oil and gas properties


3,014,299



2,354,267

Fixed assets, net of accumulated depreciation


208,320



205,465

Goodwill





620,232



620,232

Derivative instruments


129



Deferred income taxes




55,835

Other assets




31,942



32,621








$

4,769,054


$

4,237,724

Liabilities and Stockholders' Equity






Current liabilities:







Accounts payable

$

88,888


$

74,486


Accrued liabilities


343,381



278,781


Derivative instruments


5,778



49,370


Revenue payable


154,578



119,715



Total current liabilities


592,625



522,352

Long-term debt:








Principal




1,500,000



1,500,000


Less – unamortized debt issuance costs and discount


(13,491)



(12,061)



Long-term debt, net


1,486,509



1,487,939

Deferred income taxes


99,695



Other liabilities 



188,162



184,444



Total liabilities


2,366,991



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, 95,260,701 and 95,123,525 shares issued, respectively








953



951


Additional paid-in capital


2,773,260



2,763,452


Retained earnings (accumulated deficit)


(373,955)



(722,359)


Accumulated other comprehensive income


1,805



945



Total stockholders' equity


2,402,063



2,042,989








$

4,769,054


$

4,237,724

 

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SOURCE Cimarex Energy Co.

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

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