Cimarex Energy Reports 2013 Third Quarter Results

- Record Daily Production Averages 716.8 MMcfe/d Up 13% Year-over-Year

- Wolfcamp A Long Lateral in Reeves County averages 1,816 BOE/d over 30 days

- Upsized Frac Yields Higher IP in Culberson County Wolfcamp

Nov 06, 2013, 06:00 ET from Cimarex Energy Co.

DENVER, Nov. 6, 2013 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2013 net income of $138.4 million, or $1.59 per diluted share.  This compares to 2012 third quarter net income of $84.3 million, or $0.97 per diluted share.  Excluding the mark-to-market of open derivative positions, third quarter 2013 earnings were $1.62 per diluted share versus $1.01 per diluted share in the third quarter of 2012(1)

Revenue from the sale of oil, natural gas and natural gas liquids (NGL) totaled $549.6 million in the third quarter of 2013 compared to $397.4 million in the same period of 2012.  Third quarter 2013 adjusted cash flow from operations was $394.0 million versus $291.2 million a year ago(2).    

Production volumes averaged a record 716.8 million cubic feet equivalent (MMcfe) per day in the third quarter, a 13 percent increase over third quarter 2012 output of 635.1 MMcfe per day.  Oil production grew 21 percent over the same period last year to a record 39,292 barrels per day.  Permian oil production reached 31,993 barrels per day.  Third quarter 2013 production volumes were 48 percent natural gas, 33 percent oil and 19 percent NGL. 

The increase in third quarter revenue and cash flow was the result of higher production volumes and improved commodity prices. For the third quarter of 2013 natural gas prices averaged $3.72 per thousand cubic feet (Mcf) up 33 percent year-over-year and oil prices for the quarter averaged $102.88 per barrel up 17 percent from the third quarter a year ago. 

Long-term debt at September 30, 2013, was $900 million comprised of $750 million of senior notes and $150 million of borrowings under the company's senior unsecured revolving credit facility.  Debt to total capitalization at quarter-end was 19 percent(3)

Cimarex Chairman and CEO, Tom Jorden, said, "The third quarter not only produced excellent financial results, it was also a period of strong technical momentum in the Texas Delaware Basin Wolfcamp shale.  We completed a Reeves County Wolfcamp A horizontal well using a 10,000-foot lateral and have also tested upsized frac stages on our traditional 5,000-foot lateral, increasing the number from 12 stages to 20.  Both were operational and economic successes.  These new completion techniques will most certainly play into our future development plans for this large, stacked-pay resource." 

Cimarex invested $388 million on exploration and development during the third quarter bringing the total invested year-to-date to $1.2 billion.  The Permian Basin accounts for 65 percent of the capital investment in 2013. 

Cimarex drilled a total of 112 gross (52 net) wells during the quarter, of which 111 were completed as producers.  At quarter-end, 50 gross (22 net) wells were awaiting completion.

Wells Drilled and Completed by Region

For the Three Months

For the Nine Months

Ended September 30,

Ended September 30,

2013

2012

2013

2012

Gross wells

Permian Basin

42

37

132

131

Mid-Continent

67

55

154

119

Gulf Coast/Other

3

1

5

3

112

93

291

253

Net wells

Permian Basin

28

24

87

88

Mid-Continent

21

23

56

49

Gulf Coast/Other

3

-

4

1

52

47

147

138

% Gross wells completed as producers

99%

99%

99%

97%

Permian Basin Update Production from the Permian Basin averaged 352.0 MMcfe per day for the third quarter, an increase of 28 percent over third quarter 2012 and a ten percent increase sequentially.  Quarterly oil volumes increased 28 percent year-over-year to 31,993 barrels per day and accounted for 55 percent of the region's total production for the quarter.

Cimarex drilled and completed 42 gross (28 net) Permian Basin wells during the third quarter, bringing the total for 2013 to 132 gross wells (87 net).  All wells drilled in the region during the third quarter were completed as producers.  At September 30, 15 gross (10 net) wells were awaiting completion.  Drilling took place in the Delaware Basin of Texas and southeast New Mexico, mainly targeting the Bone Spring and Wolfcamp formations. 

Year-to-date, 60 gross (35 net) New Mexico Bone Spring wells have been drilled and completed.  Per well first 30-day average gross production from these wells averaged approximately 670 barrels of oil equivalent (BOE) per day (84 percent oil).  Year-to-date Ward County, Texas, Third Bone Spring drilling totaled 33 gross (24 net) wells with  per well first 30-day average gross production rates of approximately 1,000 BOE per day (80 percent oil).

In the Culberson area, Cimarex is drilling both horizontal Bone Spring and Wolfcamp wells.  Year-to-date 13 gross (nine net) Bone Spring wells have been drilled and completed with per well first 30-day average gross production of 820 BOE per day (60 percent oil).   Cimarex has also drilled 12 gross (8 net) horizontal Wolfcamp wells in Culberson County in 2013, bringing total Wolfcamp wells in the area to 41 gross (36 net).  Per well first 30-day production rates on the 41 Wolfcamp wells drilled-to-date in the Wolfcamp C and D have averaged 6.2 MMcfe per day, comprised of 42 percent gas, 28 percent oil and 30 percent NGL (assuming full NGL recovery). 

Cimarex completed two wells in Culberson County using an upsized frac design.  The Tim Tam 24 Fee #1H was completed to the Wolfcamp D using 20 frac stages with a 5,000-foot lateral and had first 30-day average gross production of 7.8 MMcfe per day, higher than the average 12-stage completion rate of 6.2 MMcfe per day.  In addition, Cimarex completed a Wolfcamp A well in Culberson County using a 20-stage completion.  That well is currently undergoing production testing.

In Reeves County, Texas, Cimarex has drilled and completed three gross (three net) horizontal Wolfcamp A wells.  The most recent well was drilled and completed using a 10,000-foot lateral and had a first 30-day average gross production rate of 1,816 BOE per day (56 percent oil, 23 percent gas and 21 percent NGL).  Cimarex currently has a second long lateral well drilling and two wells waiting on completion in Reeves County.

During the third quarter, Cimarex added 10,000 net prospective Wolfcamp acres in Ward County, Texas, bringing its total net prospective Wolfcamp acreage in the Delaware Basin to 180,000 acres.  The company currently has one rig drilling Wolfcamp wells in Ward County.

Cimarex also reported a successful well in the Avalon shale in Lea County, New Mexico.  The well had first 30-day average gross production of 1,038 BOE per day (60 percent oil) and was completed using an upsized frac (22 stages).  The Avalon shale represents further opportunity for Cimarex in the Delaware Basin.  The company has approximately 13,700 net prospective acres in Lea County.

Mid-Continent Update Mid-Continent production averaged 337.6 MMcfe per day for the third quarter of 2013, a four percent increase over the third quarter 2012 average of 324.3 MMcfe per day.  Our Cana-Woodford area represented 216.9 MMcfe per day of the third quarter 2013 total, an 18 percent increase versus the same period last year.  Year-to-date Cimarex has drilled and completed 154 gross (56 net) wells in the Mid-Continent region, 134 gross (49 net) of which were in the Cana-Woodford shale play.  All were completed as producers.  At September 30, 35 gross (12 net) wells were awaiting completion. 

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

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

Gas (Mcf per day)

Permian Basin

102,543

79,502

93,944

78,007

Mid-Continent

230,217

224,009

232,600

218,411

Gulf Coast/Other

14,062

20,735

13,799

24,110

346,822

324,246

340,343

320,528

Oil (Barrels per day)

Permian Basin

31,993

25,000

29,343

22,839

Mid-Continent

5,801

6,120

5,944

5,802

Gulf Coast/Other

1,498

1,336

1,177

1,602

39,292

32,456

36,464

30,243

NGL (Barrels per day)

Permian Basin

9,575

7,501

7,643

6,523

Mid-Continent

12,090

10,598

13,129

9,934

Gulf Coast/Other

708

1,261

778

1,487

22,373

19,360

21,550

17,944

Total Equivalent (Mcfe per day)

Permian Basin

351,951

274,508

315,860

254,179

Mid-Continent

337,563

324,317

347,038

312,827

Gulf Coast/Other

27,299

36,318

25,527

42,644

716,813

635,143

688,425

609,650

2013 Outlook Cimarex estimates fourth quarter 2013 total company volumes to average 714-734 MMcfe per day. As a result, 2013 total company volumes are now projected to average 695-700 MMcfe/d, 11 to 12 percent growth over 2012 with oil volumes projected to grow 18 percent.  Adjusted for property sales in 2012, production is expected to grow 14 percent.

Capital investment in exploration and development is now expected to be between $1.55 and $1.6 billion, the result of slightly higher acreage acquisition and somewhat higher activity levels.

Expenses for 2013 are expected to fall within the following ranges:

$/Mcfe

Production expense

$1.11 -  $1.16

Transportation & other operating expense

  0.40 -   0.45

DD&A and ARO accretion

  2.35  -  2.45

General and administrative expense

  0.28  -  0.32

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

 5.8%  -  6.2%

Other Cimarex has oil swaps and collars covering 12,000 barrels per day through December 2013 and collars covering 6,000 barrels per day from January through December 2014.  The company has Mid-Continent natural gas collars on 80,000 MMBTU per day through December 2014.  The following table summarizes the current open hedge positions:

Oil Contracts

Weighted Average Price

Period

Type

Bbls/day

Index

Floor

Ceiling

 

Swap

Oct - Dec 13

Swap

6,000

WTI

NA

NA

$

96.13

Oct - Dec 13

Collar

6,000

WTI

$

85.00

$

102.31

$

NA

Jan – Dec 14

Collar

6,000

WTI

$

85.00

$

105.68

$

NA

Gas Contracts

Weighted Ave. Price

Period

Type

MMBTU/day

Index(4)

Floor

Ceiling

Oct 13  – Dec 14

Collar

80,000

PEPL

$

3.51

$

4.57

Cimarex accounts for commodity derivative contracts using the mark-to-market (through income) accounting method. 

Conference call and webcast Cimarex will host a conference call and webcast today at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To participate in the live, interactive call, please dial 877-270-2148 five minutes before the scheduled start time (international callers dial 1-412-902-6510).  A replay will be available for one week following the call and can be accessed by dialing 877-344-7529 (international callers dial 1-412-317-0088); conference I.D. 10034791.

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.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the Company is providing revised "2013 guidance", which contains projections for certain 2013 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 for the year ended December 31, 2012, 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 volatility; the ability to complete property sales or other transactions; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; 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; higher than expected costs and expenses, including the availability and cost of services and materials; unexpected future capital expenditures; economic and competitive conditions; 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; declines in the values of our oil and gas properties resulting in impairments; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in one major geographic area; the success of the Company's risk management activities; title to properties; litigation; environmental liabilities; 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)

The reconciliation of earnings per diluted share adjusted for the impact of open mark-to-market derivative positions, which is a non-GAAP measure, is as follows:  For the third quarter of 2013, diluted earnings per share of $1.59 plus the per share tax-effected loss related to open derivative positions of $0.03 equals $1.62 diluted earnings per share.  For the third quarter of 2012, diluted earnings per share of $0.97 plus the per share tax-effected loss related to open derivative positions of $0.04 equals $1.01 diluted earnings per share.  Management believes that this non-GAAP measure is useful information for investors and it is a common statistic referred to by the investment community.

(2)

Adjusted cash flow from operations is a non-GAAP financial measure.  See below for a reconciliation of the related amounts.

(3)

Reconciliation of debt to total capitalization, which is a non-GAAP measure, is: long-term debt of $900 million divided by long-term debt of $900 million plus stockholders' equity of $3,816 million.  Management believes that this non-GAAP measure is useful information for investors and it is a common statistic referred to by the investment community.

(4)

PEPL refers to Panhandle Eastern Pipe Line, Tex/OK Mid-Continent Index as quoted in Platt's Inside FERC.

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

(in thousands)

Net cash provided by operating activities

$

370,962

$

261,216

$

940,748

$

836,148

Change in operating assets

    and liabilities

23,027

29,957

91,971

(1,509)

Adjusted cash flow from operations

$

393,989

$

291,173

$

1,032,719

$

834,639

Management believes that the non-GAAP measure of adjusted cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the company's ability to fund its capital program, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of cash flow from operating activities.  It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

PRICE AND PRODUCTION DATA

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

 Total gas production - Mcf 

31,907,621

29,830,627

92,913,719

87,824,541

 Gas volume - Mcf per day 

346,822

324,246

340,343

320,528

 Gas price - per Mcf  

$3.72

$2.79

$3.73

$2.71

 Total oil production - barrels 

3,614,865

2,985,956

9,954,625

8,286,503

 Oil volume - barrels per day 

39,292

32,456

36,464

30,243

 Oil price - per barrel 

$102.88

$88.18

$93.81

$91.67

 Total NGL production - barrels 

2,058,331

1,781,139

5,883,094

4,916,753

 NGL volume - barrels per day  

22,373

19,360

21,550

17,944

 NGL price - per barrel 

$28.63

$28.55

$28.57

$31.35

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

(in thousands)

Acquisitions:

Proved *

$

(246)

$

$

677

$

Unproved

1,816

4,636

5,481

11,349

1,570

4,636

6,158

11,349

Exploration and development:

Land and Seismic

59,035

28,226

127,064

86,613

Exploration and development

328,655

389,989

1,059,546

1,120,740

387,690

418,215

1,186,610

1,207,353

Sale proceeds:

Proved *

1,212

(10,894)

(36,667)

(11,079)

Unproved

(1,041)

(1,088)

1,212

(10,894)

(37,708)

(12,167)

$

390,472

$

411,957

$

1,155,060

$

1,206,535

*

The negative amount in the third-quarter 2013 proved acquisitions and the positive amount in the third-quarter 2013 proved sales proceeds reflect net purchase price adjustments related to second-quarter 2013 activity.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

(in thousands, except per share data)

Revenues:

Gas sales

$

118,824

$

83,208

$

346,492

$

238,102

Oil sales

371,881

263,315

933,879

759,609

NGL sales

58,922

50,860

168,106

154,160

Gas gathering, processing and other, net

11,709

9,529

32,972

31,199

561,336

406,912

1,481,449

1,183,070

Costs and expenses:

Depreciation, depletion, amortization and accretion

160,979

139,499

449,931

384,964

Production

76,166

62,699

214,985

192,818

Transportation and other operating

25,838

14,481

66,494

40,966

Gas gathering and processing

6,970

5,496

18,310

15,302

Taxes other than income

31,104

24,095

84,039

72,738

General and administrative

19,003

14,742

57,416

41,523

Stock compensation

3,347

8,301

10,459

17,519

(Gain) loss on derivative instruments, net

10,824

5,329

(1,233)

(661)

Other operating, net

2,507

2,236

7,804

7,295

336,738

276,878

908,205

772,464

Operating income

224,598

130,034

573,244

410,606

Other (income) and expense:

Interest expense 

12,945

12,191

38,228

32,852

Amortization of deferred financing costs

1,009

1,032

3,044

2,718

Capitalized interest

(7,286)

(9,231)

(23,868)

(26,154)

Loss on early extinguishment of debt

16,214

Other, net

(2,263)

(6,159)

(13,637)

(18,714)

Income before income tax

220,193

132,201

569,477

403,690

Income tax expense

81,823

47,939

211,615

149,019

Net income

$

138,370

$

84,262

$

357,862

$

254,671

Earnings per share to common stockholders:

Basic 

$

1.59

$

0.97

$

4.12

$

2.94

Diluted

$

1.59

$

0.97

$

4.12

$

2.93

Dividends per share

$

0.14

$

0.12

$

0.42

$

0.36

Shares attributable to common stockholders:

Unrestricted common shares outstanding

85,213

84,681

85,213

84,681

Diluted common shares

85,347

84,997

85,330

85,021

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

86,847

86,589

86,847

86,589

Fully diluted shares 

86,981

86,905

86,964

86,929

Comprehensive income:

Net income

$

138,370

$

84,262

$

357,862

$

254,671

Other comprehensive income:

Change in fair value of investments, net of tax 

302

238

401

502

Total comprehensive income

$

138,672

$

84,500

$

358,263

$

255,173

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

(in thousands)

Cash flows from operating activities:

Net income

$

138,370

$

84,262

$

357,862

$

254,671

Adjustment to reconcile net income to net cash 

provided by operating activities:

Depreciation, depletion, amortization and accretion

160,979

139,499

449,931

384,964

Deferred income taxes

81,823

49,568

211,615

150,648

Stock compensation

3,347

8,301

10,459

17,519

(Gain) loss on derivative instruments

10,824

5,329

(1,233)

(661)

Settlements on derivative instruments

(6,097)

(4,332)

Loss on early extinguishment of debt

16,214

Changes in non-current assets and liabilities

3,312

2,815

9,102

7,930

Amortization of deferred financing costs

and other, net

1,431

1,399

(685)

3,354

Changes in operating assets and liabilities:

Receivables, net

(33,071)

(83,436)

(88,131)

24,398

Other current assets

(5,041)

13,673

9,799

8,763

Accounts payable and accrued liabilities

15,085

39,806

(13,639)

(31,652)

Net cash provided by operating activities

370,962

261,216

940,748

836,148

Cash flows from investing activities:

Oil and gas expenditures

(389,417)

(423,134)

(1,165,555)

(1,181,742)

Sales of oil and gas assets

23,300

10,894

37,707

12,167

Sales of other assets

95

142

31,252

550

Other expenditures

(9,182)

(16,826)

(34,657)

(42,913)

Net cash used by investing activities

(375,204)

(428,924)

(1,131,253)

(1,211,938)

Cash flows from financing activities:

Net bank debt borrowings

8,000

80,000

150,000

25,000

Proceeds from other long-term debt

750,000

Other long-term debt payments

(363,595)

Financing costs incurred

(100)

(1,129)

 

(100)

(13,821)

Dividends paid

(12,122)

(10,330)

(34,570)

(29,199)

Issuance of common stock and other

8,463

7,646

10,168

10,410

Net cash provided by financing activities

4,241

76,187

125,498

378,795

Net change in cash and cash equivalents

(1)

(91,521)

(65,007)

3,005

Cash and cash equivalents at beginning of period

4,532

96,932

69,538

2,406

Cash and cash equivalents at end of period

$

4,531

$

5,411

$

4,531

$

5,411

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

September 30,

December 31,

2013

2012

Assets

(in thousands, except share data)

Current assets:

Cash and cash equivalents

$

4,531

$

69,538

Restricted cash

818

Receivables, net

391,105

302,974

Oil and gas well equipment and supplies

69,517

81,029

Deferred income taxes

13,902

8,477

Derivative instruments

7,168

Other current assets

9,832

8,119

Total current assets

496,873

470,137

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

Proved properties

12,466,073

11,258,748

Unproved properties and properties under development,

not being amortized

597,526

645,078

13,063,599

11,903,826

Less – accumulated depreciation, depletion and amortization

(7,318,137)

(6,899,057)

Net oil and gas properties

5,745,462

5,004,769

Fixed assets, net

137,455

152,605

Goodwill

620,232

620,232

Derivative instruments

2,717

Other assets, net

51,625

57,409

$

7,054,364

$

6,305,152

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

111,082

$

103,653

Accrued liabilities

403,413

392,909

Derivative instruments

4,320

Revenue payable

187,065

149,300

Total current liabilities

705,880

645,862

Long-term debt

900,000

750,000

Deferred income taxes

1,338,623

1,121,353

Other liabilities 

293,576

313,201

Total liabilities

3,238,079

2,830,416

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,

86,838,423 and 86,595,976 shares issued, respectively

868

866

Paid-in capital

1,959,160

1,939,628

Retained earnings

1,855,382

1,533,768

Accumulated other comprehensive income

875

474

3,816,285

3,474,736

$

7,054,364

$

6,305,152

SOURCE Cimarex Energy Co.



RELATED LINKS

http://www.cimarex.com