Cimarex Energy Reports Fourth-Quarter and Full-Year 2012 Results

- Fourth-quarter net income of $99.2 million

- Record quarterly production of 677 million cubic feet equivalent per day

- Year-end proved reserves increased 10% to 2.3 trillion cubic feet equivalent

Feb 19, 2013, 06:00 ET from Cimarex Energy Co.

DENVER, Feb. 19, 2013 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported fourth-quarter 2012 net income of $99.2 million, or $1.14 per diluted share.  This compares to fourth-quarter 2011 earnings of $116.9 million, or $1.36 per diluted share.  Fourth-quarter 2012 results include a $16.4 million royalty litigation charge ($0.12 per share after-tax) and a $11.1 million benefit for severance tax refunds ($0.08 per share after-tax) totaling a net reduction for the quarter of $0.04 per share after-tax.

Oil, gas and natural gas liquids (NGLs) revenue in the fourth quarter of 2012 totaled $429.8 million, a 3% increase compared to $417.5 million in the same period of 2011.  Fourth-quarter 2012 adjusted cash flow from operations was $300.1 million versus $310.2 million a year ago(1).    

Fourth-quarter 2012 production volumes averaged a record 676.7 million cubic feet equivalent (MMcfe) per day as compared to fourth-quarter 2011 output of 601.4 MMcfe per day.  Oil production grew 28% to a record 35,099 barrels per day.  Permian Basin oil production grew 42% to 27,091 barrels per day. Combined fourth-quarter 2012 Permian and Mid-Continent volumes hit an all-time high of 643.3 MMcfe per day, growing 21% over the same period in 2011.  Fourth-quarter 2012 production volumes were 49% gas, 31% oil and 20% NGLs. 

Full-year 2012 net income totaled $353.8 million, or $4.07 per diluted share, as compared to $529.9 million, or $6.15 per share, for 2011.  Full-year 2012 adjusted cash flow from operations totaled $1.13 billion versus $1.31 billion for 2011(1)

At year-end the previously announced sale of $294 million of certain non-core, long-lived oil and gas properties was closed.  The properties had current production of approximately 2,550 barrels equivalent (Boe) per day (75% oil) and proved reserves of 9.1 million barrels equivalent.

Full-year 2012 investment for exploration and development totaled $1.6 billion.  Funding of the capital program was largely provided by cash flow and property sales.  Long-term debt at December 31, 2012 was $750 million. Debt to total capitalization at quarter-end was 18%(2).  

Proved Reserves

Year-end 2012 proved reserves grew 10% to 2.3 trillion cubic feet equivalent (Tcfe).  Adjusting for the impact of property sales, proved reserves increased 13%. Proved reserves are 80% developed at year-end 2012 as compared to 82% at year-end 2011. 

Reserves added from extensions and discoveries totaled 757 billion cubic feet equivalent (Bcfe), replacing 330% of production. Reserve additions were comprised of 51% oil and natural gas liquids (liquids) and 49% gas.  With continued focus on liquids-rich production, the amount of proved reserves comprised of liquids at year-end 2012 increased to 45% as compared to 41% at year-end 2011.  Proved reserves at year-end 2012 include 1.13 Tcfe in our western Oklahoma, Cana-Woodford shale play comprised of 678 Bcfe of proved developed and 450 Bcfe of proved undeveloped reserves.

Gas

Oil

NGLs

Total

(Bcf)

(MBbl)

(MBbl)

(Bcfe)

Total proved reserves

Beginning of year 

1,216.4

72,322

65,815

2,045.2

   Revisions of previous estimates

(211.4)

(3,154)

(4,492)

(257.3)

   Extensions and discoveries

372.5

27,817

36,324

757.3

   Purchase of reserves

-

14

2

0.2

   Production 

(118.5)

(11,516)

(6,952)

(229.3)

   Sale of properties

(7.1)

(7,562)

(788)

(57.3)

End of year

1,251.9

77,921

89,909

2,258.8

Proved developed reserves

   Year-end 2011

989.5

68,250

44,755

1,667.5

   Year-end 2012

985.4

73,524

63,757

1,809.0

2012

2011

% Chg.

Pre-tax PV-10 ($ in millions) (3) 

$4,165.9

$4,594.9

-9%

Standardized Measure ($ in millions)

$2,908.7

$3,139.8

-7%

Average prices used in Standardized Measure (4)

Gas price per Mcf

$2.27

$3.79

-40%

Oil price per barrel

$88.91

$89.64

-1%

NGL price per barrel

$29.12

$41.70

-30%

2013 Outlook

Total company 2013 volumes are projected to average 675-705 MMcfe per day, an increase of 8-13% over 2012.  Adjusting for the impact of property sales, growth for 2013 totals 10-15%.  Liquids are projected to account for 51% of total equivalent production, up from 48% in 2012.  Mid-Continent and Permian 2013 production volumes are projected to grow 11-15% over 2012, averaging between 652-673 MMcfe per day.  Gulf Coast volumes are projected to average 23-32 MMcfe per day for 2013, or 4% of total estimated company volumes. 

In the first quarter of 2013, total company volumes are projected to average 642-667 MMcfe per day, a 6-10% increase over 2012. First-quarter 2013 Mid-Continent and Permian production volumes are projected to increase 12-15% over first-quarter 2012, to within a range of 620-639 MMcfe per day. Gulf Coast volumes are projected to average 22-28 MMcfe per day for the first quarter of 2013.

Full-year 2013 capital expenditures are expected to range from $1.4-$1.5 billion.  Nearly all the 2013 capital is directed towards drilling oil or liquids-rich gas in the Permian and Cana-Woodford.  We have a large inventory of drilling opportunities, limited lease expirations and few service commitments.  Actual amount invested will depend on our calculated rate of return which is significantly influenced by commodity prices. 

An approximate breakdown of the mid-point of our potential 2013 E&D capital investment and actual 2012 by region is provided below.

($ in millions)

2013 E&D Estimate

2012 E&D

Permian

$ 900

62%

$  889.1

55%

Mid-Continent

450

31%

673.2

41%

Gulf Coast

75

5%

46.3

3%

Other

25

2%

14.4

1%

$1,450

100%

$1,623.0

100%

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

Expenses ($/Mcfe):

Production expense

$1.05 -  $1.17

Transportation expense

  0.27  -  0.32

DD&A and ARO accretion

  2.40  -  2.55

General and administrative expense

  0.22  -  0.28

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

6.0%  -  6.5%

Other

In January 2013 we entered into oil swaps and collars covering 2013 production.  The following table summarizes the current open hedge positions:

Oil Contracts

Weighted Average Price

Period

Type

Daily

Volume(5)

Index(6)

Floor

Ceiling

Swap

Feb.-Dec. 13

Swaps

6,000

WTI

NA

NA

$

96.13

Feb.-Dec. 13

Collar

6,000

WTI

$

85.00

$

102.31

$

NA

12,000

Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method.  Fourth-quarter or full-year 2012 had no cash settlements.

Exploration and Development Activity

Cimarex's drilling activities are principally conducted within two main areas:  Permian Basin and Mid-Continent.  Permian activity is primarily directed to the Delaware Basin of southeast New Mexico and West Texas.  The majority of our Mid-Continent drilling is in the western Oklahoma Cana-Woodford shale. 

Cimarex drilled and completed 352 gross (192 net) wells during 2012, investing $1.6 billion on exploration and development.  Of total expenditures, 55% were invested in projects located in the Permian Basin; 41% in the Mid-Continent; and 4% in the Gulf Coast and other.

For the Three Months

For the Twelve Months

Ended December 31,

Ended December 31,

2012

2011

2012

2011

Gross wells

   Permian Basin

51

34

182

140

   Mid-Continent

48

52

167

180

   Gulf Coast/Other

-

3

3

11

99

89

352

331

Net wells

   Permian Basin

34

21

122

100

   Mid-Continent

20

12

69

64

   Gulf Coast/Other

-

3

1

10

54

36

192

174

% Gross wells completed as producers

92%

97%

95%

96%

At year-end 30 net wells were drilled and awaiting completion: 22 Mid-Continent and eight Permian Basin.  Cimarex currently has 18 operated rigs running; 14 in the Permian Basin and four in the Mid-Continent.  

Permian Basin

Cimarex drilled and completed 182 gross (122 net) Permian Basin wells during 2012, completing 94% as producers.  At quarter-end, 11 gross (8 net) wells were awaiting completion.  Drilling principally occurred in the Delaware Basin of Texas and southeast New Mexico, mainly targeting the Bone Spring and Wolfcamp formations.  Fourth-quarter 2012 Permian production averaged 292.1 MMcfe per day, an overall increase of 36% over fourth-quarter 2011, and 42% growth in oil volumes to 27,091 barrels per day.

Full-year 2012 New Mexico Bone Spring wells drilled and completed totaled 64 gross (34 net).  Per-well 30-day gross production from the 2012 Bone Spring wells averaged over 640 Boe per day (90% oil).  Texas Third Bone Spring drilling totaled 43 gross (26 net) wells, which had per-well 30-day average gross production rates of over 1,000 Boe per day (85% oil).

Cimarex continues to evaluate the Wolfcamp shale in the Delaware Basin, primarily in southern Eddy County New Mexico (White City) and northern Culberson County Texas.   Year-to-date Cimarex has drilled and completed 15 gross (14 net) horizontal Wolfcamp wells, bringing total wells in the play to 33 gross (31 net).  Per well first-30 day production rates on all the wells drilled to date have averaged 6.4 MMcfe per day, comprised of 2.8 MMcf per day of gas, 280 barrels per day of oil and 325 barrels per day of NGLs (assuming full NGL recovery), or 44% gas, 26% oil and 30% NGL. 

Mid-Continent

For 2012 Cimarex drilled and completed 167 gross (69 net) wells, completing 98% as producers.  At year-end, 53 gross (22 net) wells were awaiting completion.  Mid-Continent production averaged 351.2 MMcfe per day for the fourth quarter of 2012, an 11% increase over fourth-quarter 2011 average of 316.1 MMcfe per day.

The majority of drilling has been in the Anadarko Basin, Cana-Woodford shale play, where Cimarex drilled and completed 149 gross (61 net) wells. At year-end, 46 gross (21 net) wells were being completed or awaiting completion in this area.  Fourth-quarter 2012 net production from Cana-Woodford averaged 214.6 MMcfe per day, a 36% increase versus the fourth-quarter 2011 average of 157.9 MMcfe per day. 

Gulf Coast

Cimarex participated in three gross (0.8 net) outside operated Yegua/Cook Mountain wells in 2012, of which one gross well was successful.  Gulf Coast production averaged 31.9 MMcfe per day for the fourth quarter of 2012, a 54% decrease as compared to the fourth-quarter 2011 average of 68.9 MMcfe per day. The decreased output is a result of natural decline in highly-productive wells drilled near Beaumont, Texas.

Production by Region

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

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Gas (Mcf per day)

Permian Basin

84,363

77,731

79,605

73,557

Mid-Continent

229,924

218,576

221,305

202,953

Gulf Coast/Other

19,091

37,891

22,848

52,567

333,378

334,198

323,758

329,077

Oil (Barrels per day)

Permian Basin

27,091

19,123

23,908

16,770

Mid-Continent

6,735

5,843

6,037

5,692

Gulf Coast/Other

1,273

2,465

1,518

4,327

35,099

27,431

31,463

26,789

NGL (Barrels per day)

Permian Basin

7,527

3,761

6,776

3,365

Mid-Continent

13,483

10,409

10,826

9,255

Gulf Coast/Other

1,108

2,937

1,392

4,466

22,118

17,107

18,994

17,086

Total Equivalent (Mcfe per day)

Permian Basin

292,071

215,035

263,709

194,367

Mid-Continent

351,232

316,088

322,483

292,635

Gulf Coast/Other

33,379

70,306

40,308

105,321

676,682

601,429

626,500

592,323

Conference call and web cast

Cimarex will also host a conference call today at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time).  To access the live, interactive call, please dial (877) 789-9039 and reference call ID # 73998777 ten minutes before the scheduled start time.  A digital replay will be available for one week following the live broadcast at (855) 859-2056 and by using the conference ID # 73998777.  The listen-only web cast of the call will be accessible via www.cimarex.com.

Investor Presentation

For more details on Cimarex's full-year 2012 financial and operating results, please refer to the year-end investor presentation available at www.cimarex.com on the Investor Relations-Presentation page.

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 communication contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are based on current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are more fully described in SEC reports filed by Cimarex. While Cimarex makes these forward-looking statements in good faith, management cannot guarantee that anticipated future results will be achieved. Cimarex assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law. 

(1)

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

(2)

Reconciliation of debt to total capitalization, which is a non-GAAP measure, is:  long-term debt of $750 million divided by long-term debt of $750 million plus stockholders' equity of $3,474.7 million.

(3)

Pre-tax PV-10% is a non-GAAP financial measure.  Pre-tax PV-10% is comparable to the standardized measure, which is the most directly comparable GAAP financial measure.  Pre-tax PV-10% is computed on the same basis as the standardized measure but without deducting future income taxes. As of December 31, 2012 and 2011, Cimarex's discounted future income taxes were $1,257.2 million and $1,455.1 million, respectively.  Cimarex's standardized measure of discounted future net cash flows was $2,908.7 million at year-end 2012 and $3,139.8 million at year-end 2011.  Cimarex believes pre-tax PV-10% is a useful measure for investors for evaluating the relative monetary significance of its oil and natural gas properties. Cimarex further believes investors may utilize its pre-tax PV-10% as a basis for comparison of the relative size and value of its reserves to other companies because many factors that are unique to each individual company impact the amount of future income taxes to be paid. However, pre-tax PV-10% is not a substitute for the standardized measure of discounted future net cash flows. Cimarex's pre-tax PV-10% and the standardized measure of discounted future net cash flows do not purport to present the fair value of its oil and natural gas reserves.

(4)

Year-end 2012 reserve estimates are based on trailing 12-month average prices of $2.76 per MMBtu of natural gas (Henry Hub) and $94.71 per barrel of oil (WTI).

(5)

Average daily volume in barrels per day.

(6)

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

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

(in thousands)

Net cash provided by operating activities

$

356,616

$

320,752

$

1,192,764

$

1,292,275

Change in operating assets and liabilities

(56,540)

(10,578)

(58,049)

22,686

Adjusted cash flow from operations

$

300,076

$

310,174

$

1,134,715

$

1,314,961

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 Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

 Total gas production - Mcf 

30,670,814

30,746,238

118,495,355

120,112,992

 Gas volume - Mcf per day 

333,378

334,198

323,758

329,077

 Gas price - per Mcf  

$3.35

$3.90

$2.88

$4.42

 Total oil production - barrels 

3,229,095

2,523,676

11,515,598

9,777,923

 Oil volume - barrels per day 

35,099

27,431

31,463

26,789

 Oil price - per barrel 

$83.04

$92.76

$89.25

$93.00

 Total NGL production - barrels 

2,034,893

1,573,862

6,951,646

6,236,238

 NGL volume - barrels per day  

22,118

17,107

18,994

17,086

 NGL price - per barrel 

$28.99

$40.29

$30.66

$42.31

 

PROVED RESERVES BY REGION

Gas

Oil

NGL

Total

(Bcf)

(MBbls)

(MBbls)

(Bcfe)

Mid-Continent

996.8

17,984

70,615

1,528.3

Permian Basin

233.2

58,623

18,634

696.8

Gulf Coast/Other

21.9

1,314

660

33.7

1,251.9

77,921

89,909

2,258.8

 

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

(in thousands)

Acquisitions:

Proved

$

2,658

$

1,467

$

2,645

$

23,071

Unproved

19,521

1,900

30,870

22,327

22,179

3,367

33,515

45,398

Exploration and development:

Land and Seismic

35,347

17,453

121,960

164,285

Exploration and development

380,199

382,980

1,500,952

1,415,774

415,546

400,433

1,622,912

1,580,059

Sale proceeds:

Proved

(290,346)

(5,800)

(301,425)

(107,992)

Unproved

(3,349)

(7,381)

(4,437)

(9,352)

(293,695)

(13,181)

(305,862)

(117,344)

$

144,030

$

390,619

$

1,350,565

$

1,508,113

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

(In thousands, except per share data)

Revenues:

Gas sales

$

102,642

$

120,003

$

340,744

$

530,334

Oil sales

268,148

234,105

1,027,757

909,344

NGL sales

58,989

63,414

213,149

263,842

Gas gathering, processing and other, net

11,089

12,749

42,288

54,369

440,868

430,271

1,623,938

1,757,889

Costs and expenses:

Depreciation, depletion, amortization and accretion

141,971

114,135

526,935

401,912

Production

65,766

65,490

258,584

247,048

Transportation

16,388

15,152

57,354

56,711

Gas gathering and processing

6,663

5,855

21,965

23,327

Taxes other than income

14,256

27,843

86,994

126,468

General and administrative

12,905

10,522

54,428

45,256

Stock compensation, net

4,400

4,987

21,919

18,949

(Gain) loss on derivative instruments, net

416

1,031

(245)

(10,322)

Other operating, net

17,666

2,168

24,961

10,263

280,431

247,183

1,052,895

919,612

Operating income

160,437

183,088

571,043

838,277

Other (income) and expense:

Interest expense 

12,721

7,348

45,573

29,539

Amortization of deferred financing costs

1,026

664

3,744

6,072

Capitalized interest

(9,020)

(7,227)

(35,174)

(29,057)

Loss on early extinguishment of debt

16,214

Other, net

(1,150)

(2,532)

(19,864)

(9,758)

Income before income tax

156,860

184,835

560,550

841,481

Income tax expense

57,708

67,966

206,727

311,549

Net income

$

99,152

$

116,869

$

353,823

$

529,932

Earnings per share to common stockholders:

Basic 

$

1.14

$

1.36

$

4.08

$

6.17

Diluted

$

1.14

$

1.36

$

4.07

$

6.15

Dividends per share

$

0.12

$

0.10

$

0.48

$

0.40

Shares attributable to common stockholders:

Unrestricted common shares outstanding

84,757

83,755

84,757

83,755

Diluted common shares

84,849

84,106

85,034

84,153

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

86,630

85,834

86,630

85,834

Fully diluted shares 

86,722

86,185

86,907

86,232

Comprehensive income:

Net income

$

99,152

$

116,869

$

353,823

$

529,932

Other comprehensive income:

Change in fair value of investments, net of tax 

(14)

139

488

(278)

Total comprehensive income

$

99,138

$

117,008

$

354,311

$

529,654

 

CONDENSED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

(In thousands)

Cash flows from operating activities:

Net income

$

99,152

$

116,869

$

353,823

$

529,932

Adjustment to reconcile net income to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion

141,971

114,135

526,935

401,912

Deferred income taxes

57,568

68,636

208,216

357,622

Stock compensation, net

4,400

4,987

21,919

18,949

Derivative instruments, net

416

3,925

(245)

(3,611)

Loss on early extinguishment of debt

16,214

Changes in non-current assets and liabilities

(4,805)

699

3,125

4,418

Amortization of deferred financing costs and other, net

1,374

923

4,728

5,739

Changes in operating assets and liabilities:

(Increase) decrease in receivables, net

32,037

(16,403)

56,435

(48,632)

(Increase) decrease in other current assets

(4,554)

1,857

4,209

32,593

Increase (decrease) in accounts payable and accrued liabilities

29,057

25,124

(2,595)

(6,647)

Net cash provided by operating activities

356,616

320,752

1,192,764

1,292,275

Cash flows from investing activities:

Oil and gas expenditures

(480,965)

(409,483)

(1,662,707)

(1,562,159)

Sales of oil and gas assets

299,395

13,181

311,562

117,344

Sales of other assets

510

174

1,060

112,011

Other expenditures

(22,074)

(26,592)

(64,987)

(96,642)

Net cash used by investing activities

(203,134)

(422,720)

(1,415,072)

(1,429,446)

Cash flows from financing activities:

Net increase (decrease) in bank debt

(80,000)

55,000

(55,000)

55,000

Increase in other long-term debt

750,000

Decrease in other long-term debt

(363,595)

Financing costs incurred

(31)

(13,821)

(7,379)

Dividends paid

(10,378)

(8,583)

(39,577)

(32,581)

Issuance of common stock and other

1,023

828

11,433

10,411

Net cash provided by (used in) financing activities

(89,355)

47,214

289,440

25,451

Net change in cash and cash equivalents

64,127

(54,754)

67,132

(111,720)

Cash and cash equivalents at beginning of period

5,411

57,160

2,406

114,126

Cash and cash equivalents at end of period

$

69,538

$

2,406

$

69,538

$

2,406

 

CONDENSED BALANCE SHEETS (unaudited)

December 31,

December 31,

Assets

2012

2011

(In thousands, except share data)

Current assets:

Cash and cash equivalents

$

69,538

$

2,406

Receivables, net

302,974

359,409

Oil and gas well equipment and supplies

81,029

85,141

Deferred income taxes

8,477

2,723

Other current assets

8,119

8,216

Total current assets

470,137

457,895

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

Proved properties

11,258,748

9,933,517

Unproved properties and properties under development,

not being amortized

645,078

607,219

11,903,826

10,540,736

Less – accumulated depreciation, depletion and amortization

(6,899,057)

(6,414,528)

Net oil and gas properties

5,004,769

4,126,208

Fixed assets, net

152,605

118,215

Goodwill

620,232

620,232

Other assets, net

57,409

34,827

$

6,305,152

$

5,357,377

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

103,653

$

79,788

Accrued liabilities

392,909

385,651

Derivative instruments

245

Revenue payable

149,300

150,655

Total current liabilities

645,862

616,339

Long-term debt

750,000

405,000

Deferred income taxes

1,121,353

903,732

Other liabilities 

313,201

301,693

Total liabilities

2,830,416

2,226,764

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, 86,595,976 and 85,774,084 shares issued, respectively

866

858

Paid-in capital

1,939,628

1,908,506

Retained earnings

1,533,768

1,221,263

Accumulated other comprehensive income (loss)

474

(14)

3,474,736

3,130,613

$

6,305,152

$

5,357,377

 

SOURCE Cimarex Energy Co.



RELATED LINKS

http://www.cimarex.com