Cimarex Energy Reports Third-Quarter 2012 Results

Nov 02, 2012, 06:00 ET from Cimarex Energy Co.

DENVER, Nov. 2, 2012 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third-quarter 2012 net income of $84.3 million, or $0.97 per diluted share.  This compares to third-quarter 2011 earnings of $128.2 million, or $1.49 per diluted share. 

Third-quarter 2012 net income includes an unrealized non-cash loss on derivative instruments associated with 2012 oil hedges of $5.3 million, or $0.04 per share after-tax.  Third-quarter 2011 net income had an unrealized non-cash gain on derivative instruments associated with 2011 oil and gas hedges of $5.4 million, or $0.04 per share after-tax.

Third-quarter 2012 production volumes averaged an all-time high 635.1 million cubic feet equivalent (MMcfe), per day, a 7% increase as compared to third-quarter 2011 output of 592.0 MMcfe per day.  Oil production grew 23% to a record 32,456 barrels per day.  Permian Basin oil production grew 42% to 25,000 barrels per day.  Combined Permian and Mid-Continent third-quarter volumes averaged 598.8 MMcfe per day, growing 18% over the same period in 2011.  Total third-quarter 2012 production volumes were 51% gas, 31% oil and 18% natural gas liquids (NGL). 

Oil, gas and NGL revenue in the third quarter of 2012 totaled $397.4 million as compared to $419.7 million in the same period of 2011.  Third-quarter 2012 adjusted cash flow from operations was $291.2 million versus $356.8 million a year ago(1).    

The decrease in third-quarter revenues and cash flow is primarily a result of lower gas and NGL prices, partially offset by higher liquids production.  Third-quarter 2012 realized gas price fell 39% to $2.79 per thousand cubic feet (Mcf) and NGL prices dropped 34% to $28.55 per barrel, as compared to a year ago. Oil prices for the third quarter of 2012 averaged $88.18 per barrel flat with the third-quarter 2011 average price of $87.64 per barrel. 

For the nine months ended September 30, 2012, net income totaled $254.7 million, or $2.93 per diluted share, as compared to $413.1 million, or $4.79 per diluted share, for the first nine months of 2011.  Year-to-date through September 30, 2012 adjusted cash flow from operations totaled $834.6 million versus $1.0 billion for 2011(1). 

2012 Outlook Total Company fourth-quarter 2012 volumes are estimated to average 652-677 MMcfe/d, an 8-13% increase over fourth-quarter 2011.  Fourth-quarter 2012 Permian Basin and Mid-Continent (PB/MC) production is expected to average 622-642 MMcfe/d, an increase of 17-21% over fourth-quarter 2011. Gulf Coast volumes are estimated to average 30-35 MMcfe/d for fourth-quarter 2012. 

The resulting full-year 2012, total Company volumes are projected to average 620-626 MMcfe/d, 5-6% growth over 2011.  PB/MC 2012 production volumes are projected to average 581-585 MMcfe/d, growing 19-20% over 2011.  Gulf Coast volumes are expected to average 39-41 MMcfe/d for 2012.

Full-year 2012 exploration and development (E&D) capital investment is expected to be approximately $1.6 billion. E&D capital for the first nine months of 2011 totaled $1.2 billion.

Expenses for 2012 are expected to fall within the following ranges:

Expenses ($/Mcfe):

Production expense

$1.11 -  $1.16

Transportation expense

  0.25  -  0.30

DD&A and ARO accretion

  2.35  -  2.45

General and administrative expense

  0.25  -  0.30

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

 6.0%  -  6.5%

 

Other Long-term debt at September 30, 2012 was $830 million, comprised of $750 million 5.875% Senior Notes due in 2022 and $80 million of borrowings under its senior unsecured revolving credit facility. Debt to total capitalization ratio at quarter-end was 20% (4).  

Cimarex's hedge position is unchanged covering approximately 14,000 barrels of oil per day for the balance of 2012.  The following table summarizes the open hedge positions:

 

 Oil Contracts

Weighted Average Price

Period

Type

Daily Volume(2)

Index(3)

Floor

Ceiling

Months of  Oct.-Dec. 12

Collar

14,000

WTI

$

80.00

$

119.35

Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method.  Third-quarter 2012 had a non-cash mark-to-market loss of $5.3 million and no cash settlements.

Exploration and Development Activity Cimarex's drilling activities are 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 253 gross (138 net) wells during the first nine months of 2012, completing 97% as producers.  Exploration and development capital for the year has totaled $1.2 billion.  Of total expenditures, 52% were invested in projects located in the Permian Basin; 44% in the Mid-Continent area; and 4% in the Gulf Coast and other.

 

Wells Drilled and Completed by Region

For the Three Months

For the Nine Months

Ended September 30,

Ended September 30,

2012

2011

2012

2011

Gross wells

Permian Basin

37

35

131

106

Mid-Continent

55

42

119

128

Gulf Coast/Other

1

5

3

8

93

82

253

242

Net wells

Permian Basin

24

23

88

79

Mid-Continent

23

20

49

52

Gulf Coast/Other

0

5

1

7

47

48

138

138

% Gross wells completed as producers

99%

94%

97%

95%

 

At quarter-end 39 net wells were drilled and awaiting completion: 28 Mid-Continent and 11 Permian Basin.  Cimarex currently has 19 operated rigs running; 14 in the Permian Basin and five in the Mid-Continent.  

Permian Basin Cimarex drilled and completed 131 gross (88 net) Permian Basin wells during the first nine months of 2012, completing 96% as producers.  At quarter-end, 18 gross (11 net) wells were awaiting completion.  Drilling principally occurred in the Delaware Basin of Texas and southeast New Mexico, mainly targeting Bone Spring, Paddock and Wolfcamp formations.  Third-quarter 2012 Permian production averaged 274.5 MMcfe/d, an increase of 33% over third-quarter 2011, which included 42% growth in oil volumes to 25,000 barrels per day.

Year-to-date 2012 New Mexico Bone Spring wells drilled and completed totaled 48 gross (24 net).  Per-well 30-day gross production from the 2012 New Mexico Bone Spring wells averaged over 630 barrels equivalent (Boe) per day (86% oil).  Texas Third Bone Spring drilling totaled 28 gross (18 net) wells, which had per-well 30-day average gross production rates of over  1,000 barrels equivalent per day (80% 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 11 gross (10 net) horizontal Wolfcamp wells, bringing total wells in the play to 29 gross (27 net).  Per well first-30 day production rates on all the wells drilled to date have averaged 6.4 MMcfe/d, comprised of 2.8 MMcf/d gas, 275 barrels per day of oil and 330 barrels per day of NGLs (assuming full NGL recovery), or 43% gas, 26% oil and 31% NGL. 

Mid-Continent In the first nine months of 2012 Cimarex drilled and completed 119 gross (49 net) Mid-Continent wells.  At quarter-end, 64 gross (28 net) wells were awaiting completion.  Mid-Continent production averaged 324.3 MMcfe/d for the third quarter of 2012, a 7% increase over third-quarter 2011 average of 303.1 MMcfe/d. 

Essentially all this year's drilling activity has been in the Anadarko Basin, Cana-Woodford shale play, where Cimarex has drilled and completed 113 gross (47 net) wells. At September 30, 2012 there were 54 gross (24 net) Cana wells being completed or awaiting completion.  At year-end 2011 there were 13 gross (4.9 net) wells waiting on completion in Cana.  The increase in wells waiting on completion as compared to year-end is a result of commencing infill development drilling in 2012.

Since the Cana play began in late 2007, Cimarex has drilled or participated in 464 gross (177 net) wells.  Third-quarter 2012 net Cana production averaged 184.3 MMcfe/d, a 32% increase versus the third-quarter 2011 average of 139.2 MMcfe/d. 

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 35.1 MMcfe/d for the third quarter of 2012, a 57% decrease as compared to the third-quarter 2011 average of 81.8 MMcfe/d. 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 Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Gas (Mcf per day)

Permian Basin

79,502

76,872

78,007

72,150

Mid-Continent

224,009

209,459

218,411

197,688

Gulf Coast/Other

20,735

43,334

24,110

57,513

324,246

329,665

320,528

327,351

Oil (Barrels per day)

Permian Basin

25,000

17,578

22,839

15,977

Mid-Continent

6,120

5,720

5,802

5,641

Gulf Coast/Other

1,336

2,986

1,602

4,954

32,456

26,284

30,243

26,572

NGL (Barrels per day)

Permian Basin

7,501

3,921

6,523

3,231

Mid-Continent

10,598

9,885

9,934

8,866

Gulf Coast/Other

1,261

3,632

1,487

4,981

19,360

17,438

17,944

17,078

Total Equivalent (Mcfe per day)

Permian Basin

274,508

205,866

254,179

187,398

Mid-Continent

324,317

303,089

312,827

284,730

Gulf Coast/Other

36,318

83,045

42,644

117,127

635,143

592,000

609,650

589,255

 

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 # 37850869 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 # 37850869.  The listen-only web cast of the call will be accessible via 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 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) Adjusted cash flow from operations is a non-GAAP financial measure.  See below for a reconciliation of the related amounts.

(2) Average daily volume in barrels per day.

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

(4) Reconciliation of pro forma debt to total capitalization, which is a non-GAAP measure, is: pro forma long-term debt of $830 million divided by long-term debt of $830 million plus stockholders' equity of $3,377.9 million.

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

(in thousands)

Net cash provided by operating activities

$

261,216

$

332,432

$

836,148

$

971,523

Change in operating assets

    and liabilities

29,957

24,372

(1,509)

33,264

Adjusted cash flow from operations

$

291,173

$

356,804

$

834,639

$

1,004,787

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,

2012

2011

2012

2011

 Total gas production - Mcf 

29,830,627

30,329,145

87,824,541

89,366,754

 Gas volume - Mcf per day 

324,246

329,665

320,528

327,351

 Gas price - per Mcf  

$2.79

$4.57

$2.71

$4.59

 Total oil production - barrels 

2,985,956

2,418,141

8,286,503

7,254,247

 Oil volume - barrels per day 

32,456

26,284

30,243

26,572

 Oil price - per barrel 

$88.18

$87.64

$91.67

$93.08

 Total NGL production - barrels 

1,781,139

1,604,337

4,916,753

4,662,376

 NGL volume - barrels per day  

19,360

17,438

17,944

17,078

 NGL price - per barrel 

$28.55

$43.11

$31.35

$42.99

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

(in thousands)

Acquisitions:

Proved

$

$

12,439

$

$

21,604

Unproved

4,636

8,380

11,349

20,427

4,636

20,819

11,349

42,031

Exploration and development:

Land and Seismic

28,226

61,907

86,613

146,832

Exploration and development

389,989

360,733

1,120,740

1,032,794

418,215

422,640

1,207,353

1,179,626

Sale proceeds:

Proved

(10,894)

(83,709)

(11,079)

(102,192)

Unproved

(150)

(1,088)

(1,971)

(10,894)

(83,859)

(12,167)

(104,163)

$

411,957

$

359,600

$

1,206,535

$

1,117,494

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

(In thousands, except per share data)

Revenues:

Gas sales

$

83,208

$

138,631

$

238,102

$

410,331

Oil sales

263,315

211,928

759,609

675,239

NGL sales

50,860

69,169

154,160

200,428

Gas gathering, processing and other, net

9,529

14,081

31,199

41,620

406,912

433,809

1,183,070

1,327,618

Costs and expenses:

Depreciation, depletion, amortization and accretion

139,499

108,259

384,964

287,777

Production

62,699

62,333

192,818

181,558

Transportation

14,481

13,754

40,966

41,559

Gas gathering and processing

5,496

6,263

15,302

17,472

Taxes other than income

24,095

30,533

72,738

98,625

General and administrative

14,742

9,390

41,523

34,734

Stock compensation, net

8,301

4,595

17,519

13,962

(Gain) loss on derivative instruments, net

5,329

(7,120)

(661)

(11,353)

Other operating, net

2,236

2,379

7,295

8,095

276,878

230,386

772,464

672,429

Operating income

130,034

203,423

410,606

655,189

Other (income) and expense:

Interest expense 

12,191

7,278

32,852

22,192

Amortization of deferred financing costs

1,032

2,001

2,718

5,407

Capitalized interest

(9,231)

(7,253)

(26,154)

(21,830)

Loss on early extinguishment of debt

16,214

Other, net

(6,159)

(3,604)

(18,714)

(7,226)

Income before income tax

132,201

205,001

403,690

656,646

Income tax expense

47,939

76,849

149,019

243,583

Net income

$

84,262

$

128,152

$

254,671

$

413,063

Earnings per share to common stockholders:

Basic 

$

0.97

$

1.49

$

2.94

$

4.81

Diluted

$

0.97

$

1.49

$

2.93

$

4.79

Dividends per share

$

0.12

$

0.10

$

0.36

$

0.30

Shares attributable to common stockholders:

Unrestricted common shares outstanding

84,681

83,736

84,681

83,736

Diluted common shares

84,997

84,115

85,021

84,151

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

86,589

85,806

86,589

85,806

Fully diluted shares 

86,905

86,185

86,929

86,221

Comprehensive income:

Net income

$

84,262

$

128,152

$

254,671

$

413,063

Other comprehensive income:

Change in fair value of investments, net of tax 

238

(585)

502

(417)

Total comprehensive income

$

84,500

$

127,567

$

255,173

$

412,646

 

CONDENSED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

(In thousands)

Cash flows from operating activities:

Net income

$

84,262

$

128,152

$

254,671

$

413,063

Adjustment to reconcile net income to net cash 

provided by operating activities:

Depreciation, depletion, amortization and accretion

139,499

108,259

384,964

287,777

Deferred income taxes

49,568

120,930

150,648

288,986

Stock compensation, net

8,301

4,595

17,519

13,962

Derivative instruments, net

5,329

(5,373)

(661)

(7,536)

Loss on early extinguishment of debt

16,214

Changes in non-current assets and liabilities

2,815

(840)

7,930

3,719

Amortization of deferred financing costs and other, net

1,399

1,081

3,354

4,816

Changes in operating assets and liabilities:

(Increase) decrease in receivables, net

(83,436)

(49,778)

24,398

(32,229)

Decrease in other current assets

13,673

40,430

8,763

30,736

Increase (decrease) in accounts payable and accrued liabilities

39,806

(15,024)

(31,652)

(31,771)

Net cash provided by operating activities

261,216

332,432

836,148

971,523

Cash flows from investing activities:

Oil and gas expenditures

(423,134)

(453,375)

(1,181,742)

(1,152,676)

Sales of oil and gas assets

10,894

83,859

12,167

104,163

Sales of other assets

142

111,495

550

111,837

Other expenditures

(16,826)

(17,161)

(42,913)

(70,050)

Net cash used by investing activities

(428,924)

(275,182)

(1,211,938)

(1,006,726)

Cash flows from financing activities:

Net increase in bank debt

80,000

25,000

Increase in other long-term debt

750,000

Decrease in other long-term debt

(363,595)

Financing costs incurred

(1,129)

(7,248)

(13,821)

(7,348)

Dividends paid

(10,330)

(8,583)

(29,199)

(23,998)

Issuance of common stock and other

7,646

2,591

10,410

9,583

Net cash provided by (used in) financing activities

76,187

(13,240)

378,795

(21,763)

Net change in cash and cash equivalents

(91,521)

44,010

3,005

(56,966)

Cash and cash equivalents at beginning of period

96,932

13,150

2,406

114,126

Cash and cash equivalents at end of period

$

5,411

$

57,160

$

5,411

$

57,160

 

CONDENSED BALANCE SHEETS (unaudited)

September 30,

December 31,

Assets

2012

2011

(In thousands, except share data)

Current assets:

Cash and cash equivalents

$

5,411

$

2,406

Receivables, net

335,011

359,409

Oil and gas well equipment and supplies

77,879

85,141

Deferred income taxes

2,126

2,723

Derivative instruments

416

Other current assets

6,715

8,216

Total current assets

427,558

457,895

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

Proved properties

11,116,783

9,933,517

Unproved properties and properties under development,

not being amortized

661,626

607,219

11,778,409

10,540,736

Less – accumulated depreciation, depletion and amortization

(6,767,943)

(6,414,528)

Net oil and gas properties

5,010,466

4,126,208

Fixed assets, net

134,776

118,215

Goodwill

691,432

691,432

Other assets, net

49,023

34,827

$

6,313,255

$

5,428,577

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

64,988

$

79,788

Accrued liabilities

434,966

385,651

Derivative instruments

245

Revenue payable

151,798

150,655

Total current liabilities

651,752

616,339

Long-term debt

830,000

405,000

Deferred income taxes

1,128,642

974,932

Other liabilities 

324,914

301,693

Total liabilities

2,935,308

2,297,964

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,

86,540,753 and 85,774,084 shares issued, respectively

865

858

Paid-in capital

1,931,583

1,908,506

Retained earnings

1,445,011

1,221,263

Accumulated other comprehensive income (loss)

488

(14)

3,377,947

3,130,613

$

6,313,255

$

5,428,577

 

SOURCE Cimarex Energy Co.



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