Cimarex Reports Fourth-Quarter 2009 Net Income of $104.6 Million and Updates 2010 Production Guidance
DENVER, Feb. 17 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC) today reported fourth-quarter 2009 net income of $104.6 million, or $1.23 per diluted share. A year ago, Cimarex had a fourth-quarter loss of $1.06 billion, or $13.01 per share. Fourth-quarter 2008 results included a $1.0 billion after-tax full-cost ceiling test write-down and a $68.3 million after-tax litigation charge.
Revenues from oil and gas sales in the fourth quarter of 2009 were $313.5 million, a 10% increase compared to $285.3 million in the same period of 2008. Fourth-quarter 2009 cash flow from operations totaled $186.0 million versus $261.8 million in the same period of 2008(1).
The increase in fourth-quarter 2009 revenues is primarily a result of higher oil and gas prices. Fourth-quarter 2009 gas prices increased 5% to $5.30 per thousand cubic feet (Mcf) and oil improved 29% to $72.27 per barrel from the same period of 2008.
Fourth-quarter 2009 oil and gas production averaged 467.6 million cubic feet equivalent per day (MMcfe/d), comprised of 330.0 million cubic feet of gas and 22,935 barrels of oil.
Fourth-quarter 2009 production grew 6% sequentially from the third-quarter 2009 average of 441.5 MMcfe/d but fell 5% as compared to the fourth-quarter 2008 average of 493.7 MMcfe/d. Production rate fluctuations reflect the reduction and then increase in operated drilling rigs and successful Gulf Coast exploration. Cimarex's fourth-quarter 2008 operated rig count averaged 31, then was reduced to three rigs in the first quarter of 2009 and averaged 12 by the fourth quarter of 2009.
For the year-ended December 31, 2009, Cimarex had a net loss of $311.9 million, or $3.82 per share, as compared to a loss of $915.2 million, or $11.22 per share, for 2008. The net loss for 2009 and 2008 include full-cost ceiling test write-downs of $502 million (after-tax) and $1.4 billion (after-tax), respectively.
Capital
Fourth-quarter 2009 exploration and development (E&D) capital totaled $157.5 million, down from $352.6 million in the fourth quarter of 2008. Full-year 2009 E&D capital expenditures were $524.4 million versus $1.4 billion during 2008. Cimarex drilled and completed 110 gross (67 net) wells during 2009 as compared to 450 gross (277 net) wells in 2008.
Proved Reserves
Year-end 2009 proved reserves grew 15% to 1.53 trillion cubic feet equivalent (Tcfe) from 1.34 Tcfe at year-end 2008. Proved reserves are 77% developed at year-end 2009 as compared to 82% at year-end 2008. Reserves added from extensions, discoveries & improved recoveries totaled 312 billion cubic feet equivalent (Bcfe), replacing 185% of production. Proved reserves of 25 Bcfe were sold in 2009. Revisions to previous estimates added 73.9 Bcfe, comprised of 104.7 Bcfe from positive performance and reductions in operating costs, offset by 30.8 Bcfe from lower prices.
Other
Cimarex's oil and natural gas hedge contracts for calendar 2010 cover on average 11,000 barrels of oil per day and 160,000 MMBtu of gas per day. The following tables summarize the current commodity hedge position:
Natural Gas Contracts
---------------------
Weighted Average Price
----------------------
Period Type Volume(2) Index(3) Floor Ceiling Swap
------ ---- --------- -------- ----- ------- ----
Jan 10 - Dec 10 Collar 100,000 PEPL $5.00 $6.62 $ -
Jan 10 - Dec 10 Swap 40,000 PEPL $ - $ - $5.18
Jan 10 - Dec 10 Collar 20,000 HSC $5.00 $6.85 $ -
------
160,000
Oil Contracts
-------------
Weighted Average Price
----------------------
Period Type Volume(2) Index(3) Floor Ceiling Put
------ ---- --------- -------- ----- ------- ---
Jan 10 – Dec 10 Collar 10,000 WTI $60.03 $92.07 $ -
Jan 10 – Dec 10 Floor/ Put 1,000 WTI $ - $ - $60.00
-----
11,000
Cimarex accounts for these commodity contracts using the mark-to-market accounting method.
Total long-term debt at December 31, 2009 was $392.8 million. Bank borrowings decreased $195 million from year-end 2008. The reduction was funded from non-core property sales, tax refunds, lower capital spending relative to cash flow and a net positive working capital change. Cimarex's year-end 2009 debt to total capitalization ratio was 16% (4).
Outlook
Due to acceleration of production in southeast Texas and the Cana-Woodford shale play we are revising upward our February 8, 2010 production guidance. First-quarter 2010 production is now projected to be in the range of 560-575 MMcfe/d. Full-year 2010 production is projected to be in the range of 540-570 MMcfe/d, or a 17-23% increase over 2009.
Full-year 2010 exploration and development (E&D) capital investment is targeted to be generally within cash flow. At the present time, based on current market prices and service costs, we would expect that 2010 capital expenditures may range from $700-$900 million. We have a large inventory of drilling opportunities and limited lease expirations.
Expenses for 2010 are expected to fall within the following ranges:
Expenses ($/Mcfe):
Production expense $0.90 - $1.10
Transportation expense 0.19 - 0.24
DD&A and ARO accretion 1.50 - 1.80
General and administrative expense 0.24 - 0.30
Taxes other than income (% of oil and gas revenue) 7.5% - 8.5%
Investor Presentation
For more details on Cimarex's full-year 2009 financial and operating results, please refer to the year-end investor presentation available at www.cimarex.com on the Investor Relations-Presentation page.
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 (800) 921-0061 and reference call ID # 52139473 ten minutes before the scheduled start time. A digital replay will be available for one week following the live broadcast at (800) 642-1687 and by using the conference ID # 52139473. The listen-only web cast of the call will be accessible via www.cimarex.com.
(1) Cash flow from operations is a non-GAAP financial measure. See below for a reconciliation of the related amounts. |
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(2) Gas volume in MMBtu per day and oil volume in barrels per day. |
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(3) PEPL refers to Panhandle Eastern Pipe Line, Tex/Ok Mid-Continent index and HSC stands for Houston Ship Channel Gulf Coast index both as quoted in Platt's Inside FERC. WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange. |
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(4) Reconciliation of debt to total capitalization, which is a non-GAAP measure, is: long-term debt of $392.8 million divided by long-term debt of $392.8 million plus stockholders' equity of $2,038 million. |
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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, Permian Basin and Gulf Coast 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.
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands) (In thousands)
Net cash provided by operating
activities $209,531 $226,779 $675,177 $1,367,488
Change in operating assets
and liabilities (23,484) 35,047 (16,696) 75,731
------- ------ ------- ------
Cash flow from operations $186,047 $261,826 $658,481 $1,443,219
======== ======== ======== ==========
Management believes that the non-GAAP measure of 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. 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 For the Twelve
Months Ended Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Total gas production -
Mcf 30,363,066 32,226,065 117,967,685 127,443,682
Gas volume - Mcf per day 330,033 350,283 323,199 348,207
Gas price - per Mcf
(before hedge effect) $5.30 $4.69 $4.12 $8.34
Effect of hedges $0.00 $0.35 $0.00 $0.09
Gas price - per Mcf $5.30 $5.04 $4.12 $8.43
Total oil production -
barrels 2,110,041 2,199,414 8,498,377 8,394,937
Oil volume - barrels per
day 22,935 23,907 23,283 22,937
Oil price - per barrel $72.27 $55.96 $56.13 $96.03
PROVED RESERVES
Gas Oil Total
(Bcf) (MBbls) (Bcfe)
----- ------- ------
December 31, 2008 1,067.3 45,202 1,338.5
Revisions of previous estimates 6.7 11,201 73.9
Extensions, discoveries, and improved
recovery 229.7 13,770 312.3
Purchase of reserves 2.1 300 3.9
Production (118.0) (8,498) (169.0)
Sale of properties (1.2) (3,958) (24.9)
---- ------ -----
December 31, 2009 1,186.6 58,017 1,534.7
======= ====== =======
Proved developed - December 31, 2009 865.7 53,889 1,189.0
===== ====== =======
PROVED RESERVES BY REGION
Gas Oil Total
(Bcf) (MBbls) (Bcfe)
----- ------- ------
Mid-Continent 665.2 10,869 730.4
Permian Basin 235.7 41,938 487.3
Gulf Coast 75.0 5,170 106.0
Wyoming/Other 210.7 40 211.0
----- ---- -----
1,186.6 58,017 1,534.7
======= ====== =======
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands) (In thousands)
Acquisitions:
Proved $13,056 $5,129 $13,530 $6,618
Unproved* 400 175,777 (9,915) 175,777
----- ------- ------ -------
13,456 180,906 3,615 182,395
Exploration and development:
Land and Seismic 14,394 47,792 48,466 157,403
Exploration and development 143,116 304,797 475,960 1,280,980
------- ------- ------- ---------
157,510 352,589 524,426 1,438,383
Sale proceeds:
Proved (80,078) (38,093) (105,349) (38,093)
Unproved (1,025) - (4,059) -
------ ------ ------ ------
(81,103) (38,093) (109,408) (38,093)
------- -------- -------- ----------
$89,863 $495,402 $418,633 $1,582,685
======= ======== ======== ==========
* The negative balance reflects purchase price adjustments related to an
acreage acquisition in the fourth quarter of 2008.
CONDENSED STATEMENTS OF OPERATIONS (unaudited)
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
-------------------- ---------------------
2009 2008 (1) 2009 2008 (1)
---- -------- ------ ---------
(In thousands, except per share data)
Revenues:
Gas sales $161,010 $162,262 $485,448 $1,074,705
Oil sales 152,488 123,077 476,995 806,186
Gas gathering,
processing and
other 15,598 14,023 46,763 87,757
Gas marketing,
net (300) (526) 588 1,699
---- ----- ----- -------
328,796 298,836 1,009,794 1,970,347
------- ------- --------- ---------
Costs and expenses:
Impairment of
oil and gas
properties - 1,585,775 791,137 2,242,921
Depreciation,
depletion,
amortization
and accretion 63,556 144,577 278,012 556,200
Production 39,088 62,230 178,215 218,736
Transportation 8,525 8,556 33,758 38,107
Gas gathering
and processing 6,213 8,051 20,560 43,838
Taxes other
than income 25,109 21,037 75,634 130,490
General and
administrative 11,921 6,663 41,724 44,500
Stock compensation,
net 2,423 2,658 9,254 10,090
(Gain) loss on
derivative
instruments, net (4,554) - 13,059 -
Other
operating, net 5,169 113,441 24,263 126,433
------- ------- ------- --------
157,450 1,952,988 1,465,616 3,411,315
------- --------- --------- ---------
Operating income
(loss) 171,346 (1,654,152) (455,822) (1,440,968)
Other (income)
and expense:
Interest expense 7,874 8,020 34,428 31,963
Amortization of
deferred
financing costs 1,759 274 5,349 1,116
Capitalized
interest (7,178) (7,178) (23,408) (22,108)
Loss on early
extinguishment
of debt - 10,058 - 10,058
Other, net 4,663 6,262 16,290 (10,348)
------ ------- ------- --------
Income (loss)
before income tax 164,228 (1,671,588) (488,481) (1,451,649)
Income tax
expense (benefit) 59,583 (610,215) (176,538) (536,404)
------ --------- -------- ---------
Net income (loss) $104,645 $(1,061,373) $(311,943) $(915,245)
======== =========== ========= =========
Earnings (loss)
per share to
common
stockholders (2):
Basic $1.24 $(13.01) $(3.82) $(11.22)
===== ======= ====== =======
Diluted $1.23 $(13.01) $(3.82) $(11.22)
===== ======= ====== =======
Dividends per share $0.06 $0.06 $0.24 $0.24
===== ===== ===== =====
Shares attributable
to common
stockholders:
Common shares
outstanding 81,815 81,587 81,815 81,587
====== ====== ====== ======
Diluted common
shares
outstanding 82,562 81,587 81,815 81,587
====== ====== ====== ======
(1) Effective January 1, 2009, we adopted a new rule promulgated by the
Financial Accounting Standards Board (FASB) pertaining to the
accounting treatment for convertible debt instruments that may be
settled in cash upon conversion. The requirements are to be applied
retrospectively to previously issued convertible instruments. These
changes resulted in additional non-cash interest expense of
approximately $0.33 million and $1.7 million applied retrospectively
to the fourth quarter of 2008 and twelve months of 2008, respectively.
In addition, we had previously reported a $9.6 million gain on early
extinguishment of debt which was recast as a $10.1 million loss on
early extinguishment of debt for the fourth quarter of 2008. Long-
term debt at December 31, 2008 was decreased by $3.6 million, deferred
income tax liability increased by $1.3 million and stockholder's
equity increased by $2.3 million.
(2) Effective January 1, 2009, we adopted a new rule promulgated by the
FASB which defines when certain share based payment awards are to be
treated as participating securities in the calculation of earnings per
share. The rule requires qualifying awards to be included in computing
earnings per share using the two-class earnings allocation method and
is to be applied retrospectively to prior periods. Under the two-
class earnings allocation method, earnings available to common
stockholders do not include earnings attributable to unvested
restricted stock and stock units, which are considered participating
securities. Shares attributed to common stockholders do not include
outstanding restricted stock. Neither potential common shares nor
participating securities are included in the diluted computations when
a loss from continuing operations exists. For complete details of the
earnings per share calculation, please refer to our annual financial
statements, filed with the SEC on Form 10-K and posted on our website.
CONDENSED CASH FLOW STATEMENTS (unaudited)
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
-------------------- ---------------------
2009 2008 (1) 2009 2008 (1)
---- -------- ---- --------
(In thousands) (In thousands)
Cash flows from
operating activities:
Net income (loss) $104,645 $(1,061,373) $(311,943) $(915,245)
Adjustment to reconcile
net income (loss)
to net cash provided by
operating activities:
Impairments 1,224 1,602,541 806,039 2,259,687
Depreciation, depletion,
amortization and
accretion 63,556 144,577 278,012 556,200
Deferred income
taxes 55,832 (563,753) (164,760) (602,593)
Stock compensation,
net 2,423 2,658 9,254 10,090
Derivative instruments,
net (6,704) - 14,453 -
Gain on liquidation of
equity investees - (39) - (39)
Changes in non-current
assets and liabilities (39,725) 122,677 8,948 119,562
Amortization of deferred
financing costs
and other, net 4,796 14,538 18,478 15,557
Changes in operating assets
and liabilities:
(Increase) decrease in
receivables, net (54,163) 77,007 29,881 56,245
(Increase) decrease in
other current assets 32,490 (95,553) 49,894 (155,222)
Increase (decrease) in
accounts payable and
accrued liabilities 45,157 (16,501) (63,079) 23,246
------- ------- ------- ---------
Net cash provided by
operating activities 209,531 226,779 675,177 1,367,488
------- ------- ------- ---------
Cash flows from investing
activities:
Oil and gas expenditures (145,200) (568,056) (535,308) (1,594,775)
Sales of oil and gas and
other assets 81,179 38,662 119,735 39,096
Distributions received
from equity investees - 39 - 39
Sales of short-term
investments - 1,391 3,328 10,679
Other expenditures (10,718) (8,504) (31,849) (51,757)
------- ------- ------- ---------
Net cash used by
investing activities (74,739) (536,468) (444,094) (1,596,718)
------- ------- ------- ---------
Cash flows from financing
activities:
Net increase (decrease)
in bank debt (131,000) 220,000 (195,000) 220,000
Decrease in other
long-term debt - (105,550) - (105,550)
Financing costs incurred (6) (108) (18,001) (158)
Dividends paid (5,049) (5,033) (20,172) (20,040)
Issuance of common stock
and other 845 210 3,421 13,141
------- ------- ------- ---------
Net cash provided by
(used in) financing
activities (135,210) 109,519 (229,752) 107,393
------- ------- ------- ---------
Net change in cash and
cash equivalents (418) (200,170) 1,331 (121,837)
Cash and cash equivalents
at beginning of period 2,962 201,383 1,213 123,050
------- ------- ------- ---------
Cash and cash equivalents
at end of period $2,544 $1,213 $2,544 $1,213
======= ======= ======= =========
(1) Effective January 1, 2009, we adopted a new rule promulgated by the
Financial Accounting Standards Board (FASB) pertaining to the
accounting treatment for convertible debt instruments that may be
settled in cash upon conversion. The requirements are to be applied
retrospectively to previously issued convertible instruments. These
changes resulted in additional non-cash interest expense of
approximately $0.33 million and $1.7 million applied retrospectively
to the fourth quarter of 2008 and twelve months of 2008, respectively.
In addition, we had previously reported a $9.6 million gain on early
extinguishment of debt which was recast as a $10.1 million loss on
early extinguishment of debt for the fourth quarter of 2008. Long-
term debt at December 31, 2008 was decreased by $3.6 million, deferred
income tax liability increased by $1.3 million and stockholder's
equity increased by $2.3 million.
BALANCE SHEETS (unaudited)
December 31, December 31,
Assets 2009 2008 (1)
---- --------
(In thousands, except
share data)
Current assets:
Cash and cash equivalents $2,544 $1,213
Restricted cash 593 502
Short-term investments - 2,502
Receivables, net 227,896 259,082
Oil and gas well equipment and supplies 145,153 186,062
Deferred income taxes 15,837 2,435
Derivative instruments 1,238 -
Other current assets 13,997 63,148
------- -------
Total current assets 407,258 514,944
------- -------
Oil and gas properties at cost, using
the full cost method of accounting:
Proved properties 7,549,861 7,052,464
Unproved properties and properties
under development, not being amortized 399,724 465,638
--------- ---------
7,949,585 7,518,102
Less – accumulated depreciation,
depletion and amortization (5,764,669) (4,709,597)
---------- ----------
Net oil and gas properties 2,184,916 2,808,505
----------- -----------
Fixed assets, net 127,237 119,616
Goodwill 691,432 691,432
Other assets, net 33,694 30,436
-------- --------
$3,444,537 $4,164,933
========== ==========
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $30,214 $101,157
Accrued liabilities 235,815 263,994
Derivative instruments 13,902 -
Revenue payable 108,832 104,438
------- -------
Total current liabilities 388,763 469,589
------- -------
Long-term debt 392,793 587,630
------- -------
Deferred income taxes 348,897 500,945
------- -------
Other liabilities 275,978 255,122
------- -------
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,
83,541,995 and 84,144,024 shares
issued, respectively 835 841
Treasury stock, at cost, zero and 885,392
shares held, respectively - (33,344)
Paid-in capital 1,859,255 1,874,834
Retained earnings 178,035 510,271
Accumulated other comprehensive loss (19) (955)
-------- --------
2,038,106 2,351,647
--------- ---------
$3,444,537 $4,164,933
========== ==========
(1) Effective January 1, 2009, we adopted a new rule promulgated by the
Financial Accounting Standards Board (FASB) pertaining to the
accounting treatment for convertible debt instruments that may be
settled in cash upon conversion. The requirements are to be applied
retrospectively to previously issued convertible instruments. These
changes resulted in additional non-cash interest expense of
approximately $0.33 million and $1.7 million applied retrospectively
to the fourth quarter of 2008 and twelve months of 2008, respectively.
In addition, we had previously reported a $9.6 million gain on early
extinguishment of debt which was recast as a $10.1 million loss on
early extinguishment of debt for the fourth quarter of 2008. Long-
term debt at December 31, 2008 was decreased by $3.6 million, deferred
income tax liability increased by $1.3 million and stockholder's
equity increased by $2.3 million.
SOURCE Cimarex Energy Co.
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