Cimarex Reports Second Quarter 2014 Results

Production of 839 MMcfe per day; Up 22% Year-over-Year

Aug 05, 2014, 16:19 ET from Cimarex Energy Co.

DENVER, Aug. 5, 2014 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported second quarter 2014 net income of $148.6 million, or $1.70 per diluted share.   This compares to 2013 second quarter net income of $129.6 million, or $1.49 per diluted share.  Adjusted 2014 second quarter net income was $1.71 per diluted share(1).  Production volumes averaged 839 million cubic feet equivalent (MMcfe) per day in the quarter, a 22 percent increase over second quarter 2013 output of 687 MMcfe per day.  Oil production grew 13 percent over the same period last year to 41,759 barrels per day. Permian oil volumes were 33,317 barrels per day.  Natural gas production increased 20 percent over last year to 410 MMcf per day.  Cimarex reported NGL volumes of 29,680 barrels per day up 43 percent from 2013 levels as a result of more Permian Basin gas being fully processed.  Second quarter 2014 production volumes were 49 percent natural gas, 30 percent oil and 21 percent NGL. 

Growth in production and higher product prices resulted in revenues of $622.9 million in the second quarter of 2014 compared to $483.3 million in the same period of 2013.  Second quarter 2014 adjusted cash flow from operations was $443.1 million versus $346.3 million a year ago(1).      

Natural gas prices averaged $4.62 per thousand cubic feet (Mcf) in the quarter, up 13 percent year-over-year.  Oil prices averaged $93.39 per barrel, up three percent from a year ago and NGL prices averaged $35.35 per barrel.

Long-term debt at June 30, 2014, consisted of $1.5 billion of senior notes.  Cimarex had no borrowings under its senior unsecured revolving credit facility and had a cash balance of $129 million.  Debt to total capitalization at June 30 was 26 percent(2)

2014 Outlook

Cimarex estimates 2014 production to average 860-875 MMcfe per day, a mid-point increase of 25 percent over 2013.  Oil volumes are projected to grow 22-25 percent year-over-year.  Third quarter 2014 volumes are projected to average 920-945 MMcfe per day. 

Capital investment in exploration and development is now expected to be $1.95 billion due to slightly higher activity levels in the Mid-Continent.

Expenses per Mcfe of production for 2014 are estimated to be:

Production expense

$1.12 -  $1.17

Transportation, processing and other expense

  0.65  -  0.68

DD&A and ARO accretion

  2.60  -  2.70

General and administrative expense

  0.25  -  0.28

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

   5.5  -  5.9%

Cimarex invested $498 million on exploration and development during the second quarter, bringing the total invested year-to-date to $964 million.   The Permian Basin accounted for 71 percent of the capital investment in the first half of 2014 with the Mid-Continent representing the remainder.  The company also purchased assets in the Cana-Woodford area for $238 million during the quarter.

Cimarex drilled a total of 85 gross (51 net) wells during the quarter. At quarter-end, 46 gross (25 net) wells were awaiting completion.

 

WELLS DRILLED AND COMPLETED BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Gross wells

Permian Basin

47

55

81

90

Mid-Continent

37

35

76

87

Other

1

2

2

2

85

92

159

179

Net wells

Permian Basin

30

32

51

59

Mid-Continent

21

15

35

35

Other

-

1

1

1

51

48

87

95

% Gross wells completed as producers

99%

97%

99%

98%

Permian Basin Update

Production from the Permian Basin averaged 393.3 MMcfe per day in the second quarter, an increase of 23 percent over second quarter 2013 and a 13 percent increase sequentially.  Quarterly oil volumes increased 11 percent year-over-year to 33,317 barrels per day and accounted for 51 percent of the region's total production for the quarter.

Cimarex drilled and completed 47 gross (30 net) Permian Basin wells during the second quarter, bringing the total for 2014 to 81 gross wells (51 net).  At June 30, 22 gross (18 net) wells were awaiting completion. 

Year-to-date, 32 gross (15 net) New Mexico Bone Spring wells have been drilled and completed.  Per well first 30-day average gross production from the Cimarex-operated wells averaged approximately 905 barrels of oil equivalent (BOE) per day (79 percent oil).  Year-to-date Ward County, Texas, Third Bone Spring drilling totaled seven gross (five net) wells with per well first 30-day average gross production rates of approximately 1,034 BOE per day (75 percent oil) from Cimarex-operated wells.  Culberson County Bone Spring wells total nine gross (five net) year-to-date with per well first 30-day average gross production rates of approximately 1,170 BOE per day (60 percent oil).

In the Wolfcamp play, Cimarex continues to drill horizontal wells in multiple benches throughout its acreage in Culberson, Reeves and Ward Counties.   In the second quarter, the company drilled and completed 26 gross (21 net) Wolfcamp wells including four long laterals to the Wolfcamp D in Culberson County.  Of note, Cimarex has completed and is now producing from three of the four downspacing pilots begun in 2014. 

Mid-Continent Update

Mid-Continent production averaged 425.5 MMcfe per day for the second quarter of 2014, a 24 percent increase over the second quarter 2013 average of 343.2 MMcfe per day.  The Cana-Woodford area represented 309.7 MMcfe per day, or 73 percent of Mid-Continent production in the second quarter.  Year-to-date Cimarex has drilled and completed 76 gross (35 net) wells in the region, 60 gross (31 net) of which were in the Cana-Woodford shale play.  At June 30, 24 gross (7.5 net) wells were awaiting completion.   

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

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Gas (MMcf per day)

Permian Basin

123.6

96.3

113.1

89.6

Mid-Continent

276.6

231.5

260.3

233.8

Other

9.9

13.5

9.4

13.7

410.1

341.3

382.8

337.1

Oil (Bbls per day)

Permian Basin

33,317

30,137

32,475

27,997

Mid-Continent

7,259

5,745

6,662

6,017

Other

1,183

996

1,334

1,012

41,759

36,878

40,471

35,026

NGL (Bbls per day)

Permian Basin

11,633

7,079

10,386

6,661

Mid-Continent

17,543

12,881

16,376

13,658

Other

504

745

605

812

29,680

20,705

27,367

21,131

Total Equivalent (MMcfe per day)

Permian Basin

393.3

319.6

370.3

297.5

Mid-Continent

425.5

343.2

398.5

351.9

Other

19.9

24.0

21.1

24.6

838.7

686.8

789.9

674.0

Other

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

Oil Contracts

Weighted Ave. Price

Period

Type

Bbl/day

Index(3)

Floor

Ceiling

July 14  – Dec. 14

Collar

12,000

WTI

$

85.00

$

103.47

 

Gas Contracts

Weighted Ave. Price

Period

Type

MMBTU/day

Index(3)

Floor

Ceiling

July 14  – Dec. 14

Collar

80,000

PEPL

$

3.51

$

4.57

July 14  – Dec. 14

Collar

60,000

PermEP

$

3.62

$

4.50

 

Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method.  Cash settlements on oil and natural gas collars resulted in payments of $1.0 million and $5.8 million related to the second quarter and year-to-date, respectively.

Conference Call and Webcast

Cimarex will host a conference call tomorrow, August 6, 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 877-870-4263 five minutes before the scheduled start time (international callers dial 412-317-0790).  A replay will be available for one week following the call by dialing 877-344-7529 (international callers dial 412-317-0088); conference I.D. 10047717.  The replay will also be available on the company's website or via the Cimarex App. 

Investor Presentation

For more details, please refer to the company's updated investor presentation available on the Cimarex website at www.cimarex.com.

About Cimarex Energy Co.

Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production company with principal operating 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 "2014 Outlook", which contains projections for certain 2014 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, 2013, 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 concentrated geographic areas; 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)

Adjusted net income and adjusted cash flow from operations are non-GAAP financial measures.  See the tables 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 $1,500 million divided by long-term debt of $1,500 million plus stockholders' equity of $4,287 million.

(3)

WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange. PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index and PermEp is El Paso Permian Basin index both as quoted in Platt's Inside FERC.

 

RECONCILIATION OF ADJUSTED NET INCOME

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

(in thousands, net of tax, except per share data)

Net income

$

148,640

$

129,565

$

287,097

$

219,492

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

904

(7,926)

7,790

(6,463)

Adjusted net income

$

149,544

$

121,639

$

294,887

$

213,029

Diluted earnings per share *

$

1.70

$

1.49

$

3.29

$

2.53

Adjusted diluted earnings per share *

$

1.71

$

1.40

$

3.38

$

2.46

Diluted shares attributable to common stockholders and participating securities

87,188

86,624

87,178

86,613

Estimated tax rates utilized

37.1%

37.2%

37.1%

37.2%

Adjusted net income and adjusted diluted earnings per share excludes the noted item because management believes this item affects 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 operational trends and performance relative to other oil and gas exploration and production companies.

b) Adjusted net income is more comparable to earnings estimates provided by research analysts.

* Earnings per share are based on actual figures rather than the rounded figures presented.

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

(in thousands)

Net cash provided by operating activities

$

421,745

$

322,708

$

769,769

$

569,786

Change in operating assets and liabilities

21,367

23,601

82,235

68,944

Adjusted cash flow from operations

$

443,112

$

346,309

$

852,004

$

638,730

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 Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Gas:

 Total production (MMcf) 

37,318

31,054

69,291

61,006

 Daily production (MMcf) 

410

341

383

337

 Price (per Mcf) 

$

4.62

$

4.08

$

4.94

$

3.73

Oil:

 Total production (Bbls) 

3,800,098

3,355,922

7,325,227

6,339,760

 Daily production (Bbls) 

41,759

36,878

40,471

35,026

 Price (per Bbl) 

$

93.39

$

90.72

$

92.82

$

88.65

 NGLs: 

 Total production (Bbls) 

2,700,915

1,884,189

4,953,394

3,824,763

 Daily production (Bbls) 

29,680

20,705

27,367

21,131

 Price (per Bbl) 

$

35.35

$

27.76

$

37.43

$

28.55

 

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

(in thousands)

Acquisitions:

Proved

$

144,516

$

923

$

144,516

$

923

Unproved

114,732

3,415

114,732

3,665

259,248

4,338

259,248

4,588

Exploration and development:

Land and Seismic

43,869

36,719

109,194

68,029

Exploration and development

453,714

353,594

855,175

730,891

497,583

390,313

964,369

798,920

Sale proceeds:

Proved

(464)

(37,061)

(223)

(37,879)

Unproved

(900)

(960)

(900)

(1,041)

(1,364)

(38,021)

(1,123)

(38,920)

$

755,467

$

356,630

$

1,222,494

$

764,588

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

(in thousands, except per share data)

Revenues:

Gas sales

$

172,503

$

126,547

$

342,600

$

227,668

Oil sales

354,882

304,466

679,953

561,998

NGL sales

95,470

52,309

185,427

109,184

Gas gathering and other, net

13,814

10,435

27,905

21,263

636,669

493,757

1,235,885

920,113

Costs and expenses:

Depreciation, depletion, amortization and accretion

198,639

150,115

375,788

288,952

Production

86,085

69,433

161,226

138,819

Transportation, processing, and other operating

46,478

22,022

90,726

40,656

Gas gathering and other

10,041

5,184

18,825

11,340

Taxes other than income

32,323

27,807

65,944

52,935

General and administrative

16,571

22,836

37,283

38,413

Stock compensation

3,548

3,507

7,272

7,112

(Gain) loss on derivative instruments, net

2,454

(13,660)

18,189

(12,057)

Other operating, net

112

2,365

215

5,297

396,251

289,609

775,468

571,467

Operating income

240,418

204,148

460,417

348,646

Other (income) and expense:

Interest expense 

15,729

13,097

28,773

25,283

Amortization of deferred financing costs

995

1,015

1,993

2,035

Capitalized interest

(8,575)

(7,387)

(15,865)

(16,582)

Other, net

(4,129)

(8,758)

(11,084)

(11,374)

Income before income tax

236,398

206,181

456,600

349,284

Income tax expense

87,758

76,616

169,503

129,792

Net income

$

148,640

$

129,565

$

287,097

$

219,492

Earnings per share to common stockholders:

Basic 

$

1.71

$

1.50

$

3.30

$

2.54

Diluted

$

1.70

$

1.49

$

3.29

$

2.53

Dividends per share

$

0.16

$

0.14

$

0.32

$

0.28

Shares attributable to common stockholders:

Unrestricted common shares outstanding

85,532

84,942

85,532

84,942

Diluted common shares

85,689

85,054

85,679

85,043

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

87,031

86,512

87,031

86,512

Fully diluted shares 

87,188

86,624

87,178

86,613

Comprehensive income:

Net income

$

148,640

$

129,565

$

287,097

$

219,492

Other comprehensive income:

Change in fair value of investments, net of tax 

(56)

19

(16)

99

Total comprehensive income

$

148,584

$

129,584

$

287,081

$

219,591

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

(in thousands)

Cash flows from operating activities:

Net income

 

$

148,640

 

$

129,565

 

$

287,097

$

219,492

Adjustment to reconcile net income to net cash 

provided by operating activities:

Depreciation, depletion, amortization and accretion

198,639

150,115

375,788

288,952

Deferred income taxes

87,758

76,616

169,503

129,792

Stock compensation

3,548

3,507

7,272

7,112

(Gain) loss on derivative instruments

2,454

(13,660)

18,189

(12,057)

Settlements on derivative instruments

(1,017)

1,039

(5,804)

1,765

Changes in non-current assets and liabilities

1,771

2,416

(2,436)

5,790

Amortization of deferred financing costs

and other, net

1,319

(3,289)

2,395

(2,116)

Changes in operating assets and liabilities:

Receivables, net

(46,173)

(24,484)

(81,702)

(55,060)

Other current assets

(2,410)

5,697

(19,182)

14,840

Accounts payable and accrued liabilities

27,216

(4,814)

18,649

 

(28,724)

Net cash provided by operating activities

421,745

322,708

769,769

 

569,786

Cash flows from investing activities:

Oil and gas expenditures

(718,740)

(385,469)

(1,138,539)

(776,138)

Sales of oil and gas assets

1,364

13,508

1,123

14,407

Sales of other assets

147

31,081

251

31,157

Other expenditures

(31,547)

(5,952)

(51,401)

(25,475)

Net cash used by investing activities

(748,776)

(346,832)

(1,188,566)

 

(756,049)

Cash flows from financing activities:

Net bank debt borrowings

(275,000)

22,000

(174,000)

142,000

Proceeds from other long-term debt

750,000

750,000

Financing costs incurred

(11,218)

(11,218)

Dividends paid

(13,879)

(12,092)

(26,022)

(22,448)

Issuance of common stock and other

1,153

216

4,061

1,705

Net cash provided by financing activities

451,056

10,124

542,821

 

121,257

Net change in cash and cash equivalents

124,025

(14,000)

124,024

(65,006)

Cash and cash equivalents at beginning of period

4,530

18,532

4,531

 

69,538

Cash and cash equivalents at end of period

$

128,555

$

4,532

$

128,555

 

$

 

4,532

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

June 30,

December 31,

2014

2013

Assets

(in thousands, except share data)

Current assets:

Cash and cash equivalents

$

128,555

$

4,531

Receivables, net

449,456

367,754

Oil and gas well equipment and supplies

85,278

66,772

Deferred income taxes

13,725

16,854

Derivative instruments

4,268

Other current assets

9,338

8,960

Total current assets

686,352

469,139

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

Proved properties

13,801,249

12,863,961

Unproved properties and properties under development,

not being amortized

886,361

585,361

14,687,610

13,449,322

Less – accumulated depreciation, depletion and amortization

(7,838,007)

(7,483,685)

Net oil and gas properties

6,849,603

5,965,637

Fixed assets, net

182,521

146,918

Goodwill

620,232

620,232

Other assets, net

60,299

51,209

$

8,399,007

$

7,253,135

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

126,259

$

116,110

Accrued liabilities

468,952

412,495

Derivative instruments

8,506

389

Revenue payable

197,473

154,173

Total current liabilities

801,190

683,167

Long-term debt

1,500,000

924,000

Deferred income taxes

1,626,206

1,459,841

Other liabilities 

184,980

163,919

Total liabilities

4,112,376

3,230,927

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,

87,021,935 and 87,152,197 shares issued, respectively

870

872

Paid-in capital

1,975,159

1,970,113

Retained earnings

2,309,429

2,050,034

Accumulated other comprehensive income

1,173

1,189

4,286,631

4,022,208

$

8,399,007

$

7,253,135

 

 

 

SOURCE Cimarex Energy Co.



RELATED LINKS

http://www.cimarex.com