Cimarex Reports Second Quarter 2015 Results

Production averaged 1.0 Bcfe per day; Up 22% Year-over-Year

Wolfcamp A well in Reeves County, TX averages 3,309 BOE/day

Long Lateral Bone Spring well produces 2,753 BOE/day

Aug 04, 2015, 17:00 ET from Cimarex Energy Co.

DENVER, Aug. 4, 2015 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported a second quarter 2015 net loss of $600.2 million, or $6.47 per diluted share, including a non-cash impairment of oil and gas properties.  The adjusted second quarter net income was $14.4 million, or $0.15 per diluted share(1).  Second quarter 2015 adjusted cash flow from operations was $252.4 million versus $443.1 million a year ago(1)

Total company production averaged 1.0 billion cubic feet equivalent (Bcfe) per day during the second quarter, a 22 percent increase from second quarter 2014. Year-over-year natural gas volumes increased 14 percent, oil volumes grew 35 percent and NGL volumes were up 25 percent. 

Commodity prices impacted Cimarex's financial results for the quarter. Realized oil prices averaged $50.66 per barrel, down 46 percent versus a year ago but up 19 percent sequentially. Natural gas prices were down 46 percent year-over-year and averaged $2.51 per Mcf compared to $4.62 per Mcf.  NGL prices averaged $14.67 per barrel, down 59 percent from the second quarter of 2014 and seven percent sequentially.  (See table of Average Realized Price by Region below.)

Cimarex invested $190 million in exploration and development during the second quarter, which was funded with cash flow from operations.  Total debt at June 30, 2015, remained at $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $857 million. Debt was 26 percent of total capitalization(2)

Cimarex Chairman, President and CEO, Tom Jorden, said, "In May, Cimarex issued 6.9 million shares of common stock to increase drilling in our exceptional portfolio of projects in the Delaware Basin and Mid-Continent region.  These projects continue to provide highly attractive returns despite the negative commodity price backdrop."  He went on to say, "We received $730 million of net offering proceeds that will supplement our exploration and development activities in 2015/16 including infill development in the Woodford Shale, our first infill development in the Wolfcamp D in the Delaware Basin, as well as continued activity in the Bone Spring and emerging Meramec plays."  Cimarex plans to invest $100 million of the capital from the equity offering in the second half of 2015 with the remainder to be invested as part of the 2016 capital program.   

Cimarex now estimates total production volumes for 2015 to average 960-980 MMcfe per day, a midpoint increase of 12 percent over 2014 volumes.  Oil volumes are expected to grow 17-19 percent and gas volumes 6-8 percent.  Total company production for the third quarter 2015 is projected to average 920-940 MMcfe per day which includes a reduction of 20 MMcfe per day for facilities maintenance.  Capital investment for exploration and development is estimated to be $1.0 billion in 2015, which includes an additional $100 million of drilling and completion capital to be funded from the May equity offering.

Expenses per Mcfe of production for the remainder of 2015 are estimated to be:

Production expense

$0.90 -  $1.05

Transportation, processing and other expense

  0.47  -  0.57

DD&A and ARO accretion*

  2.00  -  2.10

General and administrative expense

  0.18  -  0.22

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

*Excludes the potential impact of any future ceiling test writedown.

   6.0  -  6.5%

 

Operations Update Cimarex invested $190 million in exploration and development during the second quarter, bringing the total for the first half of 2015 to $498 million.  Year-to-date, 66 percent has been invested in the Permian Basin and 33 percent in the Mid-Continent. We completed 45 gross (24 net) wells during the quarter.  At June 30, 61 gross (24 net) wells were awaiting completion.  Cimarex is currently operating seven drilling rigs.  

WELLS BROUGHT ON PRODUCTION BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Gross wells

Permian Basin

26

47

68

81

Mid-Continent

19

37

30

76

Other

1

-

2

45

85

98

159

Net wells

Permian Basin

18

30

48

51

Mid-Continent

6

21

9

35

Other

-

-

1

24

51

57

87

Permian Region Production from the Permian region averaged 595.1 MMcfe per day in the second quarter, a 51 percent increase over second quarter 2014. Quarterly oil volumes increased 45 percent year-over-year to 48,448 barrels per day and accounted for 49 percent of the region's total production for the quarter.

Cimarex completed and brought on production 26 gross (18 net) wells in the Permian region during the second quarter. The 26 gross wells completed include five Second Bone Spring wells and 20 Wolfcamp wells (12 in Culberson area and eight in Reeves County).  On June 30, there were three gross (two net) wells waiting on completion in the Delaware Basin.

Cimarex now has 11 long-lateral Wolfcamp D wells producing in the Culberson County, Texas.  These wells were completed using 10,000-foot laterals and had an average 30-day initial gross peak production rate of 2,255 BOE per day (25 percent oil, 45 percent gas, 30 percent NGL).  Also in the Culberson area, Cimarex completed a 7,000-foot lateral in the Bone Spring sand, which had an average 30-day initial gross peak production rate of 2,753 BOE per day including 1,870 barrels of oil per day.   

In Reeves County, Texas, Cimarex has now completed seven long lateral (10,000-foot) Wolfcamp A wells.  These wells had an average 30-day initial gross peak production rate of 1,646 BOE per day (50 percent oil, 28 percent gas, 22 percent NGL).  Of note in this group is the recently completed Big Timber 57-25 Unit#1-H, which was completed in the upper Wolfcamp A and had an average 30-day initial gross peak production rate of 3,309 BOE per day (49 percent oil, 30 percent gas, 21 percent NGL). 

Mid-Continent Activity in the Mid-Continent region was focused in the Cana area in western Oklahoma, where 18 gross (five net) Cimarex wells were completed and brought on production during the second quarter. At the end of the quarter, 58 gross (22 net) wells were waiting on completion. Second quarter production from the Cana area averaged 333.5 MMcfe per day, representing 33 percent of total company production. Total Mid-Continent production averaged 419.1 MMcfe per day for the second quarter of 2015.

Cimarex completed three additional Meramec wells in the second quarter bringing the total Meramec wells on production to ten.  Average 30-day initial gross peak production from these ten wells was 9.3 MMcfe per day, with oil yields ranging from 15 barrels per MMcf to over 330 barrels per MMcf.  Cimarex is currently flowing back its first 10,000-foot long lateral in the Meramec formation and has commenced drilling a second long lateral Meramec test.

Average daily production and commodity price for Cimarex by region are summarized below:

DAILY PRODUCTION BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Permian Basin

Gas (MMcf)

189.4

123.6

170.0

113.1

Oil (Bbls)

48,448

33,317

45,783

32,475

NGL (Bbls)

19,169

11,633

16,180

10,386

Total Equivalent (MMcfe)

595.1

393.3

541.8

370.3

Mid-Continent

Gas (MMcf)

270.2

276.6

278.6

260.3

Oil (Bbls)

7,181

7,259

7,308

6,662

NGL (Bbls)

17,633

17,543

18,194

16,376

Total Equivalent (MMcfe)

419.1

425.5

431.6

398.5

Total Company

Gas (MMcf)

466.3

410.1

456.1

382.8

Oil (Bbls)

56,261

41,759

53,765

40,471

NGL (Bbls)

37,070

29,680

34,670

27,367

Total Equivalent (MMcfe)

1,026.2

838.7

986.7

789.9

AVERAGE REALIZED PRICE BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Permian Basin

Gas ($ per Mcf)

2.50

4.82

2.61

5.00

Oil ($ per Bbl)

50.69

91.73

46.85

91.64

NGL ($ per Bbl)

12.88

32.21

13.13

34.32

Mid-Continent

Gas ($ per Mcf)

2.51

4.53

2.64

4.93

Oil ($ per Bbl)

49.98

99.78

46.06

97.41

NGL ($ per Bbl)

16.60

37.47

16.94

39.52

Total Company

Gas ($ per Mcf)

2.51

4.62

2.63

4.94

Oil ($ per Bbl)

50.66

93.39

46.79

92.82

NGL ($ per Bbl)

14.67

35.35

15.15

37.43

Other

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

     Gas Contracts

Weighted Avg. Price

Period

Type

MMBTU/day

Index(3)

Floor

Ceiling

Jan 16  – Dec 16

Collar

10,000

PEPL

$

2.70

$

2.85

Conference call and webcast Cimarex will host a conference call Wednesday, August 5, at 11:00 a.m. EDT. The call will be webcast and accessible on the company's website at www.cimarex.com. To participate in the live, interactive call, please dial 866-367-3053 five minutes before the scheduled start time (international callers dial 1-412-902-4216).  A replay will be available for one week following the call by dialing 877-344-7529 (international callers dial 1-412-317-0088); conference I.D. 10068474.  The replay will also be available on the company's website or via the Cimarex App. 

Investor Presentation For more details on Cimarex's second quarter 2015 results, please refer to the company's investor presentation available at 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 press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the company is providing revised "2015 Outlook", which contains projections for certain 2015 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/A for the year ended December 31, 2014, 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; declines in the values of our oil and gas properties resulting in impairments; 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; 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; the ability to complete property sales or other transactions; 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 (loss) and adjusted cash flow from operations are non-GAAP financial measures.  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 $1.5 billion divided by long-term debt of $1.5 billion plus stockholders' equity of $4.2 billion.

(3)

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index.

 

RECONCILIATION OF ADJUSTED NET INCOME (LOSS)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

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

Net income (loss)

$

(600,215)

$

148,640

$

(1,015,156)

$

287,097

Impairment of oil and gas properties

614,614

997,839

Mark-to-market loss on open derivative positions

904

7,790

Adjusted net income (loss)

$

14,399

$

149,544

$

(17,317)

$

294,887

Diluted earnings (loss) per share

$

(6.47)

$

1.70

$

(10.94)

$

3.29

Adjusted diluted earnings (loss) per share *

$

0.15

$

1.71

$

(0.19)

$

3.38

Diluted shares attributable to common stockholders and participating securities

92,831

**

87,188

92,831

**

87,178

Estimated tax rates utilized

36.5%

37.1%

36.5%

37.1%

Adjusted net income (loss) and adjusted diluted earnings (loss) 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 (loss) to evaluate the company's operational trends and performance relative to other oil and gas exploration and production companies.

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

*

Earnings (loss) per share are based on actual figures rather than the rounded figures presented

**

Participating securities and other dilutive shares are not included in the diluted share computation when a loss exists.

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

(in thousands)

Net cash provided by operating activities

$

257,372

$

421,745

$

370,545

$

769,769

Change in operating assets and liabilities

(5,014)

21,367

68,758

82,235

Adjusted cash flow from operations

$

252,358

$

443,112

$

439,303

$

852,004

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.

 

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

(in thousands)

Acquisitions:

Proved (*)

$

(2,258)

$

144,516

$

(2,228)

$

144,516

Unproved (*)

(9,617)

114,732

(7,748)

114,732

(11,875)

259,248

(9,976)

259,248

Exploration and development:

Land and Seismic

5,275

43,869

27,965

109,194

Exploration and development

184,999

453,714

470,526

855,175

190,274

497,583

498,491

964,369

Sale proceeds:

Proved

(1,160)

(464)

(2,305)

(223)

Unproved

(6,211)

(900)

(6,211)

(900)

(7,371)

(1,364)

(8,516)

(1,123)

$

171,028

$

755,467

$

479,999

$

1,222,494

*

The negative amounts in 2015 reflect purchase price adjustments related to an acquisition in second quarter 2014.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

(in thousands, except per share data)

Revenues:

Oil sales

$

259,344

$

354,882

$

455,349

$

679,953

Gas sales

106,374

172,503

217,336

342,600

NGL sales

49,477

95,470

95,077

185,427

Gas gathering and other, net

9,088

13,814

17,523

27,905

424,283

636,669

785,285

1,235,885

Costs and expenses:

Impairment of oil and gas properties

967,287

1,570,886

Depreciation, depletion, amortization and accretion

219,493

198,639

438,007

375,788

Production

70,600

86,085

152,811

161,226

Transportation, processing, and other operating

43,713

46,478

83,355

90,726

Gas gathering and other

11,306

10,041

20,170

18,825

Taxes other than income

25,980

32,323

47,961

65,944

General and administrative

14,054

16,571

29,992

37,283

Stock compensation

4,988

3,548

10,143

7,272

(Gain) loss on derivative instruments, net

2,454

18,189

Other operating, net

260

112

784

215

1,357,681

396,251

2,354,109

775,468

Operating income (loss)

(933,398)

240,418

(1,568,824)

460,417

Other (income) and expense:

Interest expense 

20,186

15,729

40,323

28,773

Amortization of deferred financing costs

1,111

995

2,230

1,993

Capitalized interest

(8,570)

(8,575)

(17,987)

(15,865)

Other, net

(3,854)

(4,129)

(7,439)

(11,084)

Income (loss) before income tax

(942,271)

236,398

(1,585,951)

456,600

Income tax expense (benefit)

(342,056)

87,758

(570,795)

169,503

Net income (loss)

$

(600,215)

$

148,640

$

(1,015,156)

$

287,097

Earnings (loss) per share to common stockholders:

Basic 

$

(6.47)

$

1.71

$

(10.94)

$

3.30

Diluted

$

(6.47)

$

1.70

$

(10.94)

$

3.29

Dividends per share

$

0.16

$

0.16

$

0.32

$

0.32

Shares attributable to common stockholders:

Unrestricted common shares outstanding

92,831

85,532

92,831

85,532

Diluted common shares

92,831

85,689

92,831

85,679

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

N/A*

87,031

N/A*

87,031

Fully diluted shares 

N/A*

87,188

N/A*

87,178

Comprehensive income (loss):

Net income (loss)

$

(600,215)

$

148,640

$

(1,015,156)

$

287,097

Other comprehensive income (loss):

Change in fair value of investments, net of tax 

(292)

(56)

(190)

(16)

Total comprehensive income (loss)

$

(600,507)

$

148,584

$

(1,015,346)

$

287,081

*

Due to the net loss, shares of 94,465, which include participating securities, are not considered in the loss per share calculation

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

(in thousands)

Cash flows from operating activities:

Net income (loss)

$

(600,215)

$

148,640

$

(1,015,156)

$

287,097

Adjustment to reconcile net income (loss) to net cash

provided by operating activities:

Impairment of oil and gas properties

967,287

1,570,886

Depreciation, depletion, amortization and accretion

219,493

198,639

438,007

375,788

Deferred income taxes

(342,056)

87,758

(570,795)

169,503

Stock compensation

4,988

3,548

10,143

7,272

(Gain) loss on derivative instruments

2,454

18,189

Settlements on derivative instruments

(1,017)

(5,804)

Changes in non-current assets and liabilities

1,896

1,771

2,942

(2,436)

Amortization of deferred financing costs

and other, net

965

1,319

3,276

2,395

Changes in operating assets and liabilities:

Receivables, net

20,076

(46,173)

92,473

(81,702)

Other current assets

6,227

(2,410)

16,121

(19,182)

Accounts payable and other current liabilities

(21,289)

27,216

(177,352)

18,649

Net cash provided by operating activities

257,372

421,745

370,545

769,769

Cash flows from investing activities:

Oil and gas expenditures

(228,116)

(718,740)

(599,222)

(1,138,539)

Sales of oil and gas assets and other assets

8,053

1,511

9,233

1,374

Other capital expenditures

(17,034)

(31,547)

(35,882)

(51,401)

Net cash used by investing activities

(237,097)

(748,776)

(625,871)

(1,188,566)

Cash flows from financing activities:

Net bank debt borrowings

(275,000)

(174,000)

Proceeds from other long-term debt

750,000

750,000

Proceeds from sale of common stock

752,100

752,100

Financing and underwriting costs incurred

(22,563)

(11,218)

(22,563)

(11,218)

Dividends paid

(14,182)

(13,879)

(28,129)

(26,022)

Proceeds from exercise of stock options and other

318

1,153

4,936

4,061

Net cash provided by financing activities

715,673

451,056

706,344

542,821

Net change in cash and cash equivalents

735,948

124,025

451,018

124,024

Cash and cash equivalents at beginning of period

120,932

4,530

405,862

4,531

Cash and cash equivalents at end of period

$

856,880

$

128,555

$

856,880

$

128,555

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

June 30,

December 31,

2015

2014

Assets

(in thousands, except share data)

Current assets:

Cash and cash equivalents

$

856,880

$

405,862

Receivables, net

319,370

412,108

Oil and gas well equipment and supplies

75,165

89,780

Deferred income taxes

6,961

13,475

Other current assets

9,073

10,579

Total current assets

1,267,449

931,804

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

Proved properties

15,043,625

14,402,064

Unproved properties and properties under development,

not being amortized

599,654

759,149

15,643,279

15,161,213

Less – accumulated depreciation, depletion, amortization and impairment

(10,242,417)

(8,257,502)

Net oil and gas properties

5,400,862

6,903,711

Fixed assets, net

223,646

211,031

Goodwill

620,232

620,232

Other assets, net

56,315

58,515

$

7,568,504

$

8,725,293

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

71,486

$

138,051

Accrued liabilities

262,727

447,384

Revenue payable

164,671

190,892

Total current liabilities

498,884

776,327

Long-term debt

1,500,000

1,500,000

Deferred income taxes

1,177,289

1,754,706

Other liabilities 

196,168

193,628

Total liabilities

3,372,341

4,224,661

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,

94,456,420 and 87,592,535 shares issued, respectively

945

876

Paid-in capital

2,737,008

1,997,080

Retained earnings

1,457,298

2,501,574

Accumulated other comprehensive income

912

1,102

4,196,163

4,500,632

$

7,568,504

$

8,725,293

 

 

SOURCE Cimarex Energy Co.



RELATED LINKS

http://www.cimarex.com