Investor Relations

Cimarex Reports 2014 First Quarter Results

Mid-Continent Operations Boost Production Growth

May 6, 2014

DENVER, May 6, 2014 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported 2014 first quarter net income of $138.5 million, or $1.59 per diluted share.  First quarter 2013 net income was $89.9 million, or $1.04 per diluted share.  Adjusted 2014 first quarter net income was $145.3 million, $1.67 per diluted share(1).

Driven by improved results in the Cana-Woodford shale play, first quarter production grew 12 percent to a record 740 million cubic feet equivalent (MMcfe) per day compared to 2013 first quarter output of 661 MMcfe per day.  Oil production grew 18 percent to an average 39,168 barrels per day.  Natural gas volumes increased seven percent to 355.3 MMcfe per day and natural gas liquids (NGL) were up 16 percent.

Growth in production and higher product prices resulted in revenues of $599.2 million versus $426.4 million for the same period in 2013.  Adjusted cash flow from operations was $408.9 million up 40 percent from $292.4 million during the same period a year ago(1).   

Natural gas prices increased 57 percent to $5.32 per Mcf in the first quarter of 2014 compared to the first quarter of 2013.  Realized oil prices averaged $92.22 per barrel and NGL prices averaged $39.94* per barrel, increases of seven percent and 36 percent, respectively.

Cimarex invested $467 million on exploration and development in the first quarter.  Of these expenditures, 69 percent were on Permian Basin projects and 29 percent on projects in the Mid-Continent.

At March 31, 2014, long-term debt was $1.025 billion, comprised of $750 million of senior unsecured notes and $275 million of bank debt. Debt to total capitalization was 20 percent(2).

2014 Outlook
Cimarex now estimates that total production volumes for 2014 will average 822– 847 MMcfe per day, a midpoint increase of 20 percent over 2013. These estimates do not include an estimated 35 MMcfe per day associated with the recently announced Mid-Continent acquisition that is expected to close on June 30.  Oil volumes are expected to grow 20 – 23 percent in 2014 and gas volumes 13 – 17 percent. Total company production for the second quarter of 2014 is projected to average 810 – 830 MMcfe per day.

Estimated 2014 exploration and development capital is estimated to be $1.9 billion with $1.5 billion directed towards the Permian region.

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

   
 

Production expense

$1.12 -  $1.18

 

Transportation, processing and other expense

    0.65 – 0.70*

 

DD&A and ARO accretion

  2.70  -  2.80

 

General and administrative expense

  0.29  -  0.33

 

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

   5.8  -  6.2%

*Historically, Cimarex reported realized natural gas and NGL prices net of certain processing fees.  Beginning in 2014, these fees are no longer being deducted from revenue but are instead included in transportation, processing and other expense.  In the first quarter of 2014, this resulted in higher realized prices of $0.09 per Mcf of natural gas and $4.02 per barrel of NGL and an increase to both revenues and expenses of $12 million ($0.18 per Mcfe).   As a result, Cimarex is increasing guidance for transportation, processing and other expense from $0.40-$0.45 per Mcfe to $0.65-$0.70 per Mcfe.

Permian Basin Update
First quarter 2014 production from the Permian Basin averaged 347.0 MMcfe per day, an increase of 26 percent over first quarter 2013.  Oil volumes increased 22 percent to 31,624 barrels per day.

Cimarex drilled and completed 34 gross (21 net) Permian Basin wells during the first quarter, including 25 gross (13 net) Bone Spring wells.   All were completed as producers.  At March 31, 23 gross (15 net) wells were awaiting completion.  Cimarex currently has 17 horizontal rigs running in the Permian region.

Cimarex continues to experience good results in the Permian region from the application of its upsized frac design in the Wolfcamp shale play.  In Culberson County, Texas, Cimarex now has three wells producing from the Wolfcamp D formation that were completed with an upsized frac.  These wells had an average 30-day initial gross production rate of 1,510 BOE per day.  In addition, the company now has two long lateral Wolfcamp D wells producing in Culberson County.   The newest long lateral, the Gallant Fox 37 LL Unit 1H, had comparable results to the first well with an average 30-day initial gross production rate of 2,516 BOE per day (45% gas, 26% oil and 29% NGL).

During the quarter, Cimarex increased its Wolfcamp acreage position from approximately 180,000 net acres to 225,000 net acres.  The company now has 94,000 net prospective acres in the Triple Crown area (Culberson County, TX and Eddy County, NM), 77,000 in Reeves County, TX, and 39,000 in Ward County, TX.   This increased acreage position facilitates the drilling of long laterals (greater than 5,000 feet) which the company believes to be optimal in the development of this large asset.

As previously discussed, Cimarex is currently conducting four downspacing pilots consisting of two in Culberson County and two in Reeves County.  Results are expected later this year.

Mid-Continent Update
Mid-Continent production averaged 371.3 MMcfe per day for the first quarter of 2014, a three percent increase over the first quarter 2013 average of 360.6 MMcfe per day.  Cana-Woodford represented 255.2 MMcfe per day of the first quarter 2014 total.  During the first quarter Cimarex drilled and completed 39 gross (14 net) wells, most of which were in the Cana-Woodford shale play.  All were completed as producers.

In the Cana field, Cimarex saw positive results from the testing of a new completion design and workover activities.  Both contributed to higher than expected Cana field production for the quarter, which was up 13 percent sequentially.  Going forward, Cimarex expects to use the new completion design on all of its Cana wells.  At March 31, 37 gross (21 net) Cana-Woodford wells were awaiting completion.

WELLS DRILLED AND COMPLETED BY REGION

 
   

For the Three Months Ended

   

March 31,

   

2014

 

2013

Gross wells

       

   Permian Basin

 

34

 

35

   Mid-Continent

 

39

 

52

   Other

 

1

 

-

   

74

 

87

Net wells

       

   Permian Basin

 

21

 

27

   Mid-Continent

 

14

 

20

   Other

 

1

 

-

   

36

 

47

% Gross wells completed as producers

 

99%

 

100%

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

   

For the Three Months Ended

   

March 31,

   

2014

 

2013

Gas (MMcf per day)

       

   Permian Basin

 

102.5

 

82.8

   Mid-Continent

 

243.8

 

236.2

   Other

 

9.0

 

13.8

   

355.3

 

332.8

         

Oil (Bbls per day)

       

   Permian Basin

 

31,624

 

25,832

   Mid-Continent

 

6,057

 

6,291

   Other

 

1,487

 

1,031

   

39,168

 

33,154

NGL (Bbls per day)

       

   Permian Basin

 

9,124

 

6,239

   Mid-Continent

 

15,196

 

14,443

  Other

 

708

 

880

   

25,028

 

21,562

Total Equivalent (MMcfe per day)

       

   Permian Basin

 

347.0

 

275.2

   Mid-Continent

 

371.3

 

360.6

   Other

 

22.1

 

25.3

   

740.4

 

661.1

Other

The company's senior revolving credit facility was amended to extend the maturity to July 14, 2018, increase the borrowing base from $2.25 billion to $2.5 billion and reduce the applicable LIBOR margin from LIBOR plus 1.75%-2.5% to 1.50%-2.25%.  Credit facility commitments remain unchanged at $1 billion.

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

Oil Contracts

       
             
               

Weighted Ave. Price

Period

 

Type

 

Bbl/day

 

Index(3)

 

Floor

 

Ceiling

April 14  – Dec. 14

 

Collar

 

12,000

 

WTI

 

$

85.00

 

$

103.47

                         

 

Gas Contracts

       
             
               

Weighted Ave. Price

Period

 

Type

 

MMBTU/day

 

Index(3)

 

Floor

 

Ceiling

April 14  – Dec. 14

 

Collar

 

80,000

 

PEPL

 

$

3.51

 

$

4.57

April 14  – Dec. 14

 

Collar

 

60,000

 

PermEP

 

$

3.65

 

$

4.50

                         
                         

Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method.  First quarter 2014 had $4.8 million in cash payments on gas collars.

Conference call and webcast
Cimarex will host a conference call tomorrow, May 7, 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 1-412-317-0790).  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. 10042862.  The replay will also be available on the company's website or via the Cimarex App.

 

Investor Presentation
For more details on Cimarex's 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 "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 one major geographic area; 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 $1,025 million divided by long-term debt of $1,025 million plus stockholders' equity of $4,148 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

     

March 31,

     

2014

   

2013

     

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

             

Net income

$

138,457

 

$

89,927

 

Mark-to-market loss of open derivative positions

 

6,886

   

1,463

Adjusted net income

$

145,343

 

$

91,390

Diluted earnings per share

$

1.59

 

$

1.04

Adjusted diluted earnings per share

$

1.67

 

$

1.06

             

Diluted shares attributable to common stockholders and participating securities

 

87,177

   

86,555

Estimated tax rates utilized

 

37.1%

   

37.2%

             

Adjusted net income and adjusted diluted earnings per share excludes the noted items because management believes these items affect 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.

 

 

 

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

             
     

For the Three Months Ended

     

March 31,

     

2014

   

2013

     

(in thousands)

Net cash provided by operating activities

$

348,024

 

$

247,078

 

Change in operating assets and liabilities

 

60,868

   

45,343

Adjusted cash flow from operations

$

408,892

 

$

292,421

             

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

     

March 31,

     

2014

   

2013

             

Gas:

         
 

 Total production (MMcf) 

 

31,973

   

29,952

 

 Daily production (MMcf) 

 

355

   

333

 

 Price (per Mcf) 

$

5.32

 

$

3.38

             

Oil:

           
 

 Total production (Bbls) 

 

3,525,129

   

2,983,838

 

 Daily production (Bbls) 

 

39,168

   

33,154

 

 Price (per Bbl) 

$

92.22

 

$

86.31

             

 NGLs: 

         
 

 Total production (Bbls) 

 

2,252,479

   

1,940,574

 

 Daily production (Bbls) 

 

25,028

   

21,562

 

 Price (per Bbl) 

$

39.94

 

$

29.31

             
             

OIL AND GAS CAPITALIZED EXPENDITURES

             
     

For the Three Months Ended

     

March 31,

     

2014

   

2013

     

(in thousands)

 

Acquisitions:

         
 

Proved

$

 

$

 

Unproved

 

   

250

     

   

250

             
 

Exploration and development:

         
 

Land and Seismic

 

65,325

   

31,310

 

Exploration and development

 

401,702

   

377,297

     

467,027

   

408,607

             
 

Sale proceeds:

         
 

Proved

 

   

(818)

 

Unproved

 

   

(81)

     

   

(899)

             
   

$

467,027

 

$

407,958

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

           
   

For the Three Months Ended

   

March 31,

   

2014

   

2013

           
   

(in thousands, except per share data)

           

Revenues:

         
 

Gas sales

$

170,097

 

$

101,121

 

Oil sales

 

325,071

   

257,532

 

NGL sales

 

89,957

   

56,875

 

Gas gathering and other, net

 

14,091

   

10,828

     

599,216

   

426,356

Costs and expenses:

         
 

Depreciation, depletion, amortization and accretion

 

177,149

   

138,837

 

Production

 

75,141

   

69,386

 

Transportation, processing, and other operating

 

44,248

   

18,634

 

Gas gathering and other

 

8,784

   

6,156

 

Taxes other than income

 

33,621

   

25,128

 

General and administrative

 

20,712

   

15,577

 

Stock compensation

 

3,724

   

3,605

 

Loss on derivative instruments, net

 

15,735

   

1,603

 

Other operating, net

 

103

   

2,932

     

379,217

   

281,858

             

Operating income

 

219,999

   

144,498

             

Other (income) and expense:

         
 

Interest expense 

 

13,044

   

12,186

 

Amortization of deferred financing costs

 

998

   

1,020

 

Capitalized interest

 

(7,290)

   

(9,195)

 

Other, net

 

(6,955)

   

(2,616)

             

Income before income tax

 

220,202

   

143,103

Income tax expense

 

81,745

   

53,176

             

Net income

$

138,457

 

$

89,927

             

Earnings per share to common stockholders:

         
             
 

Basic 

$

1.59

 

$

1.04

 

Diluted

$

1.59

 

$

1.04

             

Dividends per share

$

0.16

 

$

0.14

             

Shares attributable to common stockholders:

         
 

Unrestricted common shares outstanding

 

85,443

   

84,920

 

Diluted common shares

 

85,579

   

85,016

             

Shares attributable to common stockholders and participating securities:

         
 

Basic shares outstanding

 

87,042

   

86,459

 

Fully diluted shares 

 

87,177

   

86,555

             

Comprehensive income:

         
 

Net income

$

138,457

 

$

89,927

 

Other comprehensive income:

         
   

Change in fair value of investments, net of tax 

 

40

   

80

 

Total comprehensive income

$

138,497

 

$

90,007

 

 

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

 
 

For the Three Months Ended

           

 

March 31,

           

 

2014

 

2013

           

 

(in thousands)

                     

Cash flows from operating activities:

         
 

Net income

$

138,457

 

$

89,927

 

Adjustment to reconcile net income to net cash 

         
   

provided by operating activities:

         
     

Depreciation, depletion, amortization and accretion

 

177,149

   

138,837

     

Deferred income taxes

 

81,745

   

53,176

     

Stock compensation

 

3,724

   

3,605

     

Loss on derivative instruments

 

15,735

   

1,603

     

Settlements on derivative instruments

 

(4,787)

   

726

     

Changes in non-current assets and liabilities

 

(4,207)

   

3,374

     

Amortization of deferred financing costs

         
       

and other, net

 

1,076

   

1,173

 

Changes in operating assets and liabilities:

         
     

Receivables, net

 

(35,529)

   

(30,576)

     

Other current assets

 

(16,772)

   

9,143

     

Accounts payable and accrued liabilities

 

(8,567)

   

(23,910)

   

Net cash provided by operating activities

 

348,024

   

247,078

Cash flows from investing activities:

         
 

Oil and gas expenditures

 

(420,040)

   

(390,669)

 

Sales of oil and gas assets and other assets

 

104

   

975

 

Other expenditures

 

(19,854)

   

(19,523)

   

Net cash used by investing activities

 

(439,790)

   

(409,217)

Cash flows from financing activities:

         
 

Net bank debt borrowings

 

101,000

   

120,000

 

Dividends paid

 

(12,143)

   

(10,356)

 

Issuance of common stock and other

 

2,908

   

1,489

   

Net cash provided by financing activities

 

91,765

   

111,133

Net change in cash and cash equivalents

 

(1)

   

(51,006)

Cash and cash equivalents at beginning of period

 

4,531

   

69,538

Cash and cash equivalents at end of period

$

4,530

 

$

18,532

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

 

March 31,

 

December 31,

 

2014

 

2013

Assets

 

(in thousands, except share data)

Current assets:

         
 

Cash and cash equivalents

$

4,530

 

$

4,531

 

Restricted cash

 

818

   

818

 

Receivables, net

 

403,283

   

367,754

 

Oil and gas well equipment and supplies

 

84,339

   

66,772

 

Deferred income taxes

 

14,358

   

16,854

 

Derivative instruments

 

3

   

4,268

 

Other current assets

 

7,347

   

8,142

   

Total current assets

 

514,678

   

469,139

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

         
 

Proved properties

 

13,212,174

   

12,863,961

 

Unproved properties and properties under development,

         
   

not being amortized

 

713,195

   

585,361

     

13,925,369

   

13,449,322

 

Less – accumulated depreciation, depletion and amortization

 

(7,650,755)

   

(7,483,685)

   

Net oil and gas properties

 

6,274,614

   

5,965,637

Fixed assets, net

 

159,824

   

146,918

Goodwill

 

620,232

   

620,232

Other assets, net

 

49,287

   

51,209

   

$

7,618,635

 

$

7,253,135

Liabilities and Stockholders' Equity

         

Current liabilities:

         
 

Accounts payable

$

140,720

 

$

116,110

 

Accrued liabilities

 

411,352

   

412,495

 

Derivative instruments

 

7,072

   

389

 

Revenue payable

 

169,842

   

154,173

   

Total current liabilities

 

728,986

   

683,167

Long-term debt

 

1,025,000

   

924,000

Deferred income taxes

 

1,539,114

   

1,459,841

Other liabilities 

 

177,798

   

163,919

   

Total liabilities

 

3,470,898

   

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,

         
   

87,033,110 and 87,152,197 shares issued, respectively

 

870

   

872

 

Paid-in capital

 

1,970,946

   

1,970,113

 

Retained earnings

 

2,174,692

   

2,050,034

 

Accumulated other comprehensive income

 

1,229

   

1,189

     

4,147,737

   

4,022,208

   

$

7,618,635

 

$

7,253,135

 

SOURCE Cimarex Energy Co.

For further information: Cimarex Energy Co., Karen Acierno - 303-285-4957 or Mark Burford - 303-295-3995

2014 Q1 Earnings Release
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