Investor Relations

Cimarex Reports Second Quarter 2013 Results

- Production Up 16 Percent Year-over-Year

- Reeves County Wolfcamp Wells have 30-day average IP of 925 BOE per day

Aug 7, 2013

DENVER, Aug. 7, 2013 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported 2013 second quarter net income of $129.6 million, or $1.49 per diluted share.  Current quarter net income includes a non-cash hedging gain of $12.6 million ($0.09 per share after tax) and a gain on the sale of midstream assets of $4.3 million ($0.03 per share after tax). This compares to net income of $64.3 million, or $0.74 per diluted share, reported in the second quarter of 2012.

Second quarter production grew 16 percent, averaging 686.8 million cubic feet equivalent (MMcfe) per day compared to 2012 second quarter output of 590.1 MMcfe per day.  Oil production grew 29 percent and averaged 36,878 barrels per day.  Current quarter volumes were comprised of 50 percent gas, 32 percent oil and 18 percent NGL. 

Natural gas prices increased 69 percent to an average $4.08 per Mcf in the second quarter of 2013.  Realized oil prices averaged $90.72 per barrel, up three percent over last year, and NGL prices averaged $27.76 per barrel, down four percent. 

Revenues from the sale of oil, gas and NGLs totaled $483.3 million in the second quarter versus $343.2 million for the same period in 2012.  Adjusted cash flow from operations for the quarter was $346.3 million versus $240.5 million a year ago(1).    

Cimarex invested $390 million on exploration and development in the second quarter of 2013, bringing total spending year to date to $799 million.  Second quarter expenditures were allocated 65 percent toward Permian Basin projects and 29 percent to projects in the Mid-Continent.

At June 30, 2013, long-term debt totaled $892 million and was comprised of $750 million of senior unsecured notes and $142 million of bank debt.  Debt was 20 percent of total capitalization on June 30(2).

2013 Outlook
The midpoint of full year production guidance is unchanged at 690 MMcfe per day with a narrowed range of 680-700 MMcfe per day, an increase of 9 to 12 percent over 2012.  Factoring in estimated ethane rejection, third-quarter volumes are forecast between 675-700 MMcfe per day.

Permian and Mid-Continent volumes are projected to grow 12 to 15 percent over 2012, averaging 660-676 MMcfe per day.  Third quarter 2013 Permian and Mid-Continent volumes are forecasted to average 661-676 MMcfe/d.

Full year 2013 capital expenditures are expected to approximate $1.5 billion.  Nearly all the 2013 capital is directed towards drilling oil and liquids-rich gas wells in the Permian and Cana-Woodford. 

Expenses for 2013 are expected to fall within the following ranges:

 ($/Mcfe):



Production

$1.10 -  $1.22


Transportation and other operating

  0.30  -  0.35


DD&A and ARO accretion

  2.40  -  2.55


General and administrative

  0.25  -  0.30


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

6.0%  -  6.5%

Permian Basin Update
Production from the Permian Basin averaged 319.6 MMcfe per day for the second quarter, an increase of 29 percent over second quarter 2012.  Oil volumes increased 39 percent to 30,137 barrels per day.

Cimarex drilled and completed 55 gross (32 net) Permian Basin wells during the second quarter, bringing the total for 2013 to 90 gross wells (59 net).  All but one well drilled in the second quarter were completed as producers.  At June 30, 16 gross (8 net) wells were awaiting completion.  Drilling took place in the Delaware Basin of Texas and southeast New Mexico, mainly targeting the Bone Spring and Wolfcamp formations. 

Year-to-date, 42 gross (23 net) New Mexico Bone Spring wells have been drilled and completed.  Per well first 30-day gross production from these wells averaged approximately 650 barrels of oil equivalent (BOE) per day (85 percent oil).  Year-to-date Ward County, Texas, Third Bone Spring drilling totaled 21 gross (15 net) wells with  per well first 30-day average gross production rates of approximately 965 BOE per day (80 percent oil).

In the Culberson area, Cimarex is drilling both horizontal Bone Spring and Wolfcamp wells.  Year-to-date nine gross (six net) Bone Spring wells have been drilled and completed with per well first 30-day average gross production of 850 BOE per day (58 percent oil).   Cimarex has also drilled eight gross (six net) horizontal Wolfcamp wells in Culberson County in 2013, bringing total Wolfcamp wells in the area to 39 gross (35 net).  Per well first 30-day production rates on all of the Wolfcamp wells drilled-to-date in the area have averaged 6.2 MMcfe per day, comprised of 43 percent gas, 27 percent oil and 30 percent NGL (assuming full NGL recovery).  The company has seen improvement in its Wolfcamp results.  In particular, recent wells drilled to the Wolfcamp D in Culberson County have per well first-30 day production rates averaging 6.6 MMcfe per day.

In Reeves County, Texas, Cimarex has drilled and completed two gross (two net) Wolfcamp A tests with per well first 30-day production rates averaging 925 BOE per day (63 percent oil, 20 percent NGL and 17 percent gas).  Since December 31, 2012, Cimarex has increased its net acreage position in Reeves County from 35,000 to 40,000 acres with an average working interest of 84 percent.  Cimarex currently has one well drilling and one well waiting on completion.

Mid-Continent Update
Mid-Continent production averaged 343.2 MMcfe per day for the second quarter of 2013, a 14 percent increase over the second quarter 2012 average of 300.2 MMcfe per day.  Cana-Woodford represented 216.1 MMcfe per day of the second quarter 2013 total, a 38 percent increase versus the same period last year.  Year-to-date, Cimarex has drilled and completed 87 gross (35 net) wells, 74 gross (31 net) of which were in the Cana-Woodford shale play.  All were completed as producers.  At June 30, 67 gross (20 net) wells were awaiting completion.   

 

Wells Drilled and Completed by Region













For the Three Months


For the Six Months



Ended June 30,


Ended June 30,



2013

2012


2013

2012

Gross wells







    Permian Basin


55

55


90

94

    Mid-Continent


35

31


87

64

    Gulf Coast/Other


2

1


2

2



92

87


179

160

Net wells







    Permian Basin


32

37


59

64

    Mid-Continent


15

14


35

26

    Gulf Coast/Other


1

-


1

1



48

51


95

91

% Gross wells completed as producers


97%

97%


98%

96%

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,




2013


2012


2013


2012

Gas (Mcf per day)









   Permian Basin


96,306


79,409


89,573


77,252

   Mid-Continent


231,428


214,339


233,811


215,582

   Gulf Coast/Other


13,519


23,577


13,666


25,814




341,253


317,325


337,050


318,648











Oil (Barrels per day)









   Permian Basin


30,137


21,694


27,997


21,747

   Mid-Continent


5,745


5,392


6,017


5,642

   Gulf Coast/Other


996


1,600


1,012


1,735




36,878


28,686


35,026


29,124

NGL (Barrels per day)









   Permian Basin


7,079


6,317


6,661


6,029

   Mid-Continent


12,881


8,914


13,658


9,598

   Gulf Coast/Other


745


1,539


812


1,602




20,705


16,770


21,131


17,229

Total Equivalent (Mcfe per day)








   Permian Basin


319,602


247,475


297,521


243,908

   Mid-Continent


343,184


300,175


351,861


307,022

   Gulf Coast/Other


23,969


42,410


24,614


45,833




686,755


590,060


673,996


596,763











Other

General and administrative expense in the second quarter includes $7.0 million for university endowments established in honor of Cimarex founder, F.H. Merelli, and a $1.0 million contribution made for tornado relief in Oklahoma.

Cimarex has oil swaps and collars covering 12,000 barrels per day through December 2013 and Mid-Continent natural gas collars on 80,000 MMBTU per day through December 2014.  The following table summarizes the current open hedge positions:

Oil Contracts









Weighted Average Price

Period


Type


 Barrels/day


Index(3)


Floor


Ceiling


Swap

July-December 13


Swaps


6,000


WTI



NA



NA

$

96.13

July-December 13


Collar


6,000


WTI


$

85.00


$

102.31

$

NA





12,000











Gas Contracts









Weighted Average Price

Period


Type


MMBTU/day


Index(2)


Floor


Ceiling



July 13  –December 14


Collar


80,000


PEPL


$

3.51


$

4.57


















Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method.  Second quarter 2013 had a realized gain of $1.1 million in cash received from oil swaps.

Conference call and webcast
Cimarex will host a conference call and webcast today 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 877-270-2148 ten minutes before the scheduled start time (international callers dial 1-412-902-6510).  A replay will be available for one week following the call and can be accessed by dialing 877-344-7529 (international callers dial 1-412-317-0088); conference I.D. 10031564. 

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)

Cash flow from operations is a non-GAAP financial measure.  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 $892 million divided by long-term debt of $892 million plus stockholders' equity of $3,679 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 as quoted in Platt's Inside FERC.

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS














For the Three Months Ended


For the Six Months Ended




June 30,


June 30,




2013


2012


2013


2012




(in thousands)

Net cash provided by operating activities

$

322,708

$

323,040

$

569,786

$

574,932


Change in operating assets and liabilities











23,601


(82,530)


68,944


(31,466)











Adjusted cash flow from operations

$

346,309

$

240,510

$

638,730

$

543,466

 

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,




2013


2012


2013


2012












 Total gas production - Mcf 


31,053,997


28,876,597


61,006,098


57,993,914


 Gas volume - Mcf per day 


341,253


317,325


337,050


318,648


 Gas price - per Mcf  


$4.08


$2.42


$3.73


$2.67












 Total oil production - barrels 


3,355,922


2,610,407


6,339,760


5,300,547


 Oil volume - barrels per day 


36,878


28,686


35,026


29,124


 Oil price - per barrel 


$90.72


$87.81


$88.65


$93.63












 Total NGL production - barrels 


1,884,189


1,526,067


3,824,763


3,135,614


 NGL volume - barrels per day  


20,705


16,770


21,131


17,229


 NGL price - per barrel 


$27.76


$29.02


$28.55


$32.94

 

OIL AND GAS CAPITALIZED EXPENDITURES














For the Three Months Ended


For the Six Months Ended




June 30,


June 30,




2013


2012


2013


2012




(in thousands)


Acquisitions:










    Proved

$

923

$

240

$

923

$

291


    Unproved


3,415


4,791


3,665


6,713




4,338


5,031


4,588


7,004












Exploration and development:










    Land and Seismic


36,719


21,175


68,029


58,387


    Exploration and     development


353,594


365,101


730,891


730,460




390,313


386,276


798,920


788,847












Sale proceeds:










    Proved


(37,061)


(14)


(37,879)


(185)


    Unproved


(960)


(146)


(1,041)


(1,088)




(38,021)


(160)


(38,920)


(1,273)













$

356,630

$

391,147

$

764,588

$

794,578

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)
























For the Three Months Ended


For the Six Months Ended









June 30,


June 30,









2013


2012


2013


2012









(in thousands, except per share data)
















Revenues:












Gas sales



$

126,547

$

69,741

$

227,668

$

154,894


Oil sales




304,466


229,210


561,998


496,294


NGL sales



52,309


44,286


109,184


103,300


Gas gathering, processing and other, net


10,435


9,885


21,263


21,670









493,757


353,122


920,113


776,158

Costs and expenses:










Depreciation, depletion, amortization and accretion


150,115


123,678


288,952


245,465


Production



69,433


62,494


138,819


130,119


Transportation and other operating


22,022


13,169


40,656


26,485


Gas gathering and processing


5,184


4,955


11,340


9,806


Taxes other than income


27,807


23,483


52,935


48,643


General and administrative


22,836


12,634


38,413


26,781


Stock compensation


3,507


4,684


7,112


9,218


Gain on derivative instruments, net


(13,660)


(10,078)


(12,057)


(5,990)


Other operating, net


2,365


2,719


5,297


5,059









289,609


237,738


571,467


495,586
















Operating income


204,148


115,384


348,646


280,572
















Other (income) and expense:










Interest expense 


13,097


12,702


25,283


20,661


Amortization of deferred financing costs


1,015


977


2,035


1,686


Capitalized interest


(7,387)


(9,119)


(16,582)


(16,923)


Loss on early extinguishment of debt



16,214



16,214


Other, net




(8,758)


(7,829)


(11,374)


(12,555)
















Income before income tax


206,181


102,439


349,284


271,489

Income tax expense


76,616


38,137


129,792


101,080
















Net income



$

129,565

$

64,302

$

219,492

$

170,409
















Earnings per share to common stockholders:

























Basic 




$

1.50

$

0.75

$

2.54

$

1.98


Diluted




$

1.49

$

0.74

$

2.53

$

1.97
















Dividends per share

$

0.14

$

0.12

$

0.28

$

0.24
















Shares attributable to common stockholders:










Unrestricted common shares outstanding


84,942


83,984


84,942


83,984


Diluted common shares


85,054


84,319


85,043


84,337
















Shares attributable to common stockholders and participating securities:










Basic shares outstanding


86,512


86,046


86,512


86,046


Fully diluted shares 


86,624


86,381


86,613


86,399










Comprehensive income:










Net income

$

129,565

$

64,302

$

219,492

$

170,409


Other comprehensive income:











Change in fair value of investments, net of tax 


19


(135)


99


264


Total comprehensive income

$

129,584

$

64,167

$

219,591

$

170,673

 

CONDENSED CASH FLOW STATEMENTS (unaudited)

























For the Three Months Ended


For the Six Months Ended










June 30,


June 30,










2013


2012


2013


2012









(in thousands)
















Cash flows from operating activities:









    Net income

$

129,565

$

64,302

$

219,492

$

170,409

    Adjustment to reconcile net income to net cash provided by operating activities:

















            Depreciation, depletion, amortization and accretion


150,115


123,678


288,952


245,465

            Deferred income taxes


76,616


38,137


129,792


101,080

            Stock compensation


3,507


4,684


7,112


9,218

            Derivative instruments, net


(12,621)


(10,078)


(10,292)


(5,990)

            Loss on early extinguishment of debt




16,214



16,214

            Changes in non-current assets and liabilities


2,416


2,876


5,790


5,115

            Amortization of deferred financing costs and other, net


(3,289)


697


(2,116)


1,955

    Changes in operating assets and liabilities:









            (Increase) decrease in receivables, net


(24,484)


109,978


(55,060)


107,834

            (Increase) decrease in other current assets


5,697


(4,979)


14,840


(4,910)

            (Decrease) in accounts payable and accrued liabilities


(4,814)


(22,469)


(28,724)


(71,458)

                     Net cash provided by operating activities


322,708


323,040


569,786


574,932

Cash flows from investing activities:









    Oil and gas expenditures


(385,469)


(357,645)


(776,138)


(758,608)

    Sales of oil and gas assets


13,508


160


14,407


1,273

    Sales of other assets


31,081


199


31,157


408

    Other expenditures


(5,952)


(15,787)


(25,475)


(26,087)

                     Net cash used by investing activities


(346,832)


(373,073)


(756,049)


(783,014)

Cash flows from financing activities:









    Net increase (decrease) in bank debt


22,000


(222,000)


142,000


(55,000)

    Increase in other long-term debt



750,000



750,000

    Decrease in other long-term debt



(363,595)



(363,595)

    Financing costs incurred



(12,200)



(12,692)

    Dividends paid


(12,092)


(10,293)


(22,448)


(18,869)

    Issuance of common stock and other


216


647


1,705


2,764

                    Net cash provided by financing activities


10,124


142,559


121,257


302,608

Net change in cash and cash equivalents


(14,000)


92,526


(65,006)


94,526

Cash and cash equivalents at beginning of period


18,532


4,406


69,538


2,406

Cash and cash equivalents at end of period

$

4,532

$

96,932

$

4,532

$

96,932

 

CONDENSED BALANCE SHEETS (unaudited)










June 30,


December 31,

Assets


2013


2012









(in thousands, except share data)

Current assets:







Cash and cash equivalents

$

4,532

$

69,538


Receivables, net


381,634


302,974


Oil and gas well equipment and supplies


66,902


81,029


Deferred income taxes


18,111


8,477


Derivative instruments


7,956



Other current assets


7,406


8,119



Total current assets


486,541


470,137

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






Proved properties


12,097,102


11,258,748


Unproved properties and properties under development, not being amortized


567,178


645,078









12,664,280


11,903,826


Less – accumulated depreciation, depletion and amortization


(7,166,038)


(6,899,057)



Net oil and gas properties


5,498,242


5,004,769

Fixed assets, net


135,367


152,605

Goodwill





620,232


620,232

Other assets, net


55,988


57,409








$

6,796,370

$

6,305,152

Liabilities and Stockholders' Equity





Current liabilities:






Accounts payable

$

82,690

$

103,653


Accrued liabilities


416,111


392,909


Derivative instruments


59



Revenue payable


172,956


149,300



Total current liabilities


671,816


645,862

Long-term debt



892,000


750,000

Deferred income taxes


1,260,836


1,121,353

Other liabilities 



292,721


313,201



Total liabilities


3,117,373


2,830,416

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,

86,503,109 and 86,595,976 shares issued, respectively


865


866


Paid-in capital


1,948,381


1,939,628


Retained earnings


1,729,178


1,533,768


Accumulated other comprehensive income


573


474









3,678,997


3,474,736








$

6,796,370

$

6,305,152

 

SOURCE Cimarex Energy Co.

For further information: Cimarex Energy Co., 303-295-3995, www.cimarex.com: or Mark Burford, Vice President - Capital Markets and Planning; or Karen Acierno, Director - Investor Relations

Drill Deeper