Cimarex Reports First Quarter 2018 Results

DENVER, May 8, 2018 /PRNewswire/ --

• Daily production averaged 206.1 MBOE; oil production up 25% Y-O-Y
• Sales Agreements in place for bulk of Permian gas production
• Robust Avalon well results in Lea County
• Full-year 2018 production and capital guidance unchanged

Cimarex Energy Co. (NYSE: XEC) today reported first quarter 2018 net income of $186.3 million, or $1.96 per share, compared to $131.0 million, or $1.38 per share, in the same period a year ago.  First quarter adjusted net income (non-GAAP) was $173.6 million, or $1.82 per share, compared to first quarter 2017 adjusted net income (non-GAAP) of $99.7 million, or $1.05 per share.1  Net cash provided by operating activities was $383.1 million in the first quarter of 2018 compared to $249.5 million in the same period a year ago.  Adjusted cash flow from operations (non-GAAP) was $367.2 million in the first quarter of 2018 compared to $265.8 million in the first quarter a year ago1.

Total company production for the quarter came in at the high end of guidance, averaging 206.1 thousand barrels of oil equivalent (MBOE) per day.  Oil production averaged 65,212 barrels per day, up six percent from fourth quarter 2017 levels.

Realized oil prices averaged $59.93 per barrel, up 26 percent from the $47.71 per barrel received in the first quarter of 2017.  Realized natural gas prices averaged $2.28 per thousand cubic feet (Mcf) down 24 percent from the first quarter 2017 average of $3.01 per Mcf.  NGL prices were down 1 percent and averaged $20.19 per barrel from the $20.40 per barrel received in the same period of 2017.  Realized prices for 2018 reflect the adoption of Accounting Standards Codification 606 (ASC 606).  See table below (Impact of ASC 606) for comparison of realized prices for 2018 for pre- and post ASC 606.

Natural gas prices were negatively impacted by increased local price differentials.  In addition, gas takeaway in the Permian Basin between now and when planned additional pipeline capacity is expected to be operational (second half of 2019) has raised concerns about the ability of operators to move gas out of the basin.  Cimarex has taken a number of steps to ensure the flow of our natural gas production out of the Permian Basin.  We have agreed to terms for the sale of more than 98 percent of our projected Permian Basin natural gas production through October 2019.

Cimarex invested $313 million in exploration and development (E&D) during the first quarter, of which $264 million is attributable to drilling and completion activities.  First quarter investments were funded with cash flow from operations.  Total debt at March 31, 2018 consisted of $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $464 million.  Debt was 35 percent of total capitalization2.

2018 Outlook Second quarter 2018 production volumes are expected to average 200 - 209 MBOE per day.  Total daily production volumes for full year 2018 remain unchanged at 211 – 221 MBOE per day.  Full-year estimated exploration and development capital investment remains unchanged at $1.6 – 1.7 billion.

 Expenses per BOE of production for the remainder of 2018 are estimated to be:

Operations Update Cimarex invested $313 million in E&D during the first quarter, 61 percent in the Permian Basin and 38 percent in the Mid-Continent.  Cimarex brought 54 gross (15 net) wells on production during the quarter.  At March 31, 125 gross (48 net) wells were waiting on completion.  Cimarex currently is operating 13 drilling rigs.

Permian Region Production from the Permian region averaged 114,218 BOE per day in the first quarter, a 19 percent increase from first quarter 2017. Oil volumes averaged 49,845 barrels per day, representing 44 percent of the region's total equivalent production, and a 21 percent increase from first quarter 2017.  Total production increased two percent sequentially, with oil production up five percent.

Cimarex completed 17 gross (9 net) wells in the Permian region during the first quarter.  There were 52 gross (28 net) wells waiting on completion at March 31. 

Activity in the region for the quarter included nine wells completed in the Wolfcamp, Avalon and Bone Spring formations.  Of note, in Lea County, New Mexico, two Avalon wells were brought on-line during the first quarter.  The Coriander AOC 1-12 State 1H, a 10,000-foot lateral, had an average peak 30-day initial production rate of 3,333 BOE (2,233 barrel of oil) per day and the Thyme APY FED 19H, 5,000-foot lateral, had an average peak 30-day initial production rate of 2,059 BOE (1,420 barrels of oil) per day.

Cimarex currently is operating ten drilling rigs and three completion crews in the region.

Mid-Continent Region Production from the Mid-Continent averaged 91,433 BOE per day for the first quarter, up 13 percent versus first quarter 2017 and up four percent sequentially.

During the first quarter, Cimarex completed 37 gross (6 net) wells in the Mid-Continent region.  At the end of the quarter, 73 gross (20 net) wells were waiting on completion.  Cimarex currently is operating three drilling rigs and two completion crews in the region.

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

 

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

Conference call and webcastCimarex will host a conference call tomorrow, May 9, at 11:00 a.m. EDT (9:00 a.m. MT). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To join the live, interactive call, please dial 866-367-3053 ten minutes before the scheduled start time (callers in Canada dial 855-669-9657 and international callers dial 412-902-4216).

A replay will be available on the company's website.

Investor PresentationFor more details on Cimarex's first quarter 2018 results, please refer to the company's investor presentation available at www.cimarex.com.

About Cimarex EnergyDenver-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 "2018 Outlook" contains projections for certain 2018 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, 2017, 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 levels and volatility; higher than expected costs and expenses, including the availability and cost of services and materials; compliance with environmental and other regulations; risks associated with operating in one major geographic area; environmental liabilities; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; declines in the values of our oil and gas properties resulting in impairments; 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, emissions and disposal of produced water; unexpected future capital expenditures; economic and competitive conditions; the availability and cost of capital; 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; derivative and hedging activities; the success of the company's risk management activities; title to properties; litigation; the ability to complete property sales or other transactions; the effectiveness of controls over financial reporting; 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.

RECONCILIATION OF ADJUSTED NET INCOME

The following reconciles net income as reported under generally accepted accounting principles (GAAP) to adjusted net income (non-GAAP) for the periods indicated.

Adjusted net income and adjusted diluted earnings per share exclude 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 measures because:

a) Management uses adjusted net income to evaluate the company's operating performance between periods and to compare the company's performance to other oil and gas exploration and production companies.

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

* Does not include adjustments resulting from application of the "two-class method" used to determine earnings per share under GAAP.

** Reflects the weighted-average number of common shares outstanding during the period as adjusted for the dilutive effects of outstanding stock options.

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net cash provided by operating activities to adjusted cash flows from operations (non-GAAP) for the periods indicated.

Management uses the non-GAAP financial measure of adjusted cash flow from operations as a means of measuring our ability to fund our capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of net cash provided by operating activities. Management believes this non-GAAP financial measure provides useful information to investors for the same reason, and that it is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

IMPACT OF ASC 606

Effective January 1, 2018, Cimarex adopted the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606").  Application of ASC 606 has no impact on our net income or cash flows from operations; however, certain costs classified as Transportation, processing, and other operating expenses in the statement of operations under prior accounting standards are now reflected as deductions from revenue under ASC 606.  The following tables present certain Pre- and Post-ASC 606 amounts:

 

 

 

 

 

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SOURCE Cimarex Energy Co.