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Cimarex Reports Second Quarter 2017 Results

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August 8, 2017 4:28 PM EDT

DENVER, Aug. 8, 2017 /PRNewswire/ -- 

  • Second Quarter Production up 9% sequentially; Oil Production up 11% sequentially
  • Successful Wolfcamp Downspacing test in the Delaware Basin
    • 16 wells per section in Reeves County Upper Wolfcamp
  • E&D Capital unchanged for 2017; Production guidance raised slightly

Cimarex Energy Co. (NYSE: XEC) today reported second quarter 2017 net income of $97.3 million, or $1.02 per share compared to a net loss of $214.4 million, or $2.31 per share, in the same period a year ago.  Second quarter adjusted net income (non-GAAP) was $101.0 million, or $1.06 per share, compared to second quarter 2016 adjusted income (non-GAAP) of $20.9 million, or $0.22 per share1.  Net cash provided by operating activities was $255.3 million in the second quarter of 2017 compared to $132.4 million a year ago.  Adjusted cash flow from operations (non-GAAP) was $278.8 million in the second quarter of 2017 compared to $146.9 million in the second quarter a year ago1. 

Total company production came in above the high end of our guidance averaging 1,156 million cubic feet equivalent (MMcfe) per day (192.7 thousand barrels oil equivalent (MBoe) per day) during the second quarter.  This was a 19 percent increase over second quarter 2016 and a nine percent increase sequentially.  Oil production averaged 57,871 barrels per day, an 11 percent increase sequentially. 

Commodity prices improved significantly from a year ago and had a positive impact on Cimarex's financial results for the quarter.  Realized oil prices averaged $44.14 per barrel versus $40.07 per barrel in the second quarter of 2016, an increase of 10 percent.  Realized natural gas prices averaged $2.82 per thousand cubic feet (Mcf), up 55 percent from the second quarter 2016 average of $1.82 per Mcf. NGL prices averaged $18.24 per barrel, up 31 percent from the $13.93 per barrel received in the same period one year ago (see table of Average Realized Price by Region below).

Cimarex invested $296 million in exploration and development (E&D) during the second quarter, of which $219 million is attributable to drilling and completion activities.  This brings year-to-date E&D expenditures to $602 million.  Second quarter investments were funded with cash flow from operations and cash on hand.  Total debt at June 30, 2017, consisted of $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $520 million.  Debt was 39 percent of total capitalization2. 

2017 Outlook

Cimarex is maintaining its estimated full-year exploration and development capital investment of $1.1 – 1.2 billion for 2017.  Estimated capital investment is allocated 62 percent to the Permian and 37 percent to the Mid-Continent.   Daily production for 2017 is estimated to average 1,120 – 1,140 MMcfe (186.7 – 190.0 Mboe), up slightly from previous guidance.  Oil volumes are expected to grow 24-29 percent year-over-year.  Third quarter output is expected to average 1,100 – 1,140 MMcfe (183.3-190.0 Mboe) per day, down slightly from second quarter volumes.  A pick up in well completions late in the third quarter is expected to drive production higher in the fourth quarter.   Oil production is anticipated to grow 30-35 percent in fourth quarter 2017 versus fourth quarter 2016.

Expenses per Mcfe of production for the remainder of 2017 are estimated to be:

Production expense

$0.60 -  0.70

Transportation, processing and other expense

  0.50  -  0.60

DD&A and ARO accretion

  1.05  -  1.15

General and administrative expense

  0.20  -  0.25

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

   4.5  -  5.5%

Operations Update

Cimarex invested $296 million in exploration and development during the second quarter, 53 percent in the Permian Basin and 45 percent in the Mid-Continent.  Cimarex completed 51 gross (18 net) wells during the quarter.  At June 30, 2017, 98 gross (29 net) wells were waiting on completion.  Cimarex is currently operating 14 drilling rigs.

WELLS BROUGHT ON PRODUCTION BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Gross wells

Permian Basin

11

13

36

20

Mid-Continent

40

21

85

36

51

34

121

56

Net wells

Permian Basin

10

9

26

12

Mid-Continent

8

5

18

7

18

14

44

19

Permian Region

Production from the Permian Basin averaged 644.7 MMcfe per day in the second quarter, a 27 percent increase from second quarter 2016 and up 12 percent sequentially. Oil volumes represent 43 percent of the region's total production.  Natural gas production increased nine percent and NGL production was up 16 percent, sequentially. 

Of note, Cimarex completed a successful four-well downspacing project testing 16 wells per section in the Upper Wolfcamp.  Located in Reeves County, the Pagoda State project was brought on production in late April.  The four 10,000-foot lateral wells had an average peak 30-day initial production of 1,922 BOE per day of which 956 barrels per day (50 percent) is oil.  Please see our latest presentation (posted at www.cimarex.com) for more detail.

Cimarex brought 11 gross (10 net) wells on production in the Permian region during the second quarter.  There were 27 gross (13 net) wells waiting on completion on June 30.  Cimarex currently operates eight rigs in the Permian region.

Mid-Continent

Production from the Mid-Continent averaged 509 MMcfe per day for the second quarter, up ten percent versus second quarter 2016. Sequentially, crude oil volumes were up eight percent, natural gas production grew four percent and NGL volumes increased seven percent.

During the second quarter, Cimarex completed and brought on production 40 gross (8 net) wells in the Mid-Continent.  At the end of the quarter, 71 gross (16 net) wells were waiting on completion. Cimarex is currently operating six rigs in the region.

In addition to its continued delineation in the Meramec play, the company recently began completion of an increased density pilot in the Woodford formation.  The project consists of eight wells that are testing both 16 and 20 Woodford wells per section.  Results from this test are expected in the second half of 2017 and will help determine well spacing in upcoming Woodford developments.

Production by Region

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

DAILY PRODUCTION BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Permian Basin

Gas (MMcf)

219.8

181.2

210.4

177.4

Oil (Bbls)

45,828

35,338

43,446

35,944

NGL (Bbls)

24,996

19,219

23,319

16,639

Total Equivalent (Mmcfe)

644.7

508.5

611.0

492.9

Total Equivalent (Boe)

107,457

84,757

101,832

82,150

Mid-Continent

Gas (MMcf)

295.4

279.1

290.2

288.7

Oil (Bbls)

11,893

8,933

11,475

9,093

NGL (Bbls)

23,693

21,716

22,926

22,432

Total Equivalent (Mmcfe)

509.0

463.0

496.6

477.9

Total Equivalent (Boe)

84,819

77,166

82,768

79,642

Total Company

Gas (MMcf)

516.7

461.9

502.0

467.4

Oil (Bbls)

57,871

44,424

55,042

45,267

NGL (Bbls)

48,731

40,961

46,281

39,112

Total Equivalent (Mmcfe)

1,156.3

974.2

1,110.0

973.7

Total Equivalent (Boe)

192,719

162,368

184,990

162,279

AVERAGE REALIZED PRICE BY REGION

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Permian Basin

Gas ($ per Mcf)

2.77

1.88

2.83

1.92

Oil ($ per Bbl)

44.15

40.26

45.94

34.14

NGL ($ per Bbl)

16.65

11.94

17.38

10.25

Mid-Continent

Gas ($ per Mcf)

2.85

1.79

2.97

1.85

Oil ($ per Bbl)

44.10

39.28

45.39

33.07

NGL ($ per Bbl)

19.90

15.70

21.16

13.27

Total Company

Gas ($ per Mcf)

2.82

1.82

2.91

1.87

Oil ($ per Bbl)

44.14

40.07

45.82

33.94

NGL ($ per Bbl)

18.24

13.93

19.26

11.98

Other

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

3Q17

4Q17

1Q18

2Q18

3Q18

Gas

PEPL(3)

Volume (MMBtu/d)

129,891

110,000

80,000

50,000

20,000

Wtd Avg Floor

$    2.59

$    2.67

$  2.66

$  2.52

$  2.45

Wtd Avg Ceiling

$    3.09

$    3.10

$  3.08

$  2.94

$  2.65

El Paso Perm(3)

Volume (MMBtu/d)

89,891

80,000

60,000

40,000

20,000

Wtd Avg Floor

$    2.60

$    2.64

$  2.62

$  2.43

$  2.35

Wtd Avg Ceiling

$    3.07

$    3.04

$  3.00

$  2.79

$  2.55

Oil:

WTI(4)

Volume (Bbl/d)

23,978

21,000

16,000

10,000

6,000

Wtd Avg Floor

$  45.86

$  46.29

$ 46.69

$ 46.30

$ 43.83

Wtd Avg Ceiling

$  55.88

$  56.64

$ 57.34

$ 56.27

$ 54.48

Conference call and webcast

Cimarex will host a conference call tomorrow at 11:00 a.m. EDT (9:00 a.m. MDT). 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 Presentation

For more details on Cimarex's second quarter 2017 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 "2017 Outlook" contains projections for certain 2017 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, 2016, 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.

                                                                                                         

1

Adjusted net income and adjusted cash flow from operations are non-GAAP financial measures.  See below for reconciliations of the related GAAP amounts.

2

Debt to total capitalization is calculated by dividing long-term debt ($1.5 billion) by long-term debt ($1.5 billion) plus stockholders' equity ($2.3 billion). 

3

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index and El Paso Perm is El Paso Permian Basin index both as quoted in Platt's Inside FERC.

4

WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

 

RECONCILIATION OF ADJUSTED NET INCOME (LOSS) AND ADJUSTED EARNINGS (LOSS) PER SHARE

The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings (loss) per share (non-GAAP) for the periods indicated.

 

For the Three Months Ended

 

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

(in thousands, except per share data)

Net income (loss)

$

97,262

$

(214,454)

$

228,234

$

(445,913)

Impairment of oil and gas properties

—

333,291

—

652,077

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

(22,166)

37,095

(72,087)

41,735

Loss on early extinguishment of debt

28,169

—

28,169

—

Tax impact

(2,257)

(134,983)

16,469

(252,897)

Adjusted net income (loss)

$

101,008

$

20,949

$

200,785

$

(4,998)

Diluted earnings (loss) per share*

$

1.02

$

(2.31)

$

2.40

$

(4.79)

Adjusted diluted earnings (loss) per share*

$

1.06

$

0.22

$

2.11

$

(0.05)

Diluted shares attributable to common stockholders and participating securities

95,179

95,045

95,172

93,075

Adjusted net income (loss) and adjusted diluted earnings (loss) 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 (loss) 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 (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.

 

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.

 

For the Three Months Ended

 

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

(in thousands)

Net cash provided by operating activities

$

255,286

$

132,381

$

504,800

$

217,786

Change in operating assets and liabilities

23,507

14,483

39,827

10,669

Adjusted cash flow from operations

$

278,793

$

146,864

$

544,627

$

228,455

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.

 

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

(in thousands)

Acquisitions:

Proved

$

250

$

—

$

250

$

3,324

Unproved

792

—

3,825

10,568

Net purchase price adjustments

5

34

10

(2,928)

1,047

34

4,085

10,964

Exploration and development:

Land and seismic

33,302

17,474

110,487

28,636

Exploration and development

262,575

138,686

491,042

285,708

295,877

156,160

601,529

314,344

Sale proceeds:

Proved

(2,000)

—

(2,000)

(12,500)

Unproved

(2,305)

(16)

(7,271)

(16)

Net purchase price adjustments

43

357

108

(114)

(4,262)

341

(9,163)

(12,630)

$

292,662

$

156,535

$

596,451

$

312,678

 

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

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

(in thousands, except per share data)

Revenues:

Oil sales

$

232,453

$

162,005

$

456,519

$

279,578

Gas sales

132,474

76,615

264,419

159,223

NGL sales

80,886

51,939

161,312

85,291

Gas gathering and other, net

10,639

8,314

21,378

15,381

456,452

298,873

903,628

539,473

Costs and expenses:

Impairment of oil and gas properties

—

333,291

—

652,077

Depreciation, depletion, amortization, and accretion

108,844

103,836

206,280

216,770

Production

62,578

57,213

124,999

127,915

Transportation, processing, and other operating

58,624

44,436

113,647

90,879

Gas gathering and other

8,647

7,492

17,074

15,572

Taxes other than income

17,477

14,066

38,790

27,905

General and administrative

19,762

21,424

37,796

35,321

Stock compensation

6,293

7,490

12,581

13,018

(Gain) loss on derivative instruments, net

(22,509)

33,236

(66,370)

32,808

Other operating expense, net

266

24

882

114

259,982

622,508

485,679

1,212,379

Operating income (loss)

196,470

(323,635)

417,949

(672,906)

Other (income) and expense:

Interest expense 

20,095

20,824

41,147

41,629

Capitalized interest

(5,442)

(5,633)

(12,083)

(10,537)

Loss on early extinguishment of debt

28,169

—

28,169

—

Other, net

(2,231)

(2,011)

(4,441)

(3,661)

Income (loss) before income tax

155,879

(336,815)

365,157

(700,337)

Income tax expense (benefit)

58,617

(122,361)

136,923

(254,424)

Net income (loss)

$

97,262

$

(214,454)

$

228,234

$

(445,913)

Earnings (loss) per share to common stockholders:

Basic 

$

1.02

$

(2.31)

$

2.40

$

(4.79)

Diluted

$

1.02

$

(2.31)

$

2.40

$

(4.79)

Dividends declared per share

$

0.08

$

0.08

$

0.16

$

0.16

Shares attributable to common stockholders:

Unrestricted common shares outstanding

93,402

93,075

93,396

93,075

Diluted common shares

93,435

93,075

93,431

93,075

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

95,146

N/A*

95,137

N/A*

Fully diluted shares 

95,179

N/A*

95,172

N/A*

Comprehensive income (loss):

Net income (loss)

$

97,262

$

(214,454)

$

228,234

$

(445,913)

Other comprehensive income:

Change in fair value of investments, net of tax 

224

195

626

280

Total comprehensive income (loss)

$

97,486

$

(214,259)

$

228,860

$

(445,633)

*

Due to the net loss in the period ended June 30, 2016, shares of 94,996, which include participating securities, are not considered in the loss per share calculations.

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

(in thousands)

Cash flows from operating activities:

Net income (loss)

$

97,262

$

(214,454)

$

228,234

$

(445,913)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Impairment of oil and gas properties

—

333,291

—

652,077

Depreciation, depletion, amortization, and accretion

108,844

103,836

206,280

216,770

Deferred income taxes

58,617

(122,361)

136,929

(254,424)

Stock compensation

6,293

7,490

12,581

13,018

(Gain) loss on derivative instruments, net

(22,509)

33,236

(66,370)

32,808

Settlements on derivative instruments

343

3,859

(5,717)

8,927

Loss on early extinguishment of debt

28,169

—

28,169

—

Changes in non-current assets and liabilities

57

685

1,076

2,548

Other, net

1,717

1,282

3,445

2,644

Changes in operating assets and liabilities:

Receivables

(16,483)

(37,474)

(61,145)

(4,327)

Other current assets

(8,139)

5,346

(11,104)

17,328

Accounts payable and other current liabilities

1,115

17,645

32,422

(23,670)

Net cash provided by operating activities

255,286

132,381

504,800

217,786

Cash flows from investing activities:

Oil and gas expenditures

(270,331)

(148,663)

(582,172)

(325,058)

Sales of oil and gas assets

4,262

(341)

9,163

12,630

Sales of other assets

349

136

394

224

Other capital expenditures

(10,127)

(8,297)

(18,209)

(17,774)

Net cash used by investing activities

(275,847)

(157,165)

(590,824)

(329,978)

Cash flows from financing activities:

Borrowings of long-term debt

748,110

—

748,110

—

Repayments of long-term debt

(750,000)

—

(750,000)

—

Call premium, financing, and underwriting fees

(29,009)

—

(29,035)

(1)

Dividends paid

(7,576)

(7,551)

(15,153)

(22,655)

Employee withholding taxes paid upon the net

settlement of equity-classified stock awards

(277)

(3,737)

(1,215)

(4,082)

Proceeds from exercise of stock options and other

—

1,172

36

1,287

Net cash used by financing activities

(38,752)

(10,116)

(47,257)

(25,451)

Net change in cash and cash equivalents

(59,313)

(34,900)

(133,281)

(137,643)

Cash and cash equivalents at beginning of period

578,908

676,639

652,876

779,382

Cash and cash equivalents at end of period

$

519,595

$

641,739

$

519,595

$

641,739

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

June 30,

December 31,

2017

2016

Assets

(in thousands, except share data)

Current assets:

Cash and cash equivalents

$

519,595

$

652,876

Receivables, net of allowance

335,543

274,597

Oil and gas well equipment and supplies

45,486

33,342

Derivative instruments

19,803

—

Other current assets

7,449

8,489

Total current assets

927,876

969,304

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

Proved properties

16,769,915

16,225,495

Unproved properties and properties under development,

not being amortized

535,779

478,277

17,305,694

16,703,772

Less – accumulated depreciation, depletion, amortization, and impairment

(14,530,251)

(14,349,505)

Net oil and gas properties

2,775,443

2,354,267

Fixed assets, net of accumulated depreciation

206,114

205,465

Goodwill

620,232

620,232

Derivative instruments

442

—

Deferred income taxes

—

55,835

Other assets

32,873

32,621

$

4,562,980

$

4,237,724

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

87,833

$

74,486

Accrued liabilities

295,347

278,781

Derivative instruments

98

49,370

Revenue payable

142,943

119,715

Total current liabilities

526,221

522,352

Long-term debt:

Principal

1,500,000

1,500,000

Less – unamortized debt issuance costs and discount

(13,903)

(12,061)

Long-term debt, net

1,486,097

1,487,939

Deferred income taxes

48,322

—

Other liabilities 

190,585

184,444

Total liabilities

2,251,225

2,194,735

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,

95,341,554 and 95,123,525 shares issued, respectively

953

951

Additional paid-in capital

2,774,597

2,763,452

Retained earnings (accumulated deficit)

(465,366)

(722,359)

Accumulated other comprehensive income

1,571

945

Total stockholders' equity

2,311,755

2,042,989

$

4,562,980

$

4,237,724

 

 

View original content:http://www.prnewswire.com/news-releases/cimarex-reports-second-quarter-2017-results-300501507.html

SOURCE Cimarex Energy Co.


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