Cimarex Reports 2014 First Quarter Results - wave3.com-Louisville News, Weather & Sports

Cimarex Reports 2014 First Quarter Results

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SOURCE Cimarex Energy Co.

Mid-Continent Operations Boost Production Growth

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

 

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