Company's First Meramec Long Lateral tests 16.0 MMcfe/day
DENVER, Nov. 3, 2015 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported a third quarter 2015 net loss of $763.3 million, or $8.21 per diluted share, including a non-cash impairment of oil and gas properties. The adjusted third quarter net loss was $14.4 million, or $0.15 per diluted share.(1) Third quarter 2015 adjusted cash flow from operations was $178.6 million versus $439.7 million a year ago.(1)
Total company production averaged 979 million cubic feet equivalent (MMcfe) per day during the third quarter, a four percent increase from third quarter 2014. Year-over-year oil volumes grew 15 percent, natural gas volumes decreased one percent and natural gas liquids (NGL) volumes were up one percent.
Commodity prices impacted Cimarex's financial results for the quarter. Realized oil prices averaged $41.89 per barrel, down 52 percent versus a year ago and 17 percent sequentially. Natural gas prices were down 35 percent year-over-year and averaged $2.68 per thousand cubic feet (Mcf) compared to $4.10 per Mcf. NGL prices averaged $12.19 per barrel, down 64 percent from the third quarter of 2014 and 17 percent sequentially. (See table of Average Realized Price by Region below.)
Cimarex invested $184 million in exploration and development during the third quarter, which was primarily funded with cash flow from operations. Total debt at September 30, 2015, remained at $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $899 million. Debt was 30 percent of total capitalization(2). In October 2015, we entered into a new senior unsecured revolving credit facility which matures October 16, 2020. The credit facility has aggregate commitments of $1.0 billion, no borrowing base and a single financial covenant of debt to capital ratio not to exceed 65 percent.
Total company production for the fourth quarter 2015 is projected to average 980-1,010 MMcfe per day. Incorporating updated fourth quarter guidance, full year production is now estimated to average 983-991 MMcfe per day, a mid-point increase of 14 percent over 2014. Capital investment for exploration and development is estimated to be $900-$950 million in 2015, down from previous guidance of $1.0 billion.
Expenses per Mcfe of production for the remainder of 2015 are estimated to be:
Production expense
$0.77 - $0.87
Transportation, processing and other expense
0.45 - 0.55
DD&A and ARO accretion
1.65 - 1.85
General and administrative expense*
0.23 - 0.27
Taxes other than income (% of oil and gas revenue)
*Includes $0.05/Mcfe related to a charitable contribution commitment.
5.5 - 6.0%
Operations Update Cimarex invested $184 million in exploration and development during the third quarter bringing the total for the first nine months of 2015 to $683 million. Year-to-date, 59 percent has been invested in the Permian Basin and 40 percent in the Mid-Continent. We completed 56 gross (14 net) wells during the quarter. At September 30, 60 gross (27 net) wells were awaiting completion. Cimarex is currently operating seven drilling rigs.
WELLS BROUGHT ON PRODUCTION BY REGION
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Gross wells
Permian Basin
4
36
72
117
Mid-Continent
52
30
82
106
Other
—
-
-
2
56
66
154
225
Net wells
Permian Basin
4
27
52
78
Mid-Continent
10
9
19
43
Other
—
-
-
1
14
36
71
122
Permian Region Production from the Permian region averaged 562.4 MMcfe per day in the third quarter, a 38 percent increase over third quarter 2014. Quarterly oil volumes increased 24 percent year-over-year to 42,367 barrels per day and accounted for 45 percent of the region's total production for the quarter.
Cimarex completed and brought on production four gross (four net) wells in the Permian region during the third quarter. On September 30, there were seven gross (five net) wells waiting on completion in the Delaware Basin.
Cimarex now has 13 long-lateral Wolfcamp D wells producing in Culberson County, Texas, up two from our last report. These 10,000-foot laterals had an average 30-day initial gross peak production rate of 2,308 BOE per day (46 percent gas, 29 percent NGL, 25 percent oil).
Mid-Continent Activity in the Mid-Continent region was focused in the Cana area in western Oklahoma, where 52 gross (ten net) wells were completed and brought on production during the third quarter. At the end of the quarter, 53 gross (22 net) wells were waiting on completion. Third quarter production from the Cana area averaged 321.6 MMcfe per day, representing 33 percent of total company production. Total Mid-Continent production averaged 405.3 MMcfe per day for the third quarter of 2015.
In the Meramec formation, Cimarex completed its first 10,000-foot lateral. The Clayton 1HX had an average 30-day initial peak production rate of 16.0 MMcfe per day (57 percent gas, 28 percent NGL, 15 percent oil). In addition, Cimarex now has eleven 5,000-foot Meramec wells on production which have an average 30-day initial gross peak production rate of 9.3 MMcfe per day (47 percent gas, 29 percent oil, 24 percent NGL).
Average daily production and commodity price for Cimarex by region are summarized below:
DAILY PRODUCTION BY REGION
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Permian Basin
Gas (MMcf)
197.6
126.6
179.3
117.6
Oil (Bbls)
42,367
34,299
44,632
33,090
NGL (Bbls)
18,430
12,634
16,938
11,144
Total Equivalent (MMcfe)
562.4
408.1
548.7
383.0
Mid-Continent
Gas (MMcf)
260.8
333.3
272.6
284.9
Oil (Bbls)
6,981
8,158
7,197
7,166
NGL (Bbls)
17,093
22,604
17,823
18,475
Total Equivalent (MMcfe)
405.3
517.9
422.7
438.8
Total Company
Gas (MMcf)
464.3
468.4
458.9
411.7
Oil (Bbls)
49,951
43,376
52,480
41,450
NGL (Bbls)
35,815
35,627
35,056
30,151
Total Equivalent (MMcfe)
978.9
942.4
984.1
841.3
AVERAGE REALIZED PRICE BY REGION
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Permian Basin
Gas ($ per Mcf)
2.75
4.16
2.66
4.70
Oil ($ per Bbl)
42.04
85.43
45.31
89.47
NGL ($ per Bbl)
10.80
30.81
12.28
32.98
Mid-Continent
Gas ($ per Mcf)
2.63
4.07
2.63
4.59
Oil ($ per Bbl)
40.74
94.09
44.32
96.13
NGL ($ per Bbl)
13.66
35.93
15.88
38.04
Total Company
Gas ($ per Mcf)
2.68
4.10
2.65
4.62
Oil ($ per Bbl)
41.89
87.27
45.22
90.87
NGL ($ per Bbl)
12.19
34.08
14.13
36.10
Other The following table summarizes the company's current open hedge positions:
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Total
Gas:
2016
PEPL Collars (3)
Volume (MMBtu)
910,000
910,000
920,000
920,000
3,660,000
Wtd Avg Floor
$ 2.70
$ 2.70
$ 2.70
$ 2.70
$ 2.70
Wtd Avg Ceiling
$ 2.85
$ 2.85
$ 2.85
$ 2.85
$ 2.85
El Paso Perm Collars (3)
Volume (MMBtu)
1,820,000
1,210,000
920,000
920,000
4,870,000
Wtd Avg Floor
$ 2.75
$ 2.75
$ 2.75
$ 2.75
$ 2.75
Wtd Avg Ceiling
$ 3.12
$ 3.09
$ 3.06
$ 3.06
$ 3.09
2017
El Paso Perm Collars(3)
Volume (MMBtu)
900,000
910,000
-
-
1,810,000
Wtd Avg Floor
$ 2.75
$ 2.75
$ -
$ -
$ 2.75
Wtd Avg Ceiling
$ 3.36
$ 3.36
$ -
$ -
$ 3.36
First
Second
Third
Fourth
Oil:
Quarter
Quarter
Quarter
Quarter
Total
2016
WTI Oil Three-Way Collars (4)
Volume (Bbl)
273,000
273,000
276,000
276,000
1,098,000
Floor sold (put) $
$ 40.00
$ 40.00
$ 40.00
$ 40.00
$ 40.00
Floor purchased (put) $
$ 50.00
$ 50.00
$ 50.00
$ 50.00
$ 50.00
Ceiling sold (call) $
$ 60.00
$ 60.00
$ 60.00
$ 60.00
$ 60.00
Conference call and webcast Cimarex will host a conference call Wednesday, November 4, at 11:00 a.m. EST. The call will be webcast and accessible on the company's website at www.cimarex.com. To participate in the live, interactive call, please dial 1-866-367-3053 ten minutes before the scheduled start time (international callers dial 1-412-902-4216). A replay will be available for one week following the call by dialing 1-877-344-7529 (international callers dial 1-412-317-0088); conference I.D. 10073620. The replay will also be available on the company's website or via the Cimarex App.
Investor Presentation For more details on Cimarex's third quarter 2015 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 a revised "2015 Outlook", which contains projections for certain 2015 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, 2014, 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; declines in the values of our oil and gas properties resulting in impairments; 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 emissions and 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; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in two major geographic areas; the success of the company's risk management activities; title to properties; litigation; environmental liabilities; the ability to complete property sales or other transactions; 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.
www.cimarex.com
__________________________________
(1) Adjusted net income (loss) and adjusted cash flow from operations are non-GAAP financial measures. 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 $1.5 billion divided by long-term debt of $1.5 billion plus stockholders' equity of $3.4 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)
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
(in thousands, net of tax, except per share data)
Net income (loss)
$
(763,284)
$
144,315
$
(1,778,440)
$
431,412
Impairment of oil and gas properties
750,185
—
1,748,024
—
Mark-to-market (gain) loss on open derivative positions
(1,260)
(5,938)
(1,260)
1,852
Gain on sale of midstream assets
—
(4,202)
—
(4,202)
Adjusted net income (loss)
$
(14,359)
$
134,175
$
(31,676)
$
429,062
Diluted earnings (loss) per share
$
(8.21)
$
1.65
$
(19.14)
$
4.94
Adjusted diluted earnings (loss) per share *
$
(0.15)
$
1.53
$
(0.35)
$
4.91
Diluted shares attributable to common stockholders and participating securities
92,969
**
87,393
92,969
**
87,402
Estimated tax rates utilized
36.5%
37.1%
36.5%
37.1%
Adjusted net income (loss) and adjusted diluted earnings (loss) per share excludes the noted item because management believes this item affects 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 operational trends and performance relative 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
**
Participating securities and other dilutive shares are not included in the diluted share computation when a loss exists.
RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
(in thousands)
Net cash provided by operating activities
$
206,001
$
502,201
$
576,546
$
1,271,970
Change in operating assets and liabilities
(27,448)
(62,453)
41,310
19,782
Adjusted cash flow from operations
$
178,553
$
439,748
$
617,856
$
1,291,752
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 and dividends, 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.
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
(in thousands)
Acquisitions:
Proved (*)
$
2
$
—
$
(2,226)
$
144,516
Unproved (*)
2,237
—
(5,511)
114,732
2,239
—
(7,737)
259,248
Exploration and development:
Land and Seismic
10,000
34,697
37,965
143,891
Exploration and development
174,270
424,861
644,796
1,280,036
184,270
459,558
682,761
1,423,927
Sale proceeds:
Proved
(24,031)
(271,954)
(26,336)
(272,177)
Unproved
(6,201)
(174,403)
(12,412)
(175,303)
(30,232)
(446,357)
(38,748)
(447,480)
$
156,277
$
13,201
$
636,276
$
1,235,695
*
The negative amounts in 2015 reflect purchase price adjustments related to an acquisition in second quarter 2014.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
(in thousands, except per share data)
Revenues:
Oil sales
$
192,501
$
348,276
$
647,850
$
1,028,229
Gas sales
114,649
176,539
331,985
519,139
NGL sales
40,159
111,701
135,236
297,128
Gas gathering and other, net
8,746
13,224
26,269
41,129
356,055
649,740
1,141,340
1,885,625
Costs and expenses:
Impairment of oil and gas properties
1,180,649
—
2,751,535
—
Depreciation, depletion, amortization and accretion
188,269
220,779
626,276
596,567
Production
69,334
89,084
222,145
250,310
Transportation, processing, and other operating
46,290
54,573
129,645
145,299
Gas gathering and other
8,429
8,588
28,599
27,413
Taxes other than income
19,717
33,510
67,678
99,454
General and administrative
20,413
20,240
50,405
57,523
Stock compensation
4,737
3,603
14,880
10,875
(Gain) loss on derivative instruments, net
(1,968)
(9,229)
(1,968)
8,960
Other operating (income) expense, net
60
(181)
844
34
1,535,930
420,967
3,890,039
1,196,435
Operating income (loss)
(1,179,875)
228,773
(2,748,699)
689,190
Other (income) and expense:
Interest expense
20,313
19,751
60,636
48,524
Amortization of deferred financing costs
1,103
1,128
3,333
3,121
Capitalized interest
(7,100)
(10,005)
(25,087)
(25,870)
Other, net
(2,375)
(11,123)
(9,814)
(22,207)
Income (loss) before income tax
(1,191,816)
229,022
(2,777,767)
685,622
Income tax expense (benefit)
(428,532)
84,707
(999,327)
254,210
Net income (loss)
$
(763,284)
$
144,315
$
(1,778,440)
$
431,412
Earnings (loss) per share to common stockholders:
Basic
$
(8.21)
$
1.65
$
(19.14)
$
4.94
Diluted
$
(8.21)
$
1.65
$
(19.14)
$
4.94
Dividends per share
$
0.16
$
0.16
$
0.48
$
0.48
Shares attributable to common stockholders:
Unrestricted common shares outstanding
92,969
85,643
92,969
85,643
Diluted common shares
92,969
85,779
92,969
85,788
Shares attributable to common stockholders and participating securities:
Basic shares outstanding
N/A*
87,257
N/A*
87,257
Fully diluted shares
N/A*
87,393
N/A*
87,402
Comprehensive income (loss):
Net income (loss)
$
(763,284)
$
144,315
$
(1,778,440)
$
431,412
Other comprehensive income (loss):
Change in fair value of investments, net of tax
(609)
(123)
(800)
(139)
Total comprehensive income (loss)
$
(763,893)
$
144,192
$
(1,779,240)
$
431,273
*
Due to the net loss, shares of 94,568, which include participating securities, are not considered in the loss per share calculation
